The issue of assignment vs novation of CFAs has become a contentious topic of some serious debate over the last few years, owing to the changes brought about in the Jackson reforms. As everyone reading no doubt knows, receiving parties in CFAs entered into prior to 1st April 2013 can claim additional liabilities (i.e. ATE premium and success fee), whereas receiving parties in CFAs entered into after that date cannot (save for some prescribed exceptions).
This has given rise to a dispute in cases where, after that date, a CFA has been transferred from one firm of solicitors to another either as a result of a merger or as a result of a conducting fee earner moving firms. One side would argue that this results in a new post-Jackson CFA with no additional liabilities recoverable from the paying party, whereas the other side would argue that this is merely a continuation of the original CFA and that additional liabilities remain recoverable.
This issue was addressed in the matter of Jenkins v Young Brothers Transport Jenkins v Young Brothers Transport Ltd. [2006] EWHC 151 (QB). In a nutshell, Jenkins v Young Brothers was a High Court case where CFAs were found to be were assignable – the rationale being, basically, that “where a solicitor makes a professional move, taking with her to her new firm a client on a CFA, the CFA can be lawfully be assigned to the new firm and the client is not obliged to enter into a new CFA with the new firm".
In Griffith and another v Paragon Personal Finance Ltd [2016] Lexis Citation 591, the Sheffield County Court recently considered whether Jenkins v Young Brothers Transport Jenkins v Young Brothers Transport Ltd. [2006] EWHC 151 (QB) had been wrongly decided. Also considered was the issue of whether formal consent was a requirement for a valid assignment of a CFA and the issue of whether a retainer had been terminated because the CFA assignment was not put into writing.
The Facts
The matter at hand, Griffith, related to the mis-selling of PPI. The Claimants entered into a CFA with a firm of solicitors in May 2010 and was temporarily stayed while another claim against the Defendant took place. During the period of the stay, in 2013, the original firm of solicitors was incorporated into a larger firm. The Claimants were not informed about this first assignment and their consent was not sought - although evidence suggested that it would have been freely given based on the continued relationship with the relevant partner.
In 2014, the partner with whom the Claimants had been dealing decided to separate from the newly-incorporated partners and formed a new company known as Muldoon Britton. The Claimants' CFA was accordingly assigned to the new company and they continued to be represented by the same partner whom they had originally instructed. The Claimants were informed of this assignment at the time and gave their consent. A deed of assignment was executed on 30th June 2015 and the Defendant was notified. It stated that the CFA had been orally assigned.
The matter was settled sometime thereafter and costs proceedings commenced.
The Issues
The Defendant argued that failure to inform the Claimants of the initial assignment of the CFA or obtain their consent meant that the assignment was not effective. They further argued that, as the CFA had not been validly assigned, the Claimant's solicitors had effectively terminated their retainer.
The Defendant further argued that the transfer of a CFA should be properly characterised as a novation, as it removed one of the original contracting parties and substituted in another party. In essence, they argued that Jenkins v Young Brothers had been incorrectly decided.
The key issues therefore were:
- Whether formal consent was necessary
- Whether the oral assignment was valid
The Decision
Baddeley DJ held that formal consent was not required. He instead found that what was required was that there was "no objection" and that consent would be implied from the Claimants' continued instruction to the new firm. He also noted the evidence that the Claimants would not have objected to the first assignment if they had been asked. He considered that a formal consent requirement would bring the assignment into the “realms of novation” rather than being an assignment.
On the oral assignment issue, Baddeley DJ there was no need for the assignment of a contract in equity to be in writing, but considered that, given the retrospective nature of CFAs, later formalising documents could render an assignment valid.
Furthermore he opined that the first assignment was trivial and something that lots of firms had done in recent years. He considered the second assignment to be more significant, but nonetheless considered it to be straightforward; the relationship continued with the original partner and the Claimant's consent was freely given.
In doing so, he considered himself to be bound by Jenkins and opined that, if the decision in that case could be criticised, it would be for a more senior judge to do so.
Final Thoughts
The issue of whether Jenkins was correctly decided has previously been considered in Budana v Leeds Teaching Hospitals HNS Trust, albeit in a matter with very different facts. In that case, DJ Besford considered that there was "much force" in arguments put forward by the Defendant that Jenkins had been incorrectly decided, but still considered himself to be bound by it.
In this matter, Baddeley J was much more enthusiastic in his affirmation of the decision in Jenkins and described Raffety J’s decision as being pragmatic. He did, however, indicate that, if there was to be any criticism of the decision, it should be made by a more senior judge. It will be interesting to see what approach is taken to the decision in Jenkins as and when the matter is considered by a higher court, but it remains good law for now.
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