Legal Services Commission v Aaronson & Ors

Following the handing down of my judgment allowing the firm’s appeal against the Deputy Master’s refusal to stay the claim brought by the Commission, I heard submissions as to costs. It was submitted on behalf of the firm that the Commission should pay the costs of the application before the Deputy Master and of the appeal. It was submitted that there should be an order for the assessment of the costs and an order that a sum be paid by way of an interim payment. It was submitted on behalf of the Commission that by reason of the firm’s conduct the firm should only be entitled to its costs incurred after 23 March 2006, and that in any event it was inappropriate to order that there be an interim payment.

I have set out much of the correspondence between the parties which is relied on in relation to conduct in my judgment on the appeal. The Commission throughout insisted on its right to the documents, and offered to settle the appeal on the basis that it got inspection of them outside the arbitration and the firm paid the costs of the proceedings. The firm only very belatedly offered inspection of the files outside of the arbitration. The firm made various offers between September 2005 and January 2006 to meet the Commission to see if a resolution could be found to their disputes, which were rejected by the Commission. It would have been hard for the Commission to make any proposals for the settlement of all the disputes without seeing the firm’s files, but, if they had met with the firm, there could have been discussion to see if there was a way forward. In short, the firm was as cooperative as it might have been: neither was the Commission. The firm have established that they were entitled to the stay, and the Commission have always resisted that. I conclude that it is appropriate to order that the Commission pay the costs before the Deputy Master and of the appeal.

It was submitted that it was inappropriate to order an interim payment on account of costs first because the Commission was considering whether to seek leave to appeal. In view in particular of a letter written by the firm to the Commission dated 23 May 2006 in which the firm offers an expedited audit of its files – which is all the Commission could seek to gain by an appeal, it would be wrong to allow the possibility of an appeal to avoid the ordinary order for an interim payment. I also consider that the fact that this two partner firm have been put to substantial costs by the Commission speaks strongly in favour of an order. I have recorded in my judgment on the appeal the fact that the firm has the support of the Law Society in resisting the Commission’s claim: but I do not understand that the Society is making itself wholly responsible for the costs. A further reason that was advanced for not making an order was the line that has been taken as to costs in the arbitration. I do not think that that affects the issue I have to decide.

The firm provided a bill of costs totalling £44,026 in respect of the appeal. There is no bill in respect of the proceedings before the Deputy Master, where the firm were represented by leading and junior counsel. I consider that it is appropriate in the circumstances to order that there be a payment on account of the costs of £45,000. That should be paid within 14 days.

I trust that counsel will now be able to submit an agreed order.