PROVING THINGS 131: IN THE ABSENCE OF EVIDENCE THE COURT SHOULD NOT DRAW INFERENCES IN SOLICITOR’S COSTS CASE

The judgment in  Gill v Heer Manak Solicitors [2018] EWHC 2881 (QB) is one of those cases that will get costs lawyers excited.  However it is not so much a case about costs as a case about evidence, or the absence of it.

“… in circumstances where no relevant factual evidence was filed by the firm, I cannot accept that the master was entitled to make the assumptions set out in paragraphs 29 to 31”

THE CASE

The defendant firm of solicitors acted for the claimant in litigation.  Part way through that litigation, four months before the trial date,  they ceased trading as they could not find indemnity insurance. They informed the claimant of this, giving him no notice,  and his case was transferred elsewhere  (without his consent).  More than three years after it ceased trading the solicitors then made a claim against the claimant for costs that had not been paid on account.

THE ISSUE: DID THE SOLICITORS HAVE A “GOOD REASON” FOR TERMINATING THE RETAINER

The appeal centered on one issue: did the solicitors have a “good reason” for terminating the retainer. If they did they could bring the action for additional fees. If they did not then they could not.

THE HEARING BEFORE THE MASTER

The Master found that the solicitors had a good reason for terminating the retainer when they did.

THE APPEAL BEFORE THE JUDGE: “ON THE EVIDENCE” BEFORE THE MASTER THERE WAS NO GOOD REASON

Mr Justice Walker considered the rival arguments.
29. In the particular circumstances described above, the relevant question for the master can be described shortly. It was whether, on the evidence before the master, the firm’s decision to terminate the retainer with no advance notice to Mr Manjit Gill was reasonable.
30. I stress the words “on the evidence before the master”. No relevant factual evidence was filed by the firm. The only evidence before the master came from Mr Manjit Gill. That evidence was all one way. Mr Manjit Gill was embroiled in very substantial litigation with a considerable amount of money at stake. He was a student. He needed specialist legal representation. Much had to be done between 20 December 2013 and the end of April 2014. In these circumstances there was no understatement in an assertion on behalf of Mr Manjit Gill that the firm had “left him in the lurch”.
31. It was accepted on behalf of the firm that the objective test for reasonableness involved looking at the point view of both sides, and balancing their interests. It was submitted that while the master had not expressly referred to such a balance, that was in essence what paragraphs 29 to 31 of the judgment were concerned with. For my part, however, I do not read paragraphs 29 to 31 in that way. Those paragraphs do not look at the position from Mr Manjit Gill’s point of view. As it seems to me, in this regard the master erred in law.
32. Moreover, in circumstances where no relevant factual evidence was filed by the firm, I cannot accept that the master was entitled to make the assumptions set out in paragraphs 29 to 31. As recorded in the Law Society Gazette, a majority of solicitors in the firm’s predicament dealt with it in an orderly manner. In the absence of relevant factual evidence, there is no reason to think that the firm was not equally able to deal with termination of the retainer in an orderly manner. The course it took, giving Mr Manjit Gill no notice at all, can hardly be described as “orderly”.
33. The firm suggested that it was a proper inference that an experienced solicitor had worked out what the possibilities were and had seen that the proper way to deal with the matter was the course of action described in the letter of 4 February 2014 (see section A above). The firm stressed that from a solicitor’s perspective there was considerable risk in giving away to clients, before it was absolutely necessary, the fact that there was a danger of the firm closing down. I am not persuaded by these submissions. First, even if the firm’s partners had in mind the course of action described in the letter of 4 February 2014, the initial course of action described in that letter was less than satisfactory. There was no indication that the transfer made of the file was to a firm which could be expected to have the expertise necessary to advise Mr Manjit Gill. I add, although it is not necessary to my decision, that it is difficult to see that the firm had any authority to transfer the file in the way that it apparently did. More generally, however, the submission gives no weight to the potential difficulties for a person in Mr Manjit Gill’s position. He was left without cover during a period when there might have been significant developments in the litigation, and in any event when a tight timetable had been imposed at the case management hearing on 20 December. Termination of the retainer without notice occurred during the holiday season. I have no doubt that a reasonable observer would have appreciated well before 27 December that termination without notice would risk putting in jeopardy Mr Manjit Gill’s ability to comply with that timetable.
34. For all these reasons I conclude that the master was wrong to hold that the retainer could be terminated with no notice. That being so, it necessarily follows that in the present case the firm was not entitled to terminate the retainer and cannot claim the fees which it sought in the proceedings before the master.