Assignment, Novation, Transfer? Avoiding Nil Costs Recovery!
John Plunkett – Costs Lawyer
The Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO) was viewed by many as the death knell of justice in our society. Restrictions were imposed limiting access to certain areas of funding by the Legal Services Commission (LSC) and costs budgeting and costs management made everyone sit and really start thinking about their approach to case management and litigation generally.
Training programs were put together to assist Lawyers with Costs Budgeting requirements, software programmers engaged in hard-fought battles to update and expand their products and then we all took that fateful plunge into the ether; with fingers crossed.
Six years later and all appears relatively quiet. Yes; we have had to roll up our sleeves for the long hard slog. Yes; funding restrictions made by the LSC were stifling and we have had to loosen our ties. Yes; the format of the Electronic Bill of Costs is laborious and onerous, but we are slowly dragging ourselves across the finishing line; despite the expense, delay and chaos surrounding the introduction of the Court’s new IT system.
It has been a tough new era in the legal industry and much pulling up of socks has been required to make it work, but this new era has brought new more difficult challenges. Law Firms have collapsed or; merged in order to survive and entire departments have been closed and their cases sold on. Enter the world of assignment, novation and transfer….
As mentioned, the introduction of LASPO was tough and everyone has been doing their utmost to overcome adversity, but challenges to the assignment, novation and transfer of cases from one firm to another is just another hurdle to overcome. Fortunately; the handing down of judgment in Budana v Leeds Teaching Hospitals NHS Trust (Law Society intervening) [2018] 1 WLR 1965 put people’s minds at rest; that is until Roman v AXA Insurance PLC [2018] (1).
Summary of The Case
Nothing in Roman v Axa Insurance PLC appeared, on the face of it, to raise alarm.
- The case involved a relatively minor road traffic accident which saw the Claimant bring an action against the Defendant’s Insured.
- A Conditional Fee Agreement (CFA) was entered into on 17th May 2012 between the Claimant and her Instructing Solicitors (Secure Law).
- The CFA followed the Law Society model CFA; which was to be read in conjunction with the Law Society’s document “What You Need to Know About a CFA”.
- In November 2015 Secure Law restructured their Personal Injury and Clinical Negligence Teams and advised the Claimant that her case would be transferred to Lime Personal Injury (part of Shakespeare Martineau LLP).
- On 10th November 2015 Lime wrote to the Claimant advising they were happy to act for her and sent her a new CFA for signing.
- On 11th November 2015 the Claimant signed a copy of the letter to her from Lime accepting the terms set out.
- A Notice of Change of Solicitors was filed on 11th November 2015.
- A £22,500 Part 36 Offer was made by the Defendant on 17th November 2015; which was duly accepted by the Claimant.
- A Bill of Costs was served and settlement could not be reached.
- The matter proceeded to a Provisional Assessment (PA) at the Senior Court Costs Office which was carried out by Deputy Master Campbell.
Again; still nothing alarming.
The Provisional Assessment
At the PA on 15th September 2016, Deputy Master Campbell rejected the Defendant’s argument that the Claimant had not agreed to the original CFA, entered into with Secure Law, continuing after the Claimant had entered into a second CFA with Lime. This essentially entitled Secure Law to recovery of their costs against the Defendant. The Defendant was adamant the Claimant had not agreed to the CFA continuing ergo; Secure Law were not entitled to their costs against the Defendant.
The Defendant sought an oral hearing on the issue which took place before Deputy Master Campbell on 1st November 2016. In his judgment, handed down on 7th February 2017, Deputy Master Campbell upheld his provisional assessment stating:
“It follows that I have not been persuaded that a liability to pay Secure Law’s costs ceased to exist when the firm ended the CFA. For that reason this review, under CPR 47.15(7), fails”
And Claimant Solicitors across the land took another huge sigh of relief.
That however; was not to be the end of the story. The Defendant appealed the decision of Deputy Master Campbell and on 7th June 2017 HHJ Dight granted the Defendant permission to appeal. HHJ Wulwik was nominated by HHJ Dight to hear the appeal and the Parties agreed there was no need for HHJ Wulwik to sit with an assessor.
Defendant’s Grounds of Appeal
- That the Deputy Master was wrong to find that the Claimant elected to affirm the CFA entered into by the Claimant with Secure Law, it being said that the CFA was an entire contract and that the repudiation of the contract discharged the Claimant from liability under it.
- That the Deputy Master was wrong to find that the Claimant affirmed the CFA with Secure Law by continuing with the claim with the new solicitors, Lime, on the same terms as the CFA with Secure Law, it being said that the Claimant instructed Lime on a new CFA and not on the basis of the original CFA with Secure Law
Claimant’s Grounds to Uphold
- That the Claimant had waived any right to treat the CFA with Secure Law as terminated and remained liable under it in the event her claim succeeded.
- That by her acceptance of Secure Law’s proposals and/or her instruction of Lime, the Claimant accepted the partial performance of Secure Law and her liability to pay for such partial performance in the event her claim succeeded, notwithstanding the contract was otherwise one of entire obligation.
- That there was an implied term in the CFA with Secure Law that the Solicitors could terminate the agreement for good reason, such as the ill health of the Principal of the firm, and that in such circumstances the Claimant would be liable under the CFA for work done by Secure Law up to the date of such termination, subject to her claim succeeding.
The Appeal
The main issue in the Appeal was to establish if the Claimant had elected to treat the CFA with Secure Law as continuing with the work to be done by Lime on the same terms as the original CFA with Secure Law.
In summing up, HHJ Wulwik made the following observations:
- The CFA entered into by the Claimant with Secure Law was clearly on the authorities an entire contract and was accepted to be an entire contract by the Claimant.
- The letter from Secure Law sought to terminate the CFA entered into by the Claimant with Secure Law because Secure Law’s relevant department ceased to exist. That was not a permitted circumstance for ending the CFA under the Law Society document ‘What You Need to Know About a CFA’ so as to entitle Secure Law to payment. The letter from Secure Law to the Claimant was a repudiatory breach of the CFA entered into by the Claimant with Secure Law
- The letter from Secure Law to the Claimant indicated that Lime’s agreement with the Claimant would be “on the same basis as was agreed by Secure Law”, while the letter from Lime to the Claimant stated that their agreement with the Claimant would be “on the same terms that you had with Secure Law Limited”. Neither letter suggested that the CFA entered into by the Claimant with Secure Law would continue if the Claimant’s case was transferred to Lime. On the contrary, the letter from Lime to the Claimant made it clear that she would have to enter into a new CFA with Lime before they could act for her.
- The Claimant accepted the repudiatory breach of the CFA entered into with Secure Law by proceeding to instruct Lime and entering into a new CFA with Lime.
- Unlike in Budana, the Parties did not take any steps with a view to the CFA entered into by the Claimant with the first firm Secure Law continuing to subsist. The terms of the documentation in Budana clearly showed that Ms Budana did not elect to terminate her contract with the first firm of solicitors but instead decided to preserve and transfer it.
- The original CFA with Secure Law did not continue to subsist.
- The Claimant did not accept the partial performance by Secure Law and her liability to pay for such partial performance. It was an entire contract. There was no term in the conditional fee agreement with Secure Law entitling them to payment for partial performance
- The Defendant’s Appeal was allowed.
Yes; the judgment is a blow to those Claimant Solicitors who have transferred cases to different Firms, but the devil is in the detail and that detail can be found in the wording of the CFA. If you have any concerns regarding the content and wording of your CFA, now is the time to contact us.
Contact John directly by clicking here
John Plunkett – Costs Lawyer – Partners in Costs
30.04.19