DWF successfully argue that there is no presumption in favour of assignment of CFAs when claims are transferred to new lawyers
Webb v London Borough of Bromley
Before: Master Rowley
There have been a number of reported cases recently, concerning whether a CFA can be assigned from one firm to another. In cases where Claimants’ Solicitors can successfully argue that a pre-April 2013 CFA has been assigned, they can then continue to claim the substantial benefits under that CFA including a success fee on ongoing work. In the case of Webb v London Borough of Bromley (2016), Master Rowley, costs judge in the Senior Courts Costs Office did not accept that an assignment had taken place.
William Mackenzie, who acted for the Defendant in that case, takes us through the judgment, which saw the Master reject that he was bound by the decision in Jenkins v Young Brothers Transport (2006) EWHC 151 (QB) and conclude that what had taken place was a novation, denying the Claimant the additional benefits under the original CFA and her costs post novation. The reason why the Claimant went from one firm to the next was not as a result of “trust and confidence” that was found in Jenkins.
The Legal Landscape
The legal market has gone through a substantial period of consolidation over recent years and there have been a number of mergers and acquisitions in the Claimant legal arena. Some firms have sold their personal injury claims, or files have been transferred as a result of firms collapsing. Often the clients in those claims were originally signed up to a pre-April 2013 CFA, so that, were those claims to be successful, the solicitors would be entitled to claim a success fee on all of their work. Indeed, where caseloads have been acquired that feature pre-April 2013 CFAs, it is likely to have been on the understanding that the benefits would flow under those agreements from one practice to the other.
To claim those benefits the new Solicitors have to demonstrate that the CFA has been assigned to them and this raises a number of interesting and important issues;
Can a CFA be assigned from one law firm to another; and
Is it actually an assignment that has taken place or a novation; and
If so, what is the overall effect upon any paying party at the conclusion of the case?
Where Defendants seek to challenge the assignment of a CFA, Claimant’s Solicitors invariably rely on the case of Jenkins v Young Brothers Transport Ltd . In that case, heard in the QBD, Rafferty J held that;
Where the events underlying the assignment were the trust and confidence a client had in his Solicitor a conditional fee agreement could be assigned by one firm of Solicitors.
However, it has always been our position on behalf of insurers that the Jenkins case is fact specific and does not, as Claimants’ Solicitors argue, provide a sweeping endorsement of the practice of assignment of CFAs from one firm to another. In Jenkins the Claimant wanted to follow his Solicitor who moved to new firms on two occasions, thus meeting the “trust and confidence” test that Rafferty J saw as a requirement for him to conclude that the CFA had been assigned.
In the case of Webb v London Borough of Bromley, Master Rowley determined that the CFA was not assigned, instead a novation had occurred and he also found that the agreement with the new solicitors was unenforceable by virtue of the fact that it was not compliant with the Courts and Legal Services Act 1990 and the Conditional Fee Agreements Order 2013. This led to the Claimant being unable to recover costs following transfer of the claim to the new solicitors.
An understanding of the crucial difference between an assignment and a novation is important. In the case of an assignment, the original agreement continues, now with three parties rather than the two original ones, and claimant lawyers are keen for this result with CFAs pre-dating 1st April 2013 as success fees will continue to be claimed for ongoing work even after assignment.
In the case of a novation of a CFA on the other hand, the original agreement comes to an end, and a new agreement is set up with the new lawyers, which if it post-dates 1st April 2013 will not give rise to recoverable success fees, and indeed must be compliant with regulations for any costs to be recoverable.
Webb v London Borough of Bromley
The Claimant had brought a personal injury claim via her Solicitors, Lefevre LLP, and entered into a CFA with them in June 2012. That CFA provided that in the event she was successful, the Claimant would seek to claim a 99% success fee and the costs of an ATE policy. In July 2013, the Claimant’s Solicitor unfortunately died and a newly employed lawyer took over handling the claim. Lefevre LLP subsequently ceased trading in January 2014.
