England and Wales High Court (Administrative Court) Decisions

Toovey & Anor, R (on the application of) v Law Society [2002] EWHC 391 (Admin) (18th March, 2002)

IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
ADMINISTRATIVE COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		18th March 2002

Mr Justice Stanley Burnton:

Introduction

1. This is an application for Judicial Review of the decision of the Professional Standards Appeals Sub-Committee of the Law Society made on 25 May 2001 rejecting the Claimants’ appeal against the decision of Mr Andrew Darby dated 11 October 2000, refusing them waivers under Rule 10 of the Solicitors’ Indemnity Rules 1997 and 1998 in respect of their 1997/1998 and 1998/1999 contributions. The contributions in question were paid by the Claimants for the years of indemnity beginning 1 September 1997 and 1 September 1998 respectively. Their amounts were notified to the Claimants during the preceding months, i.e. in August 1997 and in August 1998 respectively.

The facts

2. The Claimants are solicitors. They were at the times relevant to these proceedings partners in the then firm called Hibberts, a two-partner firm with an office in Hyde in Cheshire. Like all solicitors, they were required, pursuant to Section 37 of the Solicitors’ Act 1974, to have professional liability insurance cover provided by the Solicitors’ Indemnity Fund. The Fund is managed and administered by Solicitors Indemnity Fund Limited, a company set up by the Law Society to administer the Fund. The company’s directors are appointed by the Law Society, and Mr Darby is, and was, at the times material to these proceedings, the company secretary. Solicitors Indemnity Fund Limited is a non-profit making company: its expenses are met out of the Fund. Mr Darby is, and was at the times material to these proceedings, also the Head of the Professional Indemnity Section of the Law Society.
3. Any insurance must, in principle, be funded by premiums paid by insureds, together with any profits or revenue earned by the insurer by investing premiums received. In the case of the Solicitors’ Indemnity Fund, the premiums are called contributions, a term doubtless used because the Fund is a mutual fund, as envisaged by section 37(2)(a) of the Act, administered by the profession for the benefit of the profession and its clients, and does not aim to make a profit. Contributions were payable only by solicitors who were principals (i.e., partners and sole practitioners) in private practice. The Fund, and the solicitors’ profession, are governed by the Solicitors’ Indemnity Rules (“the Rules”), statutory rules made with the concurrence of the Master of the Rolls under Section 37 of the Solicitors Act 1974 and Section 9 of the Administration of Justice Act 1985. The Rules relevant to the present proceedings are the Solicitors’ Indemnity Rules 1997 and the Solicitors’ Indemnity Rules 1998.
4. The Rules defined the cover provided to solicitors and regulated the amounts of contribution payable by solicitors. The provisions of the Rules changed over the period during which solicitors were required to be insured by the Fund. In particular, in 1996 a new loading/discount formula based on the ratio of claims to contributions was introduced. In 1998 a system of risk banding was introduced, and account was taken of reserves against liabilities as well as claims actually paid. Furthermore, as a result of deficits in the Fund, shortfall contributions were introduced from 1998/1999, designed to eliminate the actual or anticipated shortfall of assets against liabilities. In addition, the basic rate of contributions was substantially increased from 1997/1998.
5. It is obvious that there are many ways of apportioning the costs of insurance equitably among those insured, as the changes referred to in the proceeding paragraph illustrate. There is no single fair means of calculating contributions. It is also evident that any method of calculating contributions must ultimately produce sufficient money as to meet the liabilities of the Fund, and the provisions of the Rules for the calculation of contributions were designed to have this result.
6. The calculation of contributions in the years in question is described by Mr Darby in paragraphs 17 to 26 of his witness statement, and is helpfully summarised in the Defendant’s skeleton argument at paragraph 2:

“(i) First, an ‘unadjusted basic contribution’ was worked out, based simply on the amount of the firm’s turnover.

(ii) Secondly, the basic contribution was adjusted by applying risk factors according to the nature of the firm’s work.

(iii) Thirdly, a claims adjustment was made by applying a loading or a discount according to the claims record of the principals in the firm. The maximum loading was 100%, and the maximum discount was 30% in 1997/1998 and 65% in 1998/1999. Contributions would be loaded if the ratio of payments out of the Fund to contributions received during the relevant period was greater than 1.2, and discounted if it was 0.8 or less. … there was a ‘cap’ on the loading to which a claim could lead.”

7. In 1997/1998, the monetary amount of the loading could not exceed 15% of the value of the claims paid by the Fund. In 1998/1999 the equivalent percentage was 9%. The relevant period in 1997/1998 was the three-year period from 1 September 1990 to 31 August 1993; in 1998/1999 it was the years from 1 September 1991 to 31 August 1996. The loading produced by any single claim could not exceed 45% of that claim: in 1997/1998, 15% in each of the three years in which the claim would be taken into account for the purpose for assessing claims history; in 1998/1999, 9% for each of the five years in which a claim would figure.
8. The Rules provided for no similar cap on the amount of discount that might be lost by reason of a claim on the fund. A cap on the loss of discount relative to the value of claims paid, similar in effect to the cap on loading, was introduced only in 1999/2000.
9. The calculation of the Claimants’ contributions is described by Mr Darby in paragraphs 28 to 35 of his witness statement. The correctness of that calculation has not been challenged, and it is set out in the Annex to this judgment.
10. The Rules were changed in relation to the 1999/2000 year. For that year, for the first time, the Rules provided that the 9 per cent cap on the amount of the claims pool which had been applied to the loading of the basic contribution should also be applied to the loss of discount on the basic contribution. The result was that for the first time the Rules provided that the difference between the discount actually given to a practice and the maximum possible discount (55 per cent) should not exceed 9 per cent of the practice’s claims pool.
11. It will be seen that the calculation of contributions in 1997/1998 and 1998/1999 involved any claims paid by the Fund between 1 September 1991 and 31 August 1993 being taken into account in both years. That is, of course, a not unfamiliar experience in insurance, where a premium commonly will depend on claims experience over a number of earlier years.
12. Rule 10 of both the 1997 and the 1998 Rules gave the Law Society power to waive contributions in whole or in part. It was identical in both years and was as follows:

“Waivers

The Society shall have power in any case or class of cases to waive in writing prospectively or retrospectively any obligation on any solicitor, recognised body or registered foreign lawyer under these Rules and to amend or revoke any such waiver.”

13. It is evident that the Society could not waive contributions wholesale. Since contributions are calculated actuarially to meet the liabilities of the Fund, widespread grant of discounts would in all likelihood result in deficits that would have to be met by increases in contributions in subsequent periods. The Law Society published a booklet entitled “Applying for a Waiver of the Solicitors’ Indemnity Rules” setting out their policy on waivers. It included the following:

“Can I apply for a waiver of the Solicitors’ Indemnity Rules?

Rule 10 of the Solicitors’ Indemnity Rules (at Annex A) enables the Law Society to waive, retrospectively and prospectively, any obligation on a solicitor imposed by the Rules. The Law Society can also amend and revoke waivers that have been granted.

However, Rule 10 does not enable the Law Society to waive the obligation on a solicitor to contribute to the Solicitors’ Indemnity Fund (SIF) in favour of finding alternative means of providing cover. (This would require an amendment to the Rules by the Council of the Law Society with the concurrence of the Master of the Rolls).

In general, therefore, an application for a waiver would involve a request that the Law Society relaxes a particular provision(s) of the Rules.

Who will decide my application?

Your application will be considered by a senior member of staff within the Policy Directorate, usually the Head of the Professional Indemnity Section. The member of staff will have been delegated power by the Professional Standards Committee to consider and grant applications for waivers of the Solicitors’ Indemnity Rules.

In what circumstances will the Law Society grant a waiver?

All applications will be considered on their individual merit. At Annex B is a copy of the Indemnity Waivers Policy. The Policy was formulated to provide guidelines to those who are empowered to grant waivers. Please note that although it is called a “policy” it is a set of guidelines, which is not exhaustive.”

14. The Waivers Policy at Annex B to the booklet was as follows:

“Waivers might be appropriate in the following circumstances:

(i) to remedy serious injustice resulting from either an anomaly created by, or the strict operation of, the Indemnity Rules:

(ii) to alleviate serious hardship arising out of exceptional circumstances. In considering hardship applications, the following questions should be addressed:

(a) Is the applicant suffering severe financial difficulties?

(b) What are the circumstances giving rise to the hardship?

(c) What other options are available to the applicant?

(d) Is the relief being sought reasonable?

(iii) where the absence of a waiver would involve a breach of the Indemnity Rules which would be no more than in technical character (sic);

(iv) in any other case that is wholly exceptional in character.”

