Irwin Mitchell: Decision time
National firm Irwin Mitchell is facing payouts to 261 Court of Protection clients after its trust corporation was found in breach of the self-dealing rule.
Her Honour Judge Hilder, the court’s senior judge, said she would grant retrospective ratification of IM Trust Corporation’s (IMTC) instruction of Irwin Mitchell Asset Management (IMAM) on condition that it repay its client, ‘PW’, a sum equal to 60% of her potential claim for compensation – around £22,600.
If it does not agree, IMTC will instead have to apply to discharge its appointment and is likely to face a claim.
There are another 260 clients in similar situations and HHJ Hilder said the parties – which included the Official Solicitor (OS) and the Public Guardian – would need to “confer as to implications of this judgment and IMTC’s decision” for them.
In early 2024, the judge concluded that the IMTC’s appointment of IMAM as PW’s investment manager was a breach of the self-dealing rule – the Irwin Mitchell group gained financially from it.
Yesterday’s decision concerned what to do next. It was conducted on the assumption that retrospective ratification of IMAM’s appointment would waive PW’s claim against the law firm, and that the performance of PW’s investments, and the charges IMAM made, were in line with what a reasonable and experienced investment manager would have done.
Further, Irwin Mitchell has sold IMAM and the terms of the deal mean the conflict of interest will end in May 2027.
Pending this decision, IMTC or individuals within the Irwin Mitchell group have continued to act as deputies for the affected people, subject to an independent financial adviser conducting a high-level review of the general suitability of investment arrangements.
IMTC sought retrospective ratification of the decision to appoint IMAM, which the OS and the Public Guardian opposed.
The OS’s position was that PW’s potential claim to recover all of the fees and charges levied by IMAM should not be waived. It said the evidence put this at £37,647.
Irwin Mitchell said this figure failed to take account of IMAM’s expenditure in carrying out the work – this meant its profit from the work that could be claimed back was between £9,000 and £9,500, and did not make “any allowance for care and skill that the High Court may permit”.
The firm stressed that this was not a case where there had been any dishonesty, bad faith or surreptitious dealing – IMAM worked “diligently” for PW’s benefit, providing full consideration for the fees that were charged and PW would have incurred similar charges with an alternative investment manager.
OS made an open offer to accept a lower amount and the difference between the positions was around £18 500, HHJ Hilder observed.
“Given the costs implications and other of continued/further litigation, it is perhaps trite to express regret that the parties have been unable to bridge this gap by consensus.”
HHJ Hilder said it was not her role to reach a concluded view on how PW’s claim should be quantified but she preferred the OS’s approach.
“The fundamental difference between the two approaches relates to relevance (or not) of IMAM’s own costs of operations. Mathematically, the profits approach means that the higher IMAM’s operating costs are, the lower the compensation calculation will be,” she said.
“This seems to me to place incentives in all the wrong places, with potential even for absurdity. No doubt the court determining the claim will be sensitive to this.”
In weighing the factors, the existence of PW’s claim was more important than the value of it – which was relatively small in PW’s situation – while in the absence of ratification, PW would lose the “settled and positive relationship” she had with her deputy and litigation would follow.
The fact that PW had not actively been caused loss supported ratification too.
However, the judge was unhappy that the law firm pointed to the impact on the Court of Protection’s workload if IMTC had to resign all its appointments. This was a point increasing made in cases, she said, and “it is an unattractive argument when deployed as reason for particular determination of a specific case”.
The outcome she suggested would allow both PW’s claim to be recognised and the positive deputyship relationship to be maintained.
“In my view, it would be in PW’s best interests that IMTC’s past breach is ratified on condition that IMTC pays back into PW’s funds an appropriate amount to recognise her claim.”
An Irwin Mitchell spokesman said it had not yet decided whether to accept the condition: “This is another stage in a complex set of considerations. We acknowledge the latest judgment and we are carefully considering our next steps.
“Our clients’ best interests remain our priority. The judgment notes that it was agreed during the proceedings that our client is satisfied with the work of their current deputy and there are no allegations of any financial loss to our client.
“This case concerns a historic process which Irwin Mitchell ceased using following updated guidance from the Office of the Public Guardian in 2023.”
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