Court rules that assignment of CFAs does not breach the indemnity principle
A conditional fee agreement (CFA) can be assigned, a court has held, in a decision that will affect thousands of cases.
Ruling in the county court at Liverpool in Jones v Spire Healthcare (App No 96/2015) last week, Judge Graham Wood QC held that an insolvent firm of solicitors can validly assign its entitlement and responsibility under a CFA with a client to another firm of solicitors.
If they were not able to do so, Judge Wood said, then potentially recoverable costs would be “lost forever…to the disadvantage of any creditor in the administration, and to the advantage of an opposing party who might escape a substantial liability for costs in the event of losing the case”.
The case arose after well-known Midlands law firm Barnetts went into administration in 2013, and its CFA personal injury cases were bought by SGI Legal. A deed of assignment was drafted by specialist counsel. The claimant in Jones signed a separate deed of assignment and eventually settled her case for £17,500. Last year, a county court judge ruled that personal contracts could not be assigned under common law.
Hannah Riordan, associate at law firm Clarion, says: “Sitting at the County Court at Liverpool, HHJ Wood ruled that DJ Jenkinson was wrong to construe the ‘Jenkins exception’ to the rule against CFA assignment, so narrowly as to only apply where a client loyally follows an individual fee earner from one firm to another.
“Given that most modern day case handling is conducted at a distance, such circumstances would often be too difficult to prove. This judgment means that assignment of CFAs does not breach the indemnity principle, and will result in a valid retainer, allowing recovery of both pre-and post-assignment costs.”
NLJ columnist Professor Dominic Regan, of City University, says: “In a decision affecting thousands of cases where costs run into the millions, it has been held that one can lawfully assign a CFA.
“The practical upshot is that a newly appointed solicitor can take the benefit of the original agreement. Thus, costs and a recoverable success fee will accrue.”
