Peter Farrar v Candey Limited

The Court of Appeal dismissed the appeal and held that a firm of solicitors who had been conducting litigation could not validly take an assignment of their client’s cause of action prior to judgment. The decision rested on long-established common law rules preventing solicitors from acquiring their client’s interest in litigation in which they have conduct, together with the continued public policy rule against champerty. The court treated statutory interventions (notably section 58 and section 58AA of the Courts and Legal Services Act 1990) as delimiting the circumstances in which contingency or damages-based arrangements involving those who conduct litigation are permissible and held that transactions not falling within that statutory scheme remain unenforceable. The court therefore concluded that the Assignment was not saved by the prior damages-based agreement and was unenforceable; the appeal was dismissed.

Background and parties:

• Claimant: Peter Farrar. Appellant (solicitors): Candey Limited. Defendant/respondent (interested creditor): David Miller.
• Procedural posture: appeal from Marcus Smith J (High Court, Chancery Division, Business List) whose order dated 16 July 2021 [2021] EWHC 1950 (Ch) dismissed Candey’s application to be substituted as claimant; the issue on appeal was the validity of a deed of assignment executed by Mr Farrar in favour of Candey shortly before Mr Farrar’s unexpected death.

Factual summary:

• From 2013 Mr Farrar had engaged Candey under a damages-based agreement (the DBA) by which Candey took 50% of any recovery. Proceedings were pursued against Mr Miller; over time there were interlocutory rulings and appeals and the proceedings remained live but no step had been taken after 2018.
• On 12 September 2019 Mr Farrar and Candey entered a replacement agreement and executed a deed of assignment of Mr Farrar’s claims (the Assignment). On 11 October 2019 Mr Farrar died. Candey thereafter sought substitution as claimant; Mr Miller applied under section 423 Insolvency Act 1986 to avoid the Assignment. Marcus Smith J dismissed Candey’s substitution application, making it unnecessary to determine the s423 application.
• The Assignment purported to assign all of Mr Farrar’s claims to Candey and to provide a distribution mechanism (clause 3.1) that envisaged ATE insurance and gave priority to various sums before any balance to Mr Farrar’s estate.

Issues before the court:

1. Whether a solicitor who is conducting litigation can validly take an assignment of the client’s cause of action prior to judgment.
2. Whether the Assignment was champertous or otherwise contrary to public policy, having regard to statutory developments permitting conditional fee agreements and damages-based agreements in specified and limited circumstances (notably sections 58 and 58AA of the Courts and Legal Services Act 1990 and related secondary legislation).

Reasoning and disposition:

• The court reviewed three related common-law rules: (i) assignments of bare causes of action are permissible only where the assignee has a genuine commercial interest (Trendtex); (ii) a solicitor conducting litigation may not take an assignment of the client’s cause of action prior to judgment (authorities dating from Hall v Hallet onwards, and statutory recognition in section 59 Solicitors Act 1974); and (iii) the rule against champerty, which survives as a public policy rule despite abolition of criminal/tort liability by the Criminal Law Act 1967.
• The court emphasised that Parliament has intervened to permit conditional fee and damages-based agreements but only within the statutory limits set out in sections 58 and 58AA of the 1990 Act (and related regulations/orders). The court was bound by the Court of Appeal authorities (including Pittman, Awwad, Rees) and recent obiter of higher courts (Factortame, Sibthorpe) that a champertous agreement not sanctioned by the statutory scheme remains unenforceable.
• The court therefore held that it could not expand the permitted categories beyond those Parliament had specified. It was unnecessary to decide whether additional factual objections to the Assignment (for example lack of independent advice, potential transfer of control of litigation, and changed recovery priorities) would themselves have been decisive, because the legal rule and precedent were determinative.

Wider context: the court observed that the statutory scheme reflects Parliament’s considered limit on what arrangements are permissible and that modern regulation of the legal profession does not displace those long-standing common-law limits.

Appeal dismissed. The Court of Appeal held that solicitors who have the conduct of litigation cannot validly acquire their client’s cause of action prior to judgment and that champertous agreements not authorised by Parliament under the statutory scheme (notably sections 58 and 58AA of the Courts and Legal Services Act 1990 and related secondary legislation) remain unenforceable. The Assignment therefore could not be upheld and the appeal was dismissed.

Appeal from High Court of Justice, Business and Property Courts (Chancery Division, Business List), Marcus Smith J [2021] EWHC 1950 (Ch); this Court delivered judgment on 11 March 2022 ([2022] EWCA Civ 295).