Master Leonard:
- Mr Warren, the Claimant, is a licensed boxing promoter and manager. Over a period of years and in respect of a variety of matters Mr Warren was represented by Ms Hanna Basha, a solicitor. That was first at Carter-Ruck, subsequently (between about March 2011 and 14 September 2013) at PSB Law LLP ("PSB") and, until the end of January 2016, at the Defendant firm, Hill Dickinson LLP.
- Two of the matters in which Ms Basha acted for Mr Warren were proceedings against Mr Ricky Burns, a boxer, for breach of contract and against Mr Burns' manager, Mr Alex Morrison, for defamation. Both started when Ms Basha was with PSB.
- In March 2013, Mr Warren signed two Conditional Fee Agreements ("CFAs") with PSB, one relating to the proceedings against Mr Burns and the other to the proceedings against Mr Morrison. Both agreements were dated 27 March 2013 and provided for success fees.
- On the face of the documents, Mr Warren signed both CFAs and an accompanying copy of PSB's terms of business on 25 March 2013. On the evidence considered below, it seems more likely that he signed them on 26 (or possibly 27) March 2013, and that Ms Basha countersigned the CFAs on 27 March.
- The purpose of this judgment is to address two preliminary issues. The first is whether Mr Warren has achieved a "win" for the purposes of each CFA. The second concerns an assignment of the two CFAs, dated 25 November 2013. Mr Warren challenges the validity of that assignment.
The Burns CFA
- Ms Basha frequently communicated with Mr Warren through his PA, Emma Hedley. It is not suggested that anything sent to him in that way would have failed to reach him.
- On 26 March 2013 Ms Basha sent an email to Emma Hedley, Mr Warren's personal assistant, which read (insofar as material) as follows:
"… Could you pass the below to Frank please? … Dear Frank… Thank you for instructing us in relation to your claim against Ricky Burns.… We write to confirm your instructions to us, and enclose our Terms of Business which set out the basis upon which we are acting for you. We would be grateful if you would please read, sign and return a copy of the Terms of Business to us… We are instructed to act for both you, as an individual, and W. Promotions Ltd, as a corporate entity, in relation to… A claim for damages for breach of the joint Management Agreement that you entered into with Ricky Burns… A claim for damages for breach of the Promotional Agreement… A claim for any other relief that may be awarded by the court…
As you know proceedings have been issued and served already… Once we have received the Defence then we will be able to better advise you on the merits of the claim and the potential cost position. At this stage, as you know, from the information we have, both Jonathan Crystal and I consider that the claim is sound. However we have not had a formal response… so it is difficult to assess the arguments your opponent is likely to raise…
We have agreed to act for you in this matter on a "no-win no fee" basis… I have enclosed with this letter a copy of your CFA with this firm, together with a document entitled 'What you need to know about a Conditional Fee Agreement'. The information in the Terms of Business document which relates to the payment of my firm's fees during the course of your case is superseded by the CFA. The essence of the CFA is that you are not obliged to pay my firm's professional charges unless you are successful in the proceedings, in particular...
If you win the case, you will be liable to pay my firm's fees. However, the likelihood is that your opponents will be ordered to pay the majority of your costs… If you lose the case, you will not have to pay any of my firm's fees… Any disbursements such as Court fees and your barrister's fees will be payable by you as the case progresses. Should it become necessary to instruct a barrister, it may be that we will be able to do so on a conditional fee basis, however this cannot be guaranteed… You will also need to pay other fees, such as Court fees and fees of a mediator and expert…
Whilst I have summarised above what it means to enter into a CFA, I would be grateful if you would please read the enclosed documents very carefully and let me know if you would like to discuss any of the contents…"
- As Ms Basha's email indicated, she would appear to have attached to it three documents: the CFA in relation to the claim against Mr Burns ("the Burns CFA"): a document headed "What You Need to Know About a Conditional Fee Agreement" ("the WYK document") and PSB's standard terms of business.
- The Burns CFA named two clients: Mr Warren and W. Promotions Ltd ("WP Ltd").
- The Burns CFA contained the following material terms. Under "What is covered by this Agreement":
"The first claimant's claim against Mr Ricky Burns for damages resulting from the breach of the joint management agreement signed by the first claimant and the defendant on 15th May 2010…
The second claimant's claim for damages for breach of the Promotional Agreement dated 30th July 2010 and the Second Addendum to that Agreement dated 16th September 2011…"
- The "first claimant" referred to was Mr Warren and the "second claimant" WP Ltd.
- Under "Paying us" the agreement said:
"If you win the case, you are liable to pay our disbursements, basic charges and a success fee. The amount of these is not based on or limited by the damages. You may be able to recover from your opponent our disbursements, basic charges, success fee and the premium for any insurance policy you take out as set out in the document 'What you need to know about a Conditional Fee Agreement'…"
- The WYK document's first paragraph read:
"The provisions and terms of this document incorporate the Law Society Conditions and form part of your Conditional Fee Agreement and are binding upon you. Any amendments or additions to the Law Society Conditions which are made from time to time will apply to you. You should read this document carefully and ask us about anything you find unclear…"
- Its defined terms included:
"Lose: The court has dismissed your case, you have stopped it on our advice or you do not Win as defined below…
Win: The case is finally decided in your favour, whether by a court's decision or by agreement, upon terms including the payment to you of damages, compensation, costs or any other financial contribution … 'Finally' means that your opponent is not allowed to appeal against the court's decision; or has not appealed in time; or has lost any appeal…"
- Under the heading "What happens if you win?" The WYK document repeated the paragraph from the Burns CFA quoted above and starting with the words "If you win the case…" and, under the heading "Recovery of Costs", it included this paragraph:
"The court will decide how much you can recover if you and your opponent cannot agree the amount. If the amount agreed or allowed by the court does not cover all our basic charges and disbursements, you will be liable to pay the difference…"
- Under the heading "What happens if you lose?" the WYK document read:
"If you lose, you do not have to pay any of the basic charges or success fee except as provided for elsewhere in this agreement. You do have to pay… us for our disbursements…"
- The WYK document also provided, in fairly standard terms, for Mr Warren to end the Burns CFA at any time, in which event PSB would have the options of requiring Mr Warren to pay basic charges and disbursements, or claiming basic charges, disbursements and the success fee should Mr Warren go on to win. PSB could only end the agreement in certain circumstances, including a breach of responsibilities by Mr Warren; their deciding that he was unlikely to win; or his rejection of their advice on settlement. In those circumstances, PSB would have the same options regarding payment.
The Morrison CFA
- Within about 15 minutes of sending her email attaching the Burns CFA, Ms Basha sent a second email to Ms Hedley:
"… Could you pass the below to Frank please? … Dear Frank… Thank you for instructing us in relation to your defamation claim against Mr. Morrison.… We write to confirm your instructions to us, and enclose our Terms of Business which set out the basis upon which we are acting for you. We would be grateful if you would please read, sign and return a copy of the Terms of Business to us… As you know we have sent letters of claim to Alex Morrison who has not responded at all… I understand that as there is been no response then you are keen to issue proceedings… Taking into account the risk and benefits, I consider that the potential outcomes justify the risk and expense involved… I am happy to discuss our advice further, but if you would like to proceed, the next step in your case is to finalise the Particulars of Claim…
We have agreed to act for you in this matter on a "no-win no fee" basis at this stage… I attach a copy of your CFA with this firm, together with a document entitled 'What you need to know about a Conditional Fee Agreement'. The information in the Terms of Business document which relates to the payment of my firm's fees during the course of your case is superseded by the CFA. The essence of the CFA is that you are not obliged to pay my firm's professional charges unless you are successful in the proceedings, in particular...
