Costs bulletin for April 2017
Updates on the world of costs and the law, from the editors of Costs Law Reports. This month: CFA assignments.
law & practice 05/04/2017
Costs Bulletin for April 2017
Conditional fee agreements and assignments: the end, or just the end of the beginning
This Bulletin has often featured conditional fee agreements (CFAs) and Costs Law Reports is replete with judgments concerning their enforceability and the extent to which, in the post-LASPO world (see s 44 Legal Aid and Sentencing and Punishment of Offenders Act 2012), success fees and after the event insurance (ATE) premiums can be recovered from losing opponents in litigation. Possibly the thorniest issue has been the validity of CFAs where the original solicitor has assigned the agreement to another solicitor, purporting (in legal lingo) to transfer the benefit of the contract (the right to be paid) to the successor solicitor who must accept the burden (the obligation to complete the work) on the same terms. Somewhere in the middle is the client who has a say in who is to act for him or her: whilst the assignment is made between the solicitors themselves, the consent of the client is an essential component to the arrangement since the absence of agreement to the instruction of the new firm will mean there is no enforceable retainer permitting the successor firm to complete the work.
Before 1 April 2013, no particular problem existed because there was no LASPO and additional liabilities (generic term for success fees and ATE premiums) could be recovered via an entirely new CFA between the client and the successor solicitor. As we know, LASPO changed all that and for the past four years, a winning litigant who has funded the case via a CFA must meet the success fee and ATE premium out of damages. Only in privacy and mesothelioma litigation do they remain payable in principle by the losing party.
Where does assignment fit into this jigsaw puzzle? The answer is nowhere if the same solicitor with a pre–1 April 2013 CFA runs the case to the end and wins. In those circumstances, the pre-LASPO rules apply and the solicitor in the between the parties bill can pick up the additional liabilities from the loser as if there was no s 44. The problem arises when there has been a change of solicitor. If the new firm wishes to act under a CFA from 1 April 2013 onwards, there is no problem about that, but the additional liabilities will be for the client’s account and not the opponent’s. That said, solicitors being solicitors and clients being clients, no sensible party to a CFA would wish to take on the liability for the additional liabilities if there is a mechanism available to keep the old system running and to make the tortfeasor pay, as was the intention when Lord Irvine extended the CFA regime 20 years ago. And so we have assignments: instead of making a new CFA which would create a novation of the retainer between the client and the solicitor, the assignee firm takes an assignment of the existing CFA from the assignor firm on exactly the same terms, with the client’s consent to the new arrangement being inferred from the continuation of instructions.
The circumstances in which such arrangements can arise are varied. The only case at High Court level specifically on the point is Jenkins v Young Brothers  3 Costs LR 495 (Rafferty J) in which the solicitor moved firms twice, taking the client with her, as Mr Jenkins was anxious for there to be continuous representation. Being pre-LASPO, the successor firms could have made new CFAs with recoverable success fees, but for whatever reason, a decision was taken to assign the original CFA, and on appeal the judge held that the paying parties could not escape liability for payment under the terms of the costs order on the basis that the assignments were invalid.
For a decade, Jenkins slumbered away undisturbed, but LASPO has changed all that and to avoid additional liabilities being a casualty of its implementation, solicitors have attempted to assign CFAs in the following circumstances:
- where firm A changes its name (e.g. to firm A LLP) with the intention that the new entity acts under the same CFA on the same terms;
- where firm A merges with firm B and the new firm continues to act for the pre-merged firm’s clients;
- where firm A goes bust and its liquidator sells its book of business including its CFAs by assignment to firm B;
- where the client dies after 1 April 2013 and the CFA permits the personal representatives to complete the work under the existing CFA;
- where firm A ceases to undertake the type of work in which it has been instructed and arranges for the retainer/CFA to be assigned to another firm which does so.
With so much money in terms of success fees and ATE premiums now depending upon the validity of CFAs and whether they can be validly assigned to successor firms, it is little wonder that Jenkins has come under the spotlight, in particular whether it was correctly decided.
Paying parties predictably say that it was not: in particular, it is said that a personal contract such as a CFA is incapable of being assigned as a matter of law, that the benefit and burden of the contract cannot be transferred and that, accordingly, the retainer, and with it the obligation to pay additional liabilities, cannot be passed to the successor firms. Thus in Budana v Leeds Teaching Hospitals NHS Trust (DJ Besford, 4 February 2016) the court held that the purported assignment of a CFA from one firm of solicitors to another was ineffective where the transferring firm had terminated its retainer with the client before the purported transfer, so the losing party did not have to pay.
That decision has been leapfrogged to the Court of Appeal (the hearing in July), but the legal world was taken somewhat by surprise on 29 March 2017 when the judgment in Plevin v Paragon Personal Finance Ltd was given by the Supreme Court in which Lord Sumption (with whom all other members of the court agreed) was reported as having upheld the validity of CFA assignments as a matter of principle. The decision is published today in Costs Law Reports at  2 Costs LO 247 (note that it also dealt with ATE insurance on a split decision).
A closer analysis indicates that this was not the case. The facts were that Mrs Plevin had made a CFA with her solicitors as long ago as 19 June 2008. Between that date and the hearing of appeals, both in the Court of Appeal and Supreme Court, organisational changes had meant that the partnership had reconstituted itself as an LLP and subsequently into a limited company. On each occasion, the CFA had been assigned (so the solicitors said) to the new entity and Mrs Plevin’s case had continued to be handled on the same terms.
