Transferred CFAs are valid, rules the Court of Appeal

A solicitor’s retainer under a conditional fee agreement (CFA) can be validly transferred from one law firm to another, the Court of Appeal has held, in a case that could affect tens of thousands of claimants.

The test case, Budana v The Leeds Teaching Hospital NHS Trust [2017] EWCA Civ 1980, was leapfrogged to the Court of Appeal from the county court due to its importance.

District Judge Besford had held that the CFA was not validly assigned from law firm Baker Rees to Hudgell, because it was terminated prior to the assignment when Baker Rees closed its personal injury practice.

However, Lady Justice Gloster, giving the lead judgment, found that DJ Besford had erred in finding the CFA had been terminated. She held that, rather than an assignment, there had been a novation – a new contract – under which the client agreed to transfer the rights and obligations of Baker Rees to Hudgell and that the correct interpretation of s 44(6) of LASPO (Legal Aid, Sentencing and Punishment of Offenders Act 2012) meant the original success fee payable under the Baker Rees CFA was still enforceable.

Gloster LJ said it was clear that ‘the intention of the parties was that Hudgell should simply be substituted in Baker Rees’s place… under and subject to the same terms of the existing (and so far as the parties were concerned, at least) continuing retainer’.

Neil Hudgell, managing director of Hudgell, said the decision ‘brings certainty to law firms up and down the country which have come to the aid of clients who needed solicitors to take over their cases’.

The Law Society, which intervened in the appeal, estimated there could be tens of thousands of clients affected by this issue given the similar impact of the Jackson reforms on smaller law firms.

Nicholas Bacon QC of 4 New Square, who led the claimant’s appeal in the Court of Appeal, described the decision as 'probably the most significant costs case post-Jackson.'

He said: ‘It brings to an end years of uncertainty over the assignment of solicitors’ retainers and legitimatises the transfer arrangements which were deployed in the case and thousands of others.’