If you win the case, you will be liable to pay my firm's fees. However, the likelihood is that your opponents will be ordered to pay the majority of your costs… If you lose the case, you will not have to pay any of my firm's fees… Any disbursements such as Court fees and your barrister's fees will be payable by you as the case progresses. Should it become necessary to instruct a barrister, it may be that we will be able to do so on a conditional fee basis, however this cannot be guaranteed… You will also need to pay other fees, such as Court fees and fees of a mediator and expert…
Whilst I have summarised above what it means to enter into a CFA, I would be grateful if you would please read the enclosed documents very carefully and let me know if you would like to discuss any of the contents…"
- Again, Ms Basha's email appears to have attached the CFA between Mr Warren and PSB in relation to Mr Warren's claim against Mr Morrison ("the Morrison CFA"), a document headed "What You Need to Know About a Conditional Fee Agreement" and PSB's standard terms of business.
- The Morrison CFA named Mr Warren as the sole client. Under the heading "what is covered by this agreement" it read:
"Your claim against Mr Alex Morrison, manager of Mr Ricky Burns, for statements made by him to the press in or around March 2013…"
- The document headed "What You Need to Know About a Conditional Fee Agreement" incorporated all the terms quoted above from the WYK document, with one material difference in the definition of "Win":
"Win: The case is finally decided in your favour, whether by a court's decision or by agreement, upon terms including either the provision of an agreed apology, retraction or other form of words, or the provision of an undertaking, or the granting of an injunction restraining your opponent from further publication or other action or the payment to you of damages, compensation, costs or any other financial contribution…"
PSB's Terms of Business
- The introduction at paragraph 1 of PSB's terms of business, as provided with the Burns and Morrison CFAs, read:
"This document sets out our terms of business and, together with the accompanying letter (or email) and conditional fee agreement (if any) governs our retainer… This is an important document and if you have any queries about it, please contact us. By instructing us or continuing to instruct us after receipt of this document, you are deemed to have accepted our terms of business and unless otherwise agreed with you, these terms of business will apply to future work…"
- Under the heading "our Responsibilities" the terms of business included the following passages:
"We aim to offer all our clients a professional and consistent service, but if you have any concerns in this regard which you are unable to resolve with the partner handling the matter, please ask for a copy of our client care policy… Whilst retained by you we will… Act with integrity… Act in your best interest subject to the proper administration of justice… Give you our best advice, taking into account your needs and circumstances, and properly explain the legal work we are undertaking…"
- Under the heading "Your Instructions" the terms of business read:
"We will assume, unless you instruct us otherwise that… any director, employee, agent or representative who gives us instructions on your behalf is authorised to do so… when we act for two or more clients in the same matter, each client has the ability to gives instructions on behalf of the other(s)…"
- Under the heading "invoices" the terms of business included the following paragraphs:
"If we receive instructions from or on behalf of more than one person or company each of those for whom we act are separately responsible for payment of all our fees and disbursements… If we accept instructions from a corporate organisation (including a company, partnership and LLP) and this document is signed by a director (officer, member or partner) then in consideration of us accepting instructions, that person agrees to be personally liable to us if the organisation does not pay our fees or disbursements…"
- PSB's terms of business also made provision for "alternative funding" (including the conditional fee arrangements actually entered into with Mr Warren) and for termination of the retainer by PSB with good reason.
Counsel in the Burns and Morrison Cases
- PSB entered into CFAs with Jonathan Crystal of counsel in relation to the claims against Mr Burns and Mr Morrison, on about 27 March 2013. Ian Mill QC, leading counsel in the claim against Mr Burns, does not appear to have been instructed on a conditional fee basis. Adrienne Page QC, leading counsel in the claim against Mr Morrison, however, was.
- On 12 April 2013, Ms Basha sent the following email to Ms Hedley:
"… This is the CFA for Adrienne on the Morrison libel claim. If the claim is unsuccessful then of course she will not get paid. The slight anomaly is that if successful, but Morrison does not pay, then she is entitled to fees and Frank has a primary liability for these. This is the same for the CFAs which JC and I have entered into, but it is less likely that we would seek to recover those fees from Frank. I mention this only so that he is aware that if the claim is successful, but we are unable to recover fees from Morrison, then he could be liable for Adrienne's fees nonetheless…"
- In his witness statement, Mr Warren accepts that he saw this email, but he says that he did not pay any attention to Ms Basha's indication that it was "less likely" that she would seek to recover her firm's fees should Mr Morrison be unable to pay, because Mr Warren's agreement with Ms Basha was that he would only be charged if fees were recovered from his opponent. He also, in the same statement, says that he could not recall any conversation with Ms Basha when she told him that he might have a liability to the Defendant whether or not the case against Mr Morrison proved to be "financially fruitful".
Assignments and Further Agreements
- On a 9 September 2013 Ms Basha sent an email to Ms Hedley, addressed to Mr Warren:
"Dear Frank… I am excited to tell you that Magnus Boyd and I have been approached by Hill Dickinson LLP to set up a reputation protection team in London… Magnus intends to start 16 September and I will join him by 14 October at the latest… I am writing to seek your consent to transfer your files to my new firm. Alternatively, you are entitled to remain with PSB Law LLP or instruct a new firm completely. If you do wish to transfer your files or instruct a new firm, then there will be aspects of your retainer with PSB Law with which we need to deal. Magnus and I leave at the end of this week, so we look forward to hearing from you as soon as practicable… If you would like to transfer your files then please let me know and I will write you further to advise on the arrangements and retainer aspects…"
- Ms Basha left PSB on 14 September 2013. On 30 September 2013, PSB ceased to practise as a firm of solicitors but remained open for the purposes of concluding administrative matters.
- On 25 November 2013, PSB entered into an "Agreement to Assign" with the Defendant. The recitals to that agreement stated that Ms Basha and Mr Boyd had until 14 September 2013 been members of PSB, both having since agreed to join the Defendant; that the Defendant wished PSB to enter into assignments in respect of CFAs listed at Schedule 1 to the agreement; and that in consequence of the assignments, costs incurred by PSB under the terms of the CFAs prior to the assignment date would be payable to the Defendant, but that the intention of both parties was for PSB to receive the benefit of those costs. The assignment date was stated to be 1 October 2013.
- Under the terms of the agreement, in return for a nominal consideration PSB assigned to the Defendant the CFAs listed in Schedule 1, which included the Burns CFA and the Morrison CFA.
- I understand that the Defendant entered into new CFAs with Mr Crystal in respect of the claims against Mr Burns and Mr Morrison, in late September 2014. Ms Page QC's CFA was assigned to the Defendant on 25 November 2013.
- In the meantime, solicitors acting for Mr Burns had written to PSB demanding £126,000 from WP Ltd as security for costs, on the basis that WP Ltd "appears to be deeply insolvent". This was followed by an application for security. On 23 August 2013, WP Ltd had appointed administrators under the provisions of the Insolvency Act 1986. On 8 November 2013, WP Ltd through its administrators had agreed to assign to Mr Warren its cause of action against Mr Burns. WP Ltd was, by an order of 17 December 2013, removed (except for the purposes of costs) as second claimant in the claim against Mr Burns, but Mr Warren was ordered to pay Mr Burns' costs thrown away as a result, including his costs of the application for security for costs.
