The Court of Appeal has confirmed that a conditional fee agreement can be properly assigned between solicitor firms so that any success fee included in a ‘pre-Jackson’ retainer will continue to be recoverable where the retainer was transferred to a new firm after April 2013.
The lengthy judgment in Budana v The Leeds Teaching Hospitals NHS Trust  EWCA Civ 1980 was handed down by the Court of Appeal on 5 December 2017, with the leading decision given by the Vice President of the Civil Division of the Court of Appeal, Lady Justice Gloster. Of the four issues on appeal, the second addressed an argument that has been raised by many paying parties in costs disputes since April 2013: was the transfer of the first solicitor firm's CFA effective as an assignment, as opposed to a novation? The outcome of this decision would determine whether recoverable success fees properly included in CFAs entered into before 1 April 2013 would continue to be payable by the client, and therefore recoverable by the opponent, if that CFA was transferred to a new solicitor firm after 1 April 2013. If it wasn't, the consequences could not only prevent the recoverability of a success fee from 1 April 2013 onwards, but potentially also undermine the validity of entire retainers.
LJ Gloster stated that this wasn't really a technical or legal issue of "assignment or novation", but in a fact a determination as to whether the true effect of contractual arrangements between the parties meant that the claimant had to pay a success fee under a 'pre-Jackson’ CFA. This practical focus reflects the general logic behind the judgment as a whole.
Having considered the arguments raised by the parties and the Law Society, acting as an Intervener in the appeal, LJ Gloster came to a decision that there can be an assignment of a CFA that continues the benefits and rights to the new firm after April 2013, to include any success fee. Her reasoning was relatively straight forward, despite not agreeing fully with the arguments heard by the court. She stated that there is no reason in the current business environment why those rights and benefits cannot be transferred to a new solicitor.
The Supreme Court’s decision in Plevin was cited as confirmation that rights under a solicitor’s retainer are assignable. This wasn’t a binding decision on this specific issue, but it supported the Court of Appeal’s conclusions that:
- As a matter of law rights and benefits under a CFA are capable of assignment;
- An original CFA can remain in existence not withstanding its transfer between firms; and
- Even where a client assents to a transfer, the original CFA remains in existence as a valid contract at its original date.
LJ Gloster determined that the conditional benefit principle was not relevant to this issue as in the purported assignment there was a clear obligation for the new firm to provide legal services under the second deed. Ultimately, the Court of Appeal found that the parties clearly intended all of the rights to be transferred between the solicitor firms along with all of the obligations. This included the obligation for the new firm to continue providing legal services that were provided under the first CFA, providing that the client continued to provide the same instructions required under the first CFA.
The judgment acknowledges and reflects the policy intention behind the introduction of LASPO in 2013. That intention, as addressed in Plevin, was that the transitional provisions for success fees and ATE premiums were designed to preserve vested rights and expectations arising from the old law. In the view of LJ Gloster, an “overtechnical application of the doctrine of novation” that uses a change in legal representation to prevent a litigant from recovering a success fee would defeat the purpose of LASPO.
The second part of paragraph 74 of the judgment best summarises the decision on assignment:
“But where, as here, the parties expressly provide by their contractual arrangements that their vested rights and expectation, under the previous CFA entered into under the previous law, should be continued, I see no difficulty in construing section 44 to give effect to that intention."
After all of the legal arguments and previous decisions on this issue, this judgment from the Court of Appeal appears refreshingly logical. The focus on the purpose of LASPO, and the likely mind-sets of all those involved at the time that the purported assignments were entered into after April 2013 have trumped technicalities of legal interpretation.
There has always been an argument that paying parties would still have expected the success fee to be payable after these transfers, and would not have been prejudiced in their conduct of the remainder of the litigation. Very few genuinely would have identified the potential novation arguments at that stage, and believed that they were making strategic decisions in the litigation on the assumption that a success fee would not continue to apply to the costs being incurred by their opponent. Whilst validly raised, assignment arguments have offered paying parties the chance of unexpected windfalls at Detailed Assessment. Now it is clear that those CFAs could have been assigned properly. However beware, the factual disputes as to whether any specific CFA was properly assigned may still rage on.