In Farrar and another v Miller, the Court of Appeal upheld a decision that solicitors could not continue an action that had been assigned to them by their client: “a solicitor acting for a client in legal proceedings may not validly take an assignment of the client’s cause of action prior to judgment.” (Paragraph 51, judgment.)
Here, Mr Farrar had brought and action using Candey Solicitors and, in September 2019, a deed of assignment was executed assigning the claim to that firm, who then applied to the court to be substituted in the action in place of Mr Farrar.
The judge at first instance held that that was champertous, and therefore void.
The Court of Appeal, having examined the law in detail in relation to champerty, upheld that decision, and said that there were strong common law public policy grounds, irrespective of champerty, forbidding solicitors from taking an assignment of cases from their own clients.
I reported on the Chancery Division’s original judgment at pages 15-16 of Issue 19 – Champerty Lives on: solicitor cannot take assignment of client’s case and that write up sets out the full facts of the case, and here I simply deal with the legal issues.
As I said there: “Clearly lines need to be drawn, and the court has probably got it right here.
I have long championed contingency fees and conditional fees as giving access to justice, but I am very uncomfortable with the idea of lawyers buying up their clients’ claims.
That is a bridge too far.”
The Court of Appeal rejected Candey’s request that the court develop the common law of champerty to allow assignments to solicitors, and rejected the argument that conditional fee agreements and damages-based agreements, together with litigation funding meant that “lawyers are now as much commercial parties in litigation as they are officers of the court”.
The Court of Appeal held that it was bound by its previous decision in Pittman v Prudential Deposit Bank Ltd, that a solicitor acting for a client cannot take an assignment of the client’s cause of action before judgment.
The court was bound by previous decisions to the effect that a champertous agreement not sanctioned by the Courts and Legal Service Act 1990 remained contrary to public policy, and therefore unenforceable.
The court said that, even if it was open to it to depart from previous authorities, it would not do so.
The Court of Appeal pointed out that the 1990 Act is explicit in that damages-based agreements and conditional fee agreements that do not comply with all of the relevant conditions are unenforceable.
“It is no answer to this point that the Assignment is neither a conditional fee agreement nor a damages-based agreement… what section 58(1) and section 58AA(2) [of the 1990 Act] show is that Parliament, being well aware of the common law rules, decided to go so far towards relaxing them as sections 58 and 58AA provide and no further.” (Paragraph 52, judgment.)
The decision analyses the case law in detail, starting with the case of Hall v Hallet where an attorney called Scrase took an assignment from his client Hall of two debts of £620 and £50 in consideration of payment of the sum of £300. Lord Thurlow LC held that the assignment was void, saying at 140, 1099:
“… no attorney can be permitted to buy in things in a course of litigation, of which litigation he has the management. This the policy of justice will not endure.”
In Wood v Downes, Downes was a solicitor who had the conduct of litigation on behalf of Wood concerning an estate. They entered into an agreement for the sale of Wood’s share of the estate in consideration of the payment of £100 and a promise to pay £1000. Lord Eldon LC held that the agreement was void.
In Simpson v Lamb, an attorney called Scott was on the record for the plaintiffs, but an attorney called Shaen took over the conduct of the case shortly before trial.
After the plaintiffs had obtained a verdict for £50 damages, but before judgment, Shaen purchased the plaintiffs’ interest in the verdict for the sum of £50. The Court of Queen’s Bench held that the transaction was void. Lord Campbell CJ delivering the judgment of the Court consisting of himself, Coleridge, Wightman and Erle JJ said at 93, 1182-1183:
“ … it has been held in several cases, that no attorney can be permitted to purchase any thing in litigation, of which litigation he has the management (Hall v Hallet (1 Cox 134), Wood v Downes (18 Ves 120) and the authorities therein cited), and considering the relation in which the attorney and client stand to each other, it would seem, as was said in Hall v Hallet (1 Cox 134), to be against the policy of the law to permit such a dealing by an attorney, whilst the case is still undetermined by judgment, … whatever might have been the case had the purchase been by a stranger.”
In Pittman v Prudential Deposit Bank Ltd, the plaintiff was a solicitor who had acted for a client called Law in an action against a hotel. Law owed the plaintiff money for the costs incurred.
While the proceedings were pending Law and the plaintiff agreed that Law would assign the judgment to the plaintiff. Law obtained judgment for £250, and immediately afterwards assigned it to the plaintiff. Willes J held that the assignment was invalid, and this Court dismissed the plaintiff’s appeal.
Lord Esher MR, with whom Lopes and Rigby LJJ agreed, said that the law upon the point was clear:
“In order to preserve the honour and honesty of the profession it was a rule of law which the court had laid down and would always insist upon that a solicitor could not make an arrangement of any kind with his client during the litigation he was conducting so as to give him any advantage in respect of the result of that litigation. That might be said to be on account of the fiduciary relation between the solicitor and the client. But the doctrine was founded upon a higher rule. The responsibility of persons engaged in the profession of the law was very great, and their conduct must be regulated by the most precise rules of honour. The Court thought that, unless the rule was carried out to its fullest extent, there would be a temptation to solicitors which they should not be subjected to. It was useless to say that in the particular case the solicitor was not tempted and that he acted from the most honourable motives. The law was universal that, without considering the motives of the particular solicitor, a solicitor must not persuade his client, or indeed accept from his client a voluntary offer, so as to obtain any advantage dependent upon the result of the litigation which he was then conducting.” (Paragraph 111, judgment.)
These common law rules have been codified in section 59 of the Solicitors Act 1974, as amended, which deals with Contentious Business Agreements.
The court quoted this section here, and added its emphasis to section 59(2)(a):
“Contentious business agreements
(1) Subject to subsection (2), a solicitor may make an agreement in writing with his client as to his remuneration in respect of any contentious business done, or to be done, by him (in this Act referred to as a ‘contentious business agreement’) providing that he shall be remunerated by a gross sum or by reference to an hourly rate, or by a salary, or otherwise, and whether at a higher or lower rate than that at which he would otherwise have been entitled to be remunerated.
(2) Nothing in this section or in sections 60 to 63 shall give validity to—
(a) any purchase by a solicitor of the interest, or any part of the interest, of his client in any action, suit or other contentious proceeding; or
…”
The Court of Appeal made it clear that this is a free-standing rule having nothing to do with champerty and that the rationale for the rule was the conflict of interest which would arise between the client and the solicitor if the solicitor could negotiate for an assignment of the client’s claim, bearing in mind that the solicitor owed the client a fiduciary duty.
The Court of Appeal then went on to consider in detail the law relating to conditional fee agreements, damages-based agreements and champerty and held that public policy had not required any changes beyond those made by Parliament in sanctioning conditional fee agreements and damages-based agreements.
