Several former clients of a now-defunct personal injury firm complained to the SRA after thousands of them were pursued by the firm for wasted costs, it has emerged.
According to an administrator’s progress report for Southport firm JC & A Solicitors, the practice was in dispute with a number of ex-clients following a review of discontinued cases. Demands for repayment only stopped because of bad publicity.
The firm, which specialised in RTA claims, was placed in administration in December. Its affairs are being handled by the Manchester office of insolvency firm Leonard Curtis.
As part of the winding down of the firm, the report states administrators entered into an agreement with exit specialists Recovery First to transfer all live files from 1 October last year. The caseload was then split between six panel firms which purchased the work in progress.
The report also gives details of a seven-month campaign prior to administration, where JC & A made 3,000 requests to ex-clients for wasted costs payments, with Recovery First acting as agent. The requests included a 25% discount for early payment.
It had been estimated at the end of 2017 that more than 10,000 matters were discontinued prior to completion due to actions by the client – for example, not attending medical appointments or not returning paperwork. Under the terms of the initial engagement letter entered into between the firm and the client, the client remained liable for costs and disbursements incurred.
Following the requests for payments, 800 clients got in touch to pay up, while others agreed payment plans over a 12-month period. It was estimated at the time that £1.4m could be realised from the initial 3,000 requests.
There is no suggestion JC & A or Recovery First acted improperly, but a number of former clients did make complaints to the SRA. While the firm insisted payment requests were made under the terms of the agreements, the requests ceased in September ‘given the number of complaints received and the bad publicity being incurred’.
Before administration, the firm received £775,000 from these clients, and the requests recommenced after administrators were appointed, with Recovery First again instructed.
In April, the administrators entered into an asset purchase agreement with another Southport-based company called Vertill Limited. Payments recovered are split between the administration and Vertill as part of the agreement. To date more than £1.3m has been recovered from former JC & A clients, with further realisations ongoing.
At one point JC & A employed 150 staff, but by December this was reduced to just seven following redundancies over 18 months. Outstanding pension contributions of around £2.5m have been paid in full.
Based on current information, it is expected unsecured creditors will receive a dividend, although the amount they will recover has not been specified.