The High Court has ruled that a firm can seek damages against a former partner who transferred a conditional fee agreement when he left.
Martyn Brown had prepared the CFA for a personal injury client in October 2003 when he was still at Liverpool firm FPH Law.
Brown retired as a partner in 2009 to set up in practice as a solicitor on his own account, and agreed an undertaking to preserve a lien over FPH files taken with him.
Later that year, the PI claimant entered a CFA with Brown in his new firm, and by 2011 the claim was compromised, with Brown entering a total costs bill of £84,000 to cover his and FPH’s costs.
Brown rejected a series of offers to settle on costs and informed his former firm, but did not mention to them the validity of the original CFA was also being challenged.
At a subsequent hearing of the detailed assessment of costs, District Judge Smedley adjudged the CFA to be unenforceable and disallowed all of FPH’s profit costs, as well as making an adverse costs order against FPH.
Both FPH and Brown agreed Smedley’s judgment was binding. But lawyers for the firm argued that if Brown had complied with his contractual obligation then the claim for costs would have settled at a time when there was no declaration the CFA was unenforceable.
They suggested a compromise of the CFA costs claim between the PI claimant and his opponent would have been valid and enforceable. The loss of the chance of a compromise, they said, caused recoverable damages.
Brown argued the compromise would have been invalid because the CFA was unlawful or at least unenforceable from the date it was entered into. The alleged loss of the chance, therefore, had no value.
Sitting in the High Court in FPH Law v Martyn Robert Brown, Mrs Justice Slade DBE agreed that if Brown had performed his obligation under the undertaking there might have been no determination of the enforceability of the CFA in costs proceedings against the PI defendant.
If a compromise of those proceedings had been reached, she went on, a judgment on the legality or enforceability of the CFA might only have been required if the victim had challenged his obligation to pay costs under the CFA or if the defendant contended that Brown had not conducted negotiations in good faith.
Slade said FPH could seek to recover damages for the loss of a chance to receive a sum and could pursue its claim, although she did not say whether it would succeed at trial.