Kerry Underwood

ASSIGNMENT OF CONDITIONAL FEE AGREEMENTS: JENKINS FOLLOWED

with 14 comments


In Griffith and Griffith v Paragon Personal Finance Ltd, case 0MA25805, Sheffield County Court, 17 October 2016

 

the District Judge held that, following Jenkins v Young Brothers Transport Ltd [2006] EWHC 151 (QB), where a solicitor moves firms, taking the client with her, any Conditional Fee Agreement can be lawfully assigned to the new firm and there is no need for a fresh CFA to be entered into.

 

The case involved an assignment from a law firm operating through the medium of a partnership to a law firm operating as a limited company, and thus the same solicitor was involved throughout and in the same organisation and using the same trading name.

 

There was then a second assignment to a separate and new law firm, albeit one controlled by the solicitor who had been dealing with the cases and who was setting up on his own.

 

The court held that in a Jenkins type case, where the client moved firms with the solicitor, no formal consent was required, but rather a lack of objection.

 

Formal consent would create a three-way agreement that could be considered a novation.

 

The formalities should only be between the two law firms, or the partnership and the limited company or LLP, or whatever.

 

An oral assignment is valid. There is no requirement that an assignment of a contract has to be in writing.

 

As a Conditional Fee Agreement is a contract for legal services, the client must be able to determine who her solicitors are.

 

Lack of express consent was not fatal to the validity of the assignment.

 

The client’s consent could be implied from her continuing to instruct the new solicitors.

 

In any event the evidence here was that the client did not wish to avoid the assignment.

 

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Written by kerryunderwood

February 10, 2017 at 7:05 am

Posted in Uncategorized

14 Responses

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  1. Hi

    What if a solicitors stops doing the work and recommends to a client another firm who specialise in the area.

    New firm enters into post laspo cha but previous solicitor was on pre laspo cfa….nothing in terms to say what happens in that situation but just the usual references that if you go on to win you pay costs and SF.

    My view is it is fine but Defendant raising arguments that initial solicitor would not be entitled to costs…

    Thanks in advance!

    Maria

    Sent from my iPhone

    mbarker2014

    February 10, 2017 at 7:26 am

    • Maria

      I agree with the defendant. A contract for legal services is a entire contract- the solicitor is not free to stop acting except in the limited circumstances set out in the Code of Conduct.

      Also the condition precedent- a win – has not been satisfied.

      It is possible and lawful to draft the CFA in terms allowing for this, but I doubt if it was so drafted.

      Kerry

      Others take a different view.

      kerryunderwood

      February 10, 2017 at 9:55 am

  2. Can you assign a pre-LASPO CFA with a recoverable success fee if the client is following the solicitor because the solicitor has moved firms as in the case of Griffith above?

    Curious

    February 10, 2017 at 8:03 am

    • Yes, according to Jenkins and now Griffiths- but many if us have doubts about the correctness of Jenkins, which the court in Griffiths was bound to follow.

      Kerry

      kerryunderwood

      February 10, 2017 at 9:51 am

      • Ok. Thanks Kerry. Do you think the decision will be reversed at any point?

        Confused

        February 11, 2017 at 8:31 am

      • Probably not. Has been around for a while now. Diminishing problem as pre-April 2013 Conditional Fee Agreements with recoverable success fees fall away, so suspect courts will just let it run.

        Kerry

        kerryunderwood

        February 12, 2017 at 7:45 am

      • Ok. Thanks Kerry.

        Confused

        February 12, 2017 at 5:20 pm

  3. Pleasure

    kerryunderwood

    February 12, 2017 at 5:56 pm

  4. Hi Kerry

    Do you have any idea what the situation will be for a child whose parent entered the CFA pre-LASPO but who has subsequently reached 18?

    We have a situation where this is likely to happen soon. My inclination is to for the parent and child (once 18) to enter a deed of assignment, so that the pre-LASPO CFA can continue to be used as the funding mechanism. I would also propose to enter a new post-LASPO CFA with the now-adult child, re costs incurred from their 18th birthday, the operation and effectiveness of which is to be contingent upon the assignment being invalid.

    Or are we perhaps best to do nothing, and simply leave the pre-LASPO CFA to run, beyond the child’s 18th birthday and maybe simply write to them (the adult child) to let them know that’s what we’re going to do unless they have any objection?

    I anticipate that this is going to be a problem on some cases of significant value in future, and would hope that the courts will be loathe to penalise a Claimant who happened to turn 18 during the course of their claim such that they were only able to recover a success fee on the pre-18 work, with post-18 work subject to LASPO (and exposed to a deduction of up to 25% from their damages).