A purported assignment then took place between Lefevre LLP and the Claimant’s new Solicitors, Glamorgan Law LLP on 30 January 2014. In addition, seemingly in error, an assignment was also made between the Claimant and Glamorgan Law (“Glamorgan”). A Partner in Lefevre (who was also a Partner in Glamorgan) arranged for the assignment and the transfer of the case and upon transfer, that Partner dealt with the Claimant’s claim. Prior to the purported assignment, save for discussions in relation to the appointment of Glamorgan, the Partner had not dealt with the Claimant directly, although he had supervised the conducting fee earner.
At the successful conclusion of the case, the Claimant sought to claim the additional benefits under the CFA signed in June 2012 including a success fee on work done after what she said had been an assignment. The Defendant argued that the CFA had not been assigned, that instead novation had occurred and the resulting CFA was unenforceable.
The Claimant’s main contention was that the case of Jenkins demonstrated a wide enough principle that a burden of a CFA which is sufficiently connected to a benefit in that CFA enables that burden to be assignable under the law of contract. The legal principles of burden and benefit in relation to assignment are set out in case law and are a complex issue in their own right and we do not propose to deal with them here. Whilst the Claimant also argued that it was not necessary for her to demonstrate “trust and confidence” for an assignment to occur, the Claimant’s secondary position was that on the evidence provided, the Claimant did have “trust and confidence” in her Solicitors and the facts were the same as Jenkins. Accepting that the Partner at Lefevre did not have day to day conduct of the Claimant’s case, he was familiar with it and supervised the lawyer who did have conduct.
The Defendant’s position was, on the facts of this case the Claimant and Lefevre had actually agreed to terminate their relationship and the Claimant and Glamorgan had agreed to start a new relationship. Therefore the CFA was novated in January 2014. It was said the assignment between the Claimant and Glamorgan was just about sufficient to amount to a conditional fee agreement that constituted a retainer for the part of the bill which dealt with the costs incurred by Glamorgan so that those costs were recoverable albeit of course without a success fee as this new CFA post-dated LASPO.
In relation to the application of the “trust and confidence” test in Jenkins, it was contended by the Defendant that this was absent in this case.
Sitting in the Senior Courts Costs Office on 18 February, Master Rowley’s decision was that there had been a novation as part of which the CFA was terminated and a further retainer was made with the Claimant and her new Solicitors and in arriving at that conclusion he held:
The fundamental distinction between a novation and an assignment was in a novation the first contract is brought to an end with a second contract beginning, possibly seamlessly, with the new contracting party. In an assignment the original contract is maintained but transferred to a third party.
Despite the description of the document as being an assignment, the fact was that the Claimant was (properly) invited to make a decision about who would act for her, following the closure of Lefevre and her consent was sought as to the transfer of her file from Lefevre to Glamorgan. Had there been an assignment, then the Claimant would have simply received a communication to the effect that her file had been transferred consistent with that type of process. Even if a provider of services such as this could validly transfer its rights and obligations to another provider without the customer’s consent, assignment had not taken place here.
In Jenkins, it was clear that the Claimant wished to follow the lawyer who was dealing with his case from one firm to the next and, as such he did not want to end that relationship. What mattered to the Claimant in Jenkins was his relationship with the lawyer and the question of where the lawyer was based was irrelevant.
Here the Claimant found herself in the unfortunate position of being required to change firms of Solicitors as a result of the sad passing of the partner dealing with her case, who was also effectively the sole principal of Lefevre.
The discussions with the Claimant regarding the closure of Lefevre could have only been about the intention to end the relationship between the Claimant and Lefevre because there was no option but to end that relationship. The Claimant’s decision to instruct Glamorgan was not based on any existing relationship that there might have been with that firm.
Unlike in Jenkins, where the lawyer who had conduct of Claimant’s case was constant throughout, that was not the case in the instant case and as the element of “trust and confidence” were lacking in the relationship, Master Rowley held that the facts were distinguishable and so Jenkins was not binding upon him. He concluded that the attempt to assign the benefit and burden of the CFA between Lefevre and Glamorgan failed.