15. Rule 10 and the Waivers Policy of the Law Society are at the heart of this claim for Judicial Review. The Claimants have, however, during the course of argument, wavered between asserting that their claim is based on the proper application of the Policy and nothing else, and a claim to a waiver on other grounds. It is nonetheless convenient to mention a number of points on Rule 10 and the Waivers Policy at this stage. First, as appears from their terms, Rule 10 and the Waivers Policy involved the grant by the Law Society of a discretionary concession. A waiver was in essence a discretionary discount from the mandatory contribution calculated in accordance with the Rules. Secondly, the Waivers Policy was not described as being comprehensive: it neither set out provisions, which, if satisfied, entitled a solicitor to a waiver of contribution, nor did it set out preconditions to the grant of a waiver. The terms of the booklet issued by the Law Society indicated that a solicitor who satisfied the terms of the policy might not receive a waiver, while a solicitor who did not do so might nonetheless receive a waiver. Each case was to be considered on its individual merits. Thirdly, the Policy itself laid down stringent requirements: apart from a breach of the Rules (which is not suggested in the present case), it referred to “serious injustice”, “serious hardship”, and a “wholly exceptional” case. Manifestly, a serious injustice is not the same as an injustice, a serious hardship is not the same as a hardship, and a wholly exceptional case is not the same as an exceptional case.
16. On 22 April 1998, a joint meeting of the Standards Guidance Committee and the Board of Solicitors Indemnity Fund Limited considered the provisions to be included in the 1998 Rules. A paper was prepared for their consideration dealing with, among other matters, the possibility of a cap on loss of potential discount. It had been suggested that “The capping arrangements should be extended to include loss of discount i.e. that no firm should lose in discount (which would otherwise be available) more than 15 per cent of the value of its claims pool.” As will be seen, that proposal effectively is what the Claimants say they should have received in respect of each of the years 1997/1998 and 1998/1999. The paper gave an example of a case in which the result of a “loss” of discount was greater than the amount paid by the Fund in respect of the claim giving rise to the loss of discount. The paper stated:

“5. Following the decision to increase the maximum discount to 65%, from last year’s 30% maximum, the amount of “lost discount” has dramatically increased and the cost of the suggested relief has proved to be prohibitively expensive, amounting as it does to some £52.9 million. This would mean that a further £53 million would need to be raised by increasing the general rates above and beyond the amount already needed to finance the 65% level of discount.

6. Although it is disappointing to abandon the prospect of any measure that might encourage greater acceptance of the experience loading formula, it is an example of the inherent problems in attempting to provide a mathematical answer to every possible unfairness in the contribution calculation.

7. In the event that particular and substantial injustices arise from the formula it would remain open to the Law Society to grant waivers as they have done in the past. Between 20 and 25 waivers have been granted this year.”

17. As mentioned above, no “cap” on discounts was in fact introduced in the Rules for the 1998/1999 year of insurance. Although I do not have a minute of the meeting at which the recommendation contained in this paper was considered, it may be assumed that the cost of introducing a general cap on discounts for that year was one of the matters taken into account, as was the possibility of a waiver in individual cases, as referred to in paragraph 7 of the paper.
18. The Claimants applied for waiver by letter dated 14 August 2000, i.e., about three years after they had been informed of their 1997/1998 contributions and two years after they knew of 1998/1999 contributions. Essentially, their complaint was that they had been denied discount, and that as a result their premiums represented an excessive proportion of the claims paid by the Fund on their behalf. The letter did not refer to the Policy, and did not suggest that the Claimants had suffered serious injustice, serious (or indeed any) hardship or that their case was wholly exceptional. There was a suggestion that the calculation of the 1998 contribution was incorrect, but as mentioned above, this has not been pursued. The letter did not suggest that any particular level of discount was appropriate, or that any particular loss of discount was inappropriate. With regards to 1998, it stated:

“It appears to me that a strict application of the Rules has produced an anomalous result in the assessment of the 1998 contribution.”

The complaint in relation to 1997 referred to the fact that one claim had appeared in every year, and stated:

“… I would have thought that if the same matters are used over and over again then there is a danger that we may have been penalised too much in this year as well. I should be grateful if you would look at the figures and confirm that you will also grant a waiver to allow discount to apply to this year also.”

19. The lack of any reference to the Waivers Policy or its requirements in the letter of 14 August 2000 was probably due to the fact that the Claimants at that stage did not have a copy of the Law Society booklet referred to above, which was sent to them in October 2000. It is also not referred to in Mr Toovey’s affidavit in support of this application, sworn on 20 August 2001. In so far as the letter complained that the same claim had been used in every year in assessing their contributions, as indicated above that was inevitable if the claim occurred in a year used for the calculation of claims experience for more than one year of cover. The letter complains that the discount denied in 1998 represents more than half the value of the claim, and refers to this as a penalty. However, it is common place in other spheres of insurance for a small claim to result in a loss of a no claims bonus that may exceed the value of the claim. That is not the imposition of a penalty, but simply the result of a prescribed calculation that does not, and generally cannot, take into account the facts of each individual case. It is normal for insurance premiums in general to exceed claims paid. The insured whose claims paid exceed premiums paid must be the exceptions. If this were not so, insurers would all be insolvent. Lastly, differences between years may be, and indeed were, due to differences in the Rules applicable to different years. Generally, it is not obvious from the letter of 14 August 2000 that any injustice was involved or any other factor justifying waiver, at least in terms of the Waivers Policy.
20. There followed correspondence relating to the expected delay in dealing with the claim for waiver, due to the very large numbers of claims for waiver received that year. Mr Toovey pushed hard for the claim to receive priority: I refer to his letter dated 7 September 2000, in which he stated that he felt very strongly about the matter and had asked the Claimants’ Council Member to take up the matter personally with the President of the Law Society and with the Council. He also referred to the fact that the firm were negotiating for merger with another practice. As a result of this correspondence, the claim was fast-tracked. It was first considered by Mr Paul Dempsey, a subordinate of Mr Darby. In a memorandum of 29 September 2000, he recommended the grant of a waiver. He stated:

“4. It would appear that the Rules are operating as they should. In view of the claims in the applicants’ claims pool, they have experienced a subsequent loss of discounts. At around 6% of their gross fee income, the initial annual contribution for 1997/1998 and 1998/1999 respectively are not disproportionate.

5. However, the applicants’ statement that the loss of discount they have experienced is disproportionate to the value of the claims in their claims pool appears to merit some consideration. For 1997/1998 the firm attracted neither a claims loading or a discount. A loss of discount equivalent to 15% of the claims pool would have been £4,100.54 but instead, the firm has lost all discount obtainable worth £6,393.60.

6. For 1998/1999 the firm was awarded a claims discount of 16%, worth £4,630.37, whereas the maximum obtainable was 65%, worth £18,810.87. The firm lost discount of £14,180.50 whereas 9% of the claims pool was only £2,035.79.

7. If the loss of discount formula is applied in respect of 1997/1998, a 30% discount would be £6,393.60. A loss of discount if restricted to 15% of the claims pool would be £4,100.54. The applicant would receive a discount of £2,293.06. This equates to a discount of 11%.

8. If the loss of discount formula is applied in respect of 1998/1999, a 65% discount would be £18,810.87. A loss of discount, if restricted to 9% of the claims pool would be £2,035.79. The applicants would receive a discount of £16,775.08. This equates to a discount of 58%.”

21. Mr Dempsey’s recommendations were as follows:

“1. To grant Hibberts a waiver of the Solicitors’ Indemnity Rules 1997 such that the practice attracts a claims discount of 11% on the initial annual contribution calculated in accordance with rules 39 and 42.

2. To grant Hibberts a waiver of the Solicitors’ Indemnity Rules 1998 such that the practice attracts a claims discount of 58% on the initial annual contribution calculated in accordance with rules 39 and 42. For the avoidance of doubt the shortfall contribution remains unadjusted.”

22. Mr Dempsey’s memorandum was not at that stage sent to the Claimants. It was considered by Mr Darby. He disagreed with Mr Dempsey, and rejected the claim for discount. The Claimants were notified by letter dated 19 September 2000, enclosing the decision, which gave summary reasons for the rejection of the claim. The decision enclosed referred to incorrect years, but that error was corrected subsequently and is irrelevant to the present proceedings.
23. The Claimants complained about Mr Darby’s decision by letter dated 3 October 2000, in which they requested the full reasoning for the decision. Mr Darby responded by letter dated 11 October 2000. He enclosed a copy of the Law Society booklet referred to above, informed them of their right to appeal, and expanded on his reasons for refusing waiver. Very fairly (since he was under no obligation to do so), he enclosed Mr Dempsey’s memorandum, and stated:

“To assist you in preparing your representations you have sought full reasoning for the decision and evidence of the preparation that went into the presentation of your matter. The evidence of preparation is attached in the form of the report that I considered. As to the reasoning for the decision, you will note that I did not accept the recommendations of Mr Dempsey that I should grant relief in respect of both years. In reaching my decision I had regard to the waivers policy (attached to the guidelines) and I took the view that your application did not fall within those guidelines. I also took account of the fact that in respect of both years the contribution as a percentage of declared gross fee income was not disproportionate. I also had regard to the length of time that has elapsed between the periods relevant to your application and the date your application was received. In all the circumstances, I did not feel it was appropriate to grant any relief.”

