Litkraft Ltd v Simon Cottrell
| Jurisdiction | England & Wales |
| Judge | Pearce |
| Judgment Date | 03 March 2023 |
| Neutral Citation | [2023] EWHC 465 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | CLAIM No. CC-2021-MAN-000004 |
[2023] EWHC 465 (Comm)
His Honour Judge Pearce sitting as a Judge of the High Court
CLAIM No. CC-2021-MAN-000004
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN MANCHESTER
CIRCUIT COMMERCIAL COURT (KBD)
Manchester Civil Justice Centre
1 Bridge Street West
Manchester
M60 9DJ
Ms Claire Bunbury (instructed by FWJ Legal Ltd) for the Claimant
Mr Steven Fennell (instructed by Pinsent Masons LLP) for the Defendants
Hearing dates: 28, 29, 30 November 2022 and 1 December 2022
APPROVED JUDGMENT
I direct that no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
This judgment was handed down by the judge remotely by circulation to the parties' representatives by email and release to The National Archives. The time and date for hand-down is deemed to be 10am on Friday 3 March 2023.
INTRODUCTION
The Claimant is a Claims Management Company. It was founded by Mr Arturas Janavicius, a qualified lawyer who is Lithuanian by birth. Mr Janavicius and the company appear to have had good connections in communities of people from Eastern Europe, especially Lithuania, assisted by their ability to translate to and from English, in particular in the context of litigation. As a result it was able to introduce a lucrative market of potential clients 1 to law firms.
The Defendants are solicitors who traded as Goldsmith Williams Solicitors 2. Much of their business related to the property market, especially equity release. However, it also had a thriving business in representing clients in Personal Injury claims. The Claimant was one of many introducers with whom it developed a relationship.
From around September 2011, the Claimant started to introduce clients to GWS. At first there was no written contract between the parties, but on 1 April 2013, the Claimant and GWS entered into an agreement for the provision of services (“ the 2013 Contract”). That agreement coincided with parts of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (“ LASPO”) coming into force. LASPO had a significant effect on dealings between solicitors' firms and case management companies, most particularly because of the provisions of section 56 which prohibited the payment of referral fees. Those engaged in this business had to be careful to avoid entering into arrangements that offended against that prohibition. The contract between the Claimant and GWS was, as Mr Janavicius acknowledges, an attempt to ensure compliance with LASPO. Whether it was successful is a matter that does not need to be dealt with, at least for the purpose of resolving the preliminary issues in this case.
At the time of the 2013 Contract, the parties anticipated the continued payment of fixed fees by GWS to the Claimant for its services, although the written contract did not deal
4.1. Translation fees, which depended on the work required in any particular case and were not payable if not recovered from the relevant defendant or insurer in the particular case;
4.2. First Tranche Service Fees, being the sum of £300 plus VAT payable at an early stage in the case;
4.3. Second Tranche Service Fees 3, being the sum of £360 plus VAT from 1 April 2013 to 18 August 2013, £250 plus VAT from 19 August 2013 to 31 October 2013 and £300 plus VAT from 1 November 2013 to 31 August 2015, payable on successful conclusion of the case.
Payment of the First Trance and Second Tranche Service Fees was varied with effect from 1 September 2015 to the payment of a single fee of £600 plus VAT (“ the Single Service Fee”) early in the case.
From shortly after the 2013 Contract was executed, the Claimant and GWS had discussions about the payment of a higher fee for claims of a higher value (what came to be known as “ High Value Cases”). It is common ground that the parties considered a percentage based fee. However, the parties differ on whether they reached a concluding and binding contract on this issue.
The Claimant's case is that the 2013 Contract was varied with effect from around 29 January 2014 so as to require the Defendant to pay 17.5% of the costs recovered by GWS in High Value Cases (defined as cases where damages were in excess of £25,000 and the case was not being dealt with in a fixed costs regime), capped at £10,000; alternatively that a new contract was entered into by the Claimant and GWS obliging such payment in High Value Cases. In contrast, the Defendant denies that there was a concluded agreement as to payment for High Value Cases, whether by variation of the 2013 Contract or by the parties entering into a new contract.
