Mark Lewis Law Ltd & Anor v Taylor Hampton Solicitors Ltd & Anor

The appellants are Taylor Hampton Solicitors Ltd and Taylor Hampton Law LLP. I shall refer to them as Taylor Hampton. The respondents are Mark Lewis Law Ltd and Mark Lewis. I shall refer to them as Mark Lewis. Taylor Hampton seeks permission to appeal the decision of Master Gidden dated 30 August 2017, sealed 1 September 2017. For reasons which will become apparent, I will refer to that decision as “Gidden 2”. By Gidden 2, the Master refused Taylor Hampton’s application dated 14 August 2017 for permission to amend their defence and counterclaim and response to the first claimant’s request for information. The appellants’ notice is dated 8 September 2017 and attaches 10 grounds of appeal.

Mark Lewis resists this appeal.

Both parties appear by counsel, and both counsel submitted skeletons in advance of the hearing, and have made oral submissions. I am grateful for the assistance provided by both legal teams.

The application for permission to appeal was referred by the Court office to an oral hearing during vacation. Thus it came before me on Wednesday, 20 September 2017. I had indicated in advance that I proposed dealing with the matter on a “rolled-up basis” with the substantive appeal to follow immediately if permission was granted. In fact, the hearing lasted the best part of the day and I reserved judgment overnight. There is some urgency in resolving this matter because the trial is listed for four days in a five day window starting on 23 October 2017.

My approach to this application is governed by CPR Part 52. I will only grant permission to appeal if I consider that the appeal would have a real prospect of success or there is some other compelling reason for the appeal to be heard. If I were to grant permission, I could only allow the appeal if I concluded that Gidden 2 was wrong (no one suggests that his decision was unjust by virtue of any procedural or other irregularity).

I have concluded that this appeal has no real prospect of success and there is no compelling reason for it to be heard. I wish to be addressed on two minor points which arise on the pleadings, but in all other ways and on all other grounds I refuse permission to appeal. These are my reasons.

I start with Gidden 2. Master Gidden noted that the essence of Taylor Hampton’s application was their wish to resile from an admission of mitigated losses. I agree with Master Gidden that that was the essence of the application before him, and of the application to appeal which comes before me.

Master Gidden refused that application for various reasons (I summarise): first, on grounds of prejudice; secondly, on grounds that the application was made very late and could have been made much earlier; third, that Taylor Hampton had put forward no explanation as to why it had originally put forward a quantum case which it now suggested contained errors; fourth, that Taylor Hampton was offering no assurance that even the current proposed draft represented the final and accurate statement of case; fifth, that Taylor Hampton’s case that the amendments would not prejudice Mark Lewis but would in fact benefit him was incorrect, and did not reflect well on Taylor Hampton; sixth, that this application was a collateral challenge to Gidden 1.

Before me both parties have agreed that the collateral challenge point is a “knock-out” to this appeal. For that reason, I will consider the issue of collateral challenge first in order. That involves looking at the evolution of Taylor Hampton’s case over time.

The claim was issued on 5 March 2015. By it, Mark Lewis claimed unpaid commissions and introduction fees, due, so he argued, under the first contract with Taylor Hampton, by which he was to provide his services as a solicitor via his service company, specialising in representing victims of phone hacking. Mark Lewis added a second claim under the second contract in February 2017.

On 19 August 2015, Taylor Hampton filed its defence and counterclaim. The claim was denied and a counterclaim was advanced, the centrepiece of which was Taylor Hampton’s allegation that Mark Lewis had failed to devote 25 hours per week of chargeable time to the carrying out of legal services of Taylor Hampton, as he was obliged to do under the relevant agreement. This is referred to as the “25 hour counterclaim”. The pleading asserted at paragraph 34(i)(a) that Taylor Hampton “has had to have work that ought to have been carried out by Mark Lewis carried out by others, whether existing or additional fee earners and whether at additional cost and/or lesser profit” and at paragraph 34(i)(b) that Taylor Hampton had lost the opportunity to take on additional work. The figure claimed was supported by a statement of account attached to the defence and counterclaim. The figure claimed was £768,889.46.