24. Mr Toovey, on behalf of the Claimants, made further representations, and then by letter dated 25 October 2000 was advised to appeal if he wanted to pursue the matter. The Claimants did appeal. Their case on the appeal was set out in a 10-page document, and made the following principal points:

(1) They had an excellent claims record that was not recognised in the contribution calculations resulting from a strict application of the Rules.

(2) Their contributions were higher than could be considered fair.

(3) Their only paid claims were repeatedly used in their contribution calculations.

(4) The size of their contributions, and the uplift for claims paid by the Fund, were not in reasonable proportion to the value of the claims.

(5) The lost discount should be no more than the 15 per cent and 9 per cent used by Mr Dempsey. Their lost discount represented 23 per cent and 63 per cent of claims in 1997/98 and 98/99 respectively, and was grossly excessive.

(6) The level of discount of 49 per cent received in 1999/2000, with no real difference in claims experience, showed that the discount received for the 2 earlier years was inappropriate.

(7) Mr Dempsey’s memorandum showed that they met the requirement of anomaly as set out in paragraph (i) of the Waivers Policy.

(8) Mr Darby had had a potential conflict of interest: as a result, their application had not been impartially considered. He had as a result taken irrelevant considerations into account, namely the Claimants’ delay in making their application for discount, and failed to take meritorious considerations into account.

(9) Mr Darby had imposed additional waiver-qualification criteria that were not present in the Waivers Policy or in the Rule (presumably a reference to Rule 10).

(10) The decision to refuse waiver was contrary to the previous and continuing practice of granting waivers evidenced in the waiver reports made to the Council.

25. The Claimants’ document referred to a “legitimate expectation”. It stated:

“5.5 As Mr Darby provides no sound reasons for deducing that we do not meet the waivers criteria we can infer that there are no good reasons. Further, in refusing our application he has disregarded both his previous and continuing practice to grant ‘loss of discount’ waivers and there is a legitimate expectation that having presented a case that demonstrates this particular type of serious injustice/anomaly, and where relief has been granted to hundreds of other such practices, that we too should receive the corresponding and appropriate level of remedy. To refuse a waiver when we meet the criteria and where waivers have been, and continue to be, granted in such cases is unfair, perverse and discriminatory.”

26. The Claimants’ submission enclosed waiver reports of the Professional Indemnity Section for the 1996, 1997 and 1998 indemnity years. That for 1996 showed that out of 109 waiver applications considered, 73 were granted and 36 were refused. The 1997 report showed that out of 211 waiver applications considered, 164 were granted and 47 refused. 57 of those that were granted arose as a result of the change in the return date for the gross fees certificate. The 1998 report showed that there had been 594 applications for waiver of which 566 were granted and 23 refused. The report stated:

“Of the 566 waivers that were granted 249 related to “loss of discount” waivers. This was a manual fix of an anomalous result in the application of the Rules whereby a firm could experience a reduction in their discount which was detrimentally out of proportion to the value of the claims. Consideration was given to an appropriate rule change at the time but the cost was estimated to be in excess of £50m which was felt to be too high. This has now been ‘remedied’ in the 1999 Rules and therefore this type of waiver will now only exist for firms who are in a nil discount nil loading position….”

The report did not indicate what reduction in discount was regarded as detrimentally out of proportion to the value of claims or the extent of relief granted.

27. The Claimants were provided with a copy of the draft report to go to the Appeals Sub-Committee, and given an opportunity to comment on it and to suggest amendments. They took advantage of this opportunity. In addition, by letter dated 30 March 2001, Mr Toovey asked for the names of the members of the Sub-Committee who would consider the Claimants’ case. Those names were provided to the Claimants by the Law Society by letter dated 2 April 2001. The Claimants did not object to any members of the Sub-Committee.
28. The Claimants’ appeal was considered by the Sub-Committee on 10 April 2001. Their decision, and their reasons, are set out in the minutes of their meeting. The minutes summarised the main points raised by the Claimants, and it has not been suggested that that summary was in any way inaccurate. Each of these points was then addressed in turn. The Sub-Committee decided, on each of the seven principal points raised by the Claimants:

“(1) … The contributions rises suffered by the Claimants were not as high as many others in the profession and were by no means exceptional.

(2) although … the Claimants’ claim history was not such as to cause concern, claims records only formed part of the formula for calculating contributions and were (sic) not on its own a reason for granting a waiver.”

(3) The fact that payments made by the Claimants exceeded the claims paid on their behalf “was not an indication of unfairness - practices who had no claims record could make the same point.”

(4) The fact that a cap on loss of discount had been introduced in 1999 did not justify grant of a discretionary discount. The Rules changed from year to year, and were applied by the Sub-Committee “unless persuaded to grant a waiver, and whilst considering applications will take into account that relieving a burden for one firm might not necessarily be fair to the profession as a whole.”

(5) The fact that Mr Dempsey had recommended grant of a waiver did not bind Mr Darby, who considered each report from a waivers executive on its merits.

(6) As to the contention that Mr Darby had a conflict of interests, he acted under powers delegated by the Council of the Law Society. “The Indemnity Waivers Policy had been introduced by the Sub-Committee to provide guidelines for considering waivers and was used by Mr Darby and the Sub-Committee in their determinations.”

(7) As to the statistics showing the proportion of waivers that had been granted, “each waiver was looked at on its merits, whether by the office decision maker or the Sub-Committee, however when new rules were first made practices might experience circumstances that would justify the granting of waivers. In following years the profession would be expected to have made adjustments to accommodate the changes. It was not possible therefore to read the statistics without looking at the Rules background and, in any event, whilst striving for measure of consistent decision-making, each application was considered … individually and on its merits.”

29. Having addressed the points made by the Claimants, the Sub-Committee then considered the Waivers Policy in relation to the Claimants appeal, and concluded:

“there was no serious injustice arising from an anomaly created by, or the strict operation of, the Indemnity Rules;

there was no serious hardship arising out of exceptional circumstances;

there was no question of remedying a purely technical breach of the Indemnity Rules;

the case was not wholly exceptional in character;

no argument had been put forward to show that the waivers policy was not appropriate in this case.”

The minutes stated that the Sub-Committee had considered whether there were any other circumstances justifying the exercise of their discretion to grant a waiver and concluded that there were not. They therefore resolved, by a majority, to refuse the Claimants’ appeal.

The Grounds of Judicial Review

30. It is not easy to discern from the Claim Form with precision or clarity the grounds of Judicial Review asserted by the Claimants, and indeed they have varied during the course of the hearing. Essentially, as set out in the Claim Form, they seem to be the following:

(a) The Claimants had a legitimate expectation that their waiver application would be granted because Mr Dempsey had so recommended: paragraph 6 of the Claim Form.

(b) Irrationality: “there is a disproportion when the Rules produce an uplift for claims that is out of all proportion to the very claims for which the uplift is made.” It was irrational of the Sub-Committee to deny this disproportion and to refuse a waiver in such circumstances: paragraph 8 of the Claim Form.

(c) Misdirection: Mr Darby applied a limitation period in the application of the Waivers Policy.

(d) Perversity on the part of Mr Darby, who said: “I note that your application relates to the 1997/1998 and 1998/1999 indemnity year and on the face on it there would appear to be no reason to deal with your application in advance of those already received.”

(e) Perversity in failing to look solely at whether there was a disproportion in the claims penalty or not (paragraph 9 of the Claim Form, which confuses the question whether an application for waiver should be expedited with the substantive question whether a waiver should be granted).

(f) Breach of Article 6 of European Convention on Human Rights, because the Sub-Committee were not independent or impartial, both Mr Goode and Mr Pharaoh of the Sub-Committee being solicitors in private practice liable for contributions; and in relation to Mr Darby, because he is the company secretary of Solicitors Indemnity Fund Limited.

(g) Breach of the Common Law Rules requiring absence of bias.

(h) Breach of Article 1 of the First Protocol to the Convention.

(i) The conclusions of the Sub-Committee referred to at sub-paragraphs (3), (4) and (5) of paragraph 28 above were incorrect.

31. Curiously, the only reference in the Claim Form to the statistics as to the grant of waivers in respect of loss of discount is in paragraph 3:

“The Law Society has made use of its Waivers Policy. The Law Society has granted ‘Loss of Waiver Discounts’ in all years since 1997. Thus, of the 566 waivers granted in 1998, nearly half, namely 249 were ‘Loss of Discount Waivers’.”

The Claim Form bases no legal conclusion on this statement. The statistics as to the grant of waivers, however, played a large part in Mr Juss’s argument before me.

32. I shall consider each of these grounds for Judicial Review in turn. I shall then consider the claim based on the statistics as to the grants of waiver in other cases.