- On 15 April 2014, Ms Basha sent an email to Mr Warren, via Ms Hedley, incorporating a year-end review of all of the matters upon which Hill Dickinson had been advising Mr Warren. The letter included a review of current and potential CFA arrangements. It mentioned one matter in relation to which no costs would be recoverable by the Defendant or Mr Crystal even if Mr Warren was successful in litigation, another which was subject to a monthly retainer, and some miscellaneous matters in relation to which costs of £20,000 would be written off.
- Ms Basha's email explained, in relation to potential new CFAs, that the legal regime had changed, so that success fees would be limited and irrecoverable from any opponent. She also mentioned a number of matters in relation to which the Defendant was unable or unwilling to act on a CFA basis. As to CFAs transferred from PSB, she said:
"We were acting on a CFA basis on these matters at PSB and have assigned the cases to Hill Dickinson so that we can continue to act on a CFA basis. That said, there are a couple of loopholes in the law on assignment and we are therefore (as a firm) taking advice from counsel in relation to these issues for you and our other clients and hope to finalise the position in the next week or so …"
- The letter included, under the heading "going forward":
"I have always acted for you on the basis that we act on a CFA where we can and I am happy to continue on that basis, although because of the change in recoverability of success fees, let me know if that still works for you… In addition, over the last few years, I have been happy to help in more general terms. As you know, we are always available for review or a steer on a legal issue and we can always spend an hour or so considering the merits of potential actions or indeed getting a letter or two out to take stuff down from the Internet. If that works for you, then I do not intend to change it… However, in relation to other matters… which become more substantive than an hour or two's work and do not move on to a CFA, from the beginning of May we will need to charge you for our time. We will let you know in advance if this is the case so that you can decide whether you want to proceed with this firm before costs are incurred. An alternative, as we have discussed recently, would be to roll this work up… into a monthly retainer, but let me know if you want to explore that further…"
- On 11 June 2014 and on 21 October 2014 Mr Warren signed up to "safeguard CFAs" designed to protect the costs recovery position in the event of an effective challenge, by an opponent, to the assignment of the Burns and Morrison CFAs. I do not think it necessary to go into any detail about disagreements, other than to observe that on the face of the correspondence and documentation received by him, Mr Warren was very fully advised about the possibility and the nature of a challenge, and invited to seek independent legal advice. A similar "safeguard CFA" was entered into by the Defendant and Ms Page QC on 21 October 2014.
The Outcome of the Claim Against Mr Burns
- The claim against Mr Burns came to trial between on 7, 8, 9 and 13 October 2014. Mr Justice Knowles CBE handed down a reserved judgment on 13 November 2014: the citation is [2014] EWHC 3671 (QB). Knowles J found that Mr Burns owed Mr Warren (and Mr Morrison) unpaid commission under a management agreement, the amount to be determined if not agreed; that WP Ltd (by now in insolvent liquidation), but not Mr Warren, owed Mr Burns the unpaid balance of a purse from a fight, agreed at £102,000; and that no sum was payable by Mr Burns to WP Ltd or Mr Warren in relation to a promotion agreement.
- On 15 December 2014, Knowles J made an order giving judgment for Mr Warren against Mr Burns in the sum of £75,732.17. WP Ltd's claim was dismissed, as was a counterclaim by Mr Burns against Mr Warren. Mr Burns obtained judgment against WP Ltd for £102,000.
- In relation to costs, the order provided that Mr Burns pay 50% of Mr Warren's costs of the action (including the counterclaim) to be the subject of detailed assessment if not agreed, with £100,000 to be paid on account. The order also provided that on assessment, the Costs Judge should assess reasonableness and proportionality as if the case was one in which the claim for Mr Warren was for less than £100,000, rather than the pleaded claim for £1 .8 million, "but having regard to the importance of the issues to the parties involved in the context of the field of professional endeavour in which they operate".
- On 6 May 2015, Mr Warren obtained a Default Costs Certificate against Mr Burns in the sum of £372,031.74. In the meantime, in March 2015, Mr Burns had been made bankrupt in Scotland. A prospective appeal by Mr Burns against the judgment of Knowles J was dismissed on the application of Mr Burns' Trustee in Bankruptcy on 20 August 2015. Mr Warren submitted a claim of £447,623.91 in the bankruptcy. Nothing has been recovered by Mr Warren.
The Outcome of the Claim Against Mr Morrison
- On 5 February 2014, Mr Warren entered judgment against Mr Morrison for damages to be decided by the court. Mr Morrison had initially been represented and had served a defence, but at the beginning of December 2013 had started to act in person. On 17 January 2014 he had advised Ms Basha by email that his only source of income was a pension of £114 per week. Judgment followed his failure to comply with an unless order to take certain procedural steps.
- Mr Morrison did not attend a hearing arranged for the assessment of damages on 24 October 2014. Following that hearing, Master Eastman ordered that Mr Morrison pay to Mr Warren damages of £50,000 along with the costs of the action, to be subject to detailed assessment if not agreed. Master Eastman further ordered, pursuant to CPR 36, that Mr Morrison pay an additional sum of £5,000, with enhanced interest. Mr Morrison was ordered to make a payment on account of costs in the sum of £50,000 on or before 4 p.m. on 10 November 2014.
- On 31 October 2014, Ms Basha wrote to Mr Morrison. Her letter sought payment of the sums ordered to be paid by Master Eastman, of which she asked that damages awarded to Mr Warren be paid to him, and that amounts payable on account of costs be paid to the Defendant. Mr Morrison replied to the effect that he was unable to pay but hoped to offer payment by instalments.
- On 4 February 2015, the Defendant obtained for Mr Warren a Default Costs Certificate against Mr Morrison in the sum of £269,681.25. In due course Mr Warren made Mr Morrison bankrupt. Again, nothing has been recovered from him.
Other Litigation: The Tower Claim
- The claims against Mr Burns and Mr Morrison are only two of many, mostly contentious, matters in which Ms Basha, whether (as was the case before March 2011) with Carter-Ruck, PSB or the Defendant, advised and represented Mr Warren from time to time. Mr Warren has given a great deal of evidence in relation to those matters, much of which seems to me to be of marginal relevance, in particular where it concerns cases taken on by Ms Basha after March 2013. An example would be a case in which Ms Basha, having failed to file a costs budget in time, confirmed in writing that any failure to recover costs a result be a problem for her firm rather than its client, which in the circumstances was unsurprising.
- The following matters do seem to me to have some bearing on the issues.
- The first was a claim against five defendants following Mr Warren's making a substantial investment in what should have been (as he describes it) "a tax advantaged investment scheme", the purported tax advantages of which did not materialise. Of the five defendants, only one remained extant and solvent by the conclusion of the litigation: Mr Jeffrey Kaye, Mr Warren's former accountant. The claim is referred to by the parties, from time to time, as "the MCash case". I shall refer to it as the "Tower litigation", as all of the corporate defendants shared that name.
- On 26 October 2011, Ms Basha sent an email to Ms Hedley attaching a covering letter, PSB's "Terms and Conditions of Retainer" and a CFA with, attached, a "What You Need to Know" document similar to those considered above. Ms Basha's covering letter included the following passages:
"… We would be grateful if you would please read, sign and return a copy of the Terms of Business and Conditional Fee Agreement to us… We confirm that we have agreed to act for you on conditional fee basis in relation to the Litigation. As you know, this means that we only get paid if we are successful and then we will seek to (and should be able to) recover costs from our opponents. I'm still obliged however to give you an estimate of our costs…"
- The CFA included the following wording:
"This agreement is a legally binding contract between you and your legal representative. Before you sign, please read it carefully… If you win the case, you are liable to pay disbursements, basic charges and a success fee. The amount of these is not based on or limited by the damages. You may be able to recover from your opponent our disbursements, basic charges, success fee and the premium for any insurance policy you take out as set out in the document "what you need to know about a Conditional Fee Agreement…"
- The "what you need to know" document, under the heading "Recovery of Costs", included these words:
"The court will decide how much you can recover if you and your opponent cannot agree the amount. If the amount agreed or allowed by the court does not cover all our basic charges and disbursements, you will be liable to pay the difference… In all circumstances, you remain ultimately responsible for payment of all disbursements, basic charges and, if appropriate, success fee..."
