Budana v The Leeds Teaching Hospitals NHS Trust & Anor

A repudiatory breach does not terminate a solicitor-client retainer unless the innocent client elects to accept it. A transfer with the client’s consent may be a novation where the original solicitor is discharged, even if the parties describe it as an assignment.

For section 44(6) of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 and article 6 of the Conditional Fee Agreements Order 2013, a success fee can remain payable under a pre-1 April 2013 CFA where the new firm is intended to act under the old CFA’s terms. Technical novation does not defeat transitional protection designed to preserve vested rights and expectations.

The claimant instructed Baker Rees under a pre-LASPO conditional fee agreement after suffering personal injury at the defendant’s hospital. In March 2013, before the LASPO reforms came fully into effect, Baker Rees sought to transfer its personal injury work to Neil Hudgell Ltd. The claimant consented, signed a deed recording the transfer, and was thereafter represented by Neil Hudgell under arrangements referring to the original CFA. She later signed an alternative post-LASPO CFA with a zero success fee, conditional on the transfer deed being ineffective.

At detailed assessment, District Judge Besford held that the original CFA had been terminated. He alternatively held that it could be assigned, but that the claimant’s ratification produced a novation. The claimant appealed the termination ruling and the defendant cross-appealed the assignment ruling. The central issues were whether the CFA survived, whether the transfer was an assignment or novation, and whether any success fee remained protected by the transitional provisions of LASPO.

1. Outcome. The appeal was allowed and the cross-appeal was dismissed. Gloster LJ and Beatson LJ formed the majority on the assignment and novation issue. Davis LJ agreed with the result but adopted a different analysis.
2. Termination. A repudiatory breach does not terminate a contract unilaterally. The innocent party must elect to accept the breach and terminate; otherwise the contract continues. Applying Société Générale, London Branch v Geys [2012] UKSC 63, the claimant had affirmed rather than terminated the BR CFA by consenting to the transfer arrangements and executing the second deed.
3. Assignment and novation. The majority held that the conditional benefit principle was a limited doctrine and did not determine this case. It applies where the benefit is conditional on performance of a directly related burden, but there was no need to impose such a burden by law because the claimant and NH had expressly contracted for NH to provide the services and for BR to be discharged. Under the principles stated in Tolhurst v Associated Portland Cement Manufacturers Ltd [1902] 2 KB 660, Southway Ltd v Wolff [1991] 57 BLR 33 and Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85, the arrangements therefore constituted a novation and a new contract. Beatson LJ agreed, emphasising that the discharge of BR and the client’s consent were hallmarks of novation.
4. Transitional protection. Although technically novated after 1 April 2013, the contractual arrangements objectively intended NH to act under the continuing terms of the pre-LASPO BR CFA, preserving accrued and accruing rights to a success fee. Section 44(6) of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 and article 6 of the Conditional Fee Agreements Order 2013 were construed purposively. Following the approach in Plevin v Paragon Personal Finance Limited [2017] UKSC 23, the transitional provisions preserved vested rights and expectations and were not defeated by an overtechnical application of novation.
5. Alternative reasoning. Davis LJ considered that the tripartite arrangements had achieved an assignment, rather than a novation, because the parties expressly intended to preserve the original CFA. He nevertheless agreed that, even if there had been a true novation, the success fee remained protected by the transitional provisions. Issue 4, concerning liability under the alternative NH CFA, was therefore unnecessary to decide.

1. Court of Appeal (Civil Division) — [2017] EWCA Civ 1980 . Appeal allowed and cross-appeal dismissed.
2. County Court at Kingston upon Hull — District Judge Besford, order dated 4 February 2016. The BR CFA was held to have been terminated; alternatively, the transfer was treated as an assignment followed by novation.
3. The appeal was transferred to the Court of Appeal under the leapfrog procedure in CPR 52.23. The Law Society intervened.