Legitimate Expectation: Mr Dempsey’s recommendation

33. The present is another case in which the concept of legitimate expectation is invoked as a mantra on which to base a claim for Judicial Review with insufficient regard to the requirements for the operation of the principle or analysis of the facts of the case. It is a prerequisite of a legitimate expectation in the legally meaningful sense that there should have been a promise or assurance or policy communicated by a public authority to the claimant which the authority has departed from, or which it proposes to depart from. Reliance by the claimant on that promise or assurance or policy is not a prerequisite of relief, but is relevant to the grant of relief.
34. In the present case, the recommendation of Mr Dempsey was not communicated to the Claimants at any relevant time. They did not know of it until after Mr Darby’s decision. They could never have had any sensible expectation based upon it. It was in terms only a recommendation, and the concept of legitimate expectation cannot promote a recommendation into something that it is mandatory to accept. In the course of argument I compared Mr Dempsey’s recommendation with the judgment of a High Court Judge: a successful party at first instance could have no legitimate expectation that the judgment below would be upheld by the Court of Appeal. The present case for a legitimate expectation is however even weaker: unlike a first instance judge, Mr Dempsey did not decide anything, he merely made a recommendation to be considered by Mr Darby. At most, had they known of it, the Claimants could have expected Mr Dempsey’s recommendation to be taken into account. It was, both by Mr Darby and by the Appeals Sub-Committee. Lastly, the Claimants did not act in reliance on Mr Dempsey’s recommendation and do not claim that they did.
35. The claim for a legitimate expectation that the Law Society would accept Mr Dempsey’s recommendation is unarguable.
36. The Claimants could have asserted a legitimate expectation that the Law Society would observe what it had published in its booklet referred to above, and in particular would apply its published Waivers Policy. Since the Law Society accepts that it should have done so, and asserts that it did so, the concept of legitimate expectation adds nothing to the claim for Judicial Review.

Irrationality: “there is a disproportion when the Rules produce an uplift for claims that is out of all proportion to the very claims for which the uplift is made”. It was irrational to deny this disproportion and to refuse a waiver: paragraph 8 of the Claim Form.

37. As I indicated above, it is not necessarily irrational for rules of insurance to produce an increase in premium on account of a claim that is greater than the claim itself. Such a result could not, of itself, create an entitlement to a discretionary waiver, though it is a factor to be taken into account, and it clearly was taken into account by both Mr Darby and the Appeals Sub-Committee. This ground, as set out in the Claim Form, does not justify a discount in terms of the Waivers Policy. I see no basis for impugning the decision of the Appeals Sub-Committee under this head.

Misdirection: application of a limitations period by Mr Darby

38. The complaint under this head fails for a number of reasons. First, it is clear that the delay of the Claimants in making their claim for discount was not treated by Mr Darby as a limitation period, but merely as a factor to be taken into account.
39. Secondly, delay is a relevant factor. Delay suggests that an applicant for discount has not suffered hardship or perceived an injustice. It is more generally relevant to the exercise of a discretion in circumstances in which the Fund is seeking to balance income and expenditure year by year.
40. Thirdly, there is no evidence that the Sub-Committee took this factor into account. The Claim Form, like a number of submissions made on behalf of the Claimants, ignores the fact that it is the Sub-Committee’s decision that is the subject of Judicial Review, not Mr Darby’s; that it considered the claim for discount afresh; and that its reasons do not refer to delay.

Perversity on the part of Mr Darby: paragraph 8 of the Claim Form

41. Again, this ground ignores the fact that it is the Appeals Sub-Committee’s decision that is in question. It also ignores the fact that in the passage quoted in the Claim Form Mr Darby was dealing only with the question whether the Claimants’ application should jump the queue of waiver applications: he was not dealing with its substantive merits or lack of them. There is nothing in this point.

Perversity in failing to look just at whether there was a disproportion in the claims penalty or not

42. This ground in effect seeks to rewrite the Rules, which have statutory force, and the Waiver Policy, and to produce a result inconsistent with them. It ignores the fact that the claim for discount is a claim for a discretionary concession, to which there can be no entitlement as such, and it seeks to exclude factors which the Policy indicates should be taken into account. If accepted, this ground would lead to the reversal by the Court of the decision made by the Law Society not to cap loss of discount for the year 1998/1999. There is no good claim for Judicial Review under this head.

Breach of Article 6

43. A discretionary concession is, by definition, not the subject of a civil right within the meaning of Article 6: see Husain v Asylum Support Adjudicator [2001] EWHC Admin 852 at paragraphs [26] to [27], approved by the Court of Appeal in London Borough of Tower Hamlets v Begum [2002] EWCA Civ 239 at paragraph 24.
44. Mr Juss sought to rely on the decision of the European Court of Human Rights in Bryan v United Kingdom (1995) 21 EHRR 342. That case concerned an enforcement notice requiring the applicant to demolish buildings erected without planning permission on his own property. The Commission, at paragraph 38 of Opinion, decided that a “civil right” was engaged, because the right of property is a civil right and the enforcement notice was concerned with the way in which the applicant was entitled to use his property. That conclusion was not disputed by the United Kingdom before the European Court, which saw no reason to decide otherwise: see paragraph [38] of the Commission’s Opinion and paragraph [31] of the judgment of the Court. That decision does not detract from the correctness of the general proposition that a discretionary concession is not the subject of a civil right within the meaning of Article 6. Mr Juss also submitted that the high proportion of waiver applications granted by the Law Society established that a civil right or obligation was involved. Those statistics, which I consider further below, could not, in my judgment, convert a statutory discretion into an obligation. In my judgment, Article 6 is not engaged.

Bias at Common Law

45. Bias is relevant where there is an issue between two parties which falls to be determined by an independent tribunal. This is not such a case. The power to grant a discount was conferred by the Rules on the Law Society itself, and the Law Society clearly had an interest in maintaining the solvency of the Fund.
46. The Claimants contended that Mr Darby was personally disqualified by bias by reason of his position as the company secretary of the Solicitors Indemnity Fund Limited, whereas, apparently, Mr Dempsey, an employee of the Law Society, was not. The difference between their positions has not been explained by the Claimants. It has not been suggested that Mr Darby had any personal financial interest in the outcome of the Claimants’ application for waiver. In my judgment, there is no basis for the disqualification of Mr Darby, who was duly authorised to take decisions on behalf of the Law Society pursuant to Rule 10.
47. In any event, as I have already repeatedly mentioned, it is not Mr Darby’s decision which is the subject of these proceedings, but that of the Appeal Sub-Committee. They are said to have been biased because two of them were principals of their firms in private practice and therefore liable to pay contributions, which, it was argued, would be liable to be increased if the Claimants’ appeal was allowed and they were granted discounts in the sums claimed by them. The Claimants were unable to put forward any calculation or even estimate of the effect of the grant of their application for waivers. One would not, of course, expect them to be able to calculate the effect of a grant of their waivers on the particular contributions of the two Sub-Committee members in question. However, the Claimants were unable to put forward any estimate whatsoever of the effect on contributions or on rates. They submitted that it was unnecessary for them to do so: that the appearance of the bias is sufficient without any indication of the amount in question. I do not accept this. Personal financial interest in the result of a decision may be so small as to obviate any suggestion of bias. In Locabail (UK) Limited v Bayfield Properties Limited [2000] QB 451, the Court of Appeal stated, at page 473:

“8. In the context of automatic disqualification the question is not whether the judge has some link with a party involved in a case before the judge but whether the outcome of that cause could, realistically, effect the judge’s interest. In the Dimes case the outcome of the litigation certainly could have such an effect on the Lord Chancellors personal position. In Clenae Pty Limited v Australia and New Zealand Banking Group Ltd [1999] V.S.C.A. 35. It was held that the outcome of the litigation could not have had such an effect. That will often be the case where the judge holds a relatively small number of shares in a large company and the sums involved in the litigation are not such as could, realistically, affect the value of the judge’s share or the dividend he could expect to receive….

9. …

10. While the older cases speak of disqualification if the judge has an interest in the outcome of the proceedings ‘however small,’ there has in more recent authorities been acceptance of a de minimis exception: B.T.R Industries South Africa (Pty.) Ltd v Metal and Allied Workers’ Union, 1992 (3) S.A. 673, 694; Reg. v Inner West London Coroner, Ex parte Dallaglio [1994] 4 All ER 139, 162; Auckland Casino Ltd v Casino Control Authority [1995] 1 N.Z.L.R. 142, 148. This seems to us a proper exception provided the potential effect of any decision on the judge’s personal interest is so small as to be incapable of affecting his decision one way or the other; but it is important, bearing in mind the rationale of the rule, that any doubt should be resolved in favour of disqualification. In any case where the judge’s interest is said to derive from the interest of a spouse, partner or other family member the link must be so close and direct as to render the interest of that other person, for all practical purposes, indistinguishable from an interest of the judge himself.”