The Claimant continued to provide case management services to GWS but a dispute arose as to the payment of its invoices. This led to the Claimant issuing a statutory demand on 8 March 2016. GWS applied to set it aside and ultimately the dispute was compromised by an agreement dated September 2016 (“ the Settlement Agreement”). It is the Claimant's case that the Settlement Agreement gives rise to an estoppel that
prevents the Defendants from asserting that the contractual obligations of GWS relating to High Value Cases were other than on the terms referred to in that agreement, namely, to pay to the Claimant in respect of services provided by it a sum calculated as 17.5% of profit costs capped at £10,000Following the execution of the Settlement Agreement, the Claimant stopped introducing new business to the Claimant, though it continued to provide services in respect of existing cases. Their relationship has gradually wound down, through there remain a significant number of issues between the parties as to liability for fees.
THE LITIGATION
The Claimant commenced a claim for unpaid fees on 25 January 2021. The fees claimed fall into several categories:
10.1. Fees allegedly due as First Tranche Service Fees;
10.2. Fees allegedly due as Second Tranche Service Fees;
10.3. Fees allegedly due as Single Service Fees;
10.4. Translation fees;
10.5. Fees allegedly due in respect of High Value Cases;
The claim is stated to be in the sum of £569,446 or alternatively such sum as the court may determine. In addition the Claimant seeks an inquiry and account of the sums due.
After close of pleadings, it was apparent that, putting aside the detail of the sums allegedly due, there were certain high level issues relating in particular to the Defendants' alleged liability for the payment of fees on High Value Cases, the payment of translation fees where these were not recovered from a third party and the Defendants' liability to pay sums where files were transferred to other solicitors. At a Case Management hearing on 5 October 2021, it was ordered that there be a trial on certain preliminary issues that are set out more fully below.
The trial of the preliminary issues was listed before me for five days from 28 November 2022, though was in fact concluded in four. I am grateful to counsel for the efficient use of court time in that respect. I heard from Mr Arturas Janavicius 4 and Ms Viktorija Milasevuciene 5 on behalf of the Claimant; and Mr Christopher Williams 6, Mr James Buckley 7 and Mr Simon Cottrell 8 on behalf of the Defendants.
The structure of this judgment is as follows:
14.1. To set out the issues;
14.2. To set out the relevant legislative background in respect of the payment of referral fees;
14.3. To summarise the factual evidence of the dealings between the parties, considering the initial agreement, the alleged variation relating to High Value Cases and the circumstances of the Settlement Agreement;
14.4. To summarise the arguments advanced by each party on the issues;
14.5. To consider those arguments;
14.6. To summarise my conclusions and to consider the appropriate steps that might be taken in the light of them.
THE ISSUES
The following issues were agreed to be appropriate for resolution at a trial of preliminary issues:
15.1. Whether the 2013 Contract was varied by the exchange of emails referred to at paragraphs 17 to 19 of the Particulars of Claim to provide that in respect of High Value Cases, the Claimant would be entitled to receive 17.5% of costs recovered by the Defendants, capped at £10,000 in respect of cases issued on or after 5 September 2011 (Issue 1 — Variation).
15.2. Whether a new written contract was agreed between the parties as pleaded at paragraph 23 of the Particulars of Claim (Issue 2 — the New Contract Issue).
15.3. Whether, on its true construction, clause 6 of the Settlement Agreement has the meaning and effect contended for at paragraph 30 of the Particulars of Claim. (Issue 3 – Settlement).
15.4. Whether the Defendants are bound by the estoppel as pleaded at paragraph 31 of the Particulars of Claim (Issue 4 — Estoppel).
15.5. Whether the contract asserted by the Claimant for the payment of percentage fees in High Value Cases is void for illegality as pleaded at paragraph 30 of the Defence (Issue 5 — Illegality).
15.6. Whether the Claimant is entitled to a quantum meruit in respect of High Value Claims if it does not have any entitlement thereto under the terms of a contract or an estoppel and, if so, on what basis is it to be calculated (Issue 6 — Quantum Meruit).
15.7. Whether the limitation period for the sums claimed by the Claimant commenced on the date of the Claimant's invoice as contended for at paragraph 31(c)(ii) of the Defence or some other date (Issue 7 — Limitation).
15.8. Whether the Defendants' obligation to pay sums due to the Claimant is conditional upon the delivery of a valid VAT invoice as contended for at paragraph 31(c)(vi) of the...
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