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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Pine v Law Society [2002] EWCA Civ 175 (20th February, 2002)
URL: http://www.bailii.org/ew/cases/EWCA/Civ/2002/175.html
Cite as: [2002] 1 WLR 2189, [2002] 2 All ER 658, [2002] EWCA Civ 175, [2002] WLR 2189
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Pine v Law Society [2002] EWCA Civ 175 (20th February, 2002)
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIS HONOUR JUDGE MADDOCKS
SITTING AS A DEPUTY JUDGE OF THE CHANCERY DIVISION
Strand, London, WC2A 2LL | ||
B e f o r e :
LORD JUSTICE ROBERT WALKER
and
LORD JUSTICE RIX
____________________
| PINE | Claimant/Respondent | |
| - and - | ||
| THE LAW SOCIETY | Defendant/Applicant |
____________________
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Mr. Timothy Dutton QC (instructed by Messrs Wright Son & Pepper) for the Defendant/Applicant
____________________
AS APPROVED BY THE COURT
Crown Copyright ©
- The claimant (“Mr Pine”) was admitted a solicitor in 1985. In September 1994 he set up in practice as a sole practitioner in the name of Pine & Co. On 24th March 1999 the defendant, the Law Society, resolved to intervene in the practice of Mr Pine pursuant to the powers conferred on them by s.35 of and Schedule 1 to Solicitors Act 1974. They did so on the ground specified in Schedule I para 1(1)(a), namely suspected dishonesty. In that connection they resolved to nominate or appoint a solicitor to hold the monies or take possession of the documents to which paragraphs 6 and 9 thereof applied.
- On the same day The Law Society nominated or appointed Mr Heginbotham, a partner in the firm of Davis Blank Furniss, to be that solicitor and otherwise to act as the agent of the Law Society in the intervention. In due course Davis Blank Furniss submitted five bills to the Law Society for their “professional charges for acting on your behalf” for the five months from 25th March to 25th August 1999. The bills specify the time spent by Mr Heginbotham and other partners or employees of Davis Blank Furniss and their respective charging rates. On the reverse is to be found the information required by Reg.6 Solicitors (Non-Contentious Business) etc Order 1994. The sums claimed in the bills, totalling £16,319-08, were paid we do not know when, by the Law Society who, later in the same year, sought reimbursement from Mr Pine under Schedule 1 Part II para 13 of the Solicitors Act 1974.
- Paragraph 13 provides
- On 8th February 2000 Mr Pine was struck off. On 28th February 2000 the Law Society served a statutory demand on Mr Pine seeking payment of £16,319-08. Mr Pine’s attempt to have the statutory demand set aside was unsuccessful before District Judge Britlin, on appeal before HH Judge Maddocks and, finally, on 14th November 2000, on an application for permission to appeal before Chadwick LJ.
- In the meantime, on 26th September 2000, Mr Pine instituted proceedings against the Law Society seeking an order under s.71 Solicitors Act 1974 for a detailed assessment of the bills submitted to the Law Society by Davis Blank Furniss. S.71 provides that
- On 6th October 2001 The Law Society applied for an order that the claim be struck out under CPR Rule 3.4 or summarily dismissed under CPR Rule 24.5(1). That application came before HH Judge Maddocks, sitting as a deputy High Court judge of the Chancery Division. He dismissed it but gave the Law Society permission to appeal. This is the hearing of that appeal.
- The issue, whether the provisions of Paragraph 13 of Schedule I Part II exclude or override the provisions of s.71 came before Mummery J, as he then was, in The Law Society v McKanan-Jones 14th July 1992 (unreported). His conclusion was
- In his judgment in this case HH Judge Maddocks took a different view. He analysed the problem into two questions
- With regard to the first question Judge Maddocks concluded that
- With regard to the second Judge Maddocks considered that
- The Law Society contends that the judge was wrong to conclude that any of the bills in question came within the description of “a solicitor’s bill” within the meaning of those words in s.70(1), or, if they did, that the rights conferred by s.71 were exercisable in respect of a liability arising under Schedule 1 para 13. By his respondent’s notice Mr Pine contends that the result for which the Law Society contends would constitute a breach of Article 6(1) European Convention on Human Rights or Article 1 of the First Protocol thereto and, in either case, also of Article 14 of the Convention. Consequently, as he submits, the court is obliged to read and give effect to paragraph 13 of the First Schedule to the Solicitors Act 1974 “so far as it is possible to do so” in a sense contrary to that for which the Law Society contends. S.3 Human Rights Act 1998. Thus there are three issues for our determination
- The Law Society is entitled to intervene in a solicitor’s practice in a wide variety of circumstances ranging from suspected dishonesty to incapacity by illness or accident. The purpose of such intervention is the protection of the public and the limitation, by prompt preventive action, of claims on the Compensation Fund regulated in accordance with s.36 Solicitors Act 1974. We were told that in any given year there are likely to be about 100 interventions at an average cost of £30,000, of which a partial recovery from the solicitor concerned is made in about 30% of the interventions. The costs of intervention on the grounds of suspected dishonesty, in so far as not recovered from the solicitor, are payable out of the Compensation Fund. Solicitors Act 1974 Schedule 2 para 7(e). Costs of an intervention on other grounds, so far as not recovered, are an expense falling on the Law Society’s general funds.
