EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
Lady Paton Lady Smith Lord Bracadale	[2013] CSIH 30 P371/12 OPINION OF THE COURT delivered by LADY PATON in the appeal by FIRM A and ANOTHER Petitioners and Appellants; against THE COUNCIL OF THE LAW SOCIETY OF SCOTLAND Respondents: _______________

Petitioners and Appellants: Burr; Drummond Miller LLP

Respondents: R Dunlop QC; Balfour & Manson LLP

19 April 2013

Introduction

[1] The appellants, a firm of solicitors, acted for a client C. C granted one partner (P) a Power of Attorney. P acted on that Power of Attorney from about April 2000 until C's death on 10 September 2004. Thereafter the firm acted in C's executry. They charged fees in respect of both the attorney period and the executry period. The fees were assessed by a firm of law accountants instructed by the appellants (on their own behalf) on the basis of files sent to them by the appellants. The law accountants sent the appellants a fee for their services, amounting to £6,160 plus VAT. The appellants charged that fee to the executry estate, having advised C's executors that they were doing so but without making it clear that what they were doing was not standard practice.

[2] The executors became concerned about certain aspects of the appellants' conduct of both the attorney and the executry estates. They consulted solicitors Messrs B. They lodged about seventy-three complaints with the Law Society (the Scottish Legal Complaints Commission not yet being in existence). In the course of the ensuing proceedings, Messrs B sent the appellants' files to the Auditor of the Court of Session. Possibly as a result of a failure in communication or a misunderstanding, no formal taxation hearing took place. No invitation was extended to the appellants to make submissions to the auditor either orally or in writing. The auditor simply examined the files and issued his certificate giving lower assessments for the fees charged. Accordingly neither the appellants nor their law accountants had an opportunity to explain their position to the Auditor.

[3] On the information before them, the Law Society made a finding of inadequate professional service (IPS) in respect of some of the complaints, including complaints of overcharging and a complaint that the law accountants' fee of £6,160 plus VAT had been passed on to the clients. They issued a decision dated 28 September 2010.

[4] The appellants appealed to the Scottish Solicitors' Discipline Tribunal. The appellants were represented by Mr Walter Semple, Solicitor, Glasgow. The respondents were represented by Mr Sean Lynch, Solicitor, Kilmarnock. A hearing took place on 31 October 2011 and ensuing days. Evidence was led and submissions heard.

[5] On 23 March 2012, the appellants received the tribunal's decision in the form of a three-page interlocutor dated 20 December 2011, and a six-page decision with an accompanying note (pages 7-58). The tribunal overturned a considerable number of complaints found established by the Law Society. Read short, the tribunal's interlocutor

• varied the determination that the appellants' fees for the attorney and executry periods should be restricted to £34,388.88 plus VAT and that the appellants should refund anything in excess of this to the executry estate, and instead directed that the appellants repay any fees charged to the extent that these exceed the sum determined by a taxation of new as reasonable remuneration for the actings of the appellants during the attorney and executry periods, that taxation of new to be carried out by the Auditor of Glasgow Sheriff Court;
• varied an award of compensation from £2000 to £500;
• confirmed that the appellants should refund the sum of £6,160 plus VAT in respect of charges for the law accountants' fees;
• directed that their decision should be given publicity, that publicity to include the name of the appellants.

[6] In their accompanying note at pages 49-52, the tribunal made inter alia the following observations:

"The taxation by the Auditor of the Court of Session

The tribunal had concerns with regard to the procedure followed in respect of the taxation carried out on the appellant's files by the Auditor of the Court of Session. This was not a joint remit. It is clear from the productions lodged that [Messrs B] on behalf of the executors suggested that the fees be taxed. [The partner P] wrote back stating that any fees which were prescribed should be excluded from the taxation. [Messrs B] then wrote back on behalf of the executors stating that the executors were not agreeable to the terms of the appellants' letter and accordingly the files would be remitted to the Auditor of the Court of Session and that both parties would hear from the Auditor in due course. The next thing the appellants knew was when they received the certificate from the Auditor of the Court of Session which substantially reduced the appellants' fee and does not give an explanation as to why ... The tribunal can accordingly understand the appellants' concern with regard to the taxation ... Given that the tribunal does not consider that what was done by the Auditor was a proper taxation on joint instructions but was merely an assessment of fees, this was the same task that was carried out by the law accountants and even if the Auditor of the Court of Session's opinion carries greater weight, the Law Society failed to take account of the extent to which any representations made by the appellants could have materially affected the fee assessment ...

