Billig v Council of the Law Society of Scotland
| Jurisdiction | Scotland |
| Judgment Date | 20 September 2006 |
| Date | 20 September 2006 |
| Docket Number | No 4 |
| Court | Court of Session (Outer House) |
Court of Session Outer House
Administrative law - Judicial review - Decision of Council of the Law Society of Scotland to refuse to make a grant from the Scottish Solicitors Guarantee Fund - Whether there was material before the council entitling them to make a finding of negligence on the part of the petitioners - Whether council were entitled to refuse to make a grant - Whether council had a general or residuary statutory discretion to refuse to make a grant - Solicitors (Scotland) Act 1980 (cap 46), sec 43
Solicitors - Refusal of Council of the Law Society of Scotland to make a grant from the Scottish Solicitors Guarantee Fund - Whether there was material before the council entitling them to make a finding of negligence on the part of the petitioners - Whether council were entitled to refuse to make a grant - Whether council had a general or residuary statutory discretion to refuse to make a grant - Solicitors (Scotland) Act 1980 (cap 46), sec 43
Section 43 of the Solicitors (Scotland) Act 1980 provides for the establishment of the Scottish Solicitors Guarantee Fund ("the guarantee fund") for the purpose of compensating persons who in the opinion of the Council of the Law Society have suffered pecuniary loss by reason of dishonesty on the part of a solicitor. Section 43(5) provides that the council may refuse to make a grant, or may make a grant only to a limited extent, if they are of the opinion that there has been negligence on the part of the applicant or of any person for whom he is responsible which has contributed to the loss in question.
The petitioners had advanced sums of money to a company on the basis of undertakings given by the company's solicitor, Michael Mullen, that the loans would be repaid. The undertakings were provided dishonestly and the loans were not repaid. Mr Mullen was sequestrated but the petitioners received nothing from his estate. The petitioners applied for a grant from the guarantee fund. The claims were initially rejected, but following an application for judicial review, the respondents consented to the reduction of their decision. The matter was referred back to the guarantee fund committee which eventually concluded that the petitioners' loss was entirely caused by their own carelessness or negligence in not making financial checks on the relevant parties and that no grant should be made. The respondents agreed with this conclusion and found that the petitioners had acted without reasonable care and were wholly responsible for their loss. In particular, the respondents found that: (i) no loan documentation had been obtained; (ii) no reasonable person would have relied on the undertakings; (iii) the petitioners had failed to follow their standard procedures for the provision of such loans; (iv) the petitioners had not consulted a Scottish solicitor; (v) no checks had been carried out as to Mr Mullen's creditworthiness; and (vi) the interest rates being charged on the loan ought to have put them on notice. The respondents refused to make a grant from the guarantee fund in favour of the petitioners.
The petitioners sought judicial review and argued that: (i) it was perverse to say that the dishonesty of the solicitor had no part to play in their loss; (ii) there was no material before the respondents to allow them to conclude that the petitioners regularly obtained loan documentation, that they departed from standard procedure, that they should have been put on their guard or that they should have taken additional steps; (iii) it was not careless for the petitioners to rely on a solicitor's undertaking which was binding in law and enforceable; and (iv) the respondents had no general or residuary discretion to refuse to make a grant.
The respondents argued that they had addressed the correct question and on the material before them, were entitled to conclude that there had been negligence on the part of the petitioners which had contributed to their loss. Any finding of negligence on the part of the petitioners entitled the respondents in principle to refuse to make an award and they were entitled in the exercise of their discretion to refuse a grant. Even if there was no basis for a finding of negligence on the part of the petitioners, the respondents had a general or residuary discretion to refuse an award.
Held that: (1) the respondents were entitled on the material before them to make a finding that the petitioners had been negligent and that it had contributed to their loss; (2) the respondents were entitled to refuse to make a grant out of the guarantee fund in favour of the petitioners as in the particular circumstances of the case, the refusal was within the spectrum of reasonable decisions open to them; (3) the respondents had a general or residual discretion, apart from sec 43(5), to refuse to make a grant out of the guarantee fund; and petition dismissed.
John Billig and Allied Sterling plc presented a petition under the judicial review procedure in the Court of Session seeking to bring under judicial review a decision of the Council of the Law Society of Scotland, dated 30 April 2004, in which the council refused to make a grant out of the Scottish Solicitors guarantee fund in favour of the petitioners. They sought, inter alia, decrees of declarator and dismissal of the council's decision. The Council of the Law Society of Scotland were called as respondents.