- In the event of an intervention Schedule 1 part II Solicitors Act 1974 confers extensive powers on the Law Society or a person nominated by the Society in relation to moneys held by or due to the solicitor (paras 5 and 6), documents in the possession of the solicitor (para 9), the redirection of mail addressed to the solicitor (para 10), the appointment of a new trustee in place of the solicitor (para 11) and all other matters reasonably necessary for exercising those powers (para 16). The schedule authorises applications to the court by the solicitor (paras 6(4) and 9(8)) and the Law Society (paras 5(1), 9(10), 10(1) and 11) for the specific relief which those paragraphs authorise, namely the withdrawal of an unjustified intervention, an order to deliver documents, the approval of a payment, authority to dispose of or destroy documents and the appointment of a new trustee.
- By s.87(1) Solicitors Act 1974, subject to the context, ““costs” includes fees, charges, disbursements, expenses and remuneration”. S.69 contains restrictions on the ability of a solicitor to recover costs due to him. First, the bill of such costs must satisfy the conditions imposed by s.69(2) as to verification and delivery of the bill. Second, s.69(1) precludes any action to recover costs due to a solicitor before the expiration of one month from delivery of such a bill save in cases where there is reason to believe that the client is about to abscond. That is the context in which to consider the meaning of the words “a solicitor’s bill” in s.70(1).
- The relevant provisions are not new; they may be traced back to s.37 Solicitors Act 1843. There are a number of decided cases on what constitutes a solicitor’s bill for the purposes of the earlier enactments. The first is Allen v Aldridge (1843) 5 Beav. 401. That case concerned the recovery of costs by a solicitor for acting as steward of a manor. The claim to tax such costs failed. Lord Langdale MR said
- The later cases to which we were referred exemplify the application of that principle. In Re Osborne (1858) 25 Beav. 353 solicitors sought to recover costs due to them for having acted as election agents. One bill specified the work done as canvassing, looking up voters and conveying them to the polling booth. The other bill related to work in their office and in committee rooms. Sir John Romilly MR considered the character in which the solicitors had been employed. He concluded that they were employed as solicitors because their
- For the Law Society it is submitted that Mr Heginbotham was employed by the Law Society to act as its agent in the exercise of the powers conferred by Solicitors Act 1974 Schedule 1 Part II, but was not retained to act as its solicitor either to give advice or to conduct proceedings. The Law Society accepts that it normally appoints a solicitor as its intervention agent because of his knowledge and skill as such. It contends that there is no obligation to appoint a solicitor and that, in many cases, an accountant or office manager would do.
- Counsel for Mr Pine accepts that the costs must be incurred in the capacity of a solicitor but submits that the test formulated by Lord Langdale MR in Allen v Aldridge (1843) 5 Beav. 401 has been satisfied. For my part I prefer the submissions of counsel for Mr Pine.
- The test as formulated by Lord Langdale, which both parties accept to be correct, requires the court to consider (a) whether the business was connected with the profession of a solicitor, (b) whether the solicitor was employed because he was a solicitor and (c) whether the solicitor would not have been appointed if he had not been a solicitor or the relation of solicitor and client had not subsisted between him and his employer. In my view the answers to all three questions is in the affirmative.