48. When it is realised that the Claimants claim for waiver amounted to only about £14,500, and that the total contributions to the Fund in each year totalled many millions, the effect on individual contributions of a decision in favour of the Claimants can be seen to be infinitesimal. As an indication, Mr Darby’s report on contributions for 1997/1998 recommended a total contribution requirement for that year of £269.9 million. Looked at in another way, there are about 35,000 principals in private practice and the Appeal Sub-Committee heard about 20 appeals per year relating to contributions. Again, the effect of their decisions on the liabilities of the members of the Appeals Sub-Committee can be seen to be negligible.
49. The personal interests of the members of the Sub-Committee were not capable to giving rise to a claim of bias. No fair-minded individual would consider that there was any danger of bias: see Re Medicaments (No. 2) [2001] 1 WLR 700.
50. I am glad to reach this conclusion. Given that the power under Rule 10 is conferred on the Law Society, that the Law Society is governed by solicitors, and that the solicitors who are likely to be entrusted to govern and administer the Society are likely to be principals, it would be unfortunate indeed to conclude that the most senior members of the profession were disqualified from exercising this power on its behalf.
51. Lastly under this head, the Law Society submitted that any complaint of bias had been waived. In this connection, the Law Society relied on the statement in paragraph [26] of the judgment of the Court of Appeal in Locabail:

“If, appropriate disclosure having been made by the judge, a party raises no objection to the judge hearing or continuing to hear a case, that party cannot thereafter complain of the matter disclosed as giving rise to a real danger of bias. It would be unjust to the other party and undermine both the reality and the appearance of justice to allow him to do so.”

52. As mentioned above, the Claimants were informed by the Law Society who the solicitor members of the Appeals Sub-Committee would be. It must have been obvious to the Claimants, as solicitors and members of the Law Society, that the members of the Sub-Committee or some of them would be principals in private practice. Whether they were so could have been ascertained by enquiry from the Law Society, from the Law Society’s internet site, or from a number of publications, such as Butterworth’s Law Directory. Mr Toovey did not address this issue in his first affidavit. It was referred to by Ms Ursula Marsay-Jones, a professional indemnity consultant and former employee of the Law Society, who has advised the Claimants and sworn affidavits on their behalf. She submitted that “the argument that the Appeals Committee is not impartial or independent is credible”, but did not refer to Mr Toovey’s knowledge of the members of the Sub-Committee. Mr Toovey did not refer to the matter in his second affidavit. In her witness statement of 7 February 2002, Ms Marsay-Jones made the following points:

(1) The Claimants did not know that their matter would not receive proper or fair consideration.

(2) The Law Society did not advise the Claimants as to the Committee members’ status within private practice.

The first point is irrelevant to the claim of waiver. The whole point of waiver is that a party must decide whether to object to a tribunal before he learns of its decision. The second point does not meet the fact that the relevant information was available to the Claimants had they sought it. Ms Marsay-Jones noticeably did not assert that the Claimants were unaware of the status of the members of the Sub-Committee, although I was told by Mr Juss, on instructions, that the Claimants had not actually known their status.

53. In my judgment, the Claimants, having been given the names of the members of the Sub-Committee, being on notice that its members would be likely to include principals, and being able to ascertain whether or not they were principals if they considered that fact material, and having failed to object to those members participating in their appeal, waived any objection to those members of the Committee on the ground of their interest as principals in the outcome of the appeal.

Article 1 of the First Protocol

54. A claim (really an application) for a discretionary discount is not capable of being a possession within the meaning of Article 1 of the First Protocol. An application for a discretionary discount is not a possession. In any event, the basis of the Claimants’ contention that, assuming Article 1 of the First Protocol applies, it has been infringed, is unclear. No basis for the contention was set out in the Claimants’ skeleton argument. Paragraph 11 (B) of the Grounds in the Claim Form is no more enlightening.
55. No infringement of Article 1 of the First Protocol has been shown.

The Appeals Sub-Committee were wrong to arrive at conclusions (3), (4) and (5) set out at paragraph 28 above.

56. The opinion expressed by the Sub-Committee that payments (of contributions) exceeding claims was not an indication of unfairness is in my judgment incontestably correct. Unless contributions overall exceed claims paid, the Fund would be insolvent. Contributions were paid not to meet existing claims, which may be modest, but for insurance cover, which was substantial.
57. I see no basis for holding that the Sub-Committee were wrong or not entitled to come to the conclusions set out in sub-paragraphs (4) and (5). Their conclusion in (4) effectively referred to the Rules and to the Sub-Committee’s mandate to consider the grant of waiver under Rule 10. The argument that Mr Darby was bound by Mr Dempsey’s recommendation as such is unsustainable.
58. There is nothing in these points.

Inconsistency

59. This is the only argument of the Claimants that, in my judgment, has some substance. The contention is that the Sub-Committee acted unfairly in treating the Claimants’ case differently from other cases without any adequate explanation. It is primarily based on the statistics obtained by the Claimants on the Law Society’s decisions on waiver applications for loss of discount. The statistics are not consistent, probably because some relate to applications decided during years of insurance while others relate to applications in respect of years of insurance. This ground of challenge is also based on the manner in which applications for waiver were dealt with within the Law Society.
60. So far as statistics are concerned, according to Ms Marsay-Jones’ second affidavit, 56 per cent of all loss of discount waivers (i.e. 14 out of 25) were granted for the 1997 year. This figure does not in any way suggest that the Claimants’ application was dealt with exceptionally, and does not in my judgment raise any inference of inconsistency.
61. The figure for 1998 is very different. According to Ms Marsay-Jones, 97.7 per cent of all loss of discount waivers were granted for that year. That figure is not challenged by the Law Society. It is on any basis a remarkable figure, although the extent of waiver granted is not known. The Claimants submit that they were entitled to be treated in the same way as the other 97.7 per cent, or at least to an explanation of the differences between their case and the great majority of others.
62. The Claimants also rely on the manner in which other cases were dealt with. Ms Marsay-Jones, who formerly worked in the Professional Indemnity Section of the Law Society, deposed that:

“It was determined within the Indemnity Section that an appropriate level of claims repayment had to be established as without this we would not know to what level the excessive penalty should be reduced. It was advised that the level of claims repayment that might be experienced on the open market would be no more than 45% of a claim’s value – I believe that this figure may have been established by the then underwriter at SIF.”

Ms Marsay-Jones deposed that this figure was applied in practice, by the grant of discounts where the loss of discount exceeded 15 per cent of claims in 1997/1998 (when a 3-year period was used for the determination of claims experience) and 9 per cent in 1998/1999 (when a 5-year period was used). In 1999 the Rules were changed so as to incorporate a 9 per cent cap on loss of discount.

63. These percentages appear in Mr Dempsey’s memorandum and were the basis of his recommendation. Mr Darby’s evidence on this point was as follows:

“65. I accept that the Indemnity Section, when considering applications for waivers, did use the 15% cap on loading which applied under the 1997 Rules, and the 9% cap on loading which applied under the 1998 Rules, as a ‘rule of thumb’ when looking at the question of whether a practice’s loss of discount appeared excessive in relation to the size of the claims which it had made upon the Fund. I further accept that waivers were in fact granted in a large number of cases in which the loss of discount exceeded those levels, and that the grant of such ‘loss of discount waivers’ meant that a high proportion of the total number of applications for waiver in respect of the 1997/1998 and 1998/1999 years were successful. It is also true that, at one time, when large numbers of applications for waivers were being received, cases to which that ‘rule of thumb’ applied were fast tracked for consideration, precisely because it was anticipated that waivers were likely to be granted in such cases.

66. But there never was any rule, policy or invariable practice that a firm whose loss of discount exceeded 15% of its claims pool in 1997/1998, or 9% of its claims pool in 1998/1999, would automatically be given a waiver if one was sought, without any consideration of the other circumstances of the case. That would have been quite inconsistent with the whole nature of a waiver as a discretion to be exercised on the merits of the individual case, and with the Waivers Policy. As I have already sought to explain, it would have involved rewriting the Rules in a way that it was not open to us to do, and which would have been contrary to the specific decision not to introduce a cap on loss of discount in 1998.

67. What needs to be borne in mind, when considering the high proportion of applications for loss of discount waivers which were successful, is that those who were most likely to apply for a waiver were those who had suffered a particularly harsh or burdensome result from the strict application of the Rules, and were therefore likely to have a strong case for an exercise of discretion in their favour. This was particularly true of waiver applications made soon after the relevant notices of contribution were issued. It was also the case that, when risk banding was introduced in 1998, practices carrying on higher risk work were vulnerable to losing large sums by way of discount when only one, not especially large, claim had been made against them, and quite a lot of waivers were granted in those circumstances. Later on, and particularly after firms became aware of the introduction of the cap on loss of discount in the 1999 Rules, some of the applications for retrospective waivers that were made were much less obviously meritorious. The application by Mr Toovey and Mr Gwenlan is not the only application for a waiver that was refused even though it was possible to demonstrate that, had a cap on loss of discount been in force, the required contribution would have been reduced.

