No assignment of CFAs, says the County Court

News

23/10/2015

 

If a claimant is pursuing a personal injuries claim funded by a CFA, and the solicitors’ firm goes into administration, can the CFA be assigned to a new firm? No, says the County Court at Liverpool. In Jones v Spiral Healthcare (unreported, 11th September 2015, transcript available on Westlaw), the original CFA was entered into validly in 2012. In 2014 the Claimant’s solicitors’ firm became insolvent. Administrators were appointed. The administrators sold all of the extant CFA-funded PI claims to a new firm which took them over. The transaction was supported by a deed of assignment between the administrators and the new firm which was intended by both parties to achieve a transfer of all of the existing CFAs so that the new firm could act on the existing terms. The claim of Jones succeeded and the Claimant’s solicitors claimed the costs due under the CFA, including costs incurred after the assignment. However the Court held that it isn’t possible to assign a CFA. The Court distinguished Jenkins v Young Brothers [2006] 1WLR 3189, in which the High Court had held that it is possible to assign a CFA, on the factual basis that Jenkins involved a client following an individual solicitor whereas in Jones there was no evidence that the Claimant cared about which solicitor was acting for him and so the assignment was a simple business transaction. The Court held that what the parties thought was an assignment was in fact a novation, i.e. a new contract on the same terms as the old, and that the new contract was invalid because it did not comply with the Conditional Fee Agreements Order 2013 which required a success fee to be limited to 25% of general damages. In consequence, the costs due under the old CFA were recoverable but those incurred since the novation were not.

It does seem a nonsense that two contracting parties who intend their agreement to be an assignment, have to run the risk that a Court will tell them that contrary to both of their wishes, it is not an assignment but a novation. That is particularly so when the client’s interests were protected in exactly the same manner as they had been all along. However the practical lesson is that those who acquire CFA-funded cases from other firms, whether those firms are insolvent or not, will have to enter into a new CFA with the client and claim their costs under that.

 

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