- The business which Mr Heginbotham and his firm undertook was the winding up of the solicitor’s practice of Mr Pine by the orderly collection and distribution of his files and the proper collection, application and distribution of Mr Pine’s and his clients’ moneys. It is true that Mr Heginbotham was not retained for the purpose of advising the Law Society in relation to a specific legal problem or conducting any particular claim or defence on their behalf. But his knowledge and skills as a solicitor were used for the benefit of the Law Society in the intervention in Mr Pine’s practice. The nature of the business connected with the profession of solicitor will change with time. It is not, in my view, correct to regard the profession of a solicitor as confined to advice on specific legal problems or the prosecution or defence of particular claims. It can hardly be doubted that acting as agent for the Law Society under Schedule 1 Solicitors Act 1974 is business connected with the profession of solicitor for the purpose of the test formulated by Lord Langdale.
- It is not suggested that the Law Society is obliged to appoint a solicitor. There may well be cases in which an accountant or office manager would be more appropriate. But that consideration highlights the importance of the decision of the Law Society to appoint a solicitor in this case. The form of resolution shows that the decision was to appoint a solicitor. The choice of Mr Heginbotham to be that solicitor came later. Thus it is clear that Mr Heginbotham was appointed because he was a solicitor and that he would not have been appointed if he had not been.
- The bills submitted by Davis Blank Furniss were in the form appropriate to a bill for professional services as a solicitor. They were so described and bore the information required by Reg.6 Solicitors (Non-Contentious Business) etc Order 1994. I do not suggest that this is enough but it is consistent with all the other indications.
- For all these reasons I conclude that each of the five bills submitted by Davis Blank Furniss to the Law Society in connection with the intervention in Mr Pine’s practice is “a solicitor’s bill” for the purposes of ss 69 to 71 Solicitors Act 1974.
- Given my conclusion on the first issue the five bills fall within s.70. Accordingly it would have been open to the Law Society to apply for an order that they be taxed in accordance with the conditions prescribed by that section. It is contended on their behalf that if they choose not to and provided that they act in good faith and not irrationally then they are entitled, without more, to recover the costs of the intervention from the solicitor in whose practice they intervened. In other words the terms of paragraph 13 of Schedule 1 exclude from the ambit of s.71 solicitors bills for services rendered in an intervention.
- I have quoted the relevant provisions in paragraphs 3 and 5. Counsel for the Law Society emphasises that para 13 both creates a statutory debt and provides for the mechanism by which it is recoverable by the creditor. He stresses four aspects of that paragraph. First, the costs to which paragraph 13 applies are those incurred by the Society for the purposes of the Schedule not those specified in the bills. Second, the liability arises under paragraph 13 because the costs have been so incurred by the Society, not because of any retainer between the Society and Mr Heginbotham. Third, paragraph 13 imposes a statutory duty to pay in contrast to the contractual duty to which s.71 would apply. Fourth, the liability is recoverable as a debt without further qualification. It is suggested that it would be inconsistent with the opening words of paragraph 13, providing expressly for a potential exception, to imply another one in respect of rights arising under s.71. Counsel contended that the judge was wrong when, in the passage I have quoted in paragraph 10 above, he failed to recognise that paragraph 13 also provided for a mechanism by which the liability might be enforced.
- Counsel for Mr Pine challenged these propositions. He contended that all that paragraph did was to create a liability by the mechanism of a debt. The potential exceptions for which the opening words of paragraph 13 provide are necessary because the circumstances to which they apply will arise under the terms of the Schedule. He submitted that no such potential exception is necessary in relation to s.71 which is applicable to all solicitors’ bills. In other words, as the latter right does not arise under the Schedule so no provision in the schedule is needed. He submitted that the public law rights were inadequate protection because the Law Society had neither the information nor the incentive to challenge the amount of the bills.
- I prefer the submissions of counsel for Mr Pine. S.71 is of general application. It recognises that the person chargeable with the bill may not be ultimately liable to pay the costs thereby claimed. Its evident purpose is to confer on one with a secondary liability for those costs a right comparable to that possessed by the person primarily liable. Given that, for the reasons I have already explained, the Law Society is entitled to have the bills taxed under s.70 Parliament is unlikely to have intended that there should be degrees of secondary liability, some of which are excluded from the ambit of s.71.
- It is true that Schedule 1 provides a code for an intervention. Provision is therein made for the costs of applications to the court sanctioned by that code. To preserve the primacy of the court’s orders some such provision as that contained in the opening words of paragraph 13 is needed. But no such provision is needed in respect of a general right created outside that code. In the case of such a right clear words or an obvious implication are needed to exclude, not create, it.
- I do not consider that any of the other factors relied on by counsel for the Law Society, either alone or together, are sufficient to exclude that right. First, if the purpose of the provision is to create a secondary liability it is natural to do so by reference to the primary liability. This is what the reference to “costs incurred by the Society” achieves by identifying the subject matter of the provision. There is no reason to think that the primary liability was so identified for the purpose of excluding a defence otherwise available to the person secondarily liable.