It is not possible for the tribunal to ascertain, on the basis of the evidence before it, why the Auditor of the Court of Session reduced the appellants' fees by such a significant amount ... The tribunal considered that it had to ask itself whether or not it was reasonable of the Law Society to determine that the excess above what was taxed in the Auditor's certificate should be refunded by the appellants. The tribunal does not feel able to say that the Law Society's decision was not reasonable, but the tribunal is looking at matters afresh and has disquiet with regard to the Auditor's certificate given that it was not a joint remit. It is not clear to the tribunal whether or not the Law Society was fully aware of this when they made their decision ...

... In the circumstances ... the tribunal determined that the appellants be ordered to repay any fees charged to the extent that these exceed the sum determined by a taxation of new as reasonable remuneration for the actings of the appellants during the attorney period and the executry period. This fresh taxation shall be carried out by the Auditor of Glasgow Sheriff Court and it will be for the appellants to determine if they wish the taxation to be on the basis of oral representations or written submissions. The taxation shall be intimated on all parties ...

The law accountants' fee

The tribunal considers that in normal circumstances where a fee is charged by a lawyer and time is expended by the lawyer working out what the fee shall be, the solicitor would not charge for his time in doing this. In this case, the appellants charged the cost of the law accountants' work in preparing the appellants' fees to the executors. The tribunal accept, on the basis of the productions lodged and [P's] evidence, that the appellants did advise the executors that this was happening. The tribunal however consider that it was not fair of the appellants to give the executors the impression that this was established practice. The tribunal consider that it is unreasonable without the greatest clarity to expect a client to pay for such an outlay which may have been needlessly incurred because the client might just have accepted the solicitor's fee in the first place. It looks to the tribunal as if the law accountants' fee was quite high some 4% and the tribunal did not consider that it was good enough for the appellants just to intimate this to the executors who had not given informed consent. The tribunal do not consider that the executors had agreed to something that had been properly explained to them. The appellants appear to have given the executors the impression that this is what is always done and this is not the case. The tribunal accordingly refused the appellants' appeal in respect of the liability to repay the law accountants' fees of £6,160 plus VAT to the executry ..."

Appeal to the Court of Session

[7] The appellants now appeal to the Court of Session. As set out in Statement X of their petition, they challenge:

"... (i) the implied, though not expressed, confirmation of the Law Society of Scotland's finding of inadequate professional service;

(ii) the confirmation of the Law Society of Scotland's determination and direction that the [appellants] shall refund to the estate the sum of £6,160 plus VAT in respect of law accountant's fees;

(iii) the direction that the [appellants] shall pay the varied compensation sum of £500 to the estate of the late [C];

(iv) the direction that publicity will be given to the decision and that the publicity will include the name of the [appellants]."

The relevant statutory provisions

[8] The Solicitors (Scotland) Act 1980 provides inter alia:

"39A.- Powers where excessive fees etc charged

(1) This section applies where the Council are satisfied, in the case of any solicitor or incorporated practice, after inquiry and after giving the solicitor or incorporated practice an opportunity of being heard, that the solicitor or incorporated practice has issued an account for professional fees and outlays of an amount which is grossly excessive (whether or not the account has been paid by or on behalf of the client or debited by the solicitor or incorporated practice to the account of any sums held on behalf of the client).....

(3) On being satisfied by the solicitor or, as the case may be, incorporated practice that he or it has complied with the requirements of subsection (4) the Council, unless they are of the opinion that the solicitor or incorporated practice is liable to disciplinary proceedings under Part IV, shall terminate the suspension from practice of the solicitor or solicitors concerned and shall restore to him or them any practising certificates held by him or them for the practice year then current.

(4) The requirements referred to in subsection (3) are -

(a) to submit the account to the Auditor of the Court of Session for taxation together with all documents in the possession or control of the solicitor or incorporated practice which relate to the matters in respect of which the account was issued; and

(b) to refund to the client a sum not less than the relevant amount ....

42A.- Powers where inadequate professional services alleged.