68. It follows that, whilst a firm’s claims record (including the relationship between the size of its claims pool and the size of its resulting loss of discount) was indeed a factor for me to consider, it was only one of a number of factors that had to be taken into account.”

64. The Claimants asked the Law Society to produce information concerning the cases in which waiver was granted. The Law Society refused to do so, contending that the work involved in collecting the information would be disproportionate. No interlocutory application for disclosure of documents or of information was made by the Claimants. In these circumstances, I must deal with the claim on the evidence before me. I do not think it appropriate to make any negative inference against the Law Society, beyond any that may be made from the evidence.
65. While the facts on which this head of claim is based are easy to state, the legal basis for it is not. During his presentation of the Claimants’ case, Mr Juss stated that their case depended on the application of the Waivers Policy, and he accepted that if the Policy was correctly applied, the Claimants had no remedy. However, he also submitted that the Claimants had a legitimate expectation that if other solicitors were granted waivers, so would they. In addition, he submitted that the figures established that applicants had a right to a waiver, at least if their loss of waiver exceeded 15 per cent of a claim in 1997/1998 or 9 per cent in 1998/1999. The figures for the grant of waivers for 1998/1999 explain why the Claimants feel aggrieved, as they clearly do. However, these submissions are inconsistent with Mr Juss’s acceptance that the Claimants’ case depended solely on there having been an incorrect application of the Waivers Policy. The Waivers Policy involved individual examination of individual cases. It is not easy to distinguish the Claimants’ submission from the simple complaint that if others received waivers, so should they.
66. Mr Giffin submitted that no inconsistency of decisions had been shown, and that, even if there was inconsistency of decisions, that alone was not a ground for Judicial Review; and that the claim under this head was inconsistent with the Rules and the Policy, and if accepted would subvert both. He submitted that there could be no legitimate expectation inconsistent with the Rules and that Policy, and that in any event the requirements for a legitimate expectation were not satisfied.
67. Mr Giffin referred me to the judgment of Webster J in R v Secretary of State for the Home Department ex parte Northumbria Police Authority (1991) 5 Admin LR 489. In that case, the Home Secretary had made two inconsistent decisions relating to payments for assistance granted by one police authority to another during the miners’ strike. Judicial Review was sought of his second decision, on the ground of its inconsistency with the first decision and his failure to take proper account of Police Negotiating Body circulars. Webster J said, at 504C:

“Inconsistency

Undoubtedly ministerial and similar decisions can be struck down on the grounds of inconsistency in certain circumstances, which include those in which the authority in question has been inconsistent and has abused its discretion or unfairly misled a party into taking action which it would not otherwise have taken. Undoubtedly, also, the decisions on these applications were wholly inconsistent with the decision on the application against Derbyshire. But in my view, had there been no failure to take into account the meaning of a relevant Circular, and had the determination not been invalidated for any other reason, I would not have decided that they should be invalidated because of this inconsistency, because there is no evidence that it amounted to any sort of an abuse of discretion, and because LPA cannot say that they did anything in reliance upon the Derbyshire decision: they already had in effect, no alternative but to apply to the Secretary of State for these determinations.

Nonetheless there is another respect in which this inconsistency would have troubled me if I had not, by the time I had to consider it, already decided this application in LPA’s favour: for although the Secretary of State has explained why he, by his officials, made the Derbyshire decision in the way in which he did, and although he had explained why he made these determinations in the way in which he did, he has at no point said, in giving very full reasons in the affidavit of Mr. Addison for these determinations, that when making these determinations he took into account, in favour of LPA, the fact that he had already determined the Derbyshire application in its favour. Although it is unnecessary for me to decide this point, I would have given it much closer consideration and thought if the outcome of this application had been dependent upon it.”

68. In the present case, unlike that case, the Appeals Sub-Committee did take into account the fact that there had been previous decisions that were said to be inconsistent with that under appeal. On the other hand, the number and percentage of inconsistent decisions was, for 1998/1999, much higher than in that case.
69. In R v Secretary of State for Education ex parte C [1996] ELR 93, the Secretary of State had made two inconsistent decisions as to whether C had special educational needs, the first that she did, the second that she did not. She applied for Judicial Review of the second decision on the grounds that he was not entitled to come to a decision on this point at variance with his first decision, and that he had misconstrued the relevant legislation. The challenge on the ground of inconsistency was rejected. Schiemann J stated, at 95:

“Inconsistency

Insofar as the challenge is based on inconsistency between the first and second decisions, I reject it. I accept that there is an inconsistency, in the sense that the second decision is based on substantially the same material and yet comes to the conclusion that C has no SEN whereas the first decision seems to be premised on a conclusion that C does have SEN. However, all that this tells us is that the decisions differ. Such a difference can be accounted for on a number of different possible bases: that the first decision was flawed in law, that the first decision was reached after an inadequate examination of the facts, that there are borderline cases and different assessments of the same facts can be made at different times by different persons in the Department for Education and Science each of whom is acting within the law, or that there is something unlawful about the second decision. In my judgment there is nothing on the face of it irrational even in the same person reaching a different conclusion when he re-examines the same facts. If the reasons given for reaching the second decision are inadequate or betray illegality then the second decision will be struck down. There is however no legal obligation for him to lengthen his reasons for reaching the second decision by setting out what he considers was wrong with the first decision.”

70. This statement of the legal position is especially helpful in the present context. The decision under challenge is that of the Appeals Sub-Committee. It was open to them to review, and perhaps necessary for them to review, the decisions that had been made by the Professional Indemnity Section and to decide whether or not the approach that they had taken was correct or incorrect. They decided that, despite the information before them as to the decisions taken in other cases, the proper approach was to consider each case on the basis of the Waivers Policy on its individual merits. They were clearly entitled to do so. In doing so, they departed from a mechanical application of a percentage cap on loss of discount. That departure was one they were entitled, indeed in my judgment bound, to make. The Rules and the Waivers Policy that had been published by the Law Society required individual examination of the facts of each case. To have granted an automatic waiver in cases such as the Claimants’ would have involved a departure from the stated Policy and in effect overruled the decision of the Law Society not to introduce a cap on loss of waiver in the 1998/1999 Rules.
71. The facts of the present case can be likened to the not unfamiliar situation where a line of first instance and Court of Appeal decisions is overruled by the House of Lords. If the House of Lords concludes that those decisions are wrong, it will generally overrule them. That produces an inconsistency between the decision of the House of Lords and those of lower courts. The unsuccessful party before the House of Lords may feel aggrieved. However, unless there has been significant reliance on the earlier decisions, the House of Lords will overrule them. In Fibrosa SA v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32, Viscount Simon LC said, at 44:

“Mr. Valentine Holmes, in his able argument for the respondents, asked us to consider whether this House would be justified in disturbing a view of the law which has prevailed for nearly forty years, which has been so frequently affirmed, which has been constantly applied in working out the rights of the parties to commercial contracts, and which, moreover, at any rate furnishes a simple rule against the effect of which the parties to a contract can, if they so desire, expressly provide. These are weighty considerations, but I do not think they ought to prevail in the circumstances of this case over our primary duty of doing our utmost to secure that the law on this important matter is correctly expounded and applied. If the view which has hitherto prevailed in this matter is found to be based on a misapprehension of legal principles, it is of great importance that these principles should be correctly defined, for, if not, there is a danger that the error may spread in other directions, and a portion of our law be erected on a false foundation. Moreover, though the so-called rule in Chandler v. Webster [1904] 1 K B 493 is nearly forty years old, it has not escaped much unfavourable criticism. … I think, therefore, that we ought to regard ourselves as at liberty to examine the challenged proposition freely, and to lay down what we regard as the true doctrine in English law without being hampered by a course of practice based on previous decisions in the Court of Appeal.”

72. In Campbell College, Belfast (Governors) v Commissioner Of Valuation For Northern Ireland [1964] 1 WLR 912, Lord Reid said, at 918:

“I would not seek to lay down any general rule as to the circumstances which ought to prevent this House from correcting a long standing error. But one consideration is, I think, of paramount importance. In arranging their affairs people are entitled to rely on a decision which appears to have gone unchallenged, and it would require some exceptional reason to justify a reversal if it appeared that that was likely to create any serious embarrassment for those who had acted on the faith of what seemed to be settled law.”

