The Legal Services Commission has won a test case against solicitors to recover overpayments. The High Court decision is likely to open the way to the commission recouping millions of pounds in payments made on account which were never properly accounted for.

The solicitors concerned had contracts with the LSC and had received payments on account, but had not submitted final bills and claims for costs. The LSC made a nil assessment and sought to recoup advance payments totalling £260,000.

The High Court case was brought against two individual solicitors, Sham Loomba and Ngozi Blessing Ulasi, former partners of Howell-Jones & Partners of Surrey and West London. The LSC claimed £205,884 from Loomba, £29,900 from Ulasi and £25,000 from the former partners of Howell-Jones.

Giving judgment last week, Mr Justice Cranston rejected the defendants’ arguments that the LSC did not have the power to carry out nil assessments and that, in doing so, the LSC had acted unlawfully or had breached their human rights. He ruled: ‘The commission in my judgment is entitled to recoup the payments on account in the manner it has.’

Cranston also rejected the argument that the LSC was precluded from proceeding against the solicitors by virtue of a deed of settlement entered into between the LSC, the Law Society and the Ministry of Justice.

Peter Susman QC from Henderson Chambers in London, who acted for all the defendants, said the LSC had not made enquiries in a timely manner after the payments on account had been made. The payments made dated back 10 and, in some cases, 25 years, over which time two of the solicitors’ practices had ceased and, in the case of Howell-Jones, the solicitors concerned had moved on.

He said that many of the relevant files were either fragmentary or no longer survived, and that for a legal aid practice to store files beyond the six years recommended by the Law Society was an unaffordable luxury.

An LSC spokesman said: ‘We are very pleased that the court has found in our favour, as this is an important principle which affects the legal aid fund.’ All the defendants declined to comment.

A Law Society spokesman said: ‘We had always acknowledged that the LSC had the power to make nil assessments and this judgment confirms this.’

The High Court decision will affect a number of cases brought against solicitors across the country. In 2010/11 the LSC’s annual accounts were qualified because of overpayments of more than £50m, including £29.5m paid on account. The Society said it would issue new guidance on record-keeping in legal aid cases.