A question which the court was asked to consider recently was:
Does a conditional fee agreement continue to apply if the claim is amended part way through the proceedings?
The trustee in bankruptcy commenced proceedings against the wife of the bankrupt to set aside a transaction at an undervalue under section 339 Insolvency Act 1986 (“Act”). Prior to the commencement of the proceedings and prior to 6 April 2016 the trustee had entered into a conditional fee agreement (“CFA”) with his solicitors and obtained after the event (“ATE”) insurance. The date being important because if the CFA was dated and the ATE insurance obtained prior to 6 April 2016 any success fee and ATE insurance premium remained recoverable from the bankrupt’s wife
In 2017, the trustee sought to amend his claim to allege that the transaction was a transaction defrauding creditors under section 423 of the Act.
The defendant argued that the amendment should only be allowed if the Court made it clear on the face of the order that the amended claim was outside the scope of the CFA and was not covered by ATE insurance. If the court accepted this argument then the defendant would not be liable to pay any success fee or ATE insurance premium if the trustee in bankruptcy succeeded in the substantive proceedings.
The court refused to make a declaration requested by the defendant and held that while the defendant may be right in her argument that the amended claim was different from the original claim and so outside the scope of the CFA and not covered by ATE insurance, the court not be certain of that until the proceedings had been concluded.
Once the case is concluded, the court may then decide that the amended claim is different from the original underlying claim and so outside the scope of the CFA and the ATE insurance.
The lesson to be taken from this case is that the claimant in any proceedings should consider all potential claims prior to entering into a CFA and taking out ATE insurance and where there is any uncertainty include the claim as part of the definition of “the Claim” in any CFA.
In the matter of James Moore (A Bankrupt) Sub Nom Mawer (Trustee In Bankruptcy Of James Moore) V Moore (2017) Ch D (Sir Geoffrey Vos C) 07/04/2017