Master Rowley then went on to deal with this issue of enforceability of the subsequent agreement between Glamorgan and the Claimant. He agreed with the Defendant’s contention that the retainer fell foul of article 5 of the Conditional Fee Agreements Order and s.58(4B)(c) of the Courts and Legal Services Act, allowing as it did for a success of 100%, when that Order proscribes the maximum success fee also to be limited to no more than 25% of the general damages for pain, suffering and loss of amenity and the damages for past pecuniary loss.
As such the newly created retainer fell foul of the regulations and no costs were payable in relation to the costs incurred by Glamorgan Law. The costs incurred by Leferve LLP remained to be payable.
Master Rowley has given the Claimant leave to appeal the decision, and if the Claimant is so inclined, she can show cause why the appeal should be leapfrogged to the Court of Appeal.
As we highlighted at the start of this article, the state of flux in the claimant legal market means that large numbers of files have been transferred from one firm to another. Where there has been an attempt to assign a CFA in order to seek to claim a success fee on ongoing work it is essential that that that assignment has been done properly.
As Webb v London Borough of Bromley demonstrates, Claimants’ Solicitors will need to demonstrate to the Court where files have been transferred, that the Claimant retained “trust and confidence” in the conducting lawyer throughout the entirety of the litigation.
This could present difficulties for Claimant’s Solicitors in those instances where:
Caseloads have been transferred, but personnel have not also been transferred.
Pre-transfer, the Claimant’s file was not assigned to any one lawyer, but was conducted by a number of different lawyers in that firm.
Personnel have been transferred from one firm to another along with the files, but a new lawyer is assigned to the file post-transfer.
Even where the fee earner is the same post transfer, whether a CFA has been properly assigned will depend upon the discussions that took place between the parties including the Claimant and what was agreed with the Claimant at the time the file was transferred.
There have been a number of other judgments in this important area. In the case of Jones v Spire Healthcare (2015), District Judge Jenkinson sitting in Liverpool County Court held that the CFA between the Claimant and her old Solicitors had not been validly assigned to her new Solicitors (who had purchased the old Solicitors’ caseload when they went into administration), because, according to established common law principles, the assignment of personal contracts was not possible. He found the case did not fall within the ‘narrow exception’ to this principle established in Jenkins, where the Claimant had been ‘loyally following an individual Solicitor’ to their new firm.
However, DJ Jenkinson then went on to find that, notwithstanding the fact that the CFA itself had not been assigned, the ‘benefit of the retainer’ had been validly assigned, entitling the Claimant to recover the costs incurred by the old Solicitors but not those incurred by the new ones as there was ‘no enforceable retainer’ between the new firm and the Claimant. The judge found the agreement between the new Solicitors and the Claimant to be a novation rather than an assignment, meaning that it did not come into effect until January 2014. This case is subject to appeal later this year.
In the more recent case of Budana v The Leeds Teaching Hospitals NHS Trust (2016), District Judge Besford, sitting in Kingston upon Hull County Court, found that, whilst Claimants must be careful in how any assignment is attempted, even without “trust and confidence” (as discussed in Jenkins) a CFA could be assigned.
The judgment of the specialist costs judge in Webb v London Borough of Bromley has tilted the balance of these decisions back in favour of Defendants, but the area of law remains complex and further clarity in the form of a judgment from the Court of Appeal would be welcome. In the meantime the successful arguments used by the Defendants in Webb can be a useful template for analysis of future claims for costs in these circumstances.
The issues thrown up by the case of Webb and the other cases discussed here will be of great interest and DWF are running a number of similar cases, with a number of different Claimants’ Solicitors appearing on the other side. Should you wish to discuss these issues then please contact William Mackenzie on 020 7645 9507 or by email firstname.lastname@example.org or Steven Dawson, Head of the Costs Department on 0113 261 6118 or by email email@example.com
This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.