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Assignment of another firm’s CFA is now allowed

15/07/2016 | Matthew Littlestone

A recent appeal decision has reversed the decision in a case decided towards the end of last year and confirms that CFAs can now be assigned from one law firm to another.

Original decision

In Jones v Spire Healthcare Limited [2015], the County Court at Liverpool originally held that the purported assignment of a CFA from one law firm to another was invalid.  Jones v Spire Healthcare was originally distinguished from a similar case on the same subject, namely Jenkins v Young Bros Transport Limited [2006], where the assignment from one firm to another was permitted, in an exception to the rule against the assignment of personal contracts.  In that instance, the benefit and the burden of the CFA was assigned because the client was loyally following a particular solicitor, in whom he had considerable trust and confidence, from one firm to another.

The facts in Jones v Spire Healthcare were different.  In this case, the law firm which originally entered into the CFA with the client became insolvent and its personal injuries practice was assigned to the second law firm.  The second law firm offered the client the option of instructing the firm but had not told her that the fee earner who had worked on her case at the original law firm by then worked for the second law firm.  The client assigned her retainer to the second law firm but it was a different fee earner which had conduct of her case to settlement.  It was therefore held that, unlike in Jenkins, the client’s decision to instruct the second law firm was not based on the desire to follow a particular fee earner and in fact, the evidence suggested that the client was unaware that the fee earner who worked on her case at the original law firm worked for the second law firm.

As DJ Jenkinson sated:

“any decision by the Claimant to transfer her instructions to SGI Legal LLP was motivated by the unexpected insolvency of her former solicitors, and the ease of continuing her claim through an equally competent personal injury firm, who already had the file, and who were prepared to continue to act on the same basis.  I find that the decision was in no way influenced by the transfer of Mr Eccles to SGI Legal LLP, even if Ms Jones knew about this.”

 This meant that, rather than an assignment, the effect was that there was merely a novation of the CFA.  With a novation, as opposed to an assignment, the effect is the creation of a new contract, with a fresh date of agreement.

Appeal

On appeal, the Claimants main argument was that both the benefit and the burden of the original CFA were inextricably linked and therefore capable of being assigned.

Allowing the Claimant’s appeal, HHJ Wood QC disagreed with DJ Jenkinson in the lower court and considered that in Jenkins, Rafferty J made it clear that the benefit of being paid was conditional and inextricably linked to the burden of performance under the CFA so as to enable an assignment to take place.

HHJ Wood QC also stated that DJ Jenkinson was incorrect in deciding that the “Jenkins exception” could only be applied in narrow circumstances whereby a client insisted on following an individual fee earner from one firm to another and I whom particular trust and confidence was placed.  HHJ Wood QC said that it would be “unduly restrictive and overly legalistic to deny the parties the effect of what they intended.  Rules restricting assignment were clearly devised to protect the non-participating counterparty”.

The Claimant’s appeal was allowed, meaning that both the benefit and the burden of the CFA were assigned and there was a valid retainer in place, allowing recovery of both pre-and post- assignment costs.

 

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