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Christopher McClure takes a pragmatic look at the impact of the latest instalment of LASPO 2012 through the lens of CFA assignment.
It is by virtue of LASPO 2012, ss. 44 and 46 that litigants may no longer recover additional liabilities (i.e. success fees and ATE insurance premiums) between the parties in respect of agreements entered into on or after 1 April 2013. Limited exceptions in the form of statutory ‘saving provisions’ preserved the pre-LASPO position in relation to agreements entered into on or after 1 April 2013 in the following types of claim:
The insolvency exception no longer applies in cases where the additional liability (i.e. ATE insurance premium or conditional fee agreement) in question was incepted on or after 6 April 2016. The saving provisions in relation to both diffuse mesothelioma and clinical negligence matters presently continue.
ATE insurance premiums remain recoverable
Curiously, however, the saving provisions in relation to claims for defamation and breach of privacy will cease to apply only in relation to conditional fee agreements entered into on or after 6 April 2019. Thus ATE insurance premiums remain recoverable between the parties – at least for the time being.
The decision to make an exception in relation to the recovery of ATE insurance premiums is noteworthy and goes, at least some way, to preserving access to justice.
Whilst a CFA-funded litigant would, in the ordinary course of events, bear no liability for costs to their own legal representative should a claim fail, the potential for a ruinous level of cost (plus one’s own disbursements) behoves would-be claimants to ensure they are suitably insured against any such risks by way of ATE insurance.
Most potential claimants are therefore left with no option but to take out ATE insurance once the decision to make a claim has been made. Had the saving provisions not been preserved in relation to ATE insurance premiums, then a successful claimant would be faced with a liability not only for a success fee (usually set at 100% and in respect of which there is no cap relative to damages recovered as there are in actions for personal injury at first instance) but also for the ATE premium taken out in contemplation of the litigation in question.
Preserving the success fee inter partes
Because the changes apply only in relation to CFAs entered into on or after 6 April 2019, providers will naturally look to preserve the efficacy of a pre-LASPO CFA in the event that the claimant, who is party to a pre-LASPO CFA, transfers instructions to a firm on or after 6 April 2019.
Thankfully, the position in relation to CFA assignment (and novation) was conclusively put to rest by the Court of Appeal in Budana v Leeds Teaching Hospitals NHS Trust  1 WLR 1965 wherein it was held that a pre-LASPO CFA could be validly assigned (or novated) post-LASPO without forfeiting the benefits of a pre-LASPO CFA.
The fact that there is no requirement for a CFA entered into for the purposes of pursuing a defamation claim to cap the recoverable success fee at 25% of damages at first instance (as there is in personal injury matters and as there was the case in Budana) should mean that receiving parties are less likely to encounter technical arguments founded on the doctrine of novation.
Firms that wish to validly assign a CFA should do so in accordance with section 136 of the Law of Property Act 1925, which provides that –
The client’s consent to the assignment by definition is not required.
Providers to whom instructions are transferred post-5 April 2019 by a client who is party to a pre-LASPO CFA should seriously consider the possibility of an assignment. A client who, as a result of a failure to transfer a pre-LASPO CFA, is signed up to a post-LASPO CFA, will be liable for any subsequent providers’ success fee. The fact that an effective assignment would have led to the indemnification of that client’s liability by the paying party may give rise to a claim for negligence against the provider for any loss incurred as a result of failing to assign.
Please contact Christopher McClure to discuss any query relating to this article. Christopher is based at our Manchester office and can be contacted on 0161 835 4087.
LLB (Hons), PG Dip (BVC)
Thursday 21st March 2019