The Senior Courts Costs Office has rejected Slater & Gordon’s (S&G) bid to stay test cases brought against it by Checkmylegalfees.com (CMLF) after it attacked the firm’s business model.
In Edwards & Ors v Slater & Gordon UK Ltd  EWHC B19 (Costs), Master Rowley (pictured) said: “It is the defendant’s case that Clear Legal [which trades as CMLF] are acting champertously and/or are providing insurance unlawfully to at least some of the claimants; that they do not have the wherewithal to meet adverse orders for costs and as such is a company made of straw as far as the indemnity it has provided to some claimants is concerned and has left those who are not indemnified unaware of their potential liabilities.”
Clear Legal denied the allegations, which the judge described as a “full frontal attack upon the Clear Legal business model as it applies to the 10 cases that have been grouped together and indeed in respect of other proceedings brought by Clear Legal against this defendant”.
There are 144 Solicitors Act challenges in all in the group, which challenges the process S&G used to sign them up and whether the clients gave informed consent to their retainers.
In a separate group, Master Rowley ruled in June that the High Court, rather than a Solicitors Act assessment, was the appropriate venue for CMLF to challenge the composition of the after-the-event (ATE) insurance premium charged by S&G. It involves 10 test cases and a total of 140 cases.
In the latest hearing, S&G applied for a stay of the Edwards case, arguing that the indemnity Clear Legal offered to the claimants essentially made the arrangements a contract of insurance, rather than of legal services.
The judge said he was not surprised that Clear Legal was unable to obtain ATE insurance, given the limited level of damages in most cases and the likelihood that claims would be “stoutly defended”.
This made offering an indemnity “logical” and he found it a “peripheral element of the contract of legal services”, rather than forming a contract of insurance.
Master Rowley rejected the argument that the retainer was otherwise champertous. There was nothing which “comes close to the concept of ‘trafficking in litigation’”, he said; rather, Clear Legal was offering a CFA Lite “in terms which solicitors up and down the country are prepared to offer their clients”.
There was no evidence to support the contention that the claimants were merely “passengers” nor “any substantiated criticism (in my judgment) of the Clear Legal business model”.
In the alternative, S&G sought security for costs from Clear Legal, rather than its clients. Master Rowley said: “I am not persuaded that the defendant has managed to proceed through the gateway in rule 25.14 in establishing that Clear Legal have contributed to the claimant’s costs in order to obtain a share of sums recovered by the claimants.
“But even if that is just about established, it would not be just, in my judgment, to order Clear Legal to make a payment as security for the defendant’s costs…
“I do not consider that Clear Legal can be described as having effectively become, in all but name, a real party to the litigation motivated by its commercial interest.”
S&G had also not convinced him that Clear Legal’s balance sheet “should be a matter of concern” for the repayment of its costs if the indemnity were triggered.
However, Master Rowley did grant Clear Legal’s application for disclosure of the audio recordings S&G has of all the sign-up calls made
It alleges that the explanation when clients were signed up by their then solicitor was “lightning fast” and lacked the information to be expected of a solicitor by their client.
In a statement, CMLF founder Mark Carlisle said: “We are pleased with the court’s decision on these applications, which we believe were a transparent attempt to stifle our clients’ claims and avoid scrutiny – in particular proper scrutiny of what can only be described as a ‘lightning fast’ sign-up process, which we know has been used in at least one case, and which many former S&G clients tell us was remarkably similar to their own experience.
“Whether the sign-up processes in these cases are found in due course to be sufficient to amount to ‘informed consent’ remains to be seen but our clients will be pleased that they will, we hope, now be able to proceed to deal with the substantive issues, and to do so armed with the disclosure that any other litigant is entitled to.”
An S&G spokeswoman said the firm was disappointed by the decision and would consider whether to appeal.
“We remain deeply concerned that, far from protecting ex-clients, the arrangements put in place by Clear Legal Limited expose them to the risk of personal liability for significant adverse costs.
“The information provided to the court by Clear Legal has done nothing to assuage these concerns.
“Whilst this is a discrete application which does not bring into question our funding arrangements with our former clients, we consider there remain important questions which must be answered by Clear Legal Limited. We will continue to act to protect former clients at every opportunity.”
Robin Dunne (instructed by Clear Legal) for the claimants. Robert Marven QC (instructed by Slater & Gordon UK Limited) for the defendant.