Today the Court of Appeal has handed down the much awaited judgment in the case of Jones -v- Spire Healthcare Ltd relating to the assignment of Conditional Fee Agreements
By way of a brief background an assignment is the replacement of one party in an agreement which transfers the existing rights pursuant a contract from one party to another. Assignments are regularly entered into when legal cases transfer between law firms and when the new firm wishes to continue acting under the client's CFA with the previous firm, benefitting the new firm by ensuring they can recover the success fee for pre 1.4.13 CFAs.
In the case of Jenkins v Young Brothers Transport Limited  1 WLR 3189 the client followed their solicitor to a new firm and the CFA was assigned. The paying party argued that no assignment could occur because the CFA was a personal contract and could not be validly assigned, based upon the decision in Griffith v Tower Publishing  1 Ch 21. The court found in favour of the Claimant and held that an assignment had taken place and that it was possible to assign a personal contract where the assignee takes both the benefit and the burden of that contract. Despite the general principle that a personal contract involving skill or competence cannot be assigned, there is an exception if the client is following his solicitor and preserving the trust and confidence in that person.
There has been debate around the Jenkins decision as to whether in that case the assignment was in fact a novation. At the time of that decision whether it was an assignment or novation made little difference but following the LASPO on 1 April 2013 which meant that, save for a few exceptions, additional liabilities are not recoverable from the paying party for CFAs entered into after 1 April 2013, whether it is an assignment or a novation is key to determining whether the new firm is able to continue charging a success fee, an assignment would mean it could and a novation would mean it could not.
Even more concerning is that if the assignment is found to in fact be a novation and the new terms post April 2013 are not in compliance with the new regulations then the CFA would be unenforceable.
In the case of Jones v Spire Healthcare Ltd the circumstances were that the firm of solicitors became insolvent and consequently the firm's PI caseload was sold to another firm. A deed of assignment was executed between the administrators of the insolvent firm and the firm purchasing the PI work. The original fee earner also moved from the insolvent firm to the new firm.
The Court found that the decision to transfer to the new firm was not motivated by the Claimant loyally following her solicitor, but rather by the convenience of an equally competent firm who already had the files and were prepared to act on the same basis. It appeared that the client did not know about the solicitor moving firms before the assignment took place. So the assignment was in fact treated as novation. The problem being that the CFA entered into pre April 2013 was unenforceable following the novation as it did not impose a damages-based cap. The costs of the first firm were therefore recoverable but those of the second firm were not.
The case was accordingly appealed and Claimants and Defendants have been eagerly awaiting the outcome to see whether the Court of Appeal would endorse the decision and even potentially rule that CFAs are not in fact capable of assignment.
In its judgment today the court has determined in favour of the Claimant and disallowed the Defendant's cross-appeal. It is possible to assign both the burden and the benefit of a CFA and this was achieved in this matter. The court confirmed that a valid retainer had remained in place allowing for the recovery of costs incurred either side of the assignment with no breach of the indemnity principle.
Interestingly, and unexpectedly by those who were awaiting this Judgment, His Honour Judge Graham Wood QC does acknowledge that this decision may well not be the end of the matter. Given the potential implications of overturning such a far reaching decision, a further appeal is anticipated.
A more detailed analysis of the outcome and commentary on the implications for solicitors to follow.