Definitive decision on assignment of CFAs now likely

District Judge Jenkinson’s decision of 11th September 2015 in Denise Jones v Spire Healthcare Limited is being appealed.

This case concerned the purported assignment of a Conditional Fee Agreement (“CFA”) between Ms. Jones and her former solicitors, Barnetts to her newly instructed solicitors, SGI Legal LLP.  Barnetts insolvency led to their personal injury work being sold to SGI Legal LLP, along with Ms. Jones’s case. Having succeeded in her claim, the Defendant objected to paying Ms. Jones’s costs, in so far as they were incurred by SGI Legal. This was on the grounds that the ‘assignment’ was, in fact, a novation (an entirely new agreement) on exactly the same terms as the CFA with Barnetts and, as the new agreement did not comply with the current statutory requirements (to show a success fee cap of 25% of damages) it was unenforceable.  The decision in this case hinged on whether, based on its facts, it could be distinguished from the decision in Jenkins v Young Bros Transport Limited (2006) 1 WLR 3189.

In that case, the Court found that the benefit and burden of the CFA were inextricably linked. That is to say, the benefit (the entitlement to be paid) was wholly dependent on the burden (the obligations to act in the client’s best interest and succeed in the claim) so as to be treated as an exception to the general rule that ‘personal contracts’ cannot be assigned.

That ‘inextricable link’ has been regarded by some as being sufficient validation for an assignment of a CFA. However, the problem is that Rafferty J, in Jenkins, made it very clear that this was a decision based entirely on the facts of the case and, had it not been for the fact that the client had trust and confidence in the particular solicitor who had moved to the newly instructed firms (and was the reason for the assignment) the Court may not have come to the same decision. To quote Rafferty J: “Whether, absent that trust and confidence, a CFA could validly be assigned is not a matter upon which it has been necessary for us to reach a conclusion”. Therefore, a question remained as to whether it was enough simply to show that the benefit and burden of the contract are inextricably linked.

In Jones, DJ Jenkinson found that any trust and confidence the client had in the solicitor before the case was transferred to SGI Legal was of no consequence to the client after the date of transfer. This is despite the fact that the solicitor had also transferred to SGI Legal and remained involved in her case. In that regard, the District Judge was able to find that there were insufficient grounds to treat this case as an exception to the general rule.

The District Judge agreed with the Defendant’s submission that the ‘assignment’ was in fact a novation that was in similar terms to the CFA with Barnetts and, as the new CFA did not comply with the current statutory requirements, it was unenforceable. Fortunately, Ms. Jones was able to recover the costs incurred under the CFA with Barnetts.

Although decided differently on the facts, both decisions show that, in order to have a valid assignment of a CFA, it is not good enough simply to agree terms that provide for the acceptance of the burdens of a contract along with its benefits. The solicitors, it appears, must also prove their commitment to those terms by reference to their conduct and the conduct of their clients which, if the decision in Jones is anything to go by, could very well depend on the conduct of the client long after the agreement was entered into.

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