Quinn Direct Insurance Ltd v The Law Society of England and Wales
| Jurisdiction | England & Wales |
| Judge | The Chancellor,Lord Justice Rimer,Lord Justice Jackson |
| Judgment Date | 14 July 2010 |
| Neutral Citation | [2010] EWCA Civ 805 |
| Court | Court of Appeal (Civil Division) |
| Date | 14 July 2010 |
| Docket Number | Case No: A3/2009/2499 |
[2010] EWCA Civ 805
IN THE HIGH COURT OF JUSTICE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHANCERY DIVISION
Mr Justice Peter Smith
Before: the Chancellor of the High Court
Lord Justice Rimer
and
Lord Justice Jackson
Case No: A3/2009/2499
HC 09 00901
MR N DAVIDSON QC (instructed by Crutes LLP) for the Appellant
MR T DUTTON QC & MR M SMITH QC (instructed by Devonshires Solicitors) for the Respondent
Hearing date: 29 June 2010
The Chancellor:
Introduction
Mr Onobrakpeya, a conveyancer, and Mr Ikoku, an immigration law specialist, carried on business as solicitors in partnership in the name of South Bank Solicitors (“SBS”) from, at the latest, 1st December 2005. On 20th November 2006 Investigation Officers of the defendant (“the Law Society” including where necessary references to the Solicitors Regulation Authority) inspected the books and accounts of SBS and concluded that they did not comply with the Solicitors' Accounts Rules. Accordingly on 9th January 2007 the partners were interviewed by the Investigation Officers. Such officers reported their findings to the Law Society on 26th February 2007. On 29th June 2007 the Law Society commenced disciplinary proceedings against Mr Onobrakpeya, Mr Ikoku and a Mr Ayeni. On 17th and 18th October 2007 the Law Society intervened in the practice of SBS pursuant to its powers under s.35 of and Schedule 1 to the Solicitors Act 1974 on the ground, in the case of Mr Onobrakpeya, of suspected dishonesty and, in the case of Mr Ikoku, failure to comply with the Accounts Rules. The Law Society appointed Mr J.H.R. Dunn, a partner in Devonshires, as the Intervention Agent and person to take possession of the documents referred to in paragraph 9(1)(a) of Part II of Schedule 1 to the Solicitors Act 1974 (“the Intervention Agent”).
For the year from 1st October 2007 to 30th September 2008 the professional indemnity insurance of SBS required by the Solicitors' Indemnity Insurance Rules made under s.37 Solicitors Act 1974 was provided by the claimant (“Quinn”). By the terms of that policy (“the Policy”) each insured at SBS was entitled to an indemnity in respect of any civil liability in respect of which a claim was first made in the course of that year except to the extent that the claim arose from dishonesty or the fraudulent act or omission committed or condoned by that individual. Clause 6.2 contained provisions for notifying claims in the following terms:
“6.2 Notice and Claims Procedure
In the event of any occurrence which may give rise to liability under this Policy, and regardless of the likelihood or probability of a claim being brought under this Policy:
a) The Insured shall:
1) Notify the Company immediately you become aware of any incident or as soon as practically possible (or in accordance with any agreement made with The Company) and as soon as possible thereafter, provide any other documentation that The Company may require with the regards [sic] to the occurrence.
2) Notify The Company by telephone immediately or as soon as practically possible (and in any event on the next business day) that he has knowledge of any impending prosecution inquest or fatal injury in connection with any occurrence for which there may be liability under this Policy, and shall as soon as possible thereafter, provide that notification in writing.
3) Forward to The Company immediately on receipt every written notice or information as to any verbal notice of claim and any communication whatsoever relating to the occurrence.
4) Give all such information and assistance as The Company may require.”
A number of claims against SBS by former clients were made and notified to Quinn in the year covered by the Policy. The nature and cause of the claims may be deduced from the witness statement of Quinn's solicitor, Mr Whitfield, made on 23rd March 2009. In paragraph 6 he said:
“I am aware, from examination of statements on the SBS client account, of numerous cases in which SBS received into client account sums of money from lenders for residential property transactions whereafter sums have been paid out usually not in sums consistent with the application of loan monies to property purchase, and where the lender has alleged (usually backed up with Land Registry documentation) that the property purchase contemplated has not taken place and therefore that the monies were paid out (a) without the authority of the person to whose order the funds were received and (b) by necessary implication, dishonestly. The only persons on whose instructions SBS' bankers were to make payments from client account were Messrs Onobrakpeya and Ikoku themselves, the signature of one of them sufficing.”
Quinn has declined to indemnify Mr Onobrakpeya in respect of any claim on the ground that “the fraud provision is engaged”. It is concerned to know if it is entitled to refuse to indemnify Mr Ikoku in any given case on the ground that he condoned the fraud.
On 17th February 2009 the solicitors for Quinn wrote to the Intervention Agent