- The "Terms and Conditions of Retainer" include, under the heading "Litigation Costs":
"In litigation matters which result in court hearings, the general rule is that the loser will be ordered to pay the winner's costs. This means that if you win the case, you might be able to recover from your opponent some of the charges and expenses that you have to pay to us. If you lose the case, however, the reverse will apply and you might be required to pay some or all of your opponent's costs. You should also be aware that, even if you win the case, the charges and expenses which you will have to paid was unlikely to be greater than the amount you can actually recover from your opponent. This is because costs assessed on the standard basis typically represent around 60-90% or so of actual costs incurred. It is also possible that your opponent may not have sufficient assets to make payment of any amount of costs ordered to be paid. This is of course a commercial risk that you should be aware of from the start as the costs can sometimes exceed the value of the claim…
… It is important for you to be aware that you are at all times primarily responsible for paying the whole of our charges and expenses. Any recovery you are able to obtain from your opponent in respect of your costs will serve to reimburse you in respect of the amounts that you are primarily responsible for paying to us. Even if you are successful, your opponents might not be ordered to pay all of your costs or, for other reasons, the costs might not be recovered from your opponent in full. If the other party proves to be financially unsound, you may not get back any of your costs even if you win the case…"
- As with the Burns and Morrison cases, Mr Warren took the Tower claim from PSB to Hill Dickinson when Ms Basha moved in September 2013.
- The Tower claim CFA was one of the CFAs listed on the assignment of 25 November 2013 between PSB and the Defendant, and in due course the parties entered into a "safeguard CFA" similar to those signed for the Burns and Morrison claims.
- The beginning of the breakdown of the relationship between Mr Warren and the Defendant can be seen in the progress of the Tower claim to completion. In June 2014, following a mediation, Mr Warren received a Part 36 offer of £250,000. Mr Warren considered it too low. The advice from Ms Basha, incorporated in an email dated 31 July 2014, was more cautious:
"… You are aware of the consequences of Part 36 offers and the real issue is that if you lose at trial or fail to beat the damages offered of £250,000 then you would be liable to pay your opponent's costs together with interest on those costs from the date that the offer expires… As you know from the advice we have received… success in this case is by no means certain… The additional risk here is that although they are currently funding Jeff Kaye's claim, his insurers have reserved their rights to avoid the cover… This means that you could fight to trial and win but then only be able to recover any sum awarded against assets which Jeff Kaye has… There is a significant risk that any victory against Jeff Kaye, which is far from certain in itself, would not lead to any actual recovery of money… I appreciate that were you to accept the offer… Then you would be left with a significant shortfall and on that basis you are not minded to accept the sum. However, this needs to be set against the risk of going to trial and even winning and not recovering anything and also going to trial and losing… even though we are acting on a CFA, were you to be successful but our fees not recoverable, then you would also be liable for these…"
- Mr Warren says that he suspected that Ms Basha was pushing him into accepting a settlement sum so that she could ensure recovery of costs: in other words, that she was preferring the Defendant's interests to his. He refers to other communications sent by her to Ms Hedley at the time, emphasising her concerns about Mr Warren's ability to make any real recovery in the Tower claim, as confirmation of his suspicions. Of Ms Basha's very clear statement to the effect that he would still have to pay the Defendant in the event that the claim succeeded but Mr Kaye proved incapable of paying them, Mr Warren says in his witness statement:
"She also stated that I would be liable for Hill Dickinson's fees even if I won and my fees were not recoverable; but as this was never what had been agreed between us, I was not concerned."
- Matters evidently came to the point where Mr Warren was unwilling to accept Ms Basha's advice on settlement, and other difficulties arose. On 22 October 2014, Ms Basha sent an email to Ms Hedley asking her to pass the following message to Mr Warren:
"As you are aware from our telephone conversation earlier today, we are no longer able to support your litigation… on a conditional fee basis… It is our view that there is now a real risk that you will fail to recover substantial damages in your claim because, if you are successful, Jeff Kaye's professional indemnity insurers will be able to avoid the policy and neither Jeff Kaye or any of the other defendants have sufficient assets (as far as we are aware). You and I agreed that we would not give you formal advice on the settlement offer of the merits generally until you had the chance to speak with counsel. However, we have been unable to get counsel's view because we are not in funds. If we are unable to meet with counsel by next week and if you would like us to, we will provide formal advice.… Our ability to act in your best interests has been compromised by the lack of instructions and in particular our inability to instruct an expert to provide his report within the timeframe ordered by the Court… We have been unable to meet the deadline because we were not in funds to instruct the expert… Under the conditional fee agreement which you signed with PSB law on 26 October 2011 and which was assigned to Hill Dickinson and under the conditional fee agreement with my firm on 12 June 2014… You have certain responsibilities to us. These include providing instructions, cooperating with us and paying for disbursements with the 21 days of request of payment. The failure to comply with these obligations means that we have the right to terminate the CFA. I'm afraid that having been unable to discuss matters with you today, we are left with no choice but to exercise this right…"
- There followed a number of attempts to agree a basis upon which the Defendant could continue to act. On 9 November 2014, Ms Basha sent an email to Mr Warren, via Ms Hedley:
"I hope you appreciate that terminating the CFA in the MCash case was not a decision which I took lightly. We have worked together for almost 10 years and you have always been very supportive of my career … In order to support you, I have often not charged for rates or charged you at all (Bellew, DeGale, Luxembourg) … As promised I have considered funding for the MCash matter and had a chat with my partners… Were we to continue on a CFA and win then, as is the normal position under the CFA, you would be liable for our base costs together with uplift. Therefore, if you won the litigation with us acting on a CFA and you did not recover costs from any of the Defendants… you would be liable for my firm's costs of, say, £500,000 plus VAT…"
- The attempts to re-establish a basis upon which the Defendant could continue to represent Mr Warren in the Tower litigation failed. At about the beginning of December 2014, Mr Warren instructed his current solicitors to take over the matter. On 5 February 2015, the Tower claim settled on confidential terms. A Tomlin order of that date provided that there should be no order as to costs as between Mr Warren and Mr Kaye, neither party being at liberty to enforce any costs order against the other.
- On about 20 February 2015, the Defendant accepted a payment of £50,000 plus VAT in full and final settlement of its claim against Mr Warren for its costs of acting in the Tower claim. This represented a substantial discount upon the Defendant's costs as billed in January 2015.
Other Litigation: the Bellew Claim
- The last piece of litigation to which I need to refer was a claim against Anthony Bellew, Eddie Hearn, Barry Hearn and Matchroom Sport Ltd ("the Bellew claim").
- Mr Bellew had been a party to a boxer-manager agreement with Mr Warren. He also had an exclusive promotional agreement with WP Ltd. In about May 2012, Mr Bellew announced that he had severed ties with Mr Warren and WP Ltd and that he was free to enter into boxer-manager and promotion agreements with other parties.
