ANOTHER ROUND IN THE CFA ASSIGNMENT BATTLE: CFA CAN BE ASSIGNED

In Azim -v- Tradwise Insurance Services Limited [2016] EWHC B20 (Costs) Master Leonard found that a conditional fee agreement could properly be assigned.

KEY POINTS

  • An assignment of a CFA between solicitors was valid.
  • The validity of an assignment did not depend on there being an ongoing relationship of trust between the client and the solicitor.
  • The absence of certain documents did not mean that the court could infer that the assignment was not valid.

THE CASE

A personal injury claim had settled. Three firms of solicitors had represented the claimant. The CFA had been assigned in July 2014. The defendant took issue with the assignment and the claimant’s right to recover costs after the CFA.

THE MASTER’S JUDGMENT ON WHETHER THE CFA COULD BE ASSIGNED IN PRINCIPLE
  1. It is not in issue that a CFA can, in given circumstances, validly be assigned. The question is whether those circumstances apply in this case. The Defendant relies upon the principle that the burden of a personal contract for services may not be assigned and presents that principle as a bar to the effective assignment of a CFA, subject (the Defendant accepts) to one very specific exception identified in Jenkins. That exception, says the Defendant, arises only where a solicitor who enjoys the particular trust and confidence of the client moves from one firm to another. Neither party suggests that such was the position here.
  2. All of the judgments to which I have been referred by the parties addressed the question of whether, on the facts of the particular case, a CFA was validly assigned. The relevant principles were helpfully summarised at paragraphs 31 and 32 of the judgement of HHJ Graham Wood QC 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.”
  1. In Jenkins the receiving party (Mr Jenkins) had signed his CFA with Girlings, solicitors. He had then followed a particular solicitor, “FP”, who continued to handle his claim, through two changes of firm. The question was whether the assignment of the receiving party’s CFA, on each change of firm, was valid. Rafferty J (as she then was), upholding the decision of Master Campbell, concluded that both assignments were valid.
  2. Her key conclusions in that respect are to be found at paragraphs 28-31 of her judgment:
“… Since…the facts in this case are singular we have not derived assistance from the authorities on assignment to which we were referred. Significant in our conclusion is the intention behind the course adopted. Mr Jenkins wished to follow FP to her new firms and with good reason. Three firms agreed with him and with one another. All this is relevant to our conclusion on the argument…that a contract involving personal skill and confidence cannot be assigned. We are confident that the directing motive for Mr Jenkins was his confidence in FP’s skill, expertise and professional judgment and that what was put in place was intended to give effect to it. He sought to preserve and rely upon the trust and confidence he had in FP and in our judgment it would be a novel approach to the administration of justice were this court to seek on its merits to interfere with a professional relationship whose propriety and worth has never been challenged…
The benefit of being paid was conditional upon and inextricably linked to the meeting by Girlings of its burden of ensuring to the best of its ability that Mr Jenkins succeeded…the condition was relevant to the exercise of the right. In our judgment, upon the facts in this case the benefit and burden of the CFA could be assigned as within an exception to the general rule….
…The relationship between client and solicitor involves personal confidence. As we have already rehearsed, what drove these events was the trust and confidence Mr Jenkins had in FP based on her uninterrupted conduct of his case. 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”.
  1. In Budana District Judge Besford concluded that he was bound to follow the ratio in Jenkins, which was that (paragraph 51 of his judgment) contracts involving personal skills are capable of being transferred, permitting (paragraph 39) the transfer of a CFA between firms. As to the personal connection between solicitor and client, he commented (paragraph 56):
“… 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”.
  1. In Webb Master Rowley, having concluded that a novation rather than an assignment of the receiving party’s CFA had taken place, went on to consider whether any such assignment would have been valid. His conclusion (paragraph 46) was that the relationship of trust and confidence between the solicitor and the client in Jenkins was crucial to the conclusion of Rafferty J. In the absence of that factor, Jenkins was to be distinguished and was not binding upon him: the assignment relied on by the receiving party, in purporting to assign the burden of the CFA along with its benefit, was he concluded invalid.
  2. In Jones v Spire Healthcare Ltd HHJ Graham Wood QC reached a different conclusion. In that case the receiving party’s original solicitors had gone into administration. Her new solicitors entered into a “generic” deed of assignment under which the benefits and burdens of a number of specified retainers, including that of the receiving party, were said to be transferred. That was followed a week later by a separate deed of assignment signed by the receiving party herself.
