Solicitors holding pre-2013 conditional fee agreements (CFAs) assigned to them by prior firms breathed a sigh of (at least temporary) relief in early May 2016, following the decision of His Honour Judge Graham Wood QC in the County Court appeal in Jones v Spire Healthcare. Briefly put, a personal injury claimant (Ms Jones) entered into a pre-2013 CFA retainer with a firm of solicitors known as Barnetts. Barnetts became insolvent and administrators were appointed. In 2014, those administrators assigned the benefits and obligations of that retainer (among others) for consideration to a new firm known as SGI Legal. Upon successful settlement of Mr Jones’s claim, SGI Legal sought to recover its costs (including success fee) pursuant to the CFA. However, the paying party objected on the grounds that the assignment could never have been valid. It argued that this was a contract of personal service (unassignable following Griffith v Tower Publishing), which did not fall within the exception relating to the assignment of contracts motivated by personal trust and confidence in a particular solicitor who moves from one firm to another (as the prior CFA case of Jenkins v Young Brothers Transport Ltd had allowed).
The District Judge at first instance accepted those arguments, but HHJ Wood QC held otherwise. He considered that the District Judge had taken an unduly narrow approach as to when personal contracts should be assignable, and had placed significant emphasis on the importance of the agreement of all three relevant parties (Mr Jones, the assignor firm Barnetts’ administrator, and the assignee firm SGI Legal).
While undoubtedly welcome news for solicitors holding work in progress (WIP) on assigned CFAs, the Circuit Judge’s decision prompts two questions going forward.
First, if the assignability of a contact of personal service does not rely upon a searching enquiry into the degree of personal trust and confidence in every case (which HHJ Wood QC opined would be disastrous for legal certainty), what does the future hold for the rule against the assignment of personal contracts? The Circuit Judge’s reasoning (at paragraphs 70-73) suggests that any personal service contract may be assigned so long as what is being assigned compromises a burden and a conditional benefit. That would seem to leave the door open to do away with the special category of personal service contracts altogether. But in circumstances where obvious public policy grounds exist (not least human rights grounds) for limiting the capacity for personal service contracts to be enforced and traded by assigned (that is, without the full consent of parties required for a novation), observers might wonder whether such a bold step is bound to be challenged.
Second, HHJ Wood QC placed significant emphasis on the fact that Ms Jones, Barnetts’ administrators, and SGI Legal were all in agreement and all intended the assignment to take effect. He considered it “impossible to ignore what was intended by the arrangement entered into in this case”, and suggested that, “[i]n circumstances where there is tripartite involvement” to the extent that Ms Jones herself (strictly a stranger to the assignment between the firms) entered into a deed of assignment, “it would be an unduly restrictive and overly legalistic approach to deny the parties the effect of what they intended” (paragraph 76). Doubtless Ms Jones and her solicitors’ firms all agreed to the assignment of the CFA: they all had an interest in the pre-2013 conditions continuing to apply following the collapse of Barnetts. But there is an obvious absence from the Circuit Judge’s dramatis personae: the paying party, whose interests were directly harmed by a pre-2013 CFA being validly assigned (in 2014). This imposed a practical burden in the form of success fees, payable in the era when the costs rules have been amended to restrict them. The paying party is, strictly speaking, a stranger to the assignment. But if the wishes of Ms Jones (another stranger) factor into the broad assessment of what effect the assignment should have, why shouldn’t the situation of the paying party also be considered? They are, after all, who CFAs are all about.
We might conclude that Jones v Spire Healthcare, in arriving at a practically justifiable solution to the problem of assigning historic WIP on CFAs, has exposed unintentionally some awkward compromises in this area of the law. Further appeals can be expected before the issue is fully settled.