(1) Where -

(a) the Council receive, from any person having an interest, a complaint that professional services provided by a solicitor in connection with any matter in which he has been instructed by a client were inadequate; and

(b) the Council, after inquiry and after giving the solicitor an opportunity to make representations, uphold the complaint,

they may take such of the steps mentioned in subsection (2) as they think fit.

(2) The steps referred to in subsection (1) are -

(a) to determine that the amount of the fees and outlays to which the solicitor shall be entitled for the service shall be -

(i) nil; or

(ii) such amount as the Council may specify in the determination,

and to direct the solicitor to comply, or secure compliance, with such of the requirements set out in subsection (3) as appear to them to be necessary to give effect to the determination......

(4) Before making a determination in accordance with subsection (2)(a) the Council may submit the solicitor's account for the fees and outlays to the Auditor of the Court of Session for taxation.....

53A.- Inadequate professional services: powers of Tribunal

(1) Subject to the other provisions of this Part where -

(a) a complaint is made to the Tribunal that professional services provided by a solicitor in connection with any matter in which he has been instructed by a client were inadequate; and

(b) the Tribunal, after inquiry and after giving the solicitor an opportunity to make representations, upholds the complaint,

it may take such of the steps mentioned in subsection (2) as it thinks fit.

(2) The steps referred to in subsection (1) are -

(a) to determine that the amount of the fees and outlays to which the solicitor shall be entitled for the services shall be -

(i) nil; or

(ii) such amount as the Tribunal may specify in the determination,

and by order direct the solicitor to comply, or secure compliance, with such of the requirements set out in subsection (3) as appear to it to be necessary to give effect to the determination......

(4) Before making a determination in accordance with subsection (2)(a) the Tribunal may submit the solicitor's account for the fees and outlays to the Auditor of the Court of Session for taxation.

65.- Interpretation.

(1) In this Act, except in so far as the context otherwise requires -

'inadequate professional services' means professional services which are in any respect not of the quality which could reasonably be expected of a competent solicitor, and cognate expressions shall be construed accordingly; and references to the provision of inadequate professional services shall be construed as including references to not providing professional services which such a solicitor ought to have provided;"

Submissions for the appellants

[9] Counsel for the appellants stated that there was no dispute that there had been a breach of natural justice by not offering the appellants an opportunity to explain their position to the auditor. The respondents were therefore willing to concede the appeal with expenses and request a further remit to an auditor of court who would decide whether there had been over-charging. However counsel for the appellants did not wish to adopt that solution. He contended that the tribunal's implied confirmation of the Law Society's finding of IPS should be quashed, for two reasons. First, the definition of IPS in section 65(1) of the Solicitors (Scotland) Act 1980, namely "professional services which are in any respect not of the quality which could reasonably be expected of a competent solicitor", did not include the overcharging of fees. Charging fees did not constitute a professional service. Fees were a consideration for professional services rendered. Secondly, the tribunal had no power to order a further taxation in the absence of a finding of IPS. The tribunal appeared to have ordered a new taxation in terms of section 42A of the 1980 Act; but if so, the tribunal had to uphold the IPS complaint before having the power to order a taxation. The tribunal had therefore acted ultra vires by ordering a taxation without first upholding the complaint.

[10] There were three subsidiary matters. (i) The tribunal had taken the view that it was not fair to charge the clients with the law accountants' fee: but the definition of IPS in section 65(1) of the 1980 Act had nothing to do with fairness. The test was whether the practice adopted by the appellants was not of the quality which could reasonably be expected of a competent solicitor. The tribunal had therefore applied the wrong test. (ii) and (iii) The questions of compensation and publicity were parasitic on the decision on the merits (i.e. whether or not there had been any IPS).

[11] The court was invited to allow the appeal and to quash the finding of IPS impliedly confirmed by the tribunal.

Submissions for the respondents

[12] Senior counsel for the respondents accepted that the finding of IPS based upon a taxation in which the appellants had not been able to make submissions could not stand. He invited the court to allow the appeal on the ground set out in statement XII of the petition (an admittedly flawed taxation), and then to remit the case to the tribunal for reconsideration in the light of the new taxation. The reconsideration would include questions of IPS, compensation, publicity, and expenses. Quoad ultra the appeal should be refused.

Whether excessive fee-charging could be defined as IPS

[13] Senior counsel made three submissions under this head:

(i) The argument came too late. There had been lengthy procedures before both the Law Society and the tribunal. Throughout, overcharging had been described as "IPS" without objection. Mr Lynch had made a specific submission, with reference to authority, that overcharging constituted IPS. That submission had not been challenged.

