PROVING THINGS 63: LAW SOCIETY FAILS TO PROVE IT MAKES A LOSS: “DISAPPOINTING, TO SAY THE LEAST”
The Law Society put forward a budget of £637,000* to defend the action in Socrates Training Limited -v- The Law Society of England and Wales  CAT 10. The Law Society, however suffered from a basic failure to prove one of the matters it asserted.
Socrates is a training company. It brought an action against the Law Society arguing abuse of dominant position when the Society made it mandatory for those seeking accreditation under the Conveyancing Quality Scheme to attend courses run by the Law Society. The Law Society was unsuccessful in its defence.
EVIDENCE THE COURSES WERE MAKING A LOSS
One of the arguments the Law Society put forward was that the courses it provided were loss making. The tribunal was sceptical of the evidence put before it.
“In reliance on this schedule, the skeleton argument for the Law Society stated that: “[t]he CQS is … loss making overall, and is subsidised by practising certificate income.”
However, not only is the method of cost allocation (whereby an increase in revenue automatically generates a corresponding increase in attributable cost) an unreliable basis for any fair assessment of the profitability of the scheme, but it became clear during the course of the trial, following questions from the Tribunal, that the figures presented for CQS training income in the years prior to 2015 were materially understated. It emerged that before 31 October 2014 the Law Society’s system did not in fact record income due to CQS training, and on the final day of the hearing the Law Society presented revised figures which represented an upper bound of training income: those figures were between 70% and over 100% higher than the figures originally presented.
We are bound to record that it is disappointing, to say the least, that the Law Society produced a schedule of figures in purported compliance with the Tribunal’s orders which was wholly unsatisfactory. The method used for allocation of costs is such that even with the revised figures showing an upper bound for training income (which on that method would require all the costs figures to be recalculated), it is in our view impossible to reach any reliable view as to whether or not the CQS was loss-making, at least after 2012 when the training income significantly increased.
What can be deduced from the revised figures is that in the year ended 31 October 2014, the income from all CQS training was likely to have been close to £1 million; and that thereafter the training income (which is now accurately recorded) has been between about £1.4 and £1.5 million.We noted above that financial projections for the CQS were presented to the Management Board of the Law Society on 20 October 2010, although that also came to light only in the course of the hearing. Copies of the 2010 Business Case for the CQS, supplied to the Tribunal subsequently, projected that even on a “worst case” scenario, the CQS was expected to become significantly profitable by 2012. However, those initial budgetary estimates, as the Law Society has pointed out, assumed that applications for CQS accreditation would be made on-line, which is not in fact what happened, so that the largest cost of running the CQS is the cost of processing applications. As regards the more recent situation, we were told by Ms Smith QC, on behalf of the Law Society, that no overall financial forecasts for the CQS have been made.
We note that by letter from its solicitors to the Tribunal written after the conclusion of the trial, the Law Society restated its case to assert that the CQS is loss-making on “a standalone basis.” We doubt very much that even that conclusion can be drawn robustly given the method used for cost allocation, but in any event, the CQS of course is not a standalone business. We therefore cannot accept the submission that the CQS has had to be subsidised from the Law Society’s practising certificate income. Overall, we conclude that it is impossible on the evidence before us to determine whether or to what degree, when considered in terms of avoidable costs, the CQS as a whole is profitable for the Law Society, but it seems clear that by 2014-15 the supply of the CQS training courses generated a substantial income stream and made a positive contribution to overheads.”
(Some observers may think that if the project was making a loss and being subsidised by its members it is peculiar that the Law Society was willing to spend £637,000 of its members’ money attempting to uphold a loss-making monopoly. Members would be better off with the courses being provided by third parties and the Society not having to subsidise them at all. That is, of course, a matter for clever commercial minds and not us simple lawyer folk,)
*Recoverable costs were capped at £200,000 for the claimant from the Law Society and £350,000 for the Law Society from the claimant, see the earlier costs capping judgment available here
RELATED POSTS: THE PROVING THINGS SERIES
- Proving things 1: Civil Evidence Act notices will not cut it
- Proving things 2: evidence to support a claim for damages must be pitch perfect.