- Mr Warren believed that his competitors, Eddie and Barry Hearn and their company Matchroom Sport Ltd ("Matchroom"), had persuaded Mr Bellew to join them. Ms Basha advised Mr Warren that he could take proceedings against Mr Bellew for breach of contract and that he could also bring a claim against Eddie and Barry Hearn for inducing Mr Bellew to do so. Mr Warren says that he was keen to do this, not only because he wanted to protect his legal rights but because he wanted to send a message to other boxers with whom he had agreements, to the effect that they could not walk away from a legally binding contract.
- On 22 August 2012 Ms Basha sent to Mr Warren, via Ms Hedley, an email attaching a set of particulars of claim for signature. In the email she made the following observations:
"This Claim is not entirely straightforward… But I… consider that it is a decent claim… It seems to make sense for my firm to act on a CFA basis so that our costs are recoverable from the Hearns if we are successful. If Frank is happy with that, we will get the relevant stuff drafted and over to you."
- On 23 August 2012 Ms Basha sent an email enclosing a CFA, a "what you need to know" document and standard "Terms of Business". In our email she said:
"It makes sense to run the Bellew litigation on a CFA basis as there is a possibility of winning and recovering costs from one or other of the Defendants, unlike some of the… hearings we have done recently… As you know (apart from disbursements such as the barrister's fees and Court fees) the essence of the CFA is that if we do not win the case, we do not get paid, but if we do win we recover costs together with a success fee from one or other of the defendants… The essence of the CFA is that there is no obligation to pay my firm's professional charges unless the proceedings are successful… If Frank wins the case, he will be liable to pay my firm's fees but these will be recoverable from his opponents…."
- In a further email to Ms Hedley dated 23 August 2012 Ms Basha said:
"…the point of my previous email, as I hope you gathered, was to set out what we need to set out so that, if we are successful, we will be able to recover costs (+ success fees) from the Defendants. I can say without hesitation that if we aren't successful or don't recover fees, then we wouldn't charge Frank. However if we do win I don't want to jeopardise our ability to recover costs against Bellew and the Hearns because we haven't sent terms of business etc. etc. Hope this makes sense and do call/email if not… If Frank is happy with the CFA, could you ask him to sign and return it to us."
- Evidently, what was contemplated by Ms Basha in this case was a "CFA lite" arrangement of a kind commonly entered into before 1 April 2013, whereby the conducting solicitor's fees as payable by the client would be limited to those recovered from the opponent. The relevant CFA and the accompanying documentation did not reflect that arrangement: they are similar to those to which I have already referred, including for example provision to the effect that Mr Warren would have to pay any shortfall between PSB's charges, disbursements and success fee and the costs awarded by the court.
- The Bellew claim did not succeed. According to Mr Warren, Mr Bellew sought and obtained an order for security for costs, so Mr Warren took the view that given the limited potential litigation upside, the best thing to do was to discontinue. He then had to pay his opponents' costs.
- Ms Basha says that at the time, the majority of British boxers were signed either to Mr Warren's business, which then presented events on the subscription satellite TV channel BoxNation, or to Matchroom, owned by the Hearns, which presented its events on Sky Sports channels. In the course of the Bellew claim, WP Ltd was ordered to pay security for costs. Mr Warren sent a cheque to the court funds office, but the company was unable to honour it. Mr Warren was unable to raise funds from other sources and rather than risk the cheque being dishonoured, Mr Warren cancelled it and discontinued. This left Mr Warren concerned that discontinuing against Mr Bellew made him seem like a "soft target" for boxers who wanted to leave him or for competitors who wanted to take them from him. This, she says, informed his subsequent approach to the claims against Mr Burns and Mr Morrison.
Conflict Between the Evidence of Mr Warren and Ms Basha
- Before summarising my conclusions on the issues I have to determine, I should say that where the evidence of Mr Warren and Ms Basha conflicts I prefer Ms Basha's evidence. I say that for the following reasons.
- The Defendant has referred me to a finding of Knowles J, in his judgment in the Burns claim, rejecting as untruthful evidence from Mr Warren as to the existence of an oral agreement. The Defendant has also referred me to similar findings in other cases. It follows that Mr Warren's evidence, where contested (as it is here in all key respects) must be treated with some caution.
- Even if that were not the case I would prefer the evidence of Ms Basha, which struck me as reasonable and frank, apart possibly from a certain unnecessary defensiveness in relation to the flexibility of some of her contractual arrangements with Mr Warren. It was also consistent with the normal commercial realities of a solicitor/client relationship.
- Mr Warren's evidence, in contrast, was not. It also struck me as inconsistent and frequently at odds with the weight of the evidence. I will explain in my conclusions my reasons for saying that.
The First Issue: whether Mr Warren has achieved a "Win" under the Burns and Morrison CFAs
- The Defendant relies on the wording of each of the Burns and Morrison CFAs. Given that Mr Warren has, as against both Mr Burns and Mr Morrison, obtained judgment for a sum of money, an order for payment of his costs and a Default Costs Certificate, it might be thought that the obvious answer to the question of whether Mr Warren has achieved a "win" under the terms of each CFA is "yes". The Points of Dispute appear to advance an argument to the effect that on the wording of the CFAs, the definition of a "win" is not met, but I can find no substance in that, nor in submissions to the effect that I ought to have regard to the outcome of the Burns and Morrison claims beyond the extent to which definitions of "win" provided for in each CFA have been met.
- Mr Warren's primary case is however that his agreed retainer arrangements with Ms Basha incorporate provisions not recorded in either CFA. In his Points of Dispute Mr Warren says that on each occasion that Ms Basha acted for reward in her capacity as a solicitor for or on behalf of Mr Warren and various entities associated with him, it was agreed between Mr Warren and Ms Basha that she would only recover fees from Mr Warren in the event that the matter in which she acted resulted in a "net gain" to Mr Warren. Mr Warren argues that, not having recovered any money from either Mr Burns or Mr Morrison, no net gain has accrued to him, so no "win" has been achieved and he should not have to make payment of any fees to the Defendant under the terms of either CFA.
- Mr Warren's witness evidence put the alleged arrangement in rather different terms, but for ease of reference I shall refer to his case in this respect as the "net gain" case and to the agreement for which Mr Warren contends as the "net gain" agreement.
Conclusions: Ms Basha's Obligations in Relation to Contracts of Retainer
- It is submitted on behalf of Mr Warren, given PSB's obligation to act in his best interests, that Ms Basha was under a duty to draw his attention to differences between the retainer agreements entered into by him from time to time. The argument is raised (as I understand it) in support of the suggestion that, insofar as the Burns and Morrison CFAs do not incorporate the "net gain" agreement contended for by Mr Warren, Ms Basha had a duty to say so.
- Assuming that such an agreement existed, and leaving aside the distinction, emphasised in Motto v Trafigura Limited [2011] EWCA Civ 1150, between chargeable services rendered by a solicitor to a client and non-chargeable work undertaken by the solicitor in preparing the retainer offered to the client, the submission still does not, in my view, stand up to analysis.
- Mr Warren, in his witness statement, says that he habitually signed documents sent to him by Ms Basha without reading them, because she told him that he should do so. In his oral evidence he seemed to be saying rather that he would sign documents she sent to him simply because she had sent them for signature.
- Either way, it seems to me quite plain from the relevant correspondence that Ms Basha sent retainer documents to Mr Warren on the express basis that he would consider them and raise with her, before he signed them, any queries or concerns he might have. She did not, on the evidence, suggest that he should sign anything without reading it, nor do I believe that he would have taken such advice. It is apparent from his management of the Tower, Burns and Morrison claims that Mr Warren knew his own mind. He was not going to be told what to do by any professional adviser. If he did not read anything, it is because he chose not to do so. He knew as much about his contractual arrangements with PSB and with the Defendant as he chose to know.