(ii) The proposition that overcharging could amount to IPS was well supported by authority. Reference was made to the authorities cited in paragraph [19] below. A solicitor had to be particularly careful when dealing with powers of attorney and executries where he was holding monies for these estates. If too much money was taken out of such an estate, that was IPS.

(iii) Esto the appellants were correct, and overcharging could not be regarded as IPS, then this court should direct the tribunal to consider the case with a view to the appellants being prosecuted for "misconduct". The tribunal had not foreclosed that issue.

Whether the tribunal had power to send the case for a new taxation

[14] Senior counsel submitted that the Law Society and the tribunal were separate statutory entities. Each had jurisdiction to consider the question of excessive fees. It would be odd if they had to engage in that consideration "blind", without the benefit of taxation. Section 39A of the 1980 Act (a provision independent of IPS and dealing with excessive fees as a discrete matter) entitled the Law Society to compel a taxation, independently of any question of IPS. It would be a strange result if the involvement of IPS resulted in a different position. There could be two statutory interpretations: (a) the tribunal was enjoined to take its own view on the question of IPS: but in assessing quantum, they had the power to send fees for taxation; or (b) the tribunal was entitled to send the fees for taxation as part of an investigative exercise. Either way, the tribunal's decision was not incompetent. As a fall-back position, counsel submitted that there was, in any event, a power inherent in the Law Society and the tribunal to send an account for taxation. They could do so without any specific statutory power. There was no lack of competency, and the vires point flew off.

The law accountants' fee

[15] What was "not fair" was to suggest to the client that the charging of the law accountants' fee to the client was established practice, when it was not. Thus the professional services rendered were not of the quality which could reasonably be expected. The view of a specialist tribunal such as the Scottish Solicitors' Discipline Tribunal was to be respected in matters of professional practice. The decision relating to the law accountants' fee had been arrived at on the basis of the whole evidence heard by the tribunal. Any appeal from the tribunal on such a matter was no different from an appeal against a court's findings-in-fact (which were not lightly to be interfered with: Gupta v General Medical Council [2002] 1 WLR 1 paragraph [10]; Thomas v Thomas 1947 SC (HL) 45).

Discussion

The law accountants' fee

[16] This court should be slow to interfere with the views reached by a specialist tribunal such as the Scottish Solicitors' Discipline Tribunal, especially in matters relating to professional practice (McMahon v Council of the Law Society of Scotland 2002 SC 475 paragraph [16]; Mallon v General Medical Council 2007 SC 426 paragraph [20]). In this case, the tribunal concluded that the appellants had not rendered the professional services which could reasonably be expected of a competent solicitor in that it was not made clear to the clients that it was not standard practice to charge clients for a law accountants' fee. As the tribunal explained (page 52 line 3 of the Appendix)":

"The tribunal consider that it is unreasonable without the greatest clarity to expect a client to pay for such an outlay which may have been needlessly incurred because the client might just have accepted the solicitor's fee in the first place."

We accept the tribunal's conclusion on this matter, and we are not persuaded that they erred in reaching it. Accordingly the tribunal were in our view entitled to determine that there had been IPS on the part of the appellants in that context.

The question of overcharging of fees

[17] We reject the submission that the overcharging of a solicitor's fees cannot constitute inadequate professional service (IPS) for the following reasons:

Argument not presented earlier

[18] This argument was not presented either to the Law Society or to the tribunal, despite the appellants having had ample opportunity to do so. In our opinion, it is now too late now for the appellants to seek to introduce it.

In any event overcharging of solicitors' fees does constitute IPS

[19] A solicitor is responsible for fee notes issued on his behalf, even if they have been prepared by law accountants instructed by him. We accept Mr Dunlop's submission that if the fee is excessive, the services provided by the solicitor are not of the quality which would be expected for that price. In other words, the corollary of excessive fees is that the service was not adequate for the price: cf MacColl v Council of the Law Society of Scotland 1987 SLT 524, at page 527 (professional misconduct established where a solicitor issued excessive fee-notes prepared by his law accountant); section 42A(2)(a) of the 1980 Act (the Council's ability to reduce fees, indicative of the fact that IPS includes overcharging of fees); Smith and Barton Scottish Solicitors' Discipline Tribunal paragraph 5.03, 6.07, 6.08; Ryder Professional Conduct for Scottish Solicitors page 104; Paterson & Ritchie Law Practice and Conduct for Solicitors pages 35 to 37; John Henderson & Sons v The Council of the Law Society (an unreported decision of the Scottish Solicitors' Discipline Tribunal). We also accept the argument that in this context a solicitor requires to be particularly careful where he holds funds for an attorney or executry estate.