Cases referred to:
Ashbridge Investments Ltd v Minister of Housing and Local GovernmentWLRUNK [1965] 1 WLR 1320; [1965] 3 All ER 371
Associated Provincial Picture Houses Ltd v Wednesbury CorporationELRUNK [1948] 1 KB 223; [1947] 2 All ER 680
Burnett's Tr v GraingerUNKSCUNK [2004] UKHL 8; 2004 SC (HL) 19; 2004 SLT 513; 2004 SCLR 433
Cheval Property Finance plc v Hill 2004 SLT 1107
Council of Civil Service Unions v Minister for the Civil ServiceELRWLRUNK [1985] AC 374; [1984] 1 WLR 1174; [1984] 3 All ER 935
Derry v Peak (1889) 14 App Cases 374
Dryburgh v GordonUNK (1896) 24 R 1; 34 SLR 19; 4 SLT 113
Gran Gelato Ltd v Richcliff (Group) LtdELRWLRUNK [1992] Ch 560; [1992] 2 WLR 867; [1992] 1 All ER 865
Johnston v Little 1960 SLT 129; 1959 SLT (Notes) 70
McGillivray v Davidson 1993 SLT 693
Muir v Glasgow CorporationSCELRUNK 1943 SC (HL) 3; 1944 SLT 60; [1943] AC 448; [1943] 2 All ER 44
R v Brent London Borough Council, ex p BaruwaUNK [1997] EWCA Civ 1001; [1997] 3 FCR 97; 29 HLR 915; [1997] COD 450
R v Law Society, ex p Ingman Foods Oy ABUNK [1997] EWHC Admin 26; [1997] 2 All ER 666; [1997] PNLR 454; [1997] COD 234
R v Law Society, ex p Mortgage Express LtdUNK [1996] EWCA Civ 1234; [1997] 2 All ER 348; [1997] PNLR 469
R v Monopolies Commission, ex p South Yorkshire Transport LtdWLRUNK [1993] 1 WLR 23; [1993] 1 All ER 289
Redgrave v Hurd [1881] 20 Ch 1
Secretary of State for Education v Tameside Borough CouncilELRWLRUNK [1977] AC 1014; [1976] 3 WLR 641; [1976] 3 All ER 665
SHBA Ltd v Scottish Ministers 2002 SLT 1321
Standard Chartered Bank v Pakistan National Shipping CorpUNKELRWLRUNK [2002] UKHL 43; [2003] 1 AC 959; [2002] 3 WLR 1547; [2003] 1 All ER 173
United Mining & Finance Corp Ltd v BecherELR [1910] 2 KB 296
Textbooks etc. referred to:
Bennion, FAR, Statutory Interpretation: A Code (4th ed, LexisNexis/Butterworths, London, 2002), pp 635, 636
Henry, GLF, "Letters of Obligation" (1973) 18 JLSS 121
Smith, IS, and Barton, JM, Procedures and Decisions of the Scottish Solicitors' Discipline Tribunal (T & T Clark/Law Society of Scotland, Edinburgh, 1995), pp 142-144
Webster, JH, Professional Ethics and Practice for Scottish Solicitors (4th ed, Avizandum, Edinburgh, 2004)
The petition and answers came before the Temporary Judge (J Gordon Reid QC, FCIArb) for a first hearing on 4, 5, 6 and 13 July 2006.
At advising, on 20 September 2006, the Court dismissed the petition-
J Gordon Reid QC, FCIArb-
[1] This petition for judicial review relates to a decision by the Council of the Law Society of Scotland (the 'council') dated 30 April 2004. The council has refused to make a grant out of the Scottish Solicitors Guarantee Fund in favour of the petitioners who suffered loss through the dishonesty of a solicitor, Michael Mullen, who was, at the material time, enrolled on the Register of Solicitors in Scotland. The losses concern certain loan transactions and the granting of letters of undertaking by Mr Mullen whereby he irrevocably and unconditionally undertook personally to repay the loans being made to his client.
[2] At the first hearing, which took place on 4, 5, 6 and 13 July 2006, the petitioners sought, inter alia, decrees of declarator and reduction of the council's decision, and the respondents, the council, sought dismissal. The issues debated before me raised questions about the administration of the Scottish Solicitors Guarantee Fund (the 'guarantee fund') currently established by sec 43 of the Solicitors (Scotland) Act 1980 (the '1980 Act'). There is a lengthy history to these claims. The background leading up to the decision under challenge is well documented and is not seriously in dispute. Although there are two petitioners, counsel did not draw any distinction between them in their submissions, and I have not done so.
[3] The issues debated before me largely concerned the question (which can be expressed in a variety of ways) whether there was material before the council entitling them to make a finding of negligence on the part of the petitioners, and if there was not, whether the council had a general or residual statutory discretion to refuse to make a grant, and whether the proceedings therefore fell to be remitted to the council to consider the exercise of any such statutory discretion. Other related questions were also debated and fall to be determined.
[4] Finally, by way of introduction, I record that the petitioners tendered a short minute of amendment which substituted declaratory craves for branches (3) and (4) of...
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