    Many thanks in advance

    Geoff Jeffington

    February 15, 2017 at 12:31 pm

    • Geoff

      In what capacity did the parent enter into the Conditional Fee Agreement?

      A child is free to enter into a contract for necessaries and the courts have held, where necessary, that in those circumstances a parent was simply acting as the child’s agent and therefore the original agreement is between the child and the solicitors and remains in force once the child achieves majority, as in fact nothing significant has happened.

      This was the conclusion reached in Dunn v Mici [2008] EWHC 90115 (Costs).

      Here is my section from Butterworths Personal Injury Litigation Services (BPILS) dealing with this issue:

      “A minor who has entered in to a CFA through a Litigation Friend prior to 1 April 2013 will recover the success fee for work done during his or her minority. However if the minor becomes 18 years old after 31 March 2013, then the new CFA which he or she must enter in to will not be able to have a recoverable success fee and thus only in relation to work done up to the claimant’s 18th birthday will the success fee be recoverable.

      Thus the extent to which the success fee will be recoverable will depend upon the claimant’s age at the time of the settlement.

      In practice carry out all possible work at all possible speed so that as little work as possible is done after the claimant’s 18th birthday so as to minimise work carrying a non-recoverable success fee.
      Once a minor achieves his or her majority the role of the Litigation Friend falls away, and on the face of it so does the conditional fee agreement signed by the Litigation Friend.

      Two potential consequences flow from this:

      (i) there is a risk that any success fee will no longer be recoverable as the new conditional fee agreement is post-31 March 2013, and by virtue of s 44 of the Legal Aid, Sentencing and Punishment of Offenders Act the success fee is not recoverable;

      (ii) that the retainer runs only from the date of the new conditional fee agreement, leaving the solicitor with an indemnity issue in relation to costs incurred before that date.

      This would penalise a child for being a child on 31 March 2013, as a claimant who was an adult on 31 March 2013 would have no such problem.

      It would also give an entirely unwarranted windfall to the tortfeasor.

      To rub salt in to the wound the claimant would not get QOCS protection because at some stage there had been a conditional fee agreement with a success fee; for the same reason it is arguable that the claimant cannot get the 10% Simmons v Castle general damages uplift.

      It remains to be seen how the courts will treat such cases. My view is that they will work hard to allow recoverability of the success fee and recovery of costs back to the beginning of the case.

      This may be achieved by allowing the claimant to adopt the contract, or by holding that the Litigation Friend acted as agent for the minor, a minor of course being allowed to enter into a contract for necessities, which surely a conditional fee agreement for legal services must be.

      Although it was not the main issue in the case, this was the conclusion reached in Dunn (Daniel) v Crescenzo Mici, where the Supreme Court Costs Office was considering the validity of a conditional fee agreement under the 2000 Regulations, which imposed heavy regulatory burdens upon solicitors in conditional fee cases and which have long since been repealed. The defendant’s argument was that the claimant’s solicitor had failed to comply with the Conditional Fee Agreement Regulations 2000 and that by operation of the indemnity principle, under which only those costs which a receiving party is liable to pay his own solicitors are recoverable from a paying party, there were no costs to indemnify and therefore the losing defendant’s liability was nil. As the claimant had been a minor when the conditional fee agreement was entered into, it had been signed by his mother. At paragraph 20 of the judgment the court said:-

      “…a principal can act through an agent; here, the principal was Mr Dunn and his mother was his agent. Second, there was no requirement for a litigation friend to be appointed. This would only have been obligatory on the issue of proceedings had Mr Dunn then been a minor, but by that date, he had already attained his majority.””

      In Blankley v Central Manchester and Manchester Children’s University Hospitals NHS Trust [2015] EWCA Civ 18

      the Court of Appeal held that the liability to pay a solicitor’s costs remains with the litigant, even a litigant without capacity, and not with the Litigation Friend.

      Thus if the client lacks capacity at the time of the retainer, then that retainer is still with the litigant and the Litigation Friend is merely a statutory agent of the incapacitated litigant, and not a principal to the retainer.

      This is essentially the same line of reasoning as in Dunn v Mici.

      There is now no doubt that a contract for legal services is a contract for necessaries.

      I agree with you, as set out above, that the courts will be loathe to penalise a claimant who happens to turn 18 during the course of a claim.

      Here is the write-up from my course material:

      Children attaining majority

      As long as the minor stays a minor, then there is no problem, and the success fee and base costs are recoverable from the losing party under a pre 1 April Conditional Fee Agreement.

