Kanat Assaubayev and Others v Michael Wilson & Partners Ltd

Hearing dates: 14 th October 2014

1. The question in this appeal is whether the judge was wrong to stay a claim by which the Appellants challenged the entitlement of the Respondent to recover legal fees in circumstances where, as they contend, the Court itself has and should exercise its supervisory jurisdiction over solicitors and others in relation to the matters of which they complain.

The parties

The Appellants

2. The first five Appellants are members of a prominent and wealthy Kazakhstani family. I distinguish them by their first names. Kanat is the father; Marusya the mother; and Baurzhan, Aidar and Sanzhar are the sons. I call all five “the family”. The sixth Appellant – Hawkinson Capital Inc (“Hawkinson”) – is one of the companies associated with their commercial activities. The family and Hawkinson are, together, the Appellants. There was a seventh claimant – JSC Credit Altyn Bank – which has taken no part in the claim the subject of this appeal since February 2012.

3. In June 2010 the family became embroiled in major commercial litigation in the Chancery Division in what has been called the Jenington Action. This related to dealings in shares in Kazakhgold, which were held indirectly by members of the family prior to their acquisition by Jenington International Inc. On 23 June 2010 the claimants in that action obtained a worldwide freezing order against the family and others.

The Respondent

4. Michael Wilson & Partners Limited (“MWP”) is a company incorporated in the British Virgin Islands. It describes itself as a legal advisor. Its managing director was Michael Wilson, who was at all material times recorded on the roll of solicitors of the Senior Courts and held a practising certificate in England and Wales.

5. MWP is not and never could have been at any material time any of the following:

i) a solicitor of the Senior Courts;

ii) a firm of solicitors of which at least one partner was a solicitor;

iii) a “ recognised body” under section 9 of the Administration of Justice Act 1985; or

iv) an authorised person under the Legal Services Act 2007.

It could not have come within (i) or (ii) because it was a BVI registered company: see [21] below. It could not come within (iii) because it did not and could not comply with regulation 2.1 of the Solicitors Regulatory Authority (“SRA”) Recognised Bodies Regulations in that, inter alia, it could not comply with Rule 14.03 of the Solicitors Code of Conduct 2007 since it was neither incorporated in England and Wales nor had a practising address there: see section 9 (1) (b) at [23] below. It could not have been an authorised person under the 2007 Act because the statutory scheme for authorisation under that Act did not come into force until 1 October 2011.

The Retainers

6. By a letter from MWP dated 2 July 2010 (“the July Retainer”), apparently signed by the family and on behalf of Hawkinson and Gold Lion Holdings Ltd, a company which is not party to these proceedings, MWP was engaged to provide the family and Hawkinson with legal services in relation to the Kazakhstan aspects of the issues and the dispute that had arisen with a number of companies including Jenington International Inc relating to and involving KazakhGold Plc and KazakhAltryn MMC JSC. This was the subject matter of the Jenington action. In Schedule 1 there was a Summary of Key Personnel. These included Michael Wilson, whose business associations were said to include Membership of the Law Society of England & Wales. Included amongst the educational details of another individual at MWP was the fact that he had been admitted as a solicitor in England & Wales in 2005.

7. By a letter from MWP dated 24 August 2010 (“the August retainer”), signed by Aidar, Aidar engaged MWP with effect from 24 August 2010 to act for him personally with respect to his involvement as a defendant in the Jenington Action. The letter attached the same Schedule. The August retainer appears to have been entered into because the solicitors acting for the other defendants in the Jenington action were not prepared to go on the record for Aidar because to do so would make it difficult to maintain that Aidar and Baurzhan were not communicating with the rest of the family or aware of the freezing and disclosure orders made against them: see para 78 ff of the judgment.

