CFA ‘terminated’ before assignment, court rules

Topics: Costs, fees and funding,Personal injury & clinical negligence,Courts business

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A retainer including a pre-Jackson conditional fee agreement that was transferred between firms was terminated when the original firm told its client it was no longer conducting personal injury work, according to a county court judgment today.

The case is one of a number of actions currently working their way through the courts with significant potential ramifications for the PI sector, which has seen tens of thousands of pre-Jackson cases sold on to larger firms.

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In today’s ruling, in Budana v Leeds Teaching Hospitals NHS Trust in Kingston-upon-Hull County Court (pictured), DJ Besford held that a retainer between the client and Baker Rees had already been terminated before the pre-Jackson CFA could be assigned to PI firm Neil Hudgell; meaning that there was no valid CFA to be transferred.

A letter sent by Baker Rees on 22 March 2013 - just before the introduction of the civil justice reforms - informed the client that due to the reforms ‘we have decided to stop handling personal injury litigation’.

The letter explained that to protect clients, a process had been put in place to transfer the case to Neil Hudgell, which would continue to act on the same ‘no win, no fee’ agreement.

Besford said the wording of a letter was ‘unambiguous’, noting that there was ‘no suggestion that they would continue to act pending [the client’s] instructions… The retainer had been terminated by Baker Rees.’

The judge went on to consider whether it would in fact have been possible to assign the CFA, had the retainer not been terminated.

He rejected arguments that the CFA could not be assigned, considering himself bound by the reasoning adopted in the earlier High Court decision of Jenkins v Young Bros Transport (2006) 1 WLR 3189.

Despite noting that ‘the facts in Jenkins are far removed from the commercial wholesale disposal of clients as in this case’, Besford said that the higher authority ‘clearly permits the transfer of a CFA between firms’, and must be followed.

However, despite being bound by Jenkins, the judge commented that there was ‘much force’ in arguments put forward by the defendants’ counsel Roger Mallalieu that Jenkins had been wrongly decided.

A second CFA, entered into with Neil Hudgell on the basis that it would only apply if there were a problem with assignment of the first CFA, was found to be valid.

The judge gave permission for both an appeal and cross-appeal. It is understood that the defendants are considering applying to have the cross-appeal leapfrogged to the Court of Appeal.

The claimant was awarded Neil Hudgell’s base fees, disbursements and VAT, but not the costs of Baker Rees.

Another case concerning the assignment of CFAs is being appealed in Liverpool County Court.

CFAs entered into before 1 April 2013 retain the benefit of success fees and after-the-event insurance premiums being recoverable from losing defendants. A large number of these pre-Jackson CFAs have been bought by larger practices as smaller firms have chosen to exit the PI market.

Readers' comments (33)

  • FFS

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  • @ 03:02 pm

    "FFS" = Fair Finding, Sir?

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  • it is an expression of exasperation.

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  • This is going to lead to a potentially critical writing down of the value of WIP which may well be the final straw for some as the lenders / bankers become more risk adverse.

    A perfect storm could be brewing.

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  • This seems fundamentally unfair to the clients who by virtue of having a pre-Jackson CFA do not get the benefit of QOCS or the 10% uplift (specifically put in place to address the unfairness of removal of success fees and recoverable ATE premiums), but who lose a percentage of their damages and have to pay for ATE - which they can't get any way because no-one now is prepared to provide cover where there's a risk of paying defendants costs.
    What a mess!

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  • Can someone clarify?? We worked on a personal injury claim for 3 and half years and now the case is at quantum stage. Can we transfer the CFA to a new firm and would it be possible for the new firm to recover our cost ( the work we have done). It's pre Jackson CFA. ??

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  • Anon @ 3.45 It sounds as though you would have to assign the CFA to the new firm first, and terminate your own retainer with you client. Although it sounds as though the issue of assigning the CFA would also be subject to challenge, although in your position I would be looking for a copy ofthis judgement and reading it very, very carefully before you do anything

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  • There needs to be clarity on this given in Jones v. Spire Healthcare, which is going to Ct of A, Judge found could not uphold Jenkins as that was decided on case specific facts. In Jones costs under first CFA recoverable but not second CFS whilst in this case costs under second CFA recoverable but not the first CFA. In this case Judge did apply Jenkins. The problem has come about where the change of retainer comes about where you have a pre Jackson CFA. Remember on an assignment you can assign the rights/benefits to new solicitor (i.e. right to get paid) but not the burden (to do the work) whereas on a novation all the benefits and burdens of the original CFA are transferred to new Solicitor but original contract annulled. Therefore be careful if assigning as could turn to novation.

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  • To 3 45 Suggest use agency agreement and you should not have a problem

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  • Anon 3.19
    Yes, it is unlikely any funder is going to be filled with confidence as to the viability of PI firms which have taken over large volumes of cases.
    Bit late to short Slater & Gordon.....again.....

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