CFA ‘terminated’ before assignment, court rules
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.
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.