Former clients who accuse their City lawyers of being ‘generally aimless’ in the conduct of a dispute have been given the green light to continue their case.

Tonstate Group Limited and other claimants allege that Rosling King did not give any proper strategic advice, did not offer any costs advice and did not carry out any regular reviews of escalating costs during their instruction on a long-running litigation. The firm contests the allegations. 

The firm was instructed from 2017 to 2019 to advise on a dispute over allegations that money had been extracted from companies within the Tonstate group through the creation of false documents to record non-existent transactions. The group sought the return of the money and recission of transfers of shares.

A number of related rulings have been handed down since, including one by Mr Justice Zacaroli in 2019 known as the ‘Duomatic judgement’ where one of the parties had sought to rely on a defence that shareholders had given informal unanimous consent. Zacaroli struck out this defence, saying that the principle could not apply to conduct which a company could not lawfully carry out itself.

The claimants issued proceedings in 2020 for fees and disbursements of £5.5m charged over two years by Rosling King. The firm served a detailed breakdown of those charges in 2022 and the claimants then contended that it had incurred costs unreasonably. It was submitted that the firm had failed to properly advise the claimants so that enormous costs were incurred without the dispute advancing very far. The claimants further alleged that Rosling King should have advised them to apply to strike out the Duomatic defence earlier.

They further alleged there was no evidence of any periodic review of costs as had been promised, nor of any focus on proportionality. The approach to the litigation was the ‘maximum’ in terms of aggressiveness and cost, whereas with different advice the claimants would likely have opted for a ‘moderate’ approach.

Rosling King submitted before a hearing last September that any negligence claim was bound to fail. The firm pleaded that the claimants’ analysis was simplistic and wrong. It argued that the aimlessness claim was pleaded in a ‘cursory and wholly unparticularised way’, with no indication what strategic option should have been pursued.

The claimants, represented by London firm Rechtschaffen Law, applied to strike out the elements of the Rosling King defence which argued Zacaroli had been wrong in his judgment. The firm itself applied to strike out the Duomatic point claim and to strike out the aimlessness claim as being inadequately pleaded.

The claimants were successful on all applications.

In Tonstate Group Ltd v Rosling King LLP  Mr Justice Leech ruled that it was not valid to criticise the claimants for failing to suggest what advice should have been provided.

‘The aimlessness claim is directed at the manner in which Rosling King gave advice, the frequency with which they did so and their failure to identify the relevant costs risks involved,’ he said.

On the Duomatic point, the judge added: ‘I am not satisfied that the claimants have no real prospect of success at trial on this issue and, in my judgment, it can only be resolved with the benefit of full disclosure, witness statements and cross-examination.’

He adjourned all questions of costs and permission to appeal for a hearing listed after 1 October.

A spokesperson for Rosling King said: 'We emphatically reject the allegations made about our advice and conduct of this very lengthy and complicated litigation. Our firm takes pride in its commitment to high quality service and there have been many claims and counter-claims made in this protracted dispute. We are currently assessing the latest interim decision, which  permitted the claimants to continue on the condition that they amend their poorly drafted pleading and not be struck out; those amendments are still to be approved by the court.  We stand very firm in our belief that we advised and acted in our clients’ best interests at all times.'

 

This article is now closed for comment.