- Second the requirement in paragraph 13 that the costs so incurred “shall be paid by the solicitor” creates the secondary liability. But if the paragraph had stopped there it would have left open the question of whether the obligation was owed to the Society alone or to the Society or, in the alternative, the person to whom the Society had incurred the liability. In those circumstances there is good reason to conclude with the stipulation that the costs incurred are recoverable by the Society. I see no reason why this requirement should be regarded as excluding the right conferred by s.71.
- Finally there is the reference to the costs being recoverable “as a debt owing to the Society”. This specifies the legal process for recovery and may be contrasted with other statutory formulae of “recoverable as damages” or “recoverable as a penalty”. But the fact that money is recoverable as a debt is not inconsistent with a reduction in the amount of the claim. Thus a claim for remuneration for services rendered or goods supplied at the defendant’s request is a claim in debt notwithstanding that the defendant is entitled to defend it on the ground that the sum claimed is excessive. Chitty on Contracts 28th Ed. Para 30-005. It is for this reason that I respectfully disagree with the view of Mummery J in The Law Society v McKanan-Jones 14th July 1992 (unreported) which I have quoted in paragraph 10 above.
- I should also refer to the practical considerations urged on us by counsel for the Law Society. As he pointed out the powers of intervention are conferred on and exercised by the Law Society in the public interest. The Law Society is amenable to the normal public law remedies if, having intervened into a solicitor's practice, it seeks to recover costs from the solicitor in bad faith, irrationally or otherwise than in exercise of those powers. Counsel pointed out that the Law Society is also concerned to keep costs down. He submitted that the Law Society should not, in addition, be vexed by applications for taxation under s.71 made by solicitors who seek to postpone liability or impede the Law Society in the prompt exercise of its powers and cannot pay the costs when they lose.
- I do not think that these considerations, which are of real and justified concern to the Law Society, should be allowed to affect the question of construction. Unless the taxation is one to which the solicitor is entitled as of right, because the circumstances fall within s.70(1) as applied by s.71, the court will have a discretion whether and if so on what terms to order the taxation of the bill, s.70(2). In exercising that discretion the court will, no doubt, consider whether the applicant has made out a prima facie case for a reduction in the amount of the bill. Even if he has an order for taxation may be made on terms that all or a substantial part of the sum claimed is paid to the Law Society or into court. Similarly in cases falling within s.70(3), but not s.70(2), the court is entitled to impose a condition requiring the solicitor into whose practice the Law Society has intervened to give security for the costs of the taxation. In my view these safeguards are sufficient to protect the Law Society and the courts from unmeritorious applications under s.71.
- For all these reasons I conclude that the provisions of paragraph 13 do not override or exclude the right conferred by s.71. In those circumstances I would dismiss this appeal. I should add that it was agreed between counsel for the parties that the questions whether the application of Mr Pine for an order for taxation of costs is precluded by s.70(4) and whether the discretion conferred by s.70(2) and (3), in each case as imported into s.71, should be exercised in favour of Mr Pine should not be determined at this stage. Accordingly those issues will arise on the further hearing of Mr Pine’s application.
- In the light of my conclusions the short answer to this question is that s.3 Human Rights Act 1998 does not apply because Mr Pine is, in my view, entitled to the rights for which he contends. It follows that there could have been no breach of Articles 6(1) or 14 of the Convention or of Article 1 of the First Protocol. I see no useful purpose to be served by addressing these questions on the converse assumption.
- For all these reasons I would dismiss this appeal.
- I agree.
- I also agree.
The Vice-Chancellor :
“Subject to any order for the payment of costs that may be made on an application to the Court under this Schedule any costs incurred by the Society for the purposes of this Schedule, including, without prejudice to the generality of this paragraph, the costs of any person exercising powers under this Part of this Schedule on behalf of the Society, shall be paid by the solicitor or his personal representatives and shall be recoverable from him or them as a debt owing to the Society.”
“Where a person other than the party chargeable with the bill for the purposes of s.70 has paid, or is or was liable to pay, a bill either to the solicitor or to the party chargeable with the bill, that person or his executors, administrators or assignees may apply to the High Court for an order for the taxation of the bill as if he were the party chargeable with it, and the court may make the same order (if any) as it might have made if the application had been made by the party chargeable with the bill.”