73. In that case, the House of Lords found that there had not been such embarrassment as would prevent them from overruling previous decisions. Fibrosa and Campbell College, Belfast (Governors) v Commissioner Of Valuation For Northern Ireland may be compared with the decision of the House of Lords in Ross Smith v Ross Smith [1963] AC 280, in which the members of the House were divided on the question whether the long-standing authority of Simonin v Mallac (1860) 2 Sw. & Tr. 67 should be overruled. Lord Reid said, at 303:

“It follows that, in my judgment, Simonin v. Mallac cannot now be supported either on the ground that it could be related to some jurisdiction previously possessed by the ecclesiastical courts or on the ground stated in the judgment. No other ground has been suggested in argument in this case or in any of the numerous cases which follow the decision in Simonin's case. Should it, then, be overruled? That is, to my mind, a very difficult question. On the one hand, it has stood for a century virtually unchallenged and it has very frequently been followed. I do not think it necessary even to mention the numerous decisions which found on it. On this aspect the case could hardly be stronger. But, in my view, there is very little else to be said in favour of the decision. It would have been a compelling reason against overruling that decision if it could reasonably be supposed that anyone has regulated his affairs in reliance on its validity, but it would be fantastic to suppose that anyone has married, or indeed entered into any kind of transaction, on the faith of being able to obtain a decree of nullity in a particular jurisdiction. And no decree of nullity already pronounced could be affected.”

74. In the present case, the Claimants did not and indeed could not assert that they relied on the decisions made by the Professional Indemnity Section in other cases. They did not know the statistics, and did not know about the 45 per cent rule of thumb, until long after they had paid their contributions. They do not and cannot say that they regulated their affairs on the strength of that rule or of those decisions.
75. Mr Juss submitted that the legitimate expectation that the 45 per cent rule would be applied was based on the information that the Claimants received that such a rule of thumb was applied by the Professional Indemnity Section of the Law Society. That information was given to them by Ms Marsay-Jones in a memorandum dated 21 July 2000. The information was known to her because she had previously worked in that Section. It has not been suggested that it was generally made known to the profession by the Law Society. It was at variance with the Law Society’s booklet referred to above. Apart from the fact that the memorandum referred only to “a rule of thumb”, which by definition is not of compulsory application, and assuming that Ms Marsay-Jones was entitled to use and to disclose this information, I see no basis for her communication of it to the Claimants to give rise to any relevant substantive legitimate expectation on their part.
76. The Claimants consider themselves aggrieved because their application for 1998/1999 failed, whereas the very great majority succeeded. They feel that they were unfairly treated. However, it is obvious from the figure given for the cost of a general cap on loss of discount in the paper prepared for the Joint Meeting of 22 April 1998 referred to above that the very great majority of principals in private practice did not benefit from a cap on loss of discount, and could not have done so without a significant effect on contributions. If the Claimants were to be given a waiver otherwise than by application of Rule 10 and the published Waivers Policy, the other principals who paid their parts of the sum of £52.9 million referred to in that paper would be equally aggrieved. It is as appropriate to compare the Claimants with those who paid their parts of the £52.9 million as with the relatively small number who received a waiver.
77. In my judgment, therefore, even assuming that decisions were made in other cases that were inconsistent with that made in this case, the Claimants are not entitled to relief under this head of claim.

Conclusion

78. In my judgment the Appellate Sub-Committee was free to determine the Claimants’ case on its individual merits, by the application of Rule 10 and the published Waivers Policy of the Law Society. They did so. They made no error in applying the Rule or the Policy. They gave adequate and good reasons for their decision. They rejected the fundamental points made by the Claimants, that the payment of contributions exceeding claims, resulting from a loss of discount, was unjust and that decisions made in other cases should necessarily be applied to them. The Committee was entitled to do so. Their decision was one that was open to them on the facts of the case. It was lawful and valid.

Other matters

79. There are two other matters to mention. At the beginning of the second day of the hearing, Mr Juss applied, on the instructions of his clients, for me to recuse myself. The ground of the application, apparently, was that I had not read sufficient documents in advance of the hearing, and had not understood the merits of the Claimants’ case. I rejected the application on grounds given at the time. This judgment will demonstrate whether or not there is substance in the Claimants’ criticism. However, while a failure by the Court to understand a party’s case will justify the reversal of its judgment on appeal, it is no ground for recusal.
80. Applications for the court to recuse itself have become increasingly fashionable of late, regrettably often with no factual or legal justification. It may be tempting for a client to want to recuse the Court when he perceives that his case is failing, but that is no justification for counsel to make the application. As in the case of the making of the allegation of malice on the part of Mr Darby, it is for counsel to satisfy himself that there are reasonable grounds for making such an application. It is also regrettable that the clients on whose instructions the application was made were solicitors.
81. Lastly, I have to express my dismay that these proceedings, involving considerable documentation and two days of Court time, related to a claim for discount amounting to about £14,500.

Disposition

82. The claim for Judicial Review of the Appeals Sub-Committee’s decision will be dismissed.

Case No: CO/3334/2001

Neutral Citation No.: [2002] EWHC 391 (Admin)

IN THE HIGH COURT OF JUSTICE

QUEENS BENCH DIVISION

ADMINISTRATIVE COURT

Royal Courts of Justice

Strand,

London, WC2A 2LL

Friday 18^th March 2002

Before :
THE HONOURABLE MR JUSTICE STANLEY BURNTON - - - - - - - - - - - - - - - - - - - - - Between : THE QUEEN ON THE APPLICATION OF

	(1) PAUL H TOOVEY (2) STEPHEN B GWENLAN	Claimants
	- and -
	THE LAW SOCIETY	Defendant

- - - - - - - - - - - - - - - - - - - - - (Transcript of the Handed Down Judgment of 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) - - - - - - - - - - - - - - - - - - - - - Satvinder Juss (instructed by Chronnell Hibbert) for the Claimants Nigel Giffin (instructed by Norton Rose) for the Defendant - - - - - - - - - - - - - - - - - - - - -
Annex to the Judgment - - - - - - - - - - - - - - - - - - - - -

The calculation of the Claimants’ contributions

83. For the year 1997/1998, their gross fees certificate showed gross fees of £328,558.00, to which the rates set out in Table III in the Rules were applied to produce an unadjusted basic contribution of £27,433.91. That figure was then discounted because 28 per cent of their work was low risk work, which attracted a discount of 80 per cent. The resulting adjusted basic contribution was £21,312.00. The next stage was the calculation of the loss ratios. During the relevant period, i.e. from 1 September 1990 to 31 August 1993, the Claimants had each made contributions of £12,505.18. The claims pool (i.e., the amount paid out by the Fund to meet their insured liabilities) for each of them amounted to £13,608.48. Their loss ratio was £13,608.48:£12,505.18, i.e., 1.088. Since the Rules provided that no loading or discount should apply in a case where the loss ratio was greater than 0.8 but not greater than 1.2, their contributions were not subject either to loading or to discount. The result was that their contribution was calculated at the sum of £21,312.00, to which was added a service charge in respect of the facility of paying in monthly instalments, together with VAT.
84. For the year 1998/1999, the Claimants’ gross fees as shown by their gross fees certificate, when multiplied by the applicable tapered percentage rate in accordance with rule 39.3 of the 1998 Rules, produced an “unfactored contribution” of £29,473.27. That figure was then factored, or adjusted, by the risk banding of the work of the practice. In the case of the Claimants, because 16 per cent of their work was trust and probate, 16 per cent of the unfactored contribution was reduced by applying the factor 0.46: see Table III of the 1998 Rules. The resulting factored basic contribution was £28,939.80. The loss ratio was then calculated for the relevant period, that is, as mentioned above, the five year period from 1 September 1991 to 31 August 1996. Each of the Claimants had made contributions of £23,548.65 during the relevant period, and each had a claims pool of £11,309.95 over that period. The resulting loss ratio (contributions divided by claims) was 0.48. Rule 42 and Table V required the application of a 16 per cent discount where the claims ratio exceeded 0.44 but did not exceed 0.49, and this was applied to the factored basic contribution of £28,939.80, to produce a discount of £4,630.37. To the resulting sum a 4 per cent service charge was added together with VAT, and in addition the Claimants were required to make a separate contribution towards the shortfall in the Fund, which amounted to £5,282.55, to which was again added the service charge and VAT.
- - - - - - - - - - - - -

MR JUSTICE STANLEY BURNTON: My judgment in this matter has been distributed in draft, there are some changes between the draft and the final judgment, they are relatively minor, and for the reasons set out the application for judicial renew is dismissed.

I have received a chronology, which I have not read, Mr Juss, and a letter of 18th March, which I have not read. Do you want to tell me about them?

MR JUSS: My Lord, basically the position is as follows, there are, might I just say, negotiations, even as we speak, afoot between Mr Toovey and Lawton Rose (?) with a view to deciding how to proceed, and if they will be able to offer what we want then, of course, our position would be different in the light of that.

But, basically, in the light of the fact that there is going to be an application this morning, as we speak, that there be costs paid by Mr Toovey on an indemnity basis that hangs on a number of matters, one of which is that the application of malice was raised by us.

MR JUSTICE STANLEY BURNTON: You will not have noticed, you have not had time to, Mr Juss, I changed that paragraph to read: "malice or other improper motive" because I certainly did understand the submission to be that because Mr Derby had been pushed into accelerating the claimant's case, he decided against them; he resented that and decided against them. That is what I understood the allegation to be.