Paragon lost its appeals both in the Court of Appeal and in the Supreme Court, but contended before the costs officers that the CFA was incapable of assignment as a matter of principle, and so there was no liability to meet any of Mrs Plevin’s costs in those courts. That argument had failed and the single judge had given permission to appeal, but before the appeal was heard, Paragon had withdrawn that argument so that, as Lord Sumption put it at para 5: “It is common ground that the CFA was in principle assignable.” Thus the argument became limited to the terms and construction of the successor transfer agreements rather than to the principle of whether a CFA can be assigned in law.
This is important. Whilst at first sight it might be thought that the judgment clarified the law on the assignment of CFAs, para 5 makes it clear that the justices did not do so because the issue before them was not whether a CFA can be validly assigned. On the contrary,their judicial analysis was limited to the pure point of construction of the transfer agreements themselves and Lord Sumption left it at that. Of course he could have said “I am very surprised that this is common ground” thereby suggesting that the law does not permit the assignment of a personal contract such as a CFA, but he did not do so and none of the other justices said anything other than that they agreed with him. So Plevin decided nothing of principle, Budana lives to fight another day and there is no end to the assignment jurisprudence still less an end to the beginning! Apparently there are thousands of decisions awaiting clarification on this point. Roll on July 2017!
Save the date!!
We are planning to hold the fourth Costs Law Reports Conference in London on Thursday, 28 September 2017. By then we shall know the outcome of Lord Justice Jackson’s recommendations about fixed fees and we are happy to say that Sir Rupert has provisionally accepted our invitation to make the keynote speech. With the new bill expected to become mandatory three days later, Alexander Hutton QC’s views about how it will work, following two years of a pilot scheme largely ignored by the profession, will also be all-important, as will those of the Senior Costs Judge, Master Gordon-Saker, who will be rounding off the day’s events in a closing address. Make a diary note now!
The headnotes and full texts of the cases below are available to online subscribers at www.costslawreports.co.uk. Follow Costs Law Reports on Twitter to be notified of new cases as soon as they are published.
New cases this month
Zoya Ltd v Ahmed (t/a Property Mart) and Others  2 Costs LO 133: Wasted costs orders; court’s power to award costs due to breach of warranty of authority.
Harb v HRH Prince Abdul Aziz  2 Costs LO 157: Interim payment on account of costs and failure to pay: “unless” orders: disproportionate interference with right of access to the court under Article 6(1) ECHR.
Shackleton and Associates Ltd v Shamsi and Others  2 Costs LO 169: Whether a refusal to settle justified an award of indemnity costs: entitlement to recover costs of a solicitor advocate providing his services through a claimant company.
Fielding and Another v Hunt  2 Costs LO 191: Rule 4.83 of the Insolvency Rules 1986; application for an order that the liquidator pays applicants’ costs personally in circumstances where company has no assets to pay.
Sony/ATV Music Publishing LLC and Another v WPMC Ltd and Others  2 Costs LO 207: Section 51(3) Senior Courts Act 1981; non-party costs orders: whether order should be made in absence of prior notification of intention to apply.
Oldcorn v Southern Water Services Ltd  2 Costs LO 227: CPR 44.2: court’s discretion as to costs: whether the court should depart from the general rule in awarding costs where the overall determinative issue had been decided in the defendant’s favour.
Car Giant Ltd and Another v The Mayor and Burgesses of the London Borough of Hammersmith  2 Costs LO 235: Successful party’s failure to beat Part 36 offer; whether unsuccessful party should receive costs on the standard or indemnity basis from the date that the offer should have been accepted: costs consequences of delay in agreeing to mediate; costs budgeting under CPR 3.15; whether the court should provide an indication about the reasonableness of incurring costs in excess of the last costs budget.
Plevin v Paragon Personal Finance Ltd  2 Costs LO 247: Conditional fee agreements; validity of assignment of right to claim a success fee; recoverability of success fee and ATE insurance premium post implementation of Legal Aid, Sentencing and Punishment of Offenders Act 2012.
Costs and Fees Encyclopaedia updating
The Civil Procedure (Amendment) Rules 2017 (SI 2017/95) amend rules 3.15, 3.18, 44.9, 45.29B–E, and 45.41 to 45.45 of the Civil Procedure Rules 1998, with effect from or by 6 April 2017. Updated pages are now available for printing out and adding to your Costs and Fees Encyclopaedia: Pages 2 (3.15, 3.18), 21 (44.9), 46 (45.29B), 47–49 (45.29C, 45.29D, 45.29E), 57–58 (45.41–45.45)
The Damages-Based Agreements Regulations 2013 (SI 2013/609), which originally came into effect from 1 April 2013, have been added to the Costs and Fees Encyclopaedia. New pages are now available for printing out and adding to your Costs and Fees Encyclopaedia: Pages 268
The Immigration and Nationality (Fees) (Amendment) Order 2017 (SI 2017/440) has amended the Immigration and Nationality (Fees) Order 2016, with effect from 15 March 2017. The changes include the extension of certain provisions of the 2016 Order to the Bailiwick of Jersey and the Bailiwick of Guernsey. Updated pages are now available for printing out and adding to your Costs and Fees Encyclopaedia: Pages 317–323
The Public Record Office (Fees) Regulations 2017 (SI 2017/289) have revoked and replaced the Public Record Office (Fees) Regulations 2015, with effect from 1 April 2017. New pages are now available for printing out and adding to your Costs and Fees Encyclopaedia: Pages 403–405