Conditional fee agreements can be transferred between law firms, the Court of Appeal said yesterday in a landmark ruling for legal costs.
The appeal court overturned a decision from a district judge about a no win, no fee agreement over a clinical negligence claim involving Leeds Teaching Hospitals NHS Trust.
District Judge Ian Besford had originally held that the conditional fee agreement (CFA) was not validly assigned from the law firm Baker Rees to another practice, Hudgell. The judge ruled that the file could not be transferred because the agreement had been terminated when the first law firm informed the client that it was no longer dealing with personal injury work.
The test case was leapfrogged to the appeal court as there had been several conflicting decisions in the lower courts.
Giving the lead judgment in the Court of Appeal, Lady Justice Gloster found that Judge Besford had made a mistake in finding that the original agreement had been terminated.
The Court of Appeal found that the main issue was whether the claimant was entitled to recover a success fee under a CFA entered into before April 1, 2013, after which such fees were banned.
“There is no reason in principle why rights and benefits under a firm of solicitors’ contracts with its clients, or its books of business, should not be capable of assignment in today’s business environment,” Lady Gloster said.
She ruled 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 original success fee payable under the Baker Rees CFA was still enforceable.
“It is clear… that, objectively construed, 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,” the court ruled.
The Law Society, which represents solicitors in England and Wales, intervened in the appeal on the grounds that the case had significant implications for the legal profession. The organisation’s president, Joe Egan, said the ruling “will affect many thousands of people who, following the removal of legal aid for the bulk of personal injury claims, needed to rely on no win no fee agreements to pursue their cases”.