  3. The paying party argued that the receiving party’s CFA was not capable of assignment because it amounted to a contract of personal services which did not come within the specified exception of trust and confidence which could be identified in the decision of Rafferty J in Jenkins. The learned judge rejected that argument. At paragraphs 71-77 of his judgment he set out his reasoning:
“… It does not appear to be in dispute that a solicitor’s retainer involves a contract for personal services, and therefore is a personal contract. The assignment of both benefit and burden can only be effected in exceptional circumstances because of the nature of the personal obligations involved and in any event with tripartite consent. The general rule which appears to create an exception to the restriction on the assignment of a burden as opposed to benefit appears to have evolved in cases where the recipient of an assigned benefit has had imposed on him or her a reciprocal or corresponding burden…
It is important to distinguish, it seems to me, between the species of personal contracts which require a more restrictive approach generally on the question of assignment, and the concept of “personal trust and confidence” which is said to be the feature which drove the conclusion in the Jenkins case, and which made the decision singular on the facts. It is to be noted that in paragraphs 29 and 30 of the judgment of Rafferty J, insofar as those paragraphs purport to convey the ratio, there is no reference to a qualification of the exception to the general rule that this was a personal contract. In other words, the court was approaching its decision by applying…general principles of conditional benefit culled from the earlier authorities…
In my judgment and on careful reading of those paragraphs, Rafferty J was not seeking to qualify the exception to the general rule against the assignment of the burden of a contract to specific situations where personal trust and confidence could be established so much as to set a context in which it applied to the facts of the case. The analysis of the authorities which established the concepts of conditional benefit, reciprocity and relevance are not referred by her as relating to non-personal contracts. It seems to me that paragraph 30 lies at the crux of the decision. The judge made it plain that the benefit of being paid was conditional upon and inextricably linked to the burden of performance under the conditional fee agreement so as to enable an assignment to take place. In my judgment having followed the development of the exception through those authorities…the judge was doing no more than applying the principles which they established to the facts of the case before her. It was open to the judge to conclude that the personal trust and confidence was anecessary element where the contract was a personal one, as opposed to a compelling context, and without it the assignment would not be valid. She did not go so far as to say that, and in my judgment the ratio of her decision was not so qualified…
Whilst the reference in paragraph 28 of the judgment in Jenkins to the intention behind the course adopted relates to the wish of Mr Jenkins to follow his solicitor from one firm to another, in my judgment it is similarly impossible to ignore what was intended by the arrangement entered into in this case. Rules restricting burden assignment were clearly devised to protect the non-participating counterparty…In circumstances where there is tripartite involvement to the extent that not only do the assignee and the assignor agree to the shifting of the burden, but so too does the recipient of the benefit (here the Claimant) and a separate deed of assignment is entered into in relation to her own conditional fee agreement, it would be an unduly restrictive and overly legalistic approach to deny the parties the effect of what they intended…
There is a further matter which has influenced my decision that the ratio in Jenkins is not qualified in the way suggested… if the efficacy of an assignment depended upon a qualitative assessment of the degree of trust and confidence, this would generate considerable uncertainty, leading to potential satellite costs litigation whenever a retainer is challenged on the basis of purported CFA assignment, with the court being required to investigate in every case the nature of the relationship between the client and the solicitor. It is axiomatic that case handling these days is conducted at a distance, and it would be very difficult to identify those cases where a particular client had been insistent on the continuity of a specific fee earner. Of course every case depends upon its own particular facts, but in my judgment it would be wrong to qualify this particular exception to the general rule based upon an inextricable link between burden and benefit, by making a finding of trust and confidence a pre-requisite.”
  1. That is reasoning with which I respectfully agree. It seems to me that Rafferty J found limited assistance in the authorities to which she had been referred in applying a principle, which may be said to exist for the benefit of the non-assigning party, to circumstances in which the non-assigning party had every reason to (and did) accept an assignment. Nonetheless she applied established principles in coming to the conclusion that a CFA could be the subject of a valid assignment, and she expressly stopped short of any finding to the effect that a relationship of personal trust and confidence between a particular solicitor and a particular client was a prerequisite to that. For the reasons given by both District Judge Besford and HHJ Graham Wood QC the imposition of any such prerequisite would in my view be inappropriate.
  2. In summary I can 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.

