The recent Court of Appeal ruling in Budana v Leeds Teaching Hospital NHS Trust was greeted with a large sigh of relief and has been widely welcomed by solicitors in the claimant PI sector.
Many pre-LASPO claims were acquired by larger firms on the assumption that the right to recover success fees from the defendant would not be lost, but this was called into question by an earlier District Judge’s decision in this case that in assigning the CFA to another firm, the agreement had been terminated. The Court of Appeal ruling overturned this argument, stating categorically that the CFA was not terminated and that the success fee (under the pre-LASPO agreement) remained payable.
The details of this case have been widely reported and revolve around the dates of the CFA’s assignment: the deed transferring the CFA to another firm was dated pre-LASPO whereas the client’s consent was signed post-LASPO. The ruling deemed that the transfer was technically a novation (although one judge held that it was an assignment), but most importantly from the law firm’s perspective is that the success fee remained payable under the terms of the original pre-LASPO CFA.
Had the decision gone the other way, the financial implications for claimant PI firms would have been nothing short of catastrophic, as it would have opened the door to further delays to payments caused by increased challenges from defendants at a time when cashflow for claimant firms is already stretched to say the least. But instead, the sensible nature of this ruling has been welcomed by the sector and offers much-needed clarity over the assignment of CFAs – namely that CFAs properly transferred in bulk PI claims should not be challenged.
As Matt Gwynne – Director, Business Development & Client Relations – explains: “This decision is a welcome relief for claimant PI firms as it provides clarity over the validity of any pre-Jackson CFAs that they may have acquired.”
“In the post-Jackson era, cashflow is one of the biggest challenges for PI firms already operating in a challenging environment, so any news that improves the certainty associated with acquired caseloads is most welcome.”
At SpectraLegal we support growing and established law firms and this decision will further to the rising trend in mergers and acquisitions that we’ve seen lately. For firms that are acquisitive, it’s important to know that finance is available and we are well-placed to assist with our specialist lending products.