S.70(1) provides that
“Where before the expiration of one month from the delivery of a solicitor’s bill an application is made by the party chargeable with the bill, the High Court shall, without requiring any sum to be paid into court, order that the bill be taxed and that no action be commenced on the bill until the taxation is completed.”
By sub-section (2) if the application is made after the expiration of the month it is provided that the High Court may, in its discretion, order a taxation. In that event no action may be commenced on the bill and any action already commenced is stayed until the taxation is completed but subject to the limits and on the conditions prescribed by sub-sections (3) and (4).
“The Solicitors Act contains provisions for taxation on application by a party chargeable, or solicitor, under s.70 and taxation on application of third parties under s.71. Both provisions deal with the taxation of a solicitor’s bill. The wording of paragraph 13 of Schedule 1 makes no reference to a bill of a solicitor; it simply refers to the costs of any person exercising powers under the section. The Law Society is a person who has incurred those costs and the paragraph provides in clear terms that those costs shall be paid by the solicitor, and recoverable from him as a debt owed to the Society. The machinery as to taxation in section 70, and more particularly section 71 appears to me to have no application to a provision that costs shall constitute a debt recoverable by the Society.”
That decision was followed by HH Judge Maddocks, sitting as a deputy judge of the Chancery Division in Llewellyn v The Law Society 10th December 1993 (unreported).
“one, whether the bill of the person exercising the powers of the Law Society, the agent, is a solicitor’s bill, and if so, two, whether the terms of paragraph 13 exclude or leave no room for the application of s.71.”
“the agent [Mr Heginbotham], although not giving legal advice to the Law Society, was nevertheless exercising his professional skills as a solicitor in carrying out the work and charging accordingly.”
“Paragraph 13 does no more than create the liability to pay which, in turn, if the bill is a solicitor’s bill, leads to the right to apply for taxation under s.71”
He noted that in The Law Society v McKanan-Jones 14th July 1992 (unreported) Mummery J did not have the benefit of opposing submissions as the solicitor did not appear and was not represented. He, Judge Maddocks, was persuaded that Mummery J was wrong and that it was his duty not to follow that decision.
(1) whether the bills submitted by Davis Blank Furniss to the Law Society are solicitor’s bills for the purposes of s.70(1); and if so
(2) whether the rights conferred by s.71 are excluded by the terms of paragraph 13 of Schedule 1; and if so
(3) whether s.3 Human Rights Act 1998 applies and if so with what consequence.
Before dealing with those issues I should refer briefly to the nature of an intervention and the powers conferred on the Law Society to intervene.
“The statute does not authorise the taxation of every pecuniary demand or bill which may be made or delivered by a person who is a solicitor, for every species of employment in which he may happen to be engaged.
The business contained in a taxable bill may be business of which no part was transacted in any Court of law or Equity; but I am of opinion that it must be business connected with the profession of an attorney or solicitor – business in which the attorney or solicitor was employed, because he was an attorney or solicitor, or in which he would not have been employed, if he had not been an attorney or solicitor, or if the relation of attorney or solicitor and client had not subsisted between him and his employer.
It may perhaps, on some occasions, be questionable, whether the business contained in a solicitor’s bill be or be not such as to make the bill taxable under the Act; but in the present case I do not see any reason to doubt. The relation of solicitor and client did not subsist between Mr Ward and the Petitioners, or any of them, or between Mr Ward and any other person in relation to this matter. He was not employed by the Petitioners because he was a solicitor, but because he was steward of the manor, and he might have been steward of the manor, without being a solicitor. His bill is not as to any part of it a solicitor’s bill; it is a bill of charges claimed to be payable to the steward of the manor, and nothing else; and I am of opinion that the statute gives me no jurisdiction over it.”
“duties required [their] attendance at the committee rooms, to see, amongst other things, that nothing should be done contrary to law, or which would infringe any of the provisions in the numerous statutes relative to elections; to secure that everything should be done in a legal and proper manner, and to detect the defects of the opposite party. It was therefore necessary for [the solicitors] to exercise their legal knowledge in the best manner they could for the gentlemen by whom they were employed.”
From this report and from another (27 LJCh (NS) 532) which counsel found it seems likely that the orders related only to the second bill. By contrast in Re Inderwick (1883) 25 Ch.D 279 a commission of 100 guineas for negotiating a loan of £2,000 was not so clearly subject to taxation as to warrant an ex parte order for taxation.
Lord Justice Robert Walker
Lord Justice Rix
© 2002 Crown Copyright