- Proving things 3: the complete absence of evidence means the court will not speculate
- Proving things 4: Witnesses who just aren’t there.
- Proving things 5: witness statements and failing on causation.
- Proving things 6: “That’s what I always do” & proving causation.
- Proving things 7: If you don’t prove a loss you don’t get an order.
- Proving things 8: a defendant must prove that a failure to wear a seatbelt made a difference.
- Proving things 9: the role of experts
- Proving things 10: “He said, she said”: the difficulties of recollection.
- Proving things 11: Lies, damn lies and…
- Proving things 12: That oral contract is not worth the paper its written on.
- Proving things 13: Loss, there was no loss.
- Proving things 14: proving mitigation of loss
- Proving things 15: damages and evidence: going back to College
- Proving things 16: if you don’t prove it you don’t get it.
- Proving things 17: Heads of damage that were “entirely bogus”
- Proving things 18: Damages; Car hire; Proof & Summary Judgment
- Proving things 19: prove service or you could be caught out.
- Proving things 20: allegations of improper conduct have to be prove
- Proving things 21: when the whole process of investigation is flawed
- Proving things 22: damages, mitigation part 36 (and bundles).
- Proving things 23: serving important evidence late
- Proving things 24: Damages & the “But for test”: when it gets really complexProving things 24: Damages & the “But for test”: when it gets really complex
- Proving things 25: Attempts to smuggle in witness statements do not help (and carry no weight).
- Proving things 26: distinguishing between what you can remember and what you now think you did.
- Proving things 27: Burdens of proof, hearsay evidence and… attempted murder.
- Proving things 28: make unwarranted personal attacks and use a “mud-slinging” expert: that always ends well.
- Proving things 29: Make sure the witness evidence deals with the relevant issues
- Proving things 30: Office Gossip Proves Nothing: The importance of the source of information and belief.
- Proving things 31: witnesses tend to remember what they want to remember.
- Proving things 32: Damages claim struck out as unsustainable: application to amend refused.
- Proving things 33: causation and the burden of proof in claims against solicitors.
- Proving things 34: There is no primer for scuttlers: when your ship doesn’t come in.
- Proving things 35: Reconstruction, documents & memory.
- Proving things 36: credibility and contemporaneous documents.
- Proving things 37: An approach to damages that was “fundamentally deficient throughout”.
- Proving things 38: Proving inability to pay on a security for costs application.
- Proving things 39: You can spend £10 million in costs and still not prove your case.
- Proving things 40: No evidence – no loss.
- Proving things 41: Proving damages – you are not going to get a second bite of the cherry.
- Proving things 42: silence does not prove inducement.
- Proving things 43: How the Court decides: a Primer.
- Proving things 44: Findings of Fact, Walter Mitty and Witness Training.
- Proving things 45: If you can’t prove loss the defendant is going to get summary judgment.
- Proving things 46: Late theories advanced by experts rarely help.
- Proving things 47: Fire in the loft: it wasn’t the mouse man at all.
- Proving things 48: valves, floods, models and causation.
- Proving things 49: it is difficult to prove damages when the opinion evidence in your witness statement has been struck out.
- Proving things 50: to prove breach of contract you first have to prove that there was a contract.
- Proving things 51: No evidence of loss – no damages
- Proving things 52: Solicitor’s negligence action fails on all counts: no negligence and no loss.
- Proving things 53: dishonesty some of the times doesn’t mean dishonesty all of the time.
- Proving things 54: getting £2 in damages after claiming £15 million.
- Proving things 55: I’ll say it again: No evidence – no damages.
- Proving things 56: A judge will not speculate when things could have been proven.
- Proving things 57: Lease said soonest mended: claim for substantial damages fails (and guess the reason)
- Proving things 58: Failure to prove causation leads to award of nominal damages.
- Proving things 59: To get special damages you have to plead them and prove them.
- Proving things 60: Putting seaweed out of the window and the judge who was even-handedly offensive
- Proving things 61: More on social media: Facebook Entries & witness credibility.
- Proving things 62: “Totally unsatisfactory evidence” at trial fails to prove special damages.
law society again cannot get it right so how can Llps get grillings?