      The potential problem is in relation to a case where the Conditional Fee Agreement was signed prior to 1 April 2013 and the minor achieved majority on or after that date. There is the issue of whether costs incurred under the original CFA are recoverable, irrespective of the issue of the success fee, as if the original agreement cannot be assigned, then there is no lawful retainer in place in relation to pre-majority work. The indemnity principle means no retainer equals no fee.

      Once the minor achieves his or her majority the role of the Litigation Friend falls away and, on the face of it, so does the Conditional Fee Agreement signed by the Litigation Friend.

      Two potential consequences flow from this:

      (i) there is a risk that any success fee will no longer be recoverable as the new Conditional Fee Agreement is post 31 March 2013, and by virtue of section 44 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 the success fee is not recoverable;

      (ii) that the retainer runs only from the date of the new Conditional Fee Agreement leaving the solicitor with an indemnity principle issue in relation to costs incurred before that date.

      This penalizes a child for being a child on 31 March 2013. A claimant who was an adult on 31 March 2013, or a child who had achieved his or her majority by that date, would have no such problem.

      This gives an unwarranted windfall to the tortfeasor.

      It is strongly arguable that the Legal Aid, Sentencing and Punishment of Offenders Act 2012 is thus not compliant with the Human Rights Act 1998.

      Section 44 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 was implemented by the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (Commencement No. 5 and Saving Provision) Order 2013. Article 4 contains the saving provisions and it would have been simple to add

      “(g) proceedings where a minor whose Litigation Friend entered into a Conditional Fee Agreement before 1 April 2013 achieves his or her majority during those proceedings.”

      To rub salt in to the wound such a claimant does not get Qualified One Way Costs Shifting as at some stage there had been a Conditional Fee Agreement with a success fee (Landau v The Big Bus Company, 31 October 2014, Master Haworth, SCCO). See my piece – Qualified One Way Costs Shifting.

      For the same reason it appears that the 10% Simmons v Castle (No 2) [2012] EWCA Civ 1288 general damages uplift does not apply.

      In cases involving minors achieving their majority the courts are likely to hold that costs, including the recoverable success fee, are recoverable under the original Conditional Fee Agreement and thus no problem is caused by a child being represented under a pre 1 April 2013 CFA attaining majority.

      In Dunn v Mici [2008] EWHC 90115 (Costs) the Supreme Court Costs Office worked hard to preserve the validity of a CFA on a different point, but with the same potential effect. The court was not dealing with success fee recoverability but that does not affect the rationale of the decision; if the original Conditional Fee Agreement entered in to by the minor is valid, then costs under that original agreement, including the success fee, are recoverable.

      Dunn v Mici concerned a CFA under the since repealed 2000 Regulations, which imposed heavy regulatory burdens upon solicitors in Conditional Fee cases. The defendant argued that the claimant’s solicitor had failed to comply with those Regulations and so no costs were payable by the claimant and that by operation of the indemnity principle the losing defendant’s liability was nil.

      As the claimant had been a minor when the Conditional Fee Agreement was entered into, it had been signed by his mother. At paragraph 20 the court said:-

      “…a principal can act through an agent; here, the principal was Mr Dunn and his mother was his agent. Second, there was no requirement for a litigation friend to be appointed. This would only have been obligatory on the issue of proceedings had Mr Dunn then been a minor, but by that date, he had already attained his majority.”

      In any case where proceedings had not been issued when the Litigation Friend was appointed then the principles set out in Dunn v Mici apply.

      If, unusually, proceedings had been issued before the CFA was signed, then there would be a Litigation Friend, who would doubtless have signed the CFA.

      However, that does not prevent the Litigation Friend from also being the agent of the principal, the principal being the minor.

      Contracts for Necessaries

      There is a strong argument that a CFA to pursue a lawsuit is a contract for necessaries; such contracts have always been treated differently, and even if made by a person under a legal disability, including a minor, are valid and enforceable.

      Consequently a minor is free to enter in to a binding and enforceable Conditional Fee Agreement on the basis that it is a contract for necessaries.

      This is important in relation to the Principal-Agent argument as there must be a valid Principal for there to be a valid Agent.

      In Practice

      Solicitors should rely on the original CFA and seek recovery of costs, including the success fee, as usual.

      What we do is to the client to sign a statement as follows:

      “I confirm that the attached document is a true copy of a Conditional Fee Agreement dated [ ] entered into between [ solicitor ] and [ name of signatory ] and I confirm that [ name of signatory ]was at all times acting as my lawfully appointed Agent in relation to the Conditional Fee Agreement and had full authority to sign that agreement on my behalf.

      I have now achieved my legal majority and instruct [solicitor] to continue to act for me under this Conditional Fee Agreement.