- The documentary evidence shows that Ms Basha acted for Mr Warren on different terms from time to time depending upon the nature of the particular case. There would have been no good reason for Mr Warren to assume that any one retainer was the same as another (and he does not in any event identify any particular retainer as the model upon which this assumption rested). I do not accept that he did make such an assumption, or that there would have been any duty upon either PSB or the Defendant to point out the obvious: that any such assumption would have been both wrong and foolish. Ms Basha asked Mr Warren to read carefully the contractual documentation which he was to sign whenever her firm and Mr Warren entered into a new contractual arrangement. She had no obligation to go beyond that.
- I do not, in any event, accept the evidence offered in support of the "net gain" agreement for which Mr Warren contends.
Conclusions: The Existence of the "Net Gain" agreement
- Mr Warren's case as to the nature of the agreement upon which he relies is not consistent or clear. In oral evidence, Mr Warren struggled to illustrate how the "net gain" agreement would work. At one point he seemed to indicate that he might pay costs from recovered damages, yet without conceding that he would have had any obligation to do so. He was unable to identify any workable, clear agreement.
- His witness statement says that his agreement with Ms Basha was that he would not be charged fees unless they were recoverable from his opponent. That is not the same as the "net gain" agreement referred to in his Points of Dispute.
- To my mind, the evidence does not support the existence of either version of the "net gain" agreement.
- The contractual documentation to which I have referred is littered with clear references to and warnings to Mr Warren about his liability to pay his solicitors' costs, whether recovered from an opponent or not.
- Mr Warren, as I have mentioned, claims to have been unaware of the relevant contractual provisions because, he says, he never read them. Ms Basha however made it plain, on more than one occasion, that her understanding of the contractual arrangements her firm had entered into with Mr Warren was that her firm could recover its fees from him whether they were recovered from an opponent or not. She said as much in April 2013, in the context of the Morrison claim, and she said it again in July 2014, in the context of the Tower claim. Mr Warren, to summarise the evidence to which I have referred, says that he was not troubled by any of that because he knew that what Ms Basha was saying did not reflect their agreement.
- To my mind that explanation is not credible. Had Mr Warren really believed that he had a standing agreement with Ms Basha which contradicted what she was saying, it would have been evident to him that either Ms Basha did not share his understanding of their agreement or (as he now claims) that she was reneging upon it. In either case, a great deal of money would, potentially, have been at stake and Mr Warren would have not have remained silent. He would have said something about it. He said nothing, and my conclusion is that he said nothing because he knew that what Ms Basha was saying reflected the true position.
- It was suggested by Mr Nicol, on behalf of Mr Warren, that Ms Basha's reference, in her email of 12 April 2013 regarding the Morrison claim, to the position of Ms Page QC as a "slight anomaly", supports Mr Warren's case. In my view it does not. Ms Basha was saying in clear terms only that although her firm and Mr Crystal had the right to recover their fees from Mr Warren in any event, they were less likely than was Miss Page to enforce that right should they not be recovered from Mr Morrison. That, Ms Basha confirmed in evidence, was the only "anomaly" referred to by her and in my view the wording of her email is consistent with what she says.
- In short, if Mr Warren and Ms Basha had had an agreed arrangement by which she could never recover from him fees not recovered from a given opponent, she would not, in her email of April 2013, have made a very plain reference to the possibility that she would.
- To the extent that it does not rest on an alleged express agreement with Ms Basha, it is Mr Warren's case that the arrangements for which he contends were established by a course of dealing. The evidence of the course of the dealings between the parties does not support that proposition.
- I accept that as a matter of practice, Ms Basha (on behalf of her firm) was willing from time to time not to enforce strict contractual rights as against Mr Warren. That could include, in a suitable case, acting on the basis that fees would not be charged unless they were recovered from an opponent. In the Bellew claim, Ms Basha's confirmation by email that her firm would not seek to recover its fees if they were not recovered from Mr Bellew was not consistent with other terms of the contractual documentation, but Ms Basha made the position quite clear.
- Ms Basha had however said nothing to that effect, ten months earlier, in relation to the Tower claim and any such arrangement would have been inconsistent with the fact that, when it concluded, Mr Warren did not recover his costs but nonetheless paid to the Defendant £50,000 plus VAT in settlement of its fees. Nor did Ms Basha make any such offer in March 2014, when offering to Mr Warren PSB's retainer documentation for the Burns claim and the Morrison claim.
- As she said in her email to Mr Warren of 9 November 2014, Ms Basha had, in acting for Mr Warren over a period of years and in recognition of what had been a strong professional and personal relationship, been willing in various cases to reduce her firm's fees or waive them altogether. She gave a number of examples, including the Bellew Claim, which she would scarcely have singled out if it was simply an example of an agreed, binding arrangement.
- Notably, Ms Basha did not include in her examples either the Burns or the Morrison claims. I have not lost sight of the fact that, post-judgment, Ms Basha sought payment of her firm's costs direct from Mr Morrison, with the damages awarded by the court to go to Mr Warren, but that does not, in all the circumstances, come close to establishing the existence of a binding "net gain" agreement.
Conclusions: The Legal Merits of Mr Warren's "Net Gain" Case
- Even if I were able to accept Mr Warren's evidence in support of his "net gain" case it seems to me that it would not furnish him with any sound basis in law for escaping the terms of either the Burns or the Morrison CFAs.
- Mr Warren's claim not to have read the CFAs he signed does not assist him. The doctrine of non est factum does not protect a party who, through his own negligence or carelessness, has signed a contract by which he did not intend to be bound: Saunders v Anglia Building Society [1970] UKHL 5.
- I have seen nothing to substantiate the suggestion that Ms Basha shared Mr Warren's claimed understanding of his contractual arrangements with her. The correspondence to which I have referred shows that she did not. It takes two to make an agreement, and it is common ground that, on the principles established by, for example, Investors Compensation Scheme Ltd. v West Bromwich Building Society [1997] UKHL 28 and Rainy Sky SA v Kookmin Bank [2011] UKSC 50, the subjective intentions of the parties to any agreement are not relevant when it comes to contractual interpretation.
- As for the alleged course of dealings between the parties, it is settled law that custom or usage can only be incorporated into a contract if there is nothing in the express or necessarily implied terms of the contract to prevent such inclusion (Chitty on Contracts 32nd edition, 14-026, referring to London Export Corp v Jubilee Coffee Roasting Co, [1958] 1 W.L.R. 661). The terms of the Burns and Morrison CFAs are entirely inconsistent with the alleged agreement upon which Mr Warren seeks to rely.
Conclusions: Whether Mr Warren Has Achieved a "Win"
- For the reasons I have given, my conclusion is that Mr Warren has achieved a "Win" under the terms of both the Burns and the Morrison CFAs. His case as to an agreement with Ms Basha to the contrary is not supported by the evidence and is in any event without legal merit.
The Second Issue: The Validity of the Assignment of the Burns and Morrison CFAs
- The second question I have to determine is whether the assignment of the Burns and Morrison CFAs, on 25 November 2013, was valid. Before considering the parties' submissions, I should review the evidence offered by Mr Warren and the Defendant on the circumstances of the assignment and of Ms Basha's move from PSB to the Defendant. As Mr Warren argues that the assignment was not in his interests, I must also consider his reasons for pursuing the Burns and the Morrison claims.
