The assignment of CFAs is a key battle for claimant firms.

In the low-value, high-volume part of the personal injury market, the autumn news that the small claims limit is set to rise next year was a major blow. But it is not the only dark cloud looming on the horizon.

Firms face another, very serious threat to their survival – and it all hangs on what the court decides in relation to the assignment of conditional fee agreements.

The low level of fees under the portals for road traffic accident, employer’s liability and public liability claims have driven an even more volume-based, commoditised approach to dealing with claims. Only through shrewd investment in IT, high claims volumes, and processes that minimise the involvement of expensive qualified lawyers, can these claims be profitable.

So smaller firms, full-service firms, and PI dabblers have been selling their cases on to the big players with the cash and commitment to run lower-value personal injury cases on a very large scale.

But - as barrister Andrew Hogan points out in a detailed article in December’s Litigation Funding - there is a problem.

Many of the cases that have been transferred from one firm to another have a pre-Jackson CFA. That makes them more valuable, because they benefit from a recoverable success fee and after-the-event insurance premium.

Firms have had to find a way to preserve that pre-Jackson funding agreement – and in most cases, the method of choice had been ‘assignment’ of the CFA. But as the Gazette reported recently insurers are now challenging whether this assignment technique is actually valid – or whether recoverability will be lost on what will amount to many thousands of pre-Jackson cases.

The appeal in Jones v Spire Healthcare was heard in Liverpool County Court last week, and I gather there are other cases on the same issue making their way through the county courts.

Much rests on what the court decides in relation to the validity of these assigned CFAs – and the issue is almost certain to reach the Court of Appeal next year. The outcome will either be a great relief to the embattled claimant sector, or a potentially fatal body blow.

Rachel Rothwell is editor of Litigation Funding magazine

Topics