8. Both the July and the August retainers provided that they were to be governed by the laws of England & Wales and that, at MWP's absolute discretion, any Dispute (as defined) arising out of or relating to the relevant Retainer, or the breach, termination or invalidity thereof might be referred to mediation under the LCIA mediation procedure and, if not settled within 60 days of the appointment of a mediator, or if MWP did not want to mediate, the Dispute was to be settled at MWP's absolute discretion either (i) by the courts of Kazakhstan; (ii) the courts of the country where the client's registered office or principal place of business was situated or, if an individual, the country of his/her domicile or residence or (iii) by arbitration before the LCIA in accordance with UNCITRAL rules.

The Jenington Action

9. The action was begun in June 2010. On 31 August 2010 MWP filed an acknowledgment of service in the action on behalf of Aidar. I say “MWP” but the relevant form was signed in a box which lies immediately above the words (on the printed form) “ Defendant's solicitor”. The address to which documents were required to be sent was “ Michael Wilson & Partners, 25, Grove Road, Barnes London”. On 3 September 2010 MWP filed an application notice on behalf of Aidar for relief from sanction. The name given was “ Michael Wilson & Partners”. An “x” was inserted in the box in respect of the question “ Are you a solicitor?”. The signature appeared above the words (on the form) “Applicant's solicitor”. The name given and the address details were as before. On 22 October 2010 MWP signed a consent order in the action. This was signed on behalf of Michael Wilson & Partners Ltd described, now, as Legal Advisers for the Third Defendant. On 11 November 2010 MWP signed a consent order in the same form as the order of 22 October 2010 save that they signed as Legal Advisers of the Third (Aidar) and Fifth (Baurzhan) Defendants. On 26 January 2011 MWP signed a further consent order on behalf of Aidar in the 22 October form.

10. On 30 March 2011 MWP filed an acknowledgment of service on behalf of Baurzhan. This was in the same form as the acknowledgement signed on behalf of Aidar save that MWP had “Ltd” in its name. There was still a signature in the box above the words “ (Defendant/Defendant's solicitor/Litigation friend)”. On 12 April 2011 MWP signed another consent order on behalf of Baurzhan with “Ltd” in their title but now describing themselves as “ solicitors for the Fifth Defendant”.

11. On 2 May 2011 Cleary Gottlieb replaced MWP on the record for Aidar and Baurzhan and filed a Notice of Change to that effect. Pursuant to a Memorandum of Understanding of 18 September 2010 and a Principal Agreement initialled and signed by all parties on 30 November 2010, and later dated 8 December 2010, the Jenington action was settled. This settlement was further documented by an additional Settlement Deed dated 7 May 2011.

The Fees

12. MWP invoiced the family for a total sum of US $ 8,906,030.02 for work said to have been done over a 13 month period pursuant to the Retainers. Most of it — US $ 8,187,668.56—was said to have been done under the July retainer. More than US $ 3 million has been paid.

The Action

13. On 16 August 2011 the Appellants issued a Part 8 Claim in the Senior Courts Costs Office (“the SCCO”) seeking (i) an order setting aside the July Retainer; (ii) an order for delivery of a solicitor's bill of costs in all causes and matters in respect of which MWP had acted for the Appellants; and (iii) detailed assessment of the bill so delivered or of the 26 invoices (as set out in an attached schedule) 1 which MWP had rendered. In each case the relief was sought under Part III of the Solicitors Act 1974.

14. On 27 January 2012 MWP applied to stay these claims under section 9 of the Arbitration Act 1996 and/or the inherent jurisdiction, in reliance on the arbitration clause in the July Retainer. MWP had previously commenced arbitration proceedings by a request for arbitration dated 8 July 2011 seeking payment of the balance of its fees pursuant to the July Retainer. However the invoices accompanying the request for arbitration included by mistake ten that had been rendered to Aidar under the August Retainer, which were later removed. On 24 September 2013 MWP applied to stay the Part 8 claim so far as it lay in respect of the August Retainer.

15. On 10 September 2012 Master Campbell refused MWP's application to stay the SCCO proceedings in respect of the July Retainer. He held that the claims were