Budana v The Leeds Teaching Hospitals NHS Trust  EWCA Civ 1980
(1) Was the CFA terminated by the transfer to the second firm?
(2) If the CFA was not terminated, was the transfer of the CFA effective as an assignment (as opposed to a novation)?
(3) On the premise that the CFA was not terminated, but that the transfer took effect as a novation, should section 44 of LASPO nevertheless be interpreted so as to include a CFA entered into before 1 April and novated after 1 April 2013?
(4) If, instead, the CFA was indeed terminated, was the claimant liable to pay for the work done under the CFA in any event?
Issue (1): Termination
The transfer of the CFA could not amount to a termination of the contract without the claimant having elected to treat the contract as terminated. Unless and until any innocent party terminates the contract, it subsists.
Issue (2) Assignment or novation and Issue (3) Section 44 of LASPO
Issue (2) and issue (3) were the focal points of the appeal, since the Court were told that there were likely to be very significant numbers of analogous cases where an extant CFA had been transferred from one firm of solicitors to another, whether before or after 1 April 2013.
On issue (2), the Court decided (by a 2 to 1 majority) that a solicitors CFA is not assignable from one firm to another such as for the original CFA to survive. Such an arrangement is a novation.
However, on issue (3) the Court unanimously held that the transitional provisions of LASPO were to be construed such that the success fee payable was payable under a conditional fee agreement entered into before 1 April 2013.
Issue (4) Liability under the CFA
In light of the Court’s conclusions on issues (1)-(3), it was not necessary to consider issue (4).
Despite the multitude of issues, the salient question was whether the true effect of the contractual arrangements between the parties meant that the claimant had to pay a success fee under a conditional fee agreement entered into before 1 April 2013. This question was approached and determined with an appreciation of the economic environment in which personal injury litigation is conducted today.
The purpose of the transitional provisions of LASPO is to preserve vested rights and expectations arising from the previous law and the Court were keen not to defeat that purpose by an overtechnical application of the doctrine of novation so as to prevent any litigant, who had begun a claim under a CFA prior to 1 April 2013, from recovering costs in respect of a success fee, simply because a novation had occurred.
However, as the Court observed, whether or not any relevant CFA under which the success fee is payable to a new firm could be characterised, as in the present case, as "payable under a conditional fee agreement entered into before" 1 April 2013, would depend on the precise terms of the relevant contractual arrangements entered into between the parties and whether the new firm was indeed intended to operate "under" the terms of the previous CFA. But where, as here, the parties expressly provide by their contractual arrangements that their vested rights and expectations, under the previous CFA entered into under the previous law, should be continued, there was no difficulty in construing section 44 to give effect to that intention.
The decision will no doubt be welcomed by the many thousands, and perhaps tens of thousands, of claimants in the same position as the claimant in the present case and whose pre-1 April 2013 CFAs were purportedly assigned by one firm of solicitors to another.
For a more in-depth look at the Court’s analysis and determination of the various issues and sub-issues, please click HERE for the full judgment.