Transferring conditional fee agreements between law firms – a dangerous business
In September 2015 District Judge Jenkinson sitting at Liverpool County Court in the case of Jones v Spire Healthcare held that the assignment of personal contracts, such as conditional fee agreements, was not possible and therefore the CFA had not been validly transferred to the new firm of solicitors. The judge did however note the possible exception established in the case of Jenkins v Young Bros Transport (2006) where a contract such as a CFA could be assigned to a new law firm where the “claimant had been loyally following an individual solicitor to their new firm.”
DJ Jenkinson held a new contract had arisen between the claimant and the new i.e. transferee firm and as that contract appeared to rely upon the old conditional fee agreement rules, since removed, the new contract was invalid and therefore the second firm could not recover its costs. The decision is currently being appealed.
Today however District Judge Besford sitting at Kingston-upon-Hull County Court, in the case of Budana v Leeds Teaching Hospitals NHS Trust held that the case of Jenkins v Young Bors Transport “clearly permits the transfer of a CFA between firms.” However, the fact the first firm informed the claimant they had “decided to stop handling personal injury litigation” the effect was that they terminated the CFA, so there was nothing to transfer. The second firm were able to recover their costs as they had entered into a new CFA, but the original firm, Baker Rees. Could not.
The decisions are not perhaps as contradictory as they might seem. In “Jones” it seems the second firm’s mistake was to assume a CFA could be assigned without recourse to any kind of back-up agreement. When the assignment was held invalid they were left in the position of having entered into a new contract, which appeared then to be illegal in terms of the deductions charged and so forth.
In “Budana” the second firm had been cautious enough to have a “back-up” CFA so to speak, compliant with the current law, in the event there was no assignment.
In Jones the first firm were able to recover their fees whereas in Budana not but much can come down to the language used. If the first firm makes it clear the retainer remains live from their perspective, as does the client’s liability for costs, the position appears to differ from that of a firm stating in so many words they are no longer acting i.e. a unilateral decision.
If a firm informs a client they do not practise such an area of law anymore then the decision appears unilateral – the client has no choice – the law firm is in effect telling them they no longer act for them. Solicitors are likely to feel somewhat aggrieved and confused here as where does it leave them if say the only person who practises a particular area of law at a firm leaves yet they have perfectly valid charges on file? If they continue on with the case they are likely to fall foul of the Code of Conduct in that they may end up practising outside of their competency; if they inform the client they can no longer act then they risk it being held the retainer has been terminated in which case they can no longer recover their fees. This could leave many law firms in an impossible position, and could create a worrying lack of financial confidence in the legal sector.
In the writer’s view it seems tremendously frustrating in that in law it seems almost impossible for common sense and/or financially sensible decisions to be made by the courts. In both cases the intentions of all parties was clear – the case would be transferred to another firm, which is something that can often need to happen, for perfectly valid reasons. However it seems technicalities on both occasions have prevented common sense from prevailing and indeed caused tremendous financial damage to the law firms in question.
If dentists continuously found themselves being unable to uphold their charges how long would it be before there were no, or far less, dentists?
Isn’t it time for the Government and judges to stop sabotaging the profession and to start allowing commonsense and fairness to prevail? If they do not then the legal profession could be in danger of shrinking and deteriorating rapidly in the next generation.
By James Winterbottom, Solicitor