      Insofar as it is necessary for me to ratify this agreement, I hereby do so.”

      This avoids any argument about assignment and also avoids any issue of novation.

      This document does not need to be disclosed to the paying party until and unless the paying party takes the point on assessment of costs.

      Additionally the client should enter in to a fresh CFA on a “belt and braces” basis but this CFA should not be disclosed to the paying party until and unless the validity of the original agreement is challenged. This does at least give a right to costs from the date of the new agreement if the original one is held to be invalid. In such circumstances the success fee will not be recoverable.

      In Forde v Birmingham City Council [2009] EWHC 12 (QB) the Queen’s Bench Division of the High Court held that retrospective CFAs are permissible and that no consideration is required. Any changes to the basis of the retainer must be made prior to the entitlement to costs becoming crystallized. The terms of the backdating must be such that a reasonable client would not object, the point being that the actual client is unlikely to object because she will not be paying anything.

      If the second CFA failed then resort could be had to the first one. The court also held that s 58(1) of the Courts and Legal Services Act 1990 (CLSA 1990) and the changes made thereto meant that even a seriously flawed CFA is not illegal, but merely unenforceable. (See paragraph 206 of the judgment).

      Thus the client should also sign a retrospective, not backdated, CFA on the same basis as the original one. This CFA should not be disclosed to the paying party until and unless the validity of the original agreement is challenged.

      There is another, now very significant, problem in relation to children cases where, for any reason, there is no valid pre 1 April 2013 Conditional Fee Agreement; of course the reason may be that the cause of action did not arise until after 31 March 2013.

      The problem is that most judges are refusing to allow any deduction from a child’s damages in order to fund the claimant solicitor’s success fee. Thus in the event of a post 31 March 2013 Conditional Fee Agreement, or a pre 1 April 2013 Conditional Fee Agreement that is not assigned, the solicitor is likely to get no success fee. As recoverable costs in portal cases are not, on their own, economically viable, it is not now feasible for lawyers to act for children in such cases.

      This problem will be greatly enhanced if the small claims limit in personal injury cases is raised.

      With effect from 6 April 2015 the Civil Procedure Rules allow summary, rather than detailed, assessment of costs payable by a child to his or her own solicitors (CPR 46.4(5)). However the procedure is wholly unworkable – see my blog Children’s Cases – April is the Cruelest Month.

      Kerry

      kerryunderwood

      February 16, 2017 at 2:56 pm

      • Thanks very much for your comprehensive reply, Kerry.

        If I’m understanding things correctly, the best course of action is to have the (now adult) client sign the statement you’ve set out, and to also enter into a new “safety net” CFA with them, backdated to the outset of the matter. The former gives us the best chance of recovering the success fee in full, the latter is a fall back position so that we can at least recover our base costs.

        Just a couple of follow up queries:

        Does the “statement” have to be signed by the client whilst the claim is still ongoing? In other words, is it fatal if that was signed by them after the entitlement to recoverable costs has crystallised (for example, upon acceptance of a Part 36 Offer)?

        Secondly, I have taken it from your comment that the statement “avoids any argument about assignment” means that an assignment is a bad thing in this situation. However, I’m not sure how that sits with the comment in your 3rd paragraph from the end where you say “Thus in the event of…a pre 1 April 2013 Conditional Fee Agreement that is not assigned, the solicitor is likely to get no success fee.”, which I take as implying that an assignment will preserve the right to recovery of a success fee. What is the position with assignment?

        Kind regards

        G

        Geoff Jeffington

        February 22, 2017 at 3:56 pm

  5. Geoff

    Yes, in short. The adoption of the agreement can be done at anytime and I suggest that it be backdated to the client attaining his/her majority. For no apparent reason the courts have generally not allowed rectification of a conditional fee agreement to take place after the point has been raised by the paying party, but this is not rectification.

    The point about assignment is that the starting point is that a contract for legal services, being personal in nature, cannot be assigned. Thus it is best to avoid the need for assignment.

    What I was seeking to convey – and I accept that it could have been expressed more clearly – is that if for any reason there is held to be no valid assignment, then there is likely to be no recoverable success fee, and depending on the reason for the purported assignment, it may be unreasonable to charge the client a success fee when the client had entered in to the agreement on the basis that any success fee would be recoverable.

    Best to avoid the need for assignment altogether.

    Kerry

    kerryunderwood

    February 22, 2017 at 6:31 pm

  6. Thank for your swift reply on this matter, Kerry.

    Geoff Jeffington

    February 23, 2017 at 9:30 am

  7. No problem.

    kerryunderwood

    February 23, 2017 at 9:37 am


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