Assignment of Cause of Action by Solicitors: Legal Boundaries Affirmed in Farrar & Anor v Miller ([2022] EWCA Civ 295)

Introduction

The Court of Appeal case Farrar & Anor v Miller ([2022] EWCA Civ 295) addresses a pivotal issue concerning the validity of a solicitor's assignment of a client's cause of action under a damages-based agreement (DBA). The appellant, CANDEY, a firm of solicitors, sought to overturn a High Court decision that deemed their action as champertous and therefore invalid. The core of the dispute revolves around whether solicitors can lawfully assign a client's claim under a DBA, particularly in light of public policy considerations against champerty.

Summary of the Judgment

Marcus Smith J, in his High Court judgment dated 16 July 2021, held that CANDEY's assignment of Mr. Farrar's cause of action was champertous and thus invalid. CANDEY appealed this decision to the Court of Appeal, contending that statutory reforms had altered the public policy landscape, making such assignments permissible. However, the Court of Appeal dismissed CANDEY's appeal, upholding the High Court's ruling. The judges reaffirmed that despite statutory changes permitting certain fee arrangements, the specific act of solicitors assigning a client's cause of action remains contrary to public policy unless explicitly sanctioned by statute.

Analysis

Precedents Cited

The judgment extensively references foundational cases that establish and reinforce the common law rules against champerty and maintenance:

Trendtex Trading Corp v Credit Suisse [1982] AC 679: This House of Lords decision articulated that an assignment must demonstrate a genuine commercial interest to avoid being champertous.
Hall v Hallet (1784) 1 Cox 134: An early case establishing that solicitors cannot purchase interests in a client's litigation, reinforcing the prohibition against solicitors benefiting from their management of a case.
Wallersteiner v Moir (No 2) [1975] QB 373: Emphasized that contingency fees could contravene public policy by compromising the solicitor's duty to the court.
Awwad v Geraghty & Co [2001] QB 570: Highlighted that proprietary champertous agreements not aligned with statutory provisions remain unenforceable.
Rees v Gateley Wareing [2014] EWCA Civ 1351: Reinforced that agreements enabling solicitors to derive benefits beyond statutory allowances are champertous.
Sibthorpe v Southwark London Borough Council [2011] EWCA Civ 25: Clarified the scope of champerty independent of maintenance.
Factortame Ltd (No 8) [2002] EWCA Civ 932: Discussed the enduring relevance of champerty principles, especially concerning those conducting litigation.

These precedents collectively underscore the judiciary's stance against allowing solicitors to have financial stakes in their client's litigation outcomes unless explicitly permitted by law.

Legal Reasoning

The core legal reasoning in the judgment centers on the intersection of common law principles against champerty and statutory modifications introduced by the Courts and Legal Services Act 1990. The court delineated three primary common law rules:

Assignment of Bare Causes of Action: Such assignments are only valid if the assignee has a genuine commercial interest, as established in Trendtex Trading Corp.
Assignments by Solicitors: Solicitors cannot assign a client's cause of action prior to judgment, a rule stemming from cases like Hall v Hallet and enshrined in section 59 of the Solicitors Act 1974.
Champerty: The act of supporting litigation for a share of the proceeds remains contrary to public policy unless sanctioned by statute, as clarified in Sibthorpe v Southwark and Rees v Gateley Wareing.

Despite statutory reforms allowing conditional and damages-based agreements, the court held that these do not extend to assignments of client's claims by solicitors. The statutory framework explicitly defines permissible fee arrangements but does not accommodate assignments that would enable solicitors to control litigation outcomes for financial gain beyond the stipulated terms.

Furthermore, the court emphasized that public policy concerns, such as maintaining the integrity of the legal profession and preventing conflicts of interest, remain paramount. The Solicitors Act 1974 and subsequent amendments do not provide carte blanche for assignments that could undermine these foundational principles.

Impact

The decision in Farrar & Anor v Miller reaffirms the judiciary's strict adherence to anti-champerty principles, even in the face of legislative attempts to modernize fee arrangements. It delineates clear boundaries for solicitors, preventing them from assigning client claims to their firms, thereby protecting the fiduciary relationship between client and solicitor. This ruling has significant implications for the legal profession:

Solicitors' Fee Arrangements: Firms must navigate within the confines of statutory provisions, ensuring that any fee agreements do not inadvertently constitute champertous arrangements.
Access to Justice: While DBAs are permissible, this case limits extensions that could potentially compromise the integrity of legal representation.
Future Litigation: Legal practitioners must exercise caution in structuring financial agreements related to litigation to avoid contravening established public policy.

Moreover, the judgment signals to the legislature the necessity for clear statutory guidance if further flexibility in fee arrangements is desired, as common law constraints remain robust in preserving the justice system's integrity.

Complex Concepts Simplified

Champerty: A legal doctrine preventing an individual from funding litigation in exchange for a share of the proceeds if the lawsuit is won. Its purpose is to prevent conflicts of interest and ensure that legal professionals remain impartial.

Damages-Based Agreement (DBA): A contract between a client and a solicitor where the solicitor’s fee is contingent upon the client winning the case, typically involving a percentage of the damages awarded.

Contentious Fee Agreement: Similar to a DBA, it's an agreement where a solicitor's fee is dependent on the outcome of litigation, regulated by specific statutory conditions.

Public Policy: A principle regulating fairness, justice, and morality as upheld by the judiciary to ensure that legal decisions align with societal values.

Assignment of Cause of Action: The transfer of a legal claim or right from one party to another, enabling the assignee to pursue the claim in court.

Conclusion

The Court of Appeal's decision in Farrar & Anor v Miller serves as a definitive affirmation of the enduring common law principles against champerty and the restricted scope of statutory reforms in this domain. By upholding the invalidity of CANDEY's assignment, the court has reinforced the boundaries within which solicitors must operate, ensuring that the integrity and impartiality of legal representation remain uncompromised. This judgment underscores the necessity for clear legislative frameworks if further evolution of fee arrangements is sought, while simultaneously safeguarding the foundational aspects of justice and client-solicitor fiduciary duties.