Problem: A client instructed a city law firm to defend his interests in a criminal defence dispute with his ex-partner. However, after the trial of the criminal claim (which he lost), the law firm started bankruptcy proceedings against him in relation to the alleged outstanding fees totalling almost £115,000; the hearing was listed to take place in March 2024.
Outcome: Our lawyers were instructed 2 weeks before the hearing of the bankruptcy petition to oppose the bankruptcy on the basis it was disputed on genuine and substantial grounds. Our expert insolvency and costs lawyers urgently prepared detailed submissions, and persuaded the city law firm to withdraw their bankruptcy petition and pay our client’s legal costs.
How long did it take? Less than 2 weeks from instruction.
Our expert debt recovery and insolvency lawyers were instructed by a client who had for over a year defended his interests in a bankruptcy dispute with a city law firm (and their own law firm who was acting for them) in a claim for unpaid legal fees.
The debt was disputed throughout by the client however despite this the city law firm was unmoved and continued to pursue a bankruptcy order aggressively against the client; the hearing of the petition was listed to be heard in March 2024.
In particular the dispute was based on the fact that, amongst other things, that (i) there was no contractual entitlement to the fees and they were not authorised by the client; (ii) the charges were not reasonable and were wholly excessive; (iii) it is well reported that legal fees cannot form the basis of a liquidated debt upon which a bankruptcy petition could be based on (see further below; (iv) there was a strong basis for a professional negligence claim against the law firm; and (v) the law firm claimed costs for barrister fees however those charges were not included in the statute bills (and were therefore precluded from recovering those barrister fees from the client).
Outstanding legal fees are not a liquidated debt and a petition founded on an unliquidated sum will be dismissed as an abuse of process as was said by Evans LJ in Turner v Paloma, [2000] WLR 37:
“If a solicitor wishes to be paid and is not in funds he will need to sue and prove that his charges were either expressly agreed or are reasonable charges”. The observations in that case, including that “the solicitor’s claim is for a reasonable sum, whether by statute or at common law, not for a liquidated sum“.
For more information on the relationship between Part 7 (debt recovery proceedings instigated by your former lawyers) and your right to assessment under the Solicitors Act 1974 (Part 8 proceedings for detailed assessment under CPR 47) – please see our dedicated page on Solicitor’s Costs and Detailed Assessment.
Our lawyers were instructed and developed a strategy at the very outset to defend the bankruptcy petition. Within 2 weeks of instruction, our lawyers were able to agree to the dismissal of the bankruptcy petition and vacation of the hearing. Our lawyers were also able to recover the client’s legal costs.
If you are frustrated with a legal dispute, please do not hesitate to contact us for a Free Consultation today.
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