Friday 13th brings bad news for CMCs

The Law Society Gazette has today revealed (following a FoI Request) that in the twelve months to March 2012, 734 CMC businesses were 'cancelled' by the MoJ.

These closures were "partly prompted by 9,570 complaints from the public".

This latest bit of bad news for the CMC sector comes soon after the decision in Walter Lilly & Company Ltd v Mackay and another [2012] EWHC 649 (TCC), in which Mr Justice Akenhead held that the documents produced by a firm of "well-known claims consultants" did not benefit from legal professional or legal advice privilege.  This will probably apply to CMCs too.

In the case, the defendants retained claims consultants for "contractual and adjudication advice".  The consultants quoted various rates for types of services including "Advocate/Director/Legally Qualified Person [and] Adjudication Manager/Delay Analyst/Expert Witness".  The retainer also made provision for them to appoint solicitors to act on behalf of the client.

The primary argument revolved around whether the claims consultants had been engaged as solicitors or barristers.  It was not suggested that the consultancy firm was qualified or certified.  However, in a witness statement resisting the application for disclosure, the defendants explained that their principal contacts were "understood to be qualified, practising, barristers or solicitors".  Further: "[t]he questions that we posed ... when we took them on were all of a legal nature … the advice I received was both legal in nature and from people who held themselves out to be Lawyers."

It was argued that a client who (in good faith) instructs what he mistakenly believes to be a qualified solicitor or barrister ought to receive privilege protection over any advice he may receive.  By analogy, their customers often assume CMCs are 'lawyers' but this is often not the case.

Akenhead J made significant reference to R (Prudential plc and or another) v Special Commissioner of Income Tax [2010] EWCA Civ 1094 – the Court of Appeal decision which confirmed that legal advice privilege did not attach to tax law advice given by accountants.

The Judge noted that the Prudential judgment identified the case of Calley v Richards (1854) 19 Beaver 401 as being exceptional.  That case saw privilege attach to the advice of a solicitor who had recently ceased practising.  Lord Justice Lloyd in Prudential made clear that function could not be the applicable test, because a recently retired solicitor "might be regarded as every bit as qualified to give legal advice as he had been before retirement", and in that case had the client known the solicitor had ceased practising, privilege would not have been available.

Akenhead J held that the defendants could not benefit from the exception provided by Calley because, unlike the client in that case, they had "no good reason to believe that they were employing solicitors or barristers".  Further, he held that the fact that the defendants honestly understood that they were dealing with qualified and practising barristers or solicitors was "immaterial because their employer was not retained by the Defendants to provide the services of barristers or solicitors."

Whilst the case suggests CMCs and their clients will not benefit from legal advice privilege, it did not deal with litigation privilege.  Broadly, this is only available in confidential communications between a lawyer (in a professional capacity) and his client (or between either the lawyer or the client, and a third party) for the dominant purpose of litigation which is at least reasonably contemplated.  Akenhead J concluded that whether litigation privilege should attach to the advice of firms such as CMCs was a question for another day, but one that might turn on policy considerations.

So before it is assumed communications between CMCs and their clients do not benefit from privilege at all, we must await judicial comment as to whether they may, in any event, attract litigation privilege.