The Lord Chancellor v Charles Ete and Co & Ors

A legal aid authority may recover payments on account where a solicitor’s conduct, unreliable information and unjustified delay show an unwillingness to submit final bills for assessment. Recovery may arise under the contractual scheme, the governing statutory framework or restitution. A change-of-position defence is unavailable where the solicitor’s liabilities to repay excessive payments co-existed with the expenditure relied upon.

Contractual termination may be justified by multiple serious breaches, including unreliable records, excessive claims and prolonged billing failures, where continued substandard performance can reasonably be inferred. An internal contractual review body may make a different decision, including substituting the contractual ground for termination. Procedural fairness principles applicable to independent tribunals do not govern that internal review process.

The Lord Chancellor, as successor to the Legal Services Commission, claimed recovery of payments on account made to Charles Ete & Co under civil legal aid contracts. The defendants disputed liability and counterclaimed damages for alleged wrongful termination of the firm’s civil and crime contracts and for exclusion from the Duty Solicitor Scheme.

The court considered the firm’s prolonged failure to submit final bills, alleged overclaims, defective accounting records, termination under the contractual fundamental-breach provisions, the status of the Contract Review Body, the Duty Solicitor Scheme requirements and the defendants’ claimed losses.

1. Recovery of payments on account. The firm had repeatedly represented that final bills would be submitted, but failed to do so and supplied unreliable explanations. Its conduct demonstrated an unwillingness to submit final bills when cases had concluded. The claimant was therefore entitled to recover the payments on account under the approach in Legal Services Commission v Loomba [2012] 1 WLR 2461 and section 3(1) of the Access to Justice Act 1999.
2. Recovery was also available in restitution. Expenditure on tax, VAT, counsel’s fees and other disbursements did not establish a change of position because those liabilities co-existed with the contractual and legal obligation to repay excessive payments. The defendants’ unsupported set-off was rejected, and judgment was entered for £795,183.69.
3. The civil contract had been lawfully terminated. The firm lacked reliable and accessible records of work in progress and costs, had substantially overclaimed payments on account, had claimed unjustified file reviews and had persistently delayed submitting final bills. Those breaches were sufficiently serious to constitute Fundamental Breaches B and C. Corrective action was not required where the breaches were flagrant, persistent and continuing.
4. The Contract Review Body was entitled under the contractual review mechanism to make a different decision, including substituting a different ground for termination. It acted as an internal contractual reviewing body, not an independent tribunal. The natural justice challenge therefore failed. The crime contract was also lawfully terminated.
5. The firm was not entitled to damages for exclusion from the Duty Solicitor Scheme. The contractual tender and form requirements had not been satisfied. The defendants’ counterclaim and the transferred county court claim were dismissed. Permission to appeal was refused.

First-instance decision. The judgment records that the Firm’s claim, originally issued in the Central London County Court, was transferred to the High Court and tried together with the Lord Chancellor’s claim.