High Court finds abuse of process in how law firm sued fellow solicitors

High Court: law firm took action "deliberately" to reduce fees

High Court: law firm took action “deliberately” to reduce fees

The High Court has found a Newcastle law firm’s conduct an abuse of process after it repeatedly failed to pay the proper court fees when it issued claims.

John Male QC, sitting as a deputy High Court judge, said the total amount claimed in professional negligence actions brought by 31 claimants represented by Robinson Murphy against fellow Newcastle firm Ward Hadaway was around £9m.

Judge Male said that “in each case” the amount claimed was “hundreds of thousands of pounds” and yet, in all but one of them, Robinson Murphy paid court fees ranging from £35 (the fee for claims worth up to £300) to £240 (the fee for claims worth up to £15,000) when the claims were issued.

The judge said that “in every case the claim forms were amended just before service” to claim the larger sums that had already been intimated in letters before action, and only then was the balance of the appropriate larger fees actually paid.

“This course of action was taken deliberately by the claimants so as to reduce the fees paid initially to the court when the claims were issued to stop time running,” he said.

The court heard in Lewis and others v Ward Hadaway [2015] EWHC 3503 (Ch) that the claimants bought buy-to-let properties from the Morris Property Group (MPG), with the defendant acting both for them and their mortgage lender.

Judge Male said MPG “apparently provided” a “gifted deposit” to each claimant, effectively reducing the purchase price of each property. The mortgage lender was not informed.

The claimants alleged that Ward Hadaway knew about the gifted deposits and should have warned both clients and lender. However, the law firm denied knowing about the gifted deposits and said it understood the claimants paid “substantial deposits” direct to MPG.

Judge Male said all the claims were issued “very near to the end of the limitation period”, and in 11 cases the claim form was delivered to the court before the limitation period had expired, but was not issued by the court until afterwards.

Ward Hadaway applied for all the claims to be struck out on the grounds of abuse of process, or alternatively for summary judgment on the 11 claims on the grounds of limitation.

Judge Male held that the claimants “through Robinson Murphy, deliberately underestimated the value of their claims in order either to avoid, or to defer, the payment of the full and correct fees for the claims which they always intended to make”.

It would have been avoided if the claim was not pursued and no claim form was served within the extra four months issuing provided.

He concluded that there had been abuse of process by the law firm, noting that, before the claims were issued, there was already a ruling by a district judge criticising the firm’s “system of paying fees” in another matter and finding it to be an abuse of process. This was followed by a second ruling while the claims were being issued.

One consequence of the tactic, Judge Male said, was that “the claimants deprived the court system of fees which should have been paid at the outset and also involved the court in additional work in considering and processing the amended form…

“If I was to condone Robinson Murphy’s conduct, then their system would very likely be adopted by other claimants and their solicitors to the detriment of the flow of court fees, and with the need for increased administration by the court and also dealing with unnecessary amendments.”

However, Judge Male held that it would be “disproportionate” to strike out all the claims for abuse of process.

“The claimants would be deprived of the opportunity to have their arguable claims for substantial sums of money tried and the defendant would avoid those claims entirely without a trial on the merits. The prejudice to the claimants would be substantial as all the claims would now be barred by limitation. In contrast, the prejudice to the defendant is limited.”

However, he ruled that the 11 claims where the claim forms were issued after the deadline expired were barred under the Limitation Act 1980.

Although it was common ground that the forms were delivered “in due time”, Judge Male said the “question which I have to determine on this application is whether the claim form and the request were accompanied by the ‘appropriate fee’”.

Concluding that “the appropriate fee was not paid in time”, Judge Male said the 11 claimants did not “do all that was in their power to do to set the wheels of justice in motion according to the process laid down” nor did they “do all that they reasonably could do to bring the matter before the court for its process to follow. The claimants could have conducted themselves in a way which was not an abuse of process”.

Robinson Murphy has not responded to a request for comment.

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