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Court of Appeal Allows Transfer of CFA from one Law Firm to Another

Budana (Appellant) v Leeds Teaching Hospitals NHS Trust (Respondent) & Law Society (Intervener) (2017)[2017] EWCA Civ 1980

The Court of Appeal has ruled that the transfer of a CFA entered into before 1 April 2013 from one law firm to another was valid and that the success fee was also recoverable from the defendant.

Ms Budana instructed solicitors to pursue a personal injury claim against the NHS Trust, and she entered into a CFA with a 100% success fee. The solicitors later informed Ms Budana that it was no longer handling personal injury litigation and had arranged for another firm to take over conduct of her claim. The two firms of solicitors signed a master deed of assignment in respect of a number of claims. The first solicitors purported to assign the client's claim and the CFA to the new solicitors. On 10 April 2013, the client signed letters of instruction for the new solicitors and a deed of assignment. She also signed an alternative CFA with the new solicitors in May 2017, after the coming into force on 1 April 2013 of LASPO. The alternative CFA was expressed to only be effective if the deed of assignment did not allow the new solicitors to recover its costs.

At the hearing the County Court held that there was no valid CFA to assign as the agreement had already been terminated when the original solicitors wrote to the claimant informing her that they were closing down the PI department.

The claimant appealed the decision that the CFA had been terminated following the purported assignment of her claim and the defendant cross-appealed. The decision had attracted widespread attention and because of its importance the matter was leapfrogged to the Court of Appeal. Subsequently, the Law Society was also granted permission to intervene.

The Court of Appeal overturned the decision, and allowed the appeal. The cross appeal was dismissed. The Court ruled that there had been a novation under which the client agreed to transfer the rights and obligations to the second solicitors rather than an assignment. Crucially, the Court also allowed the claimant to recover the success fee payable under the first CFA.

Forbes comment

Defendants will be disappointed by this decision which will allow the tens of thousands of claimants thought to be in a similar position to recover success fees. A crucial factor in the decision was an acknowledgment of the current economic environment in which personal injury litigation is conducted today which has led to a large number bulk retainers being transferred. Whilst this decision does represent a significant blow for defendants, each case should still be considered on its own facts.

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