Court Declines To Bifurcate Solicitors Act Assessment

This case involved 224 claimants bringing proceedings against Slater & Gordon UK Ltd pursuant to section 70 Solicitors Act 1974. There were a further 351 similar claims awaiting issuing. The claims related to challenges over profit costs and success fees charged by the defendant law firm.

The judgment considers the appropriate process and directions required going forwards.

The issues to be decided by the court were:

• Whether to follow the process used in previous similar litigation known as the “Edwards” case ([2022] EWHC 1091 (QB)), or adopt a different approach. The Edwards case involved 150 claims against Slater & Gordon also challenging profit costs and success fees. In that case:

  • The court ordered 10 cases to be heard together as test cases.
  • The claimants were ordered to file statements of case setting out their arguments.
  • The defendant filed replies.
  • There were subsequent case management conferences and applications on issues like disclosure and security for costs.
  • Some issues relating to ATE policies were subsequently transferred to the Chancery Division based on evidence suggesting improper commissions were received.
  • The remaining issues were due to be heard by the Costs Judge in a 5 day hearing with evidence from both sides.
  • However, the parties settled before that hearing took place.

• Whether it was appropriate to delineate and separate out “commission issues” relating to the ATE policies from “assessment issues” relating to the bills of costs.

The claimants’ position

• The court should first transfer issues relating to “commission” on ATE policies to the Chancery Division before dealing with detailed assessment issues. This would allow the wide-ranging “commission issues” to be determined first.
• The “commission issues” related to allegations that the defendant solicitors received secret commissions from the ATE insurer which were not disclosed, in breach of fiduciary or other duties. The claimants said it was artificial to delineate the “commission” and “assessment” issues at this early stage. They argued the court should transfer the case to the Chancery Division first and allow that court to delineate the issues.

Per Mr Mallalieu KC’s Skeleton Argument for the Claimant:

“…it may be artificial now to seek to delineate with too great a precision what are Chancery Division issues and what are assessment issues. The best course is likely to be for the transfer to the Chancery Division issues relating to the cash account. Once those issues are then pleaded and suitably particularised in the Chancery Division, that court, as part of its case management powers, can identify whether it considers any of those would be better addressed there or here.”

• Following the earlier “Edwards” litigation, it was recognised these types of issues were better suited to the Chancery Division.

“In Mr Mallalieu’s submission, the decisions made in respect of these issues may well be dispositive of the entire proceedings. If they were not, then any “assessment issues” that remained could be dealt with in this court. The defendant was well aware, in Mr Mallalieu’s submission, of the arguments that would be brought by the claimants. As such, it made sense to transfer the proceedings at this stage so that the judge in the Chancery Division could mould the proceedings to suit those issues rather than taking over the proceedings comparatively late in the day as occurred in Edwards.” [24]

The Commission Issue

“The claimants are essentially saying that the sum charged is the wrong amount whether that is because of commissions that should not have been charged or any wider remedies that may be available. But that is for another day. I accept that, to the extent that the commission issue can be brought in these proceedings, the place to do so is the point when the cash account is being determined. It clearly cannot be dealt with in the assessing of the bills themselves since it is not included within the bills (in accordance with Herbert) and so does not form part of the Solicitors Act assessment as ordered.” [28]

The defendant’s position

• There were currently no particulars of the “commission issues” so nothing substantive to transfer.
• ATE policies are not assessed under Solicitors Act proceedings so cannot be transferred as part of these proceedings.
• The court should simply follow the standard process for assessing the bills first. Once the assessments were complete, if the claimants still wanted to raise wider “commission” arguments, they could plead those and the court could consider at that stage if any issues should be bifurcated.

