Kerry Underwood

COUNSEL, SOLICITORS AND INSOLVENCY

leave a comment »


The matters dealt with in this piece are examined in great detail in my three volume, 1,300 page book Personal Injury Small Claims, Portals and Fixed Costs – price £50 and available from Underwoods Solicitors here.

Kerry Underwood offers consultancy services in relation to this and other matters and details are here.

In

Gwinnutt v George and Ryan [2019] EWCA Civ 656

the Court of Appeal considered the status of counsel’s fees prior to 2013, which was the date when solicitors and barristers were first able to enter into contracts with one another, pursuant to the Supply of Legal Services by Barristers to Authorised Persons 2012.

Here, the barrister had become bankrupt and one of the issues was whether the non-contractual pre-2013 fees vested in the trustee in bankruptcy, the claimant in this matter.

The judge at first instance held that they did not so vest.

The Court of Appeal overturned that decision and held that the fees did vest in the trustee in bankruptcy, and the judgment contains a detailed analysis of what constitutes property for this purpose.

The judgment also examines in detail the nature of the relationship between solicitor and counsel prior to 2013, and that will now largely, but not entirely, be of historical interest.

I say not entirely, because it is clear that the Civil Liability Act and associated personal injury reforms are leading to hundreds of firms of solicitors going out of business, and we all know that there are likely to be pre-2013 counsel’s fees involved.

In any event, in relation to post-2013 fees, counsel will rank like any other creditor.

Personal injury counsel in particular should be in a hurry to collect their fees.

There are special problems where counsel is acting on a no-win, no-fee basis and the solicitors’ firm becomes insolvent before a case is concluded.

As the contract is with the now insolvent firm of solicitors, any counsel’s fee in relation to work carried out on those solicitors’ instructions takes its place in the queue with other creditors.

In this case the Court of Appeal also held that counsel’s fees, pre and post-2013, are a possession within Article 1 of the First Protocol to the European Convention on Human Rights.

It is ironic that counsel would probably be economically safer contracting direct with the client, rather than a firm of solicitors, as in percentage terms over the next two years a far higher number of personal injury firms of solicitors will become insolvent, as compared with lay clients.

This is particularly true given that solicitors are now allowed to operate through the medium of limited companies, with limited liability.

The Withdrawal of Credit Scheme operated by the Bar Council, which essentially means that firms of solicitors can have credit withdrawn by the Bar, so that they have to pay counsel’s fees in advance, obviously has no effect on an insolvent law firm.

Likewise the Solicitors Regulation Authority’s disciplinary process, which includes sanctions for failing to manage the business properly, will have no effect on an insolvent firm.

Elsewhere I have blogged about the liability of solicitors for VAT on matters such as travel, medical reports and agency fees and conveyancing search fees incurred on behalf of clients, where the courts have held that the solicitor, and not the client, is liable although obviously the solicitor can reclaim the amounts from the clients.

Again, it is ironic, that medical reporting agencies would be economically safer contracting direct with clients rather than personal injury solicitors.

I am not saying that this is generally the case with solicitors’ practices, but any solicitors’ firm doing just personal injury work is clearly at economic risk over the next two years.

Advertisements

Written by kerryunderwood

April 24, 2019 at 7:38 am

Posted in Uncategorized

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: