Assignment of CFAs: will “back up” CFAs work?

Assignment of conditional fee agreements is a topic which has come to life in recent months, with an increased interest in the applicability, scope or correctness in law of the old High Court case of Jenkins.v.Young Brothers Transport.

However although issues may start with the question as to whether a conditional fee agreement is capable of assignment at all, and if it is not assigned, what happens to the original agreement and the costs incurred under it, they certainly do not end there.

Although a court may imply that a further firm of solicitors is continuing to act on the same terms as the original conditional fee agreement, and that a novation has occurred, this can mean that a novated conditional fee agreement is subject to an unexpected set of formality requirements, particularly if any alleged assignment took place after 1st April 2013.

In such circumstances, although it may be argued that a deed of variation or a deed of rectification or the doctrine of severability can be used to remove the success fee or otherwise cure any non compliance with the statutory requirements those arguments are unlikely to succeed for reasons of public policy, as the acceptance of the arguments would run counter to the statutory scheme regulating conditional fee agreements.

A further argument, that is unlikely to have any success, is the notion that a client can be taken to have “waived” the statutory rights to consumer protection by pursuing a claim for costs based on an unenforceable conditional fee agreement.

It is accordingly conceptually odd, that it can be contended that it is consistent with public policy that a “back up” conditional fee agreement can be used to anticipate and circumvent in advance, an assignment failing and a conditional fee agreement being found to be unenforceable.

Such an agreement is really no more nor less, than a client agreeing to waive their rights if the original conditional fee agreement is found unenforceable and agreeing to be bound by a new one. Or analogous to an anticipatory severance clause, often found in commercial contracts.

It sits uneasily with the goal of consumer protection, that the client’s contractual position vis a vis his solicitor, hinges upon whether a third party raises a challenge to the enforceability of the conditional fee agreement on detailed assessment.

Why would public policy permit such an outcome, when rectification, variation, severance and probably waiver would not be allowed?

Indeed the argument that such a second, inchoate conditional fee agreement will have such an effect depends upon a further, single High Court authority, where the key arguments of public policy do not seem to have been squarely addressed by the High Court judge.

If this authority proves readily distinguishable, as it may, then the so called “back up” conditional fee agreement, may prove to be no comfort at all.

This issue will undoubtedly be litigated, I suspect in the next few months.

Another issue which no doubt will fall to be argued about in the context of claims for costs, are the cases where a firm of solicitors effectively passes on a client to a new firm of solicitors, who are said to act as agent to the first firm’s principal.

In fact, the first firm then fade out of the litigation, as the relationship is simply meant to permit continuation of a conditional fee agreement without the need to make a new retainer: the so called “agent” is to all intents and purposes running the show.

The questions that this relationship raises, are interesting ones but probably deserve their own post.



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