Manjit Gill v Heer Manak Solicitors [2018] EWHC 2881
Background
Mr Manjit Gill, (hereafter referred to as the Appellant for simplicity) was involved in litigation pursued by HMRC. There were six Defendants to HMRC’s claim, the first three Defendants had unpaid tax liabilities, the Appellant was the sixth Defendant who had no allegations of tax liabilities levelled against him. HMRC’s position was that property had been transferred to the Appellant by the first three Defendants, in order that said property be put beyond the reach of HMRC.
A freezing order was imposed on the Appellant’s assets, who then instructed Heer Manak Solicitors (hereafter referred to as the Respondent for simplicity) to work on his behalf in the litigation. A retainer dated the 7th June 2013 was entered into and work commenced on the file.
On the 27th December 2013, without notice, the Appellant was informed that the Respondent firm was closing down as a result of their being unable to secure a competitive rate for professional indemnity insurance. A difficulty encountered by a number of firms at the time and reported in the Law Gazette.
The Respondent had requested and received payments on account for charges and expenses to be incurred as the matter progressed. More than three years after the closure of the Respondent firm, they made a claim for additional amounts over and above those paid on account.
The Appellant challenged the Respondent’s ability to recover these additional amounts following the termination of the retainer. At first instance, Master Simons of the Senior Court Costs Office ruled that the Respondent was entitled to terminate the retainer as a result of the closure of the solicitors practice and the fees were therefore owed.
The Appeal
Questions arose as to whether (1) the Respondent had good reason for termination of the retainer and if so, (2) whether it had given reasonable notice of the termination of the retainer. Both of these had been ruled in the favour of the Respondent at first instance. The only question under Appeal was the latter, and whether Master Simons was right to conclude that reasonable notice had been given as to the termination of the retainer.
On Appeal, Mr Justice Walker outlined that the relevant question was whether, on the evidence presented, the Respondent’s decision to terminate the retainer with no advance warning was reasonable.
The objective test for ‘reasonableness’ involves looking at the issue from both side’s vantage point, and balancing their interests. Master Simons had only considered the position from the point of view of the Respondent and not from the point of view of the Appellant. As Justice Walker explains (Paragraph 30):
“Manjit Gill was embroiled in very substantial litigation with a considerable amount of money at stake. He was a student. He needed specialist legal representation. Much had to be done between 20 December 2013 and the end of April 2014. In these circumstances there was no understatement in an assertion on behalf of Mr Manjit Gill that the firm had “left him in the lurch”.”
Justice Walker explains that the failure to take into account the Appellant’s point of view was an error in law on the part of Master Simons.
Carrying on, Justice Walker refers to the lack of factual evidence before the Court on behalf of the Respondent, regarding the reasonableness of the termination without warning. Without any such factual evidence Justice Walker compared the Respondent’s conduct with that of other firms, referring to a Law Gazette article which described the majority of firms having dealt with similar issues in an orderly manner.
“The course it (the Respondent) took, giving Mr Manjit Gill no notice at all, can hardly be described as ‘orderly’.”
The Respondent maintained the argument successfully presented at first instance. Namely that there was significant risk in a firm notifying clients before it was absolutely necessary, that there was any prospect of the firm closing down. At first instance Master Simons agreed, stating “to do so would be commercial suicide”.
Justice Walker did not accept that this commercial consideration was sufficient to justify the lack of notice provided to the Appellant regarding the termination of his retainer, as such the decision failed to give sufficient weight to the position it would put the Appellant in. Justice Walker (paragraph 33):
“He was left without cover during a period when there might have been significant developments in the litigation, and in any event when a tight timetable had been imposed at the case management hearing on 20 December… I have no doubt that a reasonable observer would have appreciated well before 27 December that termination without notice would risk putting in jeopardy Mr Manjit Gill’s ability to comply with that timetable”
Justice Walker found that Master Simons was wrong to determine termination without notice had been reasonable. Accordingly the Respondent was unable to claim the fees which it sought from the Appellant.
Analysis
The decision should be considered in the context of the Respondent’s conduct, not only in the substantive action, but also in the litigation to recover the fees themselves. It is clear that Justice Walker based the decision on the evidence before the Court. With no evidence having been presented by the Respondent in support of the reasonableness of the termination of the retainer, they were always fighting an uphill battle.
Even if evidence had been presented by the Respondent, it is clear that the termination of the retainer must be reasonable having consideration to the impact upon the specific client. Here, there were tight timescales which needed to be complied with and which were compromised by the termination without notice. This was clearly in the mind of Justice Walker in reaching his decision. Had the impact of the termination upon the Appellant’s litigation been less, a different decision could have been reached.
In the specific circumstance of termination of a retainer, the lesson is clear. Sufficient notice must be provided to enable the client to continue to pursue their litigation without difficulty, even if potentially this presents commercial difficulties to the firm. The case also provides wider reminders; firstly that when considering reasonableness, both sides’ points of view must be considered, and secondly evidence must be provided to show the reasonableness of an action, when said reasonableness is to be determined by the Court.