Costs judge gives another CFA assignment the thumbs-up

Assignment: deal between law firms effective

Assignment: deal between law firms effective

The assignment of conditional fee agreements (CFAs) is under the spotlight yet again after a costs judge ruled that one had been validly made.

Master Leonard agreed with HHJ Wood’s recent ruling in Jones v Spire Healthcare that the leading authority in the area did not require there to be a relationship of personal trust and confidence between a particular solicitor and client to allow an assignment.

Azim v Tradewise Insurance Services Ltd [2016] EWHC B20 (Costs) concerned the detailed assessment following the claimant’s acceptance of a £3,500 part 36 offer for a road traffic claim.

The transfer of the case from TLW Solicitors to Russell Worth Ltd on 23 July 2014 was under scrutiny. The two firms reached an agreement to transfer various claims over on that date, and TLW wrote to the claimant the same day, saying: “We have recently received an influx of new work as a resulting (sic) of securing a new contract, however unfortunately have been unable to replace a couple of key staff who are currently on maternity leave. This means that existing staff have more cases to deal with than we would normally wish.

“Rather than have this impact on the quality of service which you receive or cause any delays to the settlement of your claim, we have put in place arrangements to pass over the handling of your case to another firm which specialises in cases such as yours.” The letter emphasised that the claimant was free to go elsewhere.

The court had to decided whether the retainer with TLW had been terminated, whether the CFA could be assigned in this way, and whether, if so, it was effective.

Master Leonard distinguished this case from other recent cases, such as Budana and Webb, because here the assignment occurred before the claimant was informed about it. There was “no real basis for concluding that the TLW CFA had been, or was, terminated at the point that TLW entered into its 23 July 2014 transfer arrangement with Russell Worth Limited”.

As to the legality of the assignment, the only binding authority is Mrs Justice Rafferty (as she then was) ruling in Jenkins v Young Brothers Transport Ltd [2006] EWHC 151, which established a narrow exception to the rule that a personal contract could not be assigned, saying it could be where a client was following his solicitor to another firm.

In his much-discussed Jones ruling in May, HHJ Wood ruled that Rafferty J was not seeking to qualify the exception to the general rule against the assignment of the burden of a contract to specific situations where personal trust and confidence could be established, so much as to set a context in which it applied to the facts of the case.

Master Leonard said: “That is reasoning with which I respectfully agree. It seems to me that Rafferty J found limited assistance in the authorities to which she had been referred in applying a principle, which may be said to exist for the benefit of the non-assigning party, to circumstances in which the non-assigning party had every reason to (and did) accept an assignment.

“Nonetheless she applied established principles in coming to the conclusion that a CFA could be the subject of a valid assignment, and she expressly stopped short of any finding to the effect that a relationship of personal trust and confidence between a particular solicitor and a particular client was a prerequisite to that.

“For the reasons given by both District Judge Besford [in Budana] and HHJ Graham Wood QC the imposition of any such prerequisite would in my view be inappropriate.

“In summary I can identify no obstacle, in the principles governing assignment of the benefit and burden of contracts, to the validity of a bona fide, arms-length CFA assignment in the circumstances of this case.”

He went on to find the assignment effective and that, as a result, a novation had not taken place.

Master Leonard concluded: “It follows that the indemnity principle does not operate to prevent the recovery of the costs incurred by the claimant and payable both to TLW and Russell Worth Limited under the terms of the TLW CFA.”

    Readers Comments

  • Phil says:

    This issue is already being considered by the Court of Appeal next Spring (as reported by this site on 30 June). Why report a first instance decision?

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