Decision

The Costs Judge found that it was premature to delineate “commission” and “assessment” issues at this stage:

“It seems to me to demonstrate the difficulty with the claimants’ approach. As things stand, there is no description of the commission issue points which are said to be “substantial and potentially wide ranging” other than in Mr Mallalieu’s skeleton argument. Indeed, it may be said that the length of his skeleton (16 pages) to Mr Marven’s (3 pages) is, to some extent, required by the need to give the court some idea of the arguments the claimants will wish to raise in the future.” [32]

“As Mr Marven pointed out, there is nothing currently to transfer to the Chancery Division other than an order for detailed assessment of the profit costs and success fees. Such a transfer would be rather puzzling, I imagine. Mr Mallalieu’s seventh reason elegantly describes the artificiality of delineating the issues between the commission and assessment issues and suggests that the Chancery Division should send back any elements that should be addressed here. This is a stark description of the complete lack of any particularisation of any of the issues as things stand. The seventh reason suggests that the pleading out of the commission issue will tease out the delineation so that assessment issues will become plain. But why they would be raised in the commission issue is not apparent if they can clearly be identified as assessment issues. The issues that might be identified, in my view, are more likely to be those which may bear on both the commission and assessment strands.” [33]

He decided not to follow the process used in Edwards.

“Having listened to the parties’ arguments and reflected upon the proceedings in Edwards, I have come to the conclusion that a different approach is required. These proceedings currently relate to challenges to the profit costs and success fee. Those challenges can be dealt with by the usual method of a breakdown, points of dispute and replies. The proceedings in Edwards suffered from a continued evolution of arguments that might be raised. That evolution came partly from outside the litigation e.g. the Belsner decision and also partly from within the litigation, most particularly Mr Carlisle’s discussions with the ATE provider’s administrators. The effect of this was to prevent much headway being made. [37]

“It seems to me that if the challenges to the profit costs and success fee are dealt with first, the scope for evolution is relatively limited and a timetable can be set which envisages assessment of the bills within a reasonable amount of time. At that point, the claimants will be afforded the opportunity to set out their positive case as to the dispute regarding the cash account. Whilst in Edwards I decided to transfer the proceedings, I take the view that this is not something I should pre-determine. Once I have seen the scope of the issues raised and both sides’ pleadings, I will be in a position to determine whether transfer is appropriate of any of these proceedings. [38]

“In Edwards I thought it was plain that the suggestion of a transfer was predicated on the basis that there were hundreds of cases involved and that would justify the costs of effectively two sets of proceedings. However, I have subsequently been met with the submission on individual cases that this bifurcation, as I have described it, is appropriate in any individual case. That seems to me to be an approach which fails to deal justly with the case at a proportionate cost and merits a re-consideration at least to see if there is a method by which the overriding objective can be achieved.” [39]

As regards the commission issue, he said:

“Should the claimants decide that they do not wish to await the conclusion of their assessment issues before getting to the commission issue, then they plainly could commence proceedings in the Chancery Division now. Any judgments given there would obviously feed into the dispute regarding the cash account. That might ultimately mean the delaying of the determination of the cash account and therefore the formal conclusion of the assessment. But the solicitors have already been paid for their work and any delay after a conclusion about the reasonableness of those fees had been reached would be less significant, in my view, than if everything remains in issue. [45]

“In the light of these comments, I consider that the defendant should serve cash accounts, whether or not separate breakdowns are to be provided. But the purpose of the cash account at this stage is no more than to provide figures for the claimants to contemplate the drafting of any positive case they want to bring either here or anywhere else. I do not expect to be dealing with any interim issues concerning them at this stage. I will express the preference for the cash account to include the figures for the statute bill so that the figures balance, albeit I appreciate the description in the rules does not appear to expect this.” [46]

Next Steps

“I consider that directions regarding the choosing of test cases followed by breakdowns (including cash accounts), inspection, points of dispute and replies are required. My provisional view is that Mr Marven’s suggestion of fixing a CMC to review progress and provide further directions thereafter is more useful than trying to fix a complete timetable. But I appreciate that counsel may wish to have dates fixed in their diaries as early as possible. [48]

“Hopefully the parties will be able to agree the wording and dates for such directions so that an order can be sealed at the time the judgment is handed down. But if not, and on the assumption that more than 30 minutes would be required, the judgment can be handed down in the parties’ absence and the hearing adjourned, with time extended for any consequential applications. In that case, the parties should confer and submit time estimates and dates to avoid for the adjourned hearing.” [49]