The Lord Chancellor v Charles Ete and Company Charles Ete (2nd Defendant) Ratookumar Manorbhai Patel (3rd Defendant)
| Jurisdiction | England & Wales |
| Judge | Mr. Justice Holgate |
| Judgment Date | 18 February 2016 |
| Neutral Citation | [2016] EWHC 275 (QB) |
| Docket Number | Case No: TLQ/15/0521 |
| Court | Queen's Bench Division |
| Date | 18 February 2016 |
[2016] EWHC 275 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr. Justice Holgate
Case No: TLQ/15/0521
-and-
-and-
Nicola Rushton (instructed by Michelmores LLP) for the Claimant
Mr. Charles Ete for all Defendants
Hearing dates: 18, 19, 20, 21, 22 and 25 January 2016
Approved Judgment
Introduction
The Lord Chancellor as successor to the Legal Services Commission ("LSC") brings a claim for the recovery of payments on account made to a firm of solicitors, Charles Ete & Co ("the Firm") under the legal aid scheme. The claim was brought in the High Court. The Defendants are firstly the Firm, secondly Mr. Charles Ete and thirdly Ratookumar Manorbhai Patel. At all material times the Second and Third Defendants were partners in the Firm.
The Third Defendant did not appear at the trial and Mr. Ete stated that he was unaware of the Third Defendant's whereabouts. But on 22 July 2013 the Firm sent an Acknowledgment of Service on behalf of all three Defendants. At that point the Firm became the solicitor on the record, representing not only the Second but also the Third Defendant ( CPR 42.1(1)). It has not been suggested that that formal position has changed since then. The Third Defendant has not communicated with the Court about his participation in these proceedings but from the record he is represented by the Firm.
During the trial the Defendants' case was presented by Mr. Ete as the representative of the Firm and therefore continuing to act on behalf of all three Defendants. He is a solicitor with some nineteen years experience as an advocate. He was directly involved in the matters which are the subject of this litigation.
The Firm had contracts with the LSC to carry out both civil and criminal legal aid work for clients. The claim for recoupment of payments on account ("POA") relates entirely to work carried out under a civil contract in respect of family proceedings. From 2009 the LSC became increasingly concerned as to the large number of certificated civil cases in which the Firm had not submitted final bills so that a reconciliation could be carried out between the POAs and a final assessment. Bills for a substantial number of cases had been promised by the Firm on a number of occasions and still not produced. The LSC were also concerned about the large amount of POAs compared to the Firm's work in progress as well as its accounting procedures. An on-site audit of the Firm was carried out on 31 October and 1 November 2011 continuing on 7 and 8 December 2011. This resulted in two reports containing some serious criticisms of the Firm's billing practices. The reports were sent to the Firm.
As a result of these investigations and the Defendants' failure to provide adequate information, sanctions were imposed. On 4 November 2011 a contract notice suspended payment of future POAs for profit costs (but not disbursements). On 19 January 2012 the LSC sent a notice to the First Defendant to terminate the contract for family work. On 27 January 2012 the Firm instituted a contractual review in respect of that decision. On 2 March 2012 the Contract Review Body ("CRB") conducted an oral hearing and on 9 March 2012 it issued a decision confirming the termination of the contract.
On 27 January 2012 the LSC issued the first of its letters notifying the Firm that it was exercising its powers to recover POAs. This process culminated in a letter from the LSC dated 24 July 2012.
On 15 June 2012 an on-site audit took place at the Firm's offices in respect of work carried out under the crime contract. This audit was carried out by a different Auditor from the person who had audited the Firm in 2011. The Auditor recommended termination of the crime contract. On 4 July 2012 the LSC sent a notice to the First Defendant terminating its crime contract. On 26 July the Firm asked for a review of that decision by the CRB. Following a hearing the CRB decided to uphold the termination of the crime contract.
The proceedings and the pleadings
The Claimant issued his claim in the High Court on 11 July 2013. It relates solely to recovery of POAs for family law work and interest thereon. In an updated version of its Schedule of loss "A" the Claimant seeks repayment of £795,183.69, plus interest down to the date of judgment at the rate of 4% per annum. The Defendants deny that any circumstances arose entitling the Claimant to recover the POAs, whether under the contract or as a restitutionary claim. Moreover, in their Response to the Claimant's Schedule A the Defendants say that the total amount of the work they have carried out exceeds the value of the POAs and therefore say they are owed by the Claimant £455,480.30 plus interest.