WAS THE ASSIGNMENT VALID?

The Master then considered whether the assignment was valid.

Whether the Assignment was Effective
  1. Mr Latham refers me to the provisions of Section 136 of the Law of Property Act 1925. The benefit of a contract, as a chose in action, is capable of assignment provided that it complies with certain specific requirements including that it is in writing under the hand of the assignor and that express notice in writing of the assignment has been given to the debtor.
  2. I do not need to go into more detail about the statutory requirements because the Defendant’s case is not that the evidence before the court demonstrates that the Claimant has failed to comply with them. It is that the Claimant’s failure to make full disclosure of all of the contractual documentation raises sufficient doubt about statutory compliance to justify the conclusion that the Claimant has not discharged the burden of demonstrating that the assignment is valid by reference to the statutory requirements.
  3. The point is that not all of the contractual arrangements between TLW and Russell Worth Limited have been disclosed. Mr Latham argues that in order to determine whether the assignment of the TLW CFA met the statutory requirements, the court must see all of the documentation. Given that the letter from TLW to Russell Worth Limited dated 23 July 2014 was expressed to be “pursuant to” a Sale and Purchase Agreement of the same date, the terms of that agreement must be pertinent.
  4. Because that agreement has not been disclosed, argues Mr Latham, the court cannot be completely satisfied that the statutory requirements have been met. This raises an element of doubt which, in accordance with CPR 44.3(2)(b), must be resolved in favour of the paying party. Alternatively, in accordance with general principles of evidence it is for the Claimant to establish a valid assignment between TLW and Russell Worth Limited, and in withholding the Sale and Purchase Agreement of 23 July 2014 the Claimant has failed to disclose all pertinent terms and so to discharge that burden.
  5. I am unable to accept those arguments. First, as I explained in the course of oral submissions, in my view CPR 44.3(2)(b) addresses only the resolution of doubt in relation to the reasonableness or proportionality of costs. It does not create a general exception to the established rules of evidence.
  6. I agree that it is nonetheless incumbent upon the Claimant to demonstrate that the assignment relied on by him is valid in complying both with the statutory requirements and with the principles I have attempted to summarise. To my mind the documents disclosed by the Claimant are perfectly sufficient for those purposes and I am unaware of any reason to suppose that the Sale and Purchase Agreement would add anything material. The suggestion that it might seems to me to be entirely speculative.
  7. Mr Smith for the Claimant submits that the only possible ground for arguing non-compliance with section 136 in this particular case might be that in order for the assignment to be effectual in law, the section requires that “notice in writing has been given” to the non-assigning party. Here, notice was contemporaneous with the assignment rather than preceding it, but nothing really turns on that.
  8. I agree. At most, one might argue that the assignment does not become effective under Section 136 until notice has been given: there is no express requirement in the statute for notice of assignment to be given in advance of assignment and no reason to put a gloss upon the statutory provisions by imposing one.
  9. For those reasons I find no sound basis for concluding that the assignment of the TLW CFA on 23 July 2014 in any way failed to comply with the provisions of Section 136 of the Law of Property Act 1925.

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