ASSIGNMENT OF CONDITIONAL FEE AGREEMENTS: THE CHAOS CONTINUES
Master Leonard held that an assignment of a Conditional Fee Agreement in a personal injury case was valid and its validity did not depend on a continuing relationship of trust and confidence between the client and solicitor as was the case in Jenkins v Young Brothers Transport Ltd  EWHC 151 (QB)
Here Mr Azim had had a Conditional Fee Agreement with one firm of solicitors which was subsequently assigned to another firm of solicitors.
A key issue was whether the first firm had terminated the Conditional Fee Agreement by way of a letter sent to Mr Azim on the same day as it entered into the assignment with the second firm of solicitors. That letter explained that, due to staff reductions, the solicitors were transferring Mr Azim’s case to the new solicitors on the same terms as the existing Conditional Fee Agreement and they enclosed a Form of Consent which Mr Azim subsequently signed.
Here the court distinguished what it described as the “quite different” facts in Budana v The Leeds Teaching Hospitals NHS Trust (unreported) 4 February 2016, Kingston-upon-Hull County Court and Webb v London Borough of Bromley (unreported), Senior Courts Costs Office (18 February 2016) and found that the letter had not terminated the Conditional Fee Agreement. For the assignment to be valid it was essential for Mr Azim to have had notice.
Thus the paying party’s argument could only succeed if, notwithstanding the need for that notice to be given, that notice was deemed to have terminated the Conditional Fee Agreement.
Consequently the Master held that if the assignment was valid there was no sound basis for concluding that there had been a termination of the Conditional Fee Agreement.
As to the validity of the assignment of the Conditional Fee Agreement the Master rejected the paying party’s contention that a burden of a personal contract cannot be assigned except where a solicitor who enjoys the “particular trust and confidence” of the client moves firm as was the case in Jenkins v Young Brothers.
Here the Master followed the approach in Jones v Spire Healthcare Ltd  3 Costs L0487 and saw no obstacle to a genuine arm’s length assignment of Conditional Fee Agreement in this case.
The Master also rejected arguments based on Section 136 of the Law of Property Act 1925 as he saw no reason to add a gloss to the statutory provisions by imposing a requirement for notice of assignment to be given in advance of the assignment.
Here the court said:-
“29. It was accordingly appropriate for TLW to write to the Claimant, as it did on 23 July 2014, first to give notice of the assignment and second to explain that the Claimant had the option of instructing other solicitors should he choose to do so. That seems to me to offer 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.
- The Defendant argues that the notice of assignment to the Claimant dated 23 July 2014 should be construed as a termination of the CFA, but even if that is right (and I do not accept that it is) such notice had not been given at the point of executing the assignment. Following assignment it cannot (again assuming, for present purposes, that the assignment was valid) have been open to TLW to terminate it.
- Nor was the Claimant’s consent to assignment sought in advance, so as to support the argument that what actually took place was a novation. The assignment having taken place and notice having duly been given it only remained for the Claimant to choose whether to allow Russell Worth Limited to act for him, as arranged by TLW, or to instruct other solicitors.
- In short the Defendant’s difficulty is that its argument, on the facts of this case, can only succeed if one accepts that although notice to a client is an essential element of any valid assignment of a CFA between solicitors, giving such notice will in any circumstances terminate the CFA and render it ineffective. That (in fairness to the Defendant) is not how the case is put, but its case on termination seems to me to reduce to those propositions.
- My conclusion is, accordingly, that if the assignment arrangement of 23 July 2014 was in itself valid than there is no sound basis for concluding that the TLW CFA was, at any stage, terminated by TLW. I turn to the question of whether the assignment was valid.”
In relation to the Jenkins point there was no suggestion here that the new solicitor enjoyed the particular trust and confidence of the client.
The court quoted with approval the principles set out at paragraphs 31 and 32 of the judgment in Jones v Spire Healthcare Ltd:-
“… the court is concerned with choses in action, that is non-tangible property and future entitlements, or present entitlements realisable in the future. The general principles… can be distilled as follows:
…The benefit of a contract, other than one which involves personal skill and confidence dependent upon a particular individual discharging obligations under it, can be assigned, whereas the burden cannot, subject to certain exceptions. One of those exceptions arises where the benefits and burdens are inextricably linked, for instance where entitlement to the right or benefit is dependent or conditional upon the discharge of certain responsibilities.”
The court then looked at the Jenkins v Young Brothers decision carefully quoting extensively from it, including the sentence:
“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”.
Thus in Jenkins the judge had not ruled out a valid assignment of a CFA where there was no relationship of trust and confidence with the solicitor in the firm to which the CFA was assigned.
In Budana the District Judge, quoted with approval here, said:-
“… Whilst the personal connection in Jenkins was an important factor it was not a necessary condition of the transfer being valid. To make such a finding would introduce an element of subjectivity as to the degree of trust and confidence required to validate the assignment. In my judgment, following the ratio in Jenkins I am bound to find that it is now possible to assign contracts involving personal skill, even where there was previously no personal relationship between the claimant and the new firm.”
The court in Webb took a different view holding that the relationship of trust and confidence between the solicitor and client in Jenkins was crucial to the judge’s finding and that in the absence of that factor Jenkins was to be distinguished and was not binding and therefore the assignment relied upon by the receiving party in Webb, in purporting to assign the burden of the Conditional Fee Agreement, along with its benefit, was invalid.
In Jones v Spire Healthcare Ltd, which I deal with in my post – Assignment of Conditional Fee Agreements: A Decision not to be relied Upon – the court reached a different conclusion and held that a firm of solicitors can validly assign its entitlement and responsibility under a Conditional Fee Agreement with a client to another firm of solicitors.
In the present case the Master adopted that reasoning and said that the imposition of any requirement that there be a relationship of personal trust and confidence between a particular solicitor and a particular client was inappropriate.
Another non-binding decision which should not be relied upon.
The state of the law on this important topic is currently chaotic and the sooner we get a definitive ruling of the Court of Appeal the better.
Please see my related blogs:-