MR JUSS: Your Lordship will recall how that point was raised by myself on the hearing, and I took you to Part 8 of the claim form. I said that if one looks at the facts and looks at the correspondence one finds an acrimonious set of correspondence between the parties. In the light of that fact the decision, eventually reached by Mr Derby, is not rational. It may well be that that might be the backdrop to it, at which point my learned friend rose to his feet and said: "If malice is being alleged then this ought to be properly pleaded." I said that it was not being alleged, and your Lordship then uttered out aloud that malice was not an allegation. My Lord, it never surfaced in argument again, and if one looks at the affidavit of Mr Toovey malice is not alleged at all; discourtesy is alleged, but malice is not.

MR JUSTICE STANLEY BURNTON: It is touched on, as I said in my judgment, it is an odd paragraph in his affidavit, is it not? Anyway, if I am assured that no allegation of malice was intended, I am perfectly happy to take out that paragraph of the judgment.

MR JUSS: I am grateful, my Lord. My Lord, might I just say this. We on this side feel, Mr Toovey feels, that he has conducted himself in a most commendable manner, every extension that has been applied for he has acceded to and all correspondence has been totally courteous. If, in the light of that, there is to be any allegation of discourtesy by Mr Toovey, it naturally is a matter that will concern us. So, unless it can be substantiated in any way, it really out to be taken out.

MR JUSTICE STANLEY BURNTON: I shall, subject to what Mr Giffin may say, happily remove that from the final judgment. I shall withdraw these versions and versions with that paragraph omitted will be available by 10.15, and I shall deal with it in that way.

MR JUSS: My Lord, the only other thing is that, of course, since I am on it, if one looks at the grounds for alleging, or asking, for costs on an indemnity basis, one goes to the four grounds, and one of them is that the whole of the second day was taken up with a totally improper allegation that the judge had recused himself. My Lord, I was uncomfortable making that application, I do accept that I did make it, and matters just moved on. In fact, the second day was not as productive from our point of view. The second day was the day when your Lordship said, 'Well look, let us see what else you can come up with.'

MR JUSTICE STANLEY BURNTON: The application to recuse did not take more than 20 minutes or so.

MR JUSS: Yes, my Lord, and that was not causative of extra costs. So if that is being used as a basis to ask for costs on an indemnity basis that really is -- the only thing, my Lord is----

MR JUSTICE STANLEY BURNTON: Should not Mr Giffin make his application before you respond to it?

MR JUSS: Yes, my Lord. Might I just say that the only thing I would say, if your Lordship is in the process of looking at the decision, and possibly amending parts of it, your Lordship made the point, in fact this was also raised by the other side, that paragraph 29 had the greatest mileage in it, and paragraph 29 deals with the statistics that I raised. My Lord, I thought that, although your Lordship is entirely right to say that, in the claim form that is set out but no conclusions are drawn in the claim form. The way in which the case ran throughout was on the basis that if 355 applications had been allowed and only eight had been refused, what we were saying was that our case was as meritorious as any of the others. We were, in fact, therefore, drawing a deduction from those facts, and if it is going to go away----

MR JUSTICE STANLEY BURNTON: What was the deduction?

MR JUSS: The deduction was precisely this, my Lord, that---

MR JUSTICE STANLEY BURNTON: That "if they got, we should get"?

MR JUSS: Yes, we would say that like cases must be treated like. That it is a phenomenal disparity, my Lord, that 355 are allowed and eight are refused.

MR JUSTICE STANLEY BURNTON: I addressed all that in the judgment.

MR JUSS: What your Lordship said in the judgment was no conclusions must be drawn from that, and this is the best argument that there is.

MR JUSTICE STANLEY BURNTON: In the claim form no conclusion was drawn, and the only such conclusions, as there were, were made in submissions.

MR JUSS: Could it be added that there were submissions to this effect in relation to that? In paragraph 29 that point is not made and that is the only thing we say.

MR JUSTICE STANLEY BURNTON: From paragraphs 59 on I make it clear. I dealt at length with your argument on inconsistency. Indeed, it gets something like 20 paragraphs, more than anything else, and I would not have done that if there had been no argument on it.

MR JUSS: Indeed, which is why, my Lord, as I say, in relation to the malice argument as well, there are at least two occasions in the judgment when your Lordship does say that the essential argument is that of common interest rather than malice per se. If your Lordship has addressed this point subsequently, then it ill-fits with the apparent impression given at paragraph 29. But if the point could be simply made that "In argument counsel addressed/purported to say the following points..." or something like that. It would not detract, my Lord, from the point your Lordship makes, which is that in the claim form it is true that we do not draw any conclusion from it.

MR JUSTICE STANLEY BURNTON: It is now paragraph 31.

MR JUSS: Paragraph 31 deals with legitimate expectations.

MR JUSTICE STANLEY BURNTON: No, you are probably not looking at the final version. It says this: "The Claim Form bases no legal conclusion on the statements. The statistics as to the grant of waivers, however, played a large part in Mr Juss's argument before me." What else do you want me to say?

MR JUSS: My Lord, my concern was heightened in relation to this because of the application to be made by my learned friend which focuses on paragraph 29.

MR JUSTICE STANLEY BURNTON: Let him make his application then you can reply to it. Mr Giffin, do you have any applications to make?

MR JUSS: My Lord, subject to how Mr Toovey gets back to me in the next five or ten minutes or so, my application would be that really there ought to be no order as to costs in this.

MR JUSTICE STANLEY BURNTON: Do you have an application other than that, are you asking for leave to appeal?

MR JUSS: My Lord, this is something we will appeal if, in fact, the response from the Law Society is not favourable this morning.

MR JUSTICE STANLEY BURNTON: You must either ask for leave to appeal or not. This is the occasion when you must decide what you are doing.

MR JUSS: Could I just say that Mr Toovey has been negotiating throughout the weekend and this morning, now this court is sitting an hour earlier than it would normally, and by 10.30 I am sure we will have a response. My Lord, the position is this, I can tell the court the position is this---

MR JUSTICE STANLEY BURNTON: Yes?

MR GIFFIN: My Lord, there has, I now believe, been a successful attempt to take instructions this morning. If I were to have, I think, one minute, I think we might find that I could invite your Lordship to make an order by consent without----

MR JUSTICE STANLEY BURNTON: Are you asking me to rise?

MR GIFFIN: My Lord, yes, if your Lordship would do that.

(The Court Rose)

MR GIFFIN: My Lord, I am able to tell your Lordship it is agreed between the parties that, subject to the court being willing to make this order, the order should be an order for costs in the defendant's favour on the standard basis from the date on which Lawton Rose came on the record, I am afraid I cannot give your Lordship that date at the moment and that there be no other order. On that basis, the claimant will not be seeking permission to appeal. I am sorry that communication difficulties meant that we were not able to sort that out before your Lordship came into court.

MR JUSTICE STANLEY BURNTON: It is agreed then, Mr Juss?

MR JUSS: Those are also my instructions.

MR JUSTICE STANLEY BURNTON: I see no reason why I should not make such an order. But, I think, I hinted in almost the last paragraph of this judgment, that other means of disposing of this dispute would have been very sensible, simply having regard to the amount involved. There we are, it has taken to this late stage. Thank you both very much.

MR JUSS: My Lord, can I just ask that the amendments that I proposed this morning be taken on board?

MR JUSTICE STANLEY BURNTON: I did take them on board, Mr Juss, and I am taking out the paragraph I said I would take out a moment ago.

MR JUSS: My Lord, on the suggestion that the grounds of review tended to alternate. The grounds of review were exactly those set out in the claim form. They were followed word by word exactly as they stood.

MR JUSTICE STANLEY BURNTON: There we are.

MR JUSS: My Lord, finally, may I say, this has been a difficult case.

MR JUSTICE STANLEY BURNTON: Mr Juss, I appreciated that you were in a difficult position. I have softened to some extent, as you will see, if you look at the final version, and what was said at the end. I appreciated the difficulties of your position.

MR JUSS: It is also very difficult to (inaudible) between one's duty to the court, which is very, very high, but equally high is the duty to one's client----

MR JUSTICE STANLEY BURNTON: There are occasions when one has to turn to one's client, even a client who is a solicitor, perhaps when it is a solicitor it is more difficult, and be firm. I appreciate that when one is under pressure it is sometimes difficult to realise where the line is, and I was not suggesting in any way that you had been guilty of anything in the shape of misconduct, but one is concerned that applications, such as the application to recuse, are becoming very common; they have become fashionable. I have increasingly seen cases in which applications to recuse a judge have been made in circumstances where three or four years ago no one would have dreamt of it. I did feel I had to say something about it.

Good, unless there is anything further, the corrected amended version of the final judgment will be here by 10.15, if not earlier.

--------------