NON-SOLICITOR LITIGATION ENTITIES AND WASTED COSTS: WANT TO BE £102,000 OUT OF POCKET?

An earlier post looked at the issues relating to litigation being conducted by an non-authorised entity.  In M A Lloyd & Son Ltd -v- PPC International Limited [2016] EWHC 2162 (QB) issues of wasted costs arose in relation to a non-authorised body conducting litigation.

KEY POINTS

• A solicitor employed by an entity that was not authorised to conduct litigation was responsible for the conduct the claim on behalf of a claimant.
• The claimant’s conduct of various actions had been unreasonable to the extent that the wasted costs jurisdiction was exercised.
• The solicitor was  (apparently personally) liable to pay £102,000 in wasted costs.

THE CLAIM

There were three sets of proceedings brought by the claimant on broadly similar grounds.

• The claimant (“MAL”) brought proceedings for alleged breaches of a confidentiality agreement.  An application to serve out of the jurisdiction in those proceedings were dismissed and MAL ordered to pay costs.
• A second set of proceedings led to MAL being ordered to pay money into court.  MAL failed to comply and that action was struck out.
• A third action was stayed.
• MAL then went into administration. The outstanding costs totalled £120,000, there was minimal chance of the defendant recovering costs from MAL.

THE ENTITY LITIGATING ON THE CLAIMANT’S BEHALF

The defendant applied for wasted costs against the individual solicitor litigating on behalf of MAL. His Honour Judge Seys-Llewellyn QC (sitting as a judge of the High Court) observed:-

1. Mr McCarthy is a qualified solicitor. From a date at some time during 2012, he was employed by “Charles Henry” which is not a firm of solicitors or limited legal partnership, but which Mr Leigh Ellis the solicitor for PPC (in his Thirteenth Statement dated 1 February 2016) ‘understands to be a company limited by guarantee and a charity, which describes itself as ‘providing legal support to members of the public’ and which states on its formal notepaper that it “retains solicitors and other lawyers as consultants and enjoys direct access to the Bar” ‘.

2. The legislation in this field provides that only certain persons or bodies are licensed or authorised to carry out “reserved legal activities” (including advocacy and the conduct of litigation). Charles Henry was registered with the SRA (Solicitors Regulatory Authority) and Leigh Ellis in that witness statement states his understanding that it was not at any time licensed or authorised to carry out reserved legal activities. By comparison a qualified solicitor, doubtless subject to maintaining his practising certificate, would be authorised to carry out those activities. Mr McCarthy was a qualified solicitor. It is not suggested that he was not authorised or licensed to carry out the relevant activities.

3. I find the role of Charles Henry in this litigation, as a body not authorised or licensed to carry out reserved legal activities, at least opaque. In this, I am in good company. In proceedings between Norseman Holding Limited –v- Warwick Court (Harold Hill) Management Company Limited [2013] EWHC 3868 (QB) Coulson J, stated that ‘certain aspects of NHL’s conduct of the litigation generally, and this appeal in particular, can only be described as extraordinary’:

“Throughout all this game playing, an issue arose – and continues to arise – in relation to the nature of those representing NHL. Charles Henry are on the record as solicitors, and indeed that is confirmed in a witness statement dated 18 January 2013 signed by Keith Gregory, who describes himself as a trainee legal executive at Charles Henry.

However it appears that Charles Henry are not an authorised body recognised by the Solicitors’ Regulation Authority for the purpose of carrying out litigation, and, at the contested hearing in front of Judge Davies on 21 January 2013, that was expressly confirmed by NHL’s Counsel, Mr Shrimpton who described Charles Henry as ‘not a firm and not able to conduct litigation’…..

Even for the purposes of this appeal, the issue as to who is acting for NHL as their solicitor is wholly muddled. In his skeleton argument, at paragraph 22, Mr Butler said that it was common ground that Dr Eiland was the solicitor conducting the litigation on behalf of NHL. I have seen nothing to confirm that Dr Eiland is or was NHL’s solicitor. Orally, I was told that this was wrong and that NHL’s solicitor is Mr Rory McCarthy, but again I have seen nothing to suggest that he is acting on the record as NHL’s solicitor.

There is, therefore, an unacceptable muddle as to who – if anyone – could be said to be the solicitor acting on behalf of NHL. That muddle lies at the heart of what happened next. At the hearing of 21 January 2013, before Judge Davies, NHL were represented by Mr Shrimpton of counsel. Mr Gregory and Mr McCarthy sat behind him. Dr Eiland was not in Court……”

THE LIABILITY OF THE INDIVIDUAL SOLICITOR TO PAY WASTED COSTS

The defendant sought a wasted costs order against the solicitor employed by Charles Henry “Mr McCarthy”.  Mr McCarthy had failed to comply with a court order in relation to the service of evidence in reply.  His application for relief from sanctions in this respect was refused.

DID THE SOLICITOR HAVE CONDUCT OF THE LITIGATION?

The judge examined the evidence in detail and found that Mr McCarthy was the solicitor with conduct of the litigation.  The failure to file evidence in time was an important factor.

1. “… it is trite that where a party has direct knowledge of facts and matters, and may reasonably be expected to lodge evidence on points of importance, a Court may properly draw adverse inference against the person who has failed to bring such evidence before the Court. In my judgment this applies to the question whether Mr McCarthy was conducting the litigation, but also to the questions whether the Court is satisfied that it was unreasonable or improper conduct on his own part as opposed to that of others, and to the question whether it is the conduct of the solicitor which has caused costs to be incurred as opposed to instruction by the client or following the wishes of the client as expressed to the legal representative.”

HAD COSTS BEEN UNREASONABLY INCURRED?

Here the judge’s finding was clear.

1. Whether costs were unreasonably and/or improperly incurred. I refer above to the agreement as to the nature of the conduct of proceedings which resulted in the orders which PPC now seek to recover as wasted costs. The number of applications made by or on behalf of MAL, either simple applications or applications for permission for appeal, is extraordinary; as to be blunt is the vacuous nature of much of the material put forward under them. I would have had no hesitation in concluding that the conduct was improper and unreasonable in the sense explained in Ridehalgh, and that there was abuse of process in the refusal to pay previous costs orders which had been imposed, a continued series of purposeless and hopeless challenges and applications, which with few exceptions appear to have been for the ulterior purpose of attempting to outlast PPC’s willingness to litigate, and a repeated willingness to embrace and or seek delay.

WHAT COSTS HAD BEEN CAUSED BY THE LAWYER’S CONDUCT

The judge considered each element of the claim for costs in detail.  He concluded that the sum of £101,058.00 amounted to wasted costs and this was the sum the solicitor was ordered to pay.

WORKING FOR AN UNAUTHORISED ENTITY COULD BE A DANGEROUS THEN

If Charles Henry had no insurance, and offers no indemnity to the solicitor involved then he is £102,000 out of pocket.

RELATED POSTS

• A cautionary tale for anyone considering “alternatives” to solicitors in litigation.

On wasted costs

• Schedules of damages, wasted costs and the statement of truth.
• Wasted costs order made against solicitors: compliance with orders, absent statements and late bundles.