The Law Society’s budgeted costs of £637,000 to defend the competition law action brought over its Conveyancing Quality Scheme (CQS) are disproportionate and should be capped at nearly half of that, the president of the Competition Appeal Tribunal has ruled.
He said that while the society was entitled to switch solicitors from a Birmingham firm to City giant Norton Rose Fulbright, it could not expect the claimant to pick up the extra cost.
Capping its recoverable costs at a maximum of £350,000, Mr Justice Roth expressed surprise at various elements of the society’s budget, such as the 450 hours clocked up – at the cost of £140,000 – since Norton Rose was instructed two months ago.
North London-based Socrates Training, which provides anti-money laundering (AML) training, among other compliance-related courses, claims that the Law Society acted anti-competitively by changing the CQS rules last year and requiring law firms to buy its training in order to maintain their accreditation.
The judge said that damages were quantified at £112,500 – on the basis that the society’s conduct has lost Socrates’ the custom of 75 firms which would spend £600 each for two and a half years.
He added: “Of course, if an injunction were not granted after trial, the ongoing loss would be greater, so it may be said that the value of the claim is not limited to the damages to trial but extends several years into the future. Even so, it is hard to see that in broad terms it is over £500,000.”
As the case was on the tribunal’s fast-track, costs have to be capped and the judge worked from the parties’ budgets. Socrates put forward a budget of £220,000, including almost £56,000 for an expert economist. It is handling the claim in-house, with limited external help from solicitors, and has instructed junior counsel Philip Woolfe of Monckton Chambers.
Having initially instructed an unnamed “well-known” Birmingham law firm, the Law Society quickly turned to City giant Norton Rose Fulbright to handle the case.
Roth J said: “Of course, the Law Society is fully entitled to use a City of London firm, and there is nothing remotely unreasonable about its decision to use a firm in the City with specialist competition expertise for a competition claim. But that decision has obviously resulted in significantly higher costs: for example, the hourly rate being charged by the partner in the City of London firm is almost exactly double the rate by the partner previously handling the case in Birmingham.
“This is so although, as Mr Scott, a partner in the Law Society’s current solicitors, explains in his witness statement and as I accept, the solicitors have reduced their fees below their usual commercial rate. However, even with this reduction the charge amounts to £395 an hour for the partner and £315 an hour for a senior associate. I note that the trainee solicitor is charged at £150 an hour.”
The judge said that even though the decision use the City firm was not unreasonable, Chancery Lane was not entitled to place this increased cost on the claimant, “particularly where the Law Society is also using specialist leading counsel” – Kassie Smith QC, also of Monckton. There was, he said, nothing to stop the society itself paying more to its lawyers.
He accepted that in the circumstances the Law Society’s lawyers would have more work to do on the case than the claimant’s, but nonetheless considered the overall budgeted figure to be “disproportionate for a case of this nature, where the trial is estimated to last three or four days”.
Socrates director Bernard George, a solicitor, said: “We were naturally shocked to be told that the Law Society is planning to spend £640,000 on fast-track case listed for a three-to-four-day trial. That is nearly three times what we plan to spend.
“The costs cap imposed by the court of £350,000 gives Socrates some protection, but it is still an eye-watering sum for a pretty simple case. Of course, that just means that the poor old profession will have to pick up the shortfall of £290,000 even if the Law Society wins on all issues, which is most regrettable.
“We feel more strongly than ever that our case is right ethically as well as legally. We are fighting not just for ourselves, but for the whole training industry, which could be devastated if the Law Society is able to use its accreditation schemes to claim ever wider training monopolies. Law firms will suffer too, as they will lose their freedom to buy the most suitable training. So it is vital that we win.
“We have had tremendous support from solicitors around the country who have wished us well with this litigation. We owe it to them to fight this case all the way and that is what we will do.”
A Law Society spokeswoman had no comment on the costs ruling but reiterated its belief that the claim was “wholly without merit”.
For a fuller report on the costs issues, read our story on Litigation Futures.