Conclusions: The Circumstances of Ms Basha's Move from PSB to the Defendant
- In his witness statement, Mr Warren says that when he received Ms Basha's email of 9 September 2013 to say that she was moving to the Defendant firm, he was engaged in negotiations with the administrators of WP Ltd to discuss the possibility of assigning to him its claim against Ricky Burns, among other matters. Her email did not mention anything about his CFAs with PSB, but he does recall being asked to sign something in relation to the transfer of the files, which he would have done without reading it: it was never explained to him.
- Mr Warren also says that it was not viable for him to remain with PSB. He had no relationship with anyone else there that Ms Basha had all the knowledge and information of this case is and she had been leading a multi-million-pound claim (this is a reference to the Tower claim). For that reason, it was inconceivable that she should not continue. Her email told him that she was leaving at the end of the week. With various deadlines coming up, there was no time to consider changing solicitors. Given only days to decide whether to follow Ms Basha, he had no choice but to follow her to her new firm.
- In oral evidence, Mr Warren contradicted that last part of his written evidence by saying (as he evidently clearly remembered) that Ms Basha's email of 9 September 2013 was a formality. He had, he said, previously been informed by Ms Basha of her intention to move to the Defendant firm. He had already agreed to move his cases with Ms Basha to the Defendant, because at the time he trusted and had confidence in her. He was, he said, only with PSB because of her.
- Ms Basha says that Mr Warren wanted PSB to conduct both the Burns and Morrison claims under CFAs, because he wanted PSB to share the risk in the case and he did not want to fund the litigation on a normal retainer basis. That would have required that he pay legal fees on a monthly basis (the "Terms of Business" accompanying both CFAs provide for regular payments on account).
- When she told Mr Warren that she was moving to the Defendant firm, he told her that he wanted all his matters to move with her. They briefly discussed the options open to him, including an assignment of his CFAs from PSB to the Defendant. Mr Warren was, she says, at the time incurring high costs in connection with the administration of WP Ltd. He wanted the CFAs to be assigned, because if they were not assigned he would (upon disinstructing PSB) have had to pay PSB's legal costs to that date, which she puts at over £100,000, and then either sign up to new conditional fee agreements with the Defendant, or pay them on a non-conditional basis. He did not want to do any of that.
- Another important consideration was the fact that the Morrison and Burns CFAs had been entered into in March 2013. The law had changed on 1 April 2013, so that (with specified exceptions) success fees payable under CFAs signed after that date would not be recoverable from an opponent. If the Burns CFA were to be terminated, Mr Warren would be unable to recover any success fee payable by him under a new CFA. She confirms that Mr Warren signed a letter asking for his matters to be transferred from PSB to the Defendant.
- Again, I prefer the evidence of Ms Basha to that of Mr Warren, both for the reasons I have already given and because his account of the circumstances of the transfer of his cases from PSB to the Defendant is so inconsistent. I accept Ms Basha's account of the relevant events.
Conclusions: Mr Warren's Motivation in Undertaking the Burns and Morrison Claims
- I accept Ms Basha's evidence to the effect that Mr Warren's motive in pursuing Mr Burns and Mr Morrison was not simply-or even primarily-the recovery of money.
- Ms Basha explained that at the relevant time, Mr Warren's business was under enormous pressure because he was losing many of his boxers to Matchroom. Having had to discontinue his claim against Mr Bellew, Mr Warren was concerned to send out a signal to other boxers that they could not walk away from agreements with him.
- Mr Burns was one of a number of boxers who had left Mr Warren to join Matchroom. He was an important asset to Mr Warren's business, but the litigation was not simply about retaining a key commercial asset. It was about, as Ms Basha puts it, "drawing a line in the sand". Mr Burns was trying to walk away from his arrangements with Mr Warren and Mr Morrison, Mr Burns' manager, had made statements about Mr Warren which he viewed as defamatory. Forcing both Mr Burns and his manager Mr Morrison into personal insolvency was a result which Mr Warren considered would warn others against similar conduct.
Mr Warren's Submissions on the validity of the Assignment
- In his skeleton opening, Mr Nicol summarised Mr Warren's case in relation to assignment in this way (I paraphrase, I hope without doing a disservice to his submissions).
- PSB (and latterly the Defendant) acted for and on behalf of Mr Warren as his solicitors and, as such, owed Mr Warren specific contractual, tortious and fiduciary duties. The fact that Mr Warren was the Defendant's client alters, Mr Nicol submits, the dynamics of his challenge to the validity of the CFAs and their assignment as compared to the more normal challenge by a potential paying party.
- It was a specific term of Mr Warren's retainer with PSB that PSB would act in Mr Warren's best interests and the CFAs dated 27th March 2013 were entire contracts.
- On 23rd August 2013 W. Promotions Limited was placed in Administration and on 14th September 2013 Ms Basha ceased to be a member of PSB. On 30th September 2013 PSB Law LLP ceased to practise as a firm of solicitors.
- The alleged assignments of the Burns and Morrison CFAs took place on 25th November 2013 with an "Assignment Date" of 1 October 2013 (the latter date, according to the Defendant's replies to the Points of Dispute, being relevant in relation only to the determination of costs payable to PSB).
- It follows that PSB ceased to exist before either contract could be performed and that WP Ltd was placed in administration before either contract could be performed. Any liabilities of either Mr Warren or WP Ltd were lawfully avoided on the demise of PSB and WP Ltd, and it was not in Mr Warren's best interests to preserve them. That applies to the "safeguard CFA" as well as to the attempted assignment of the Burns and Morrison CFAs. Ms Basha should have advised Mr Warren upon the effect of PSB's demise.
- Further, a significant change in the terms of each CFA, such as a change in the performing party from PSB to the Defendant and Ms Basha's changed status in each organisation, was a material change which rendered each agreement unassignable, or at least arguably unassignable without the informed consent of the parties to each CFA. In the circumstances of this case, the consent of Mr Warren was required to any assignment. There was no informed consent, and any subsequent dealings between Mr Warren and the Defendant could not in those circumstances amount to an affirmation or ratification of the purported assignment.
Budana
- Since the parties made their opening submissions, the Court of Appeal has, in Budana v The Leeds Teaching Hospital NHS Trust [2017] EWCA Civ 1980, offered authoritative guidance on the validity of the assignment of CFAs. I would summarise that guidance, for present purposes, in this way.
- Budana involved a personal injury claim. On 2 December 2011, Ms Budana instructed Baker Rees, solicitors ("BR"), to pursue a claim for damages, entering on that date into a CFA with a success fee. On 22 March 2013, BR advised that due to changes in the law, they would no longer conduct personal injury litigation and that they proposed to transfer the case to Neil Hudgell Ltd ("NH").
- On 25 March 2013, BR and NH entered into agreements providing, inter alia, for the transfer of Ms Budana's claim to NH. Ms Budana was advised of the transfer, and that the case would continue under her CFA of 2 December 2011, by telephone on 31 March 2013. She agreed to this and on 10 April 2013, signed and returned a letter of instruction to NH, and a deed of assignment as between herself and NH. On 17 May 2013, Ms Budana also signed an alternative CFA with NH, not unlike the "safeguard CFA" signed by the parties in this case.
- Before the Court of Appeal, the parties identified four issues to be determined, three of which were pertinent for the purposes of this judgment. They were whether BR had terminated its CFA by its letter of 22 March 2013; if not, whether the transfer of the BR CFA was effective as an assignment or as a novation; and if it took effect as a novation after 1 April 2013, whether the success fee payable under the CFA was recoverable.
