Successor practice application against City firm “futile”

High Court: Declaration against law firm would not bind its insurer

A successor practice application against a City law firm should be struck out, a High Court master has ruled, but only after the claimant has been given a chance to amend his claim.

Master Cook said the claim arose from alleged professional negligence by Lorrells, a City firm which went into liquidation in 2015, with estimated net liabilities of £2.3m.

Its business was absorbed by Eldons Berkeley, the court was told.

Mark Lorrell, formerly managing partner of Lorrells, was initially struck off by the Solicitors Disciplinary Tribunal last year, but this was overturned by the High Court and replaced with a two-year suspension.

Master Cook said the claimant, Justin Cohen, had taken assignment of two causes of action against Lorrells which together were worth nearly £2m.

However, Lorrells’ indemnity insurer was now itself in insolvent liquidation.

Applying to strike out the claim for a declaration that it was a successor practice to Lorrells, Eldons Berkeley argued that the claim’s only purpose was to seek an indemnity from its insurer, AmTrust Europe.

Master Cook said the relevant liability was that of Lorrells, against which the claimant had judgment.

“The important point to grasp is that the insurance arrangements, whatever they may be, do not transfer the liability of [Lorrells] to [Eldons].”

Master Cook said it may be that Lorrells would effectively be insured by AmTrust because of the successor practice rules, but with the insurer not a party to the proceedings, he had “some difficulty in understanding what purpose [Eldons’] continued involvement in these proceedings serves”.

“In my judgment the critical factor here is that a declaration in the form currently sought will not bind AmTrust… In the circumstances there is considerable merit in [Eldons’] submission that this is inappropriate and futile litigation.”

Master Cook suggested that this was a case where the benefit of the litigation did not justify the cost of the proceedings.

“It is no longer the role of the court simply to provide a level playing field and to referee whatever game the parties choose to play upon it.

“The court is concerned to ensure that judicial and court resources are appropriately and proportionately used in accordance with the requirements of justice.”

He said the claim for a declaration would only have utility if AmTrust was joined to these proceedings by the claimant.

To permit the claim to proceed in purely against Eldons Berkeley would put the firm “to a great deal of time and cost in circumstances where it has no direct liability to the claimant and the issue may well have to be litigated further between different parties at even greater cost and court time”.

Though satisfied that the claim should be struck out, Master Cook said the claimant should be given the opportunity of reformulating its claim to include AmTrust Europe.

“If the successor practice issue is to persist, it would be inappropriate and disproportionate to require the claimant to start from scratch.”

He decided that the claim should be stayed for a “limited period”, with a direction that that unless the claimant applied to lift the stay together with an application to amend his claim, then the claim against Eldons Berkeley would be struck out.

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