Twilight’s last gleaming

One of the more interesting points of law that I have argued (alongside and against the rest of the costs Bar) in recent years, was the “assignment point” as it came to be known. The arguments brought back memories of the years immediately after the introduction of the Conditional Fee Agreements Regulations 2000, now safely repealed where on every detailed assessment there was the danger that a conditional fee agreement might be found to be unenforceable and the entire edifice of the Bill of Costs come crashing down accordingly.

For the benefit of those who have spent the last few years in a cave, it can be recalled that the assignment point involved challenges to the validity of two firms attempts to transfer a conditional fee agreement between themselves, so that the conditional fee agreement made between a client and firm A, was transferred lock stock and barrel, with a recoverable success fee to firm B.

The arguments on this point largely came to an end with the decision of the Court of Appeal in Budana v The Leeds Teaching Hospitals NHS Trust [2017] EWCA Civ 1980. The majority of the Court of Appeal applied an orthodox approach to the vexed questions of assignment v novation, and the full court found that in any event, on the facts of that case, the transitional provisions could be interpreted to permit the recoverable success fee with firm A, to morph over to firm B.

The judgment in Budana is involved: it is also hedged with qualifications. It is readily apparent that had the facts been somewhat different, a different conclusion might have been reached. It is by no means the law that when one law firm tries to transfer a client and their retainer to another law firm, they will achieve the result they are looking for.

Having said that, reported instances of decisions on this point are few and far between: one such reason may be because, a properly advised receiving party when faced with points of dispute raising the issue will rely on the Pamplin procedure, to refuse to provide documentation which would shed light on the transfer arrangements, and suggest Budana provides a complete answer to such point arguments, so that there is no “genuine issue” for the court to investigate.

One of the few times that the issue has come before the courts is in the case decided at the end of last year of Roman v Axa Insurance County Court at Central London HH Judge Wulwik 13th December 2018. Although this decision, is only the decision of a circuit judge, and so not binding, moreover it is a decision on its own facts, but it is a useful illustration of the arguments that might arise, due to muddled paperwork.

As the judge stated the issue to be:

2. The issue is whether Deputy Master Campbell was right to conclude that the claimant, Mrs Alicia Roman, elected to treat a conditional fee agreement with a firm of solicitors, Secure Law Limited, as continuing notwithstanding her instruction of new solicitors, Lime Personal Injury, so that when the new solicitors, Lime, went on to win the claim, costs were payable to Secure Law under their conditional fee agreement.

The case proceeded on the basis of an analysis of the communications between the claimant and her former firm of solicitors and the consequences which flowed therefrom.

17. The main point in this appeal is whether the Deputy Master was right in finding that the claimant, Mrs Roman, elected to treat the conditional fee agreement with Secure Law as continuing with the work to be done by Lime on the same terms as the original fee agreement with Secure Law. The defendant says that in this case the original conditional fee agreement was terminated by Secure Law’s conduct in no longer being willing to act for the claimant and by the claimant accepting that  repudiatory conduct by entering into a new conditional fee agreement with Lime. The defendant says that unlike Budana, the original conditional fee agreement did not remain in place following the claimant’s instruction of the new firm.

18. The letter from Secure Law to the claimant proposed transferring the claimant’s claim to Lime, and that Lime would continue to act on her behalf and represent her “on the same basis as was agreed by Secure Law”. The letter from Lime to the claimant dated 10 November 2015, and which she signed on 11 November 2015, enclosed the copy letter from Secure Law. That letter indicated that Lime’s agents, Clear Visits Limited, would be visiting the claimant to go through the documents that the claimant would have to sign, those documents including a new conditional fee agreement with Lime which the agents would bring with them on their visit. The letter from Lime assured the claimant that they would continue to act on a no win, no fee basis and that their agreement with the claimant would be “on the same terms that you had with Secure Law Limited. Financially the outcome will be exactly the same”.

19. There are a number of points to be made:

i) The conditional fee agreement entered into by the claimant with Secure Law was clearly on the authorities an entire contract and was accepted to be an entire contract by the claimant.

ii) The letter from Secure Law sought to terminate the conditional fee agreement entered into by the claimant with Secure Law because Secure Law’s relevant department ceased to exist with the restructuring of their personal injury and clinical negligence teams. That was not a permitted circumstance for ending the conditional fee agreement under the Law Society document ‘What You Need to Know About a CFA’ so as to entitle Secure Law to payment. The letter from Secure Law to the claimant was a repudiatory breach of the conditional fee agreement entered into by the claimant with Secure Law.

iii) The letter from Secure Law to the claimant indicated that Lime’s agreement with the claimant would be “on the same basis as was agreed by Secure Law”, while the letter from Lime to the claimant stated that their agreement with the claimant would be “on the same terms that you had with Secure Law Limited”. Neither letter suggested that the conditional fee agreement entered into by the claimant with Secure Law would continue if the claimant’s case was transferred to Lime. On the contrary, the letter from Lime to the claimant made it clear that she would have to enter into a new conditional fee agreement
with Lime before they could act for her.

iv) The claimant accepted the repudiatory breach of the conditional fee agreement entered into with Secure Law by proceeding to instruct Lime and entering into a new conditional fee agreement with Lime.

v) Unlike in Budana, the parties did not take any steps with a view to the conditional fee agreement entered into by the claimant with the first firm Secure Law continuing to subsist. There was no affirmation by the claimant of the conditional fee agreement with Secure Law, as there was in Budana by the second deed in that case and Ms Budana’s conduct more generally. As Gloster LJ said, the terms of the documentation in Budana clearly showed that Ms  Budana did not elect to terminate her contract with the first firm of solicitors but instead decided to preserve and transfer it. That is not the position in the
present case.

20. In my judgment, the Deputy Master was wrong to find that the claimant, Mrs Roman, elected to affirm the conditional fee agreement with Secure Law or that the claimant affirmed the conditional fee agreement by continuing with the claim with Lime on the same terms. The original conditional fee agreement with Secure Law did not continue to subsist.

This decision is a good example of how Budana does not serve as a kind of fairy dust, which can be sprinkled over any transfer, in any circumstances, to make it effective. Instead, analysis of the documentation surrounding a change of solicitors, may indicate that the former firm have effectively terminated their retainer, so that there is nothing left to transfer to the new firm. If the client does not owe the former solicitors a penny, then neither will the paying party under the indemnity principle.

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