- The Court of Appeal found that BR's letter of 22 March 2013 did not have the effect of terminating its CFA. Even if the sending of that letter could have amounted to a repudiatory breach of contract, Ms Budana did not elect to treat the contract as terminated. On the contrary (Gloster LJ, paragraphs 38-41) she had affirmed it by signing her own transfer document and by her conduct generally: she decided to preserve and transfer the BR CFA.
- By a majority (Gloster LJ and Beatson LJ) the court found that the transfer of the BR CFA to NH operated as a novation rather than an assignment, but the court was unanimous in finding, on a proper interpretation of the relevant statutory provisions, that the success fee provided for by the BR CFA remained recoverable under an order for costs notwithstanding that the novation took place after 1 April 2013.
- Budana was decided after the hearing of this case concluded, and both parties provided me with supplemental written submissions to address its implications. Mr Bacon for the Defendant argues that this case is, essentially, on all fours with Budana. Accordingly, applying the same principles, I should find that the consensual transfer of the Burns and Morrison CFAs from PSB to the Defendant was a novation of the parties' obligations of the same kind, and valid as such. Each CFA remained in force as an operative contractual instrument as between the Defendant and Mr Warren, pursuant to which, depending upon the outcome of each claim, the Defendant should be in a position to enforce the rights assigned to it by PSB.
- Mr Nicol disagrees and distinguishes this case from Budana in this way. First, he argues, Ms Budana's case was transferred to new solicitors at a time when BR was still in existence and capable of continuing to act on her behalf (albeit not willing to do so). Second, her case was transferred to a new firm on the same terms as she had instructed the first firm. Third, her case was transferred as part of a wider agreement, the terms of which were extensively recorded by the Court of Appeal.
- Here, says Mr Nicol, both CFAs had already been terminated due to the demise of PSB. In Budana the court made it clear that it was not open to BR to terminate its CFA unilaterally: here, Mr Nicol says, that is precisely what PSB did, by ceasing to practise as a firm of solicitors prior to the transfer taking place.
- Mr Nicol also relies upon Gloster LJ's observation, at paragraph 48 of her judgment in Budana, that the client's consent is crucial to the transfer of a CFA from one firm to another. Here, he argues, informed consent was not given, because Mr Warren was not adequately advised. He should have been told that it was not in his best interests to preserve either CFA.
Conclusions on the Validity of the Transfer of the Burns and Morrison CFAs
- I am unable to accept that there is any material distinction between the facts of this case and the facts of Budana.
- It seems to me that it cannot be correct to say that the Burns and Morrison CFAs were terminated on PSB's ceasing to practise on 30 September 2013. First, that proposition relies upon Mr Nicol's attempt to distinguish between (in Budana) BR's being unable or unwilling to continue representing its client, and (here) PSB's ceasing to practise as a firm of solicitors. To my mind there cannot be any material distinction. The effect, as regards performance of the relevant contract, would be precisely the same. As in Budana, even if PSB's decision to cease practising could be treated as a repudiatory breach of the Burns and Morrison CFAs it would then have been for Mr Warren to accept that breach and to treat each CFA as terminated, and he did not.
- In any event, on the facts of this case it does not seem to me to be open to Mr Warren to argue that PSB's ceasing to practise on 30 September 2013 constituted a repudiatory breach of contract. To my mind, Mr Nicol equates ceasing to practise with dissolution. PSB must, on the evidence, have been advised by Ms Basha, before her departure on 14 September 2013, of the fact that Mr Warren had elected to take his business with her. PSB's ceasing to practise post-dated her departure, and may well have been (at least in part) a consequence of it.
- I have seen no evidence to suggest that, if PSB had been told that Mr Warren wished PSB to continue to represent him, it could or would not have done so. On the evidence, PSB at all times performed its obligations under the Burns and Morrison CFAs to the extent that Mr Warren required it to do so. It was never in breach.
- Similarly, the proposition that the Burns CFA was terminated on WP Ltd's going into administration, does not seem to me to stand up to any degree of analysis. Administration in itself does not terminate a contract. Mr Nicol argues that there was an implied term in the Burns CFA to the effect that it would be terminated in the event of administration, but I can see no basis for implying any such term, nor for any such term to extend to the termination of the CFA as against Mr Warren himself.
- The suggestion that Ms Basha's move to the Defendant from PSB materially changed the terms of the Burns and Morrison CFAs, so as to render them incapable of assignment, seems to me to have no basis in law. If the argument is based upon the proposition that following her transfer from a relatively small firm (PSB) to a large firm (the Defendant) Ms Basha lost a degree of autonomy and could no longer honour her "net gain" agreement with Mr Warren, then the answer is that there was no such agreement. I have in any event accepted Ms Basha's evidence, which includes a clear statement to the effect that she had just as much effective decision-making freedom when with the Defendant as she had had with PSB.
- On the issue of consent, having accepted Ms Basha's evidence the only conclusion I can draw is that Mr Warren gave full and informed consent to the transfer of the Burns and Morrison CFAs to the Defendant, subsequently ratifying that by continuing to instruct the Defendant and signing the safeguard CFAs.
- As for the claim that the transfer of the Burns and Morrison CFAs to the Defendant was not in Mr Warren's interests, Mr Bacon points out, rightly in my view, that the suggestion that the transfer of the Burns and Morrison CFAs was not in Mr Warren's interests does not in itself offer any clear basis for concluding that he is therefore released from his contractual obligations.
- That aside, I can find no substance in the suggestion that the assignment of the Burns and Morrison CFAs was not, at the time, in Mr Warren's best interests, or that he should have been advised to that effect.
- That submission rests on the proposition that, as at the date of transfer, Mr Warren could have avoided both CFAs, and should have been advised to do so. Ms Basha evidently thought that Mr Warren continued to be bound by both CFAs, and for the reasons I have given I believe that she was correct.
- Nor do I accept that Mr Warren would have wished to walk away from either CFA. I have already accepted Ms Basha's evidence to the effect that Mr Warren saw the transfer of the Burns and Morrison CFAs to the Defendant as the best way of maintaining claims against Mr Burns and Mr Morrison that Mr Warren wished to pursue for reasons other than simple financial return.
- The account given in Mr Warren's witness statement of the circumstances of his transferring his business to the Defendant is evidently inaccurate. It seems to me to be part of a body of evidence intended to give the impression that Mr Warren was discouraged by Ms Basha from reading the agreements he signed, that he was not advised or was left with no choice about making crucial decisions, and that Ms Basha acted against his interests.
- I do not accept any of that. In my view Mr Warren was at all times aware, at least to the extent that he chose to be aware, of the import of the decisions that he was making and of the agreements into which he entered. He knew his own mind and he acted as he saw fit. When he needed advice, he asked for it and he got it. I find no substance in his criticisms of that advice.
- Under cross-examination Mr Warren admitted that at the time it took place, the transfer of the Burns and Morrison CFAs to the Defendant was in his (and WP Ltd's) best interests, but at the same time he attempted to say that it turned out not to be. I can only conclude that he was attempting to say that he wishes, with hindsight, that he had acted differently. That offers no proper basis for avoiding his contractual liabilities or for criticising Ms Basha, PSB or the Defendant.
- In short Mr Warren was not in a position to walk away from either the Burns or the Morrison CFAs; he did not want to do so; and there was no reason to advise him to try to do so.
Summary of Conclusions
- For the reasons I have given, I have concluded that Mr Warren has achieved a "win" under the terms of the Burns and Morrison CFAs. The transfer of those CFAs from PSB Ltd to the Defendant was valid and the Defendant is entitled to enforce their terms against Mr Warren.