Mark Lewis requested further information from Taylor Hampton as to the identity of the fee earners who had done the work that Taylor Hampton said should have been done by Mr Lewis, to identify what additional fee earners were recruited to do that work and to identify the work done by its nature, the case it related to and its quantity in hours. This was request 6 of the RFI, seeking further information in relation to paragraph 34(i)(a) of the defence and counterclaim as it then stood. The response was given by Taylor Hampton in a document dated 10 February 2016 attested by a statement of truth (which is the “Response to RFI”). Five individual employees were named and clarification was given that the nature of the work done was primarily on phone hacking cases. As to the individual cases and quantity of hours, the Response to RFI referred to the attached spreadsheet which was labelled Table A. The Response to RFI is a formal document, which forms part of Taylor Hampton’s pleaded case. Together with the defence and counterclaim, I will refer to these as the “original version”.

Within the Response to RFI, Table A is important. It sets out Taylor Hampton’s calculations for the four years that Mark Lewis was working for them (from 5 September 2011 to, on their case, 29 April 2015). One of the bases of calculation is a line headed “fee earners recorded time” which sets out the hours charged by other fee earners in the aggregate amount of £744,000. Table A then sets out figures for the notional charge to clients if those hours had in fact been done by Mark Lewis, instead of the other fee earners at a lower rate, and arrives at a differential between the two resulting figures, which is claimed as Taylor Hampton’s loss. That figure is in fact £794,986.34, therefore slightly higher than the figure that appears in the defence and counterclaim.

In the original version, therefore, the 25 hour counterclaim was advanced on the basis of the differential between the fees actually billed (£744,000) and the notional fees which could have been billed if Mark Lewis had done that work at his higher charge out rate. I shall call this the “differential basis”. The calculation involved working out the gross notional claim and then giving credit for fees actually billed. Counsel variously referred to this as a concession or a form of mitigation of loss: I accept those descriptions.

The original trial date in 2016 was lost and trial was re-listed for October 2017. Taylor Hampton proposed various amendments to its pleaded case during the early part of 2017, culminating in an application dated 3 July 2017 for permission to amend, attaching a draft amended defence and counterclaim (this is the “July version”). By paragraphs 33 and 34 of the July version, Taylor Hampton sought to advance a much wider case on quantum than previously. The case built on the differential was abandoned. In its place, Taylor Hampton sought to argue that they had been deprived of the opportunity to obtain work in this specialist area and had therefore lost potential income and profit, all as a result of Mark Lewis’ alleged failure to attend to his contractual obligations. The claim was advanced essentially as a “loss of profit” or economic loss claim. The resulting figures extinguished the claim altogether and indeed left a balance said to be due and payable by Mark Lewis to Taylor Hampton.

The matter came before Master Gidden on 27 July 2017 and gave rise to an order dated 4 August 2017 (“Gidden 1”). Master Gidden dismissed Taylor Hampton’s application. He refused the proposed amendments to various parts of the pleading, including to paragraphs 33 and 34. He recorded in the order that he had only been addressed on some of the proposed amendments (and, by implication, those he was addressed on he had refused). He gave directions to allow Taylor Hampton to present a further amended pleading for Mark Lewis to consider, with any further disputes to come back before him. I have been shown a file note recording the judgment. Master Gidden concluded that it was not realistic for the case to be heard in October without considerable prejudice to Mark Lewis. He did not think that Taylor Hampton had made out a compelling case to justify the amendments and thought that the prejudice to Mark Lewis and the prospect of further delay weighed heavily against permitting the amendments.

There never has been, and is not now, any appeal against Gidden 1.