The new taxation

[20] Approximately seventy-three heads of complaint were made in this case. Some, but not all, related to alleged overcharging of fees, while the remainder comprised allegations of a variety of unsatisfactory professional services. One of the latter allegations, namely the charging to the client of £6,160 plus VAT for the law accountants' work in preparing the fee-notes, was accepted by the tribunal to constitute IPS.

[21] In our view, even without the other heads of complaint made in this case, the issue of the £6,160 alone brought matters under the umbrella of section 53A(1) of the 1980 Act. In terms of that sub-section, the tribunal was entitled to "take such of the steps mentioned in subsection (2) as it thinks fit". Section 53A(2) provides that those steps include:

" ... (a) to determine that the amount of the fees and outlays to which the solicitor shall be entitled for the services shall be -

(i) nil; or

(ii) such amount as the tribunal may specify in the determination ..."

Subsection (4) empowers the tribunal:

"Before making a determination in accordance with subsection (2)(a) the tribunal may submit the solicitor's account for the fees and outlays to the Auditor of the Court of Session."

Section 42A(4) gives similar powers to the Council of the Law Society.

[22] We consider that Parliament clearly intended that both the Council and the tribunal should have the power to send a case to an auditor of court to have questions relating to the appropriate level of fee answered. While both section 42A(4) and 53A(4) specify a particular auditor - the Auditor of the Court of Session - it is our opinion that the tribunal also has an inherent power to undertake or order such inquiry as is necessary to determine inter alia the amount of the fees and outlays which a solicitor is entitled to charge, including a remit by the tribunal ex proprio motu to another auditor of court, such as the auditor of one of the sheriff courts, in order to ascertain the said amount of fees and outlays in a case such as the present - as happens, for instance, where the Auditor of the Court of Session has a conflict of interest.

[23] In any event the appellants' position (as set out in their Supplementary Note of Argument) is that the tribunal "appears to have ordered a taxation in terms of section 42A(2)(c)" (presumably intended to be a reference to section 53A). It is not in fact clear from the tribunal's interlocutor, decision, or note that the taxation was necessarily ordered in terms of that statutory provision. A fortiori therefore it is our view that a tribunal such as the Scottish Solicitor's Discipline Tribunal has the inherent power to order such an investigation and report. In the result therefore, we are not persuaded that the tribunal had no power to remit the case to the Auditor of Glasgow Sheriff Court. We wish to add that it is, in the circumstances, a sensible course of action to have adopted. We agree with the tribunal that it is necessary that such a new taxation should take place, with opportunity for the appellants to present submissions, and to do so before an auditor who has not previously considered these fees. To that extent therefore this appeal should succeed, and the finding of IPS insofar as based upon the overcharging of fees should be quashed.

Compensation, publicity and expenses

[24] The remaining issues of compensation (whether to be awarded, and if so, how much); publicity, and any awards of expenses against the appellants relating to the hearings before the Law Society and the tribunal, will depend upon the outcome of the new taxation.

Decision

[25] In the result, we allow the appeal on the ground set out in Statement XII of the petition (lack of opportunity to make submissions to the auditor); quash the finding of inadequate professional service (IPS) insofar as based on overcharging of fees (i.e. from the words "vary the determination that the appellants' fees" in the 8^th and 7^th last lines of page 2 of the interlocutor dated 20 December 2011 to and including the words "taxation fee or the part there payable by them being intimated to them;" in the 5^th and 6^th lines of page 3 of the interlocutor); quash the directions that compensation of £500 be paid and that publicity be given; confirm the determination that the sum of £6,160 plus VAT in respect of the law accountants' fee should be refunded to the executry estate; and remit the case to the tribunal for reconsideration in the light of the new taxation (that reconsideration to include questions of IPS, compensation, publicity and expenses); quoad ultra we refuse the appeal.

[26] We reserve the question of the expenses of this appeal to enable parties to address us on that matter.