SCCO approves another CFA assignment

This costs dispute arose out of a personal injury claim, caused by a road traffic accident. The accident occurred on 15 October 2011, and the claimant ultimately accepted the defendant’s Part 36 offer of £3,500 on 20 January 2015 (paragraphs 1 – 2).

While pursuing their case, the claimant was represented by three different firms of solicitors: firstly, Minster Law between 17 October 2011 and 14 November 2012; then TLW Solicitors between 16 November 2012 and 23 July 2014; and finally Russell Worth Limited from 24 July 2014 onwards. All three firms purported to act for the claimant under a conditional fee agreement (CFA). The claimant’s CFA with Minster Law was dated 19 October 2011, while their CFA with TLW was dated 17 January 2013 – on terms which provided for it to have retrospective effect from the date of initial instruction. TLW then transferred the claimant’s CFA to Russell Worth on 23 July 2014, with the latter firm commencing to work on behalf of claimant the following day (paragraphs 3 – 4).

The transfer of the claimant’s case from TLW to Russell Worth was initiated by TLW due to staff shortages. TWL’s letter to the claimant, dated 23 July 2014, explained that they “were under no obligation to consent to the transfer of your claim and file to Russell Worth” or, indeed, any other firm. However, the claimant was told that, if they did agree to the transfer, Russell Worth would work on the same “no win no fee terms” as set out in the TLW CFA. On 31 August 2013, the claimant signed the form confirming “my consent to the assignment of the CFA to Russell Worth Limited and agree that, from now on, Russell Worth Limited may perform the solicitors' obligations under the CFA in substitution for TLW Solicitors and that, from now on, my responsibilities under the CFA shall extend to Russell Worth Limited” (paragraphs 12 - 13).

At the detailed assessment of the claimant’s costs, the defendant sought to challenge the right of the claimant to recover their costs under the terms of the TLW CFA. In determining this challenge, the court was invited to consider three key issues:

• Firstly, the defendant argued that the claimant’s CFA with TLW had been terminated, because TLW’s letter to the claimant had contained an “unequivocal statement to the effect that TLW would not continue to act for him” (paragraph 17). If the CFA has been terminated by this action, then any successor CFA – relied on by Russell Worth – would be ineffective, because it did not comply with the post 1 April 2013 LASPO 2012 regime (paragraph 18 – 19). 
• The defendant’s second line of attack focused on the lawfulness of TLW’s purported assignment of its CFA to Russell Worth. As a general rule, it was accepted that burden of a personal contract cannot be assigned – which has, in principle, limited the ability of firms to transfer CFAs between each other. The only exception to this general prohibition occurs, the defence counsel argued, “is where a solicitor who enjoys the particular trust and confidence of the client moves from one firm to another”– which did not happen in this case (paragraph 34). 
• The final main argument advanced by the defence was notionally based on S136 of the Law of Property Act 1925 – but actually turned on procedural and evidential grounds. In essence, the defendant’s counsel claimed that, by failing to make a full disclosure of all contractual documents, the claimant had not given the court sufficient proof that their assignment had complied with the Act’s requirements. The upshot of this lack of disclosure, it was argued, was that CPR 44.3 (2) (b) required the court to resolve the issue in favour of the paying party – i.e. the defendant. The alternative basis for achieving the same outcome was based on the general principles of evidence (paragraphs 44 – 48).

Delivering his ruling in the SCCO, Master Leonard evaluated each of the issues identified in turn.

• In relation to whether the claimant’s CFA with TLW had been terminated, Master Leonard decided that no such termination had occurred (paragraph 33). Having reviewed the notice of assignment sent by TLW to the claimant, he said it “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,” (paragraph 29). In any event, Master Leonard added, because the claimant was effectively informed of the CFA assignment after it had occurred, it was no longer within the gift of TLW to terminate their CFA (paragraph 30).
• In relation to whether it was possible to lawfully assign the TLW CFA, Master Leonard concluded that he could “identify no obstacle, in the principles governing assignment of the benefit and burden of contracts, to the validity of a bona fide, arms-length CFA assignment in the circumstances of this case” (paragraph 43). Having reviewed existing case law, he decided that there was no absolute requirement that a CFA assignment could only be valid if there was a relationship of personal trust between a particular solicitor and a particular client. The imposition of any such prerequisite was, in his view, “inappropriate” (paragraph 42).
• In relation to the suggestion that the assignment might be deemed not to be effective by the court due to a lack of disclosed evidence, Master Leonard gave short shrift to the arguments made by the defence counsel. On the CPR 44.3 (2) (b) point, he observed that this provision was only intended to address the resolution of doubt in relation to the reasonableness or proportionality of costs – it did not create a general exception to the rules of evidence. And, while he agreed that it was incumbent on the claimant to demonstrate that an assignment complies with its relevant statutory provisions, Master Leonard stated that: “the documents disclosed by the claimant are perfectly sufficient for those purposes” (paragraphs 44 – 52).

Having decided that the claimant’s CFA of 17 January 2013 was validly assigned between TLW and Russell Worth, Master Leonard therefore concluded that the indemnity principle did not operate to prevent the recovery of the costs incurred by the claimant. Those costs were therefore to be paid to both TLW and Russell Worth under the terms of the TLW CFA.

In reaching his conclusions the Master cited with approval the decision of HHJ Graham Wood QC in Jones v Spire Healthcare...

"… 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."