On 14 August 2017, Taylor Hampton purported to comply with the Master’s directions, and served a new version of the amended defence and counterclaim. Paragraph 34(i) was largely restored to its original state, except that some updating of the figures had been done and the claim now was put at £749,493.63 up to 29 April 2015, which was said to be the date of termination of the contracts. That paragraph referred to the statement of account annexed. The original statement of account was deleted in its entirety and in its place a fresh statement of account was appended. Within that, and under the heading “Total time completed by more junior fee earners”, a new line and set of figures appeared, setting out the number of hours that would have been “appropriately” undertaken by Mark Lewis as a credit against the gross 25 hour counterclaim: the figure credited was only £114,000. A further credit was given for the fact that Taylor Hampton would only recoup 80% of its fees billed to clients on average.

Those changes were explained in the accompanying draft Amended Response to RFI. Together with the draft amended defence and counterclaim, this is the “August version”. Question 6 of the draft amended Response to RFI was heavily amended. Amongst other things, it now asserted that only a small amount of the hours spent by other individuals would in fact have been appropriate for Mark Lewis to carry out because he was a grade A fee earner. Accordingly, only limited credit was now given within the counterclaim for work performed by others. Table A was deleted, and in its place Table C was inserted. The value of the counterclaim was now pleaded at “no less than £749,493.63”. It is not clear to me what value, in fact, Taylor Hampton did put on their counterclaim at this stage.

Mark Lewis objected to the August version. Taylor Hampton applied on 14 August 2017 for permission to amend. That application came before Master Gidden on 17 August 2017. He delivered his judgment in writing on 30 August 2017. This is Gidden 2, the decision now under appeal by Taylor Hampton.

Master Gidden was the author of the 4 August 2017 order (Gidden 1), and so he was perfectly positioned to determine whether Taylor Hampton’s application for permission for the August version was indeed a collateral challenge to his own earlier order, Gidden 1. He concluded that Taylor Hampton was simply trying to reargue the point in a manner that was inconsistent with his earlier order.

I agree. By Gidden 1 the Master had in terms refused the application to amend paragraph 34(i)(a) of the July version. One of the amendments proposed in the July version was the withdrawal of the concession made in the original version. The July version went wider than that and adopted a full-blown loss of profit basis of calculation, but the withdrawal of the concession was part and parcel of the proposed new approach, and the Master disallowed that new approach in its entirety. It was not therefore open to Taylor Hampton to seek, through different words and via a slightly different mechanism, to withdraw its concession, either in whole or in part. The matter had already been considered and rejected.

In fact, on analysis, the August version was pretty close to the rejected loss of profit basis in the July version: by it, Taylor Hampton was in effect saying that Mark Lewis would, but for his breach of contract, have charged work to clients at his full rate, but that work was not in fact done by anyone else; in other words, the argument was that Taylor Hampton had lost out on profits from work that it could have, but did not in fact, undertake through Mark Lewis or anyone else. This is a long way from the differential basis originally pleaded.

I conclude that the effect of Gidden 1 was to require Taylor Hampton to rest its counterclaim, if it wished to pursue it at all, on the differential basis, which incorporated the concession that £744,000 of fees were in fact generated by more junior staff. By the August version, Taylor Hampton sought to sidestep the differential basis, at least in large part, and substitute an entirely different basis of counterclaim. The August version was therefore a collateral attack on Gidden 1.

That being so, this appeal is bound to fail (subject to the two minor points I have mentioned), and I refuse permission to appeal on the main plank of Taylor Hampton’s case before me.

However, in case I am wrong on the collateral challenge point, I deal with the other aspects of Taylor Hampton’s case, albeit briefly. In summary, I detect no error in the Master’s approach. The Master was being asked to exercise his discretion in Taylor Hampton’s favour in relation to what was, ultimately, case management. I could only interfere with that exercise of discretion, or grant permission to appeal in this case, if I was persuaded that there was real substance in the proposition that the Master had erred in some material way.

Ground 1: I am not persuaded that the Master failed to have regard to the applicable legal test. The principles are well established and familiar. There is no lack of alignment between Gidden 2 and the leading authorities cited by Taylor Hampton, namely Quah v Goldman Sachs International [2015] EWHC 759 (Comm) and Various Claimants v Newsgroup International [2016] EWHC 961 (Chancery). McCloud v Mears Ltd [2014] EWHC 3140 (QB) is simply an illustration of the court exercising discretion in the claimant’s favour, in an extreme case.