On 20 March 2013 the Firm had already brought a claim against the LSC in the Central London County Court. At that stage the only relief sought was a declaration that the civil contract had been wrongfully terminated on the grounds that there had been no evidence to support the LSC's conclusion that there was a substantial risk to the legal aid fund because of the POAs made to the Firm. No claim for damages was made at that stage.
On 9 May 2013 the District Judge ordered the Claimant to file Particulars of Claim compliant with CPR 16.4. Amended Particulars of Claim were filed on 23 May 2013. The Firm alleged that both the civil and crime contracts had been wrongfully terminated because, in breach of the Unfair Terms in Consumer Contracts Regulations (1999 SI 1999 No 2083) and the Commercial Agents (Council Directive) Regulations 1993, the LSC had failed to give an adequate period of notice to terminate the contracts. It was said that three months should have been given. On that sole basis damages were claimed for alleged wrongful termination, but eventually this allegation was withdrawn by Mr Ete at the trial. By contrast, the Firm did not criticise or dispute any of the findings made in any of the Auditors' reports.
In paragraph 16 of its Particulars of Claim the Firm alleged that during 2010 it had wrongfully been omitted by the LSC from the rotas for the Duty Solicitor Scheme in criminal matters, giving rise to a claim for loss of income of "up to £30,000". It was also contended that, the LSC being a public body, the CRB's review of the decisions to terminate had been tainted by breach of natural justice because it had included LSC officials and so its decisions to uphold termination of the contracts should be "set aside".
On 13 August 2013 the Defendants filed a defence and counterclaim in the High Court proceedings brought by the Lord Chancellor. They alleged that the civil contract had been wrongfully terminated, because of the inadequate length of the notice period given (relying upon unfair contract terms legislation) and the breach of natural justice involved in the composition of the CRB (paragraphs 7 and 10). The only monetary claim made in relation to the crime contract was once again the alleged loss said to have arisen from the non-inclusion of the Firm in the Duty Solicitor Scheme (paragraph 9).
The defence and counterclaim also stated that losses had been incurred by the Firm by virtue of (a) the LSC's decision on 4 November 2011 to suspend POAs in respect of profit costs under the contract for family work and (b) delays by the LSC in the payment of final bills submitted to them (paragraph 13). It has to be said that the Defendants have never supplied particulars (let alone specific evidence) in relation to either of these matters and in those circumstances it would have been impossible for the Lord Chancellor to respond. Mr. Ete merely made generalised assertions during the hearing about the effects on the financial circumstances of his Firm of alleged delays in the payment of final bills and the decision to suspend payment. These matters have not been pursued by him in any detail whatsoever and it would be impossible for the Court to reach any proper conclusions on them.
The only possible reference to the crime contract in the 2013 defence and counterclaim is to be found in paragraph 9. It is somewhat unclear but at most it only referred to the alleged inadequacy of the notice termination period for that contract. In particular, there was no allegation that the LSC did not have grounds for terminating the crime contract. As noted in paragraph 10 above this allegation was withdrawn at the trial.
On 16 October 2014 Master Yoxall ordered that the Firm's claim in the Central London County Court be transferred to the High Court and should be tried together with the Lord Chancellor's claim in that Court. In this way the two matters came before me for a trial beginning on 18 January 2016.
On 8 December 2014 the Defendants filed an amended defence and counterclaim in the original High Court proceedings. That document still did not contain any allegation that the Claimant had lacked grounds for terminating the crime contract.
Evidence from both sides was exchanged by way of written statements in the middle of 2015. The witness statements filed on behalf of the Defendants did not contain any criticisms of the Auditors' reports, nor was it suggested that the LSC had not had any grounds for terminating the crime contract. Nevertheless when the Defendants served a Schedule of Loss in support of their counterclaim on 3 June 2015, items one to three related to alleged losses concerning the crime contract.
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