Ground 2: the argument that no prejudice had at any stage been suggested collapses in the face of my conclusion that the August version was a collateral attack on Gidden 1. The issue of prejudice was squarely before the Master on 4 August 2017 (Gidden 1) and formed a key part of his conclusions on that occasion. There was no need to rehearse the point afresh in preparation for the 17 August 2017 hearing (Gidden 2). In any event, it was obvious that a late change of case, such as that proposed by the August version, would cause prejudice to Mark Lewis. That prejudice is real, and cannot be mitigated by suggesting that because it only took Taylor Hampton three days to analyse the documents in order to revise its case on the concession, so Mark Lewis would not have a substantial job on his hands in answering that revised case. Mark Lewis wishes to challenge the whole predicate of the revised case (i.e. that the junior solicitors only covered for a very modest part of what Mark Lewis otherwise would have done) and this will undoubtedly require further evidence and substantial additional time and cost. That is highly prejudicial to Mark Lewis at this late stage.

Ground 3: The Master was entitled to conclude that the application was being made very late in the day. It was. It is self evident that the amendments could have been made earlier than in fact they were. That was a proper point for the Master to take into account in exercising discretion.

Grounds 4 and 6 make similar points: There is no irrationality or difficulty in understanding Gidden 2. I will return later to the position as it now presents itself. The particular argument, that by refusing the amendments, Taylor Hampton would be forced to support a case which it no longer believed to be factually correct, was addressed squarely by Master Gidden and dismissed by him. He was right to conclude that in circumstances where a party has made a concession on the facts, that party is not automatically entitled to resile from that concession, if his belief in the underlying facts changes, regardless of when or why that occurs. The Court retains a discretion, to be exercised in accordance with the overriding objective, as to whether it will permit that to occur. In this case, that discretion has been exercised in Mark Lewis’ favour, for reasons given by the Master. The consequence may be that Taylor Hampton is now fixed with its concession, even if it believes that concession to have been mistaken on the facts. The statement of truth appended to the pleadings may need to be caveated to reflect that position. But that can be managed within the litigation process.

Further, by these grounds, Taylor Hampton advances an argument of surprisingly broad application in suggesting that, now that it has, as it says, realised that an error was made in the original pleading, it must be entitled to correct that error come what may, and even if it is detected late and causes prejudice to the opposing party. The Master was right to reject that argument. The consequence of Taylor Hampton being fixed with its earlier concession is that it will have to give credit in the quantification of its counterclaim for the amounts originally conceded, namely £744,000. There is no insurmountable difficulty in consequence. The position can be explained to the trial judge.

Ground 5: I have dealt with the collateral challenge point.

Grounds 7 and 8. In light of the further submissions from Counsel at the restored hearing, it appears that there is no dispute in relation to the matters raised under Grounds 7 and 8. I grant limited permission to appeal on those grounds and allow the appeal on those grounds only. The effect of this is to (i) allow Taylor Hampton to present its counterclaim to 29 April 2015, the date on which it argues the agreements came to an end. Any concessions to the counterclaim will likewise have to be extended. It also (ii) permits Taylor Hampton to incorporate other concessions it has already made in Mark Lewis’ favour in its case for trial (for example, the 20% discount in recovery of fees billed). These were modest issues which took up no time at the hearing, but I take the opportunity now to tidy them up.

Ground 9: the Master was correct to reject the proposition that Taylor Hampton should, at this stage, be entitled to withdraw its concession simply because (it said) that its concession had been made by mistake and in error.

Taylor Hampton has purported to comply with the further directions in Gidden 2 by producing a further amended defence and counterclaim with written notice (the “September version”). I suspect that the September version, including the statement of account annexed to it, may require some further analysis in light of this judgment, to check that it is in keeping with my judgment and reflects the position Taylor Hampton will take at trial.

I will hear from both counsel as to whether further directions to that end are required.

I grant limited permission to appeal under grounds 7 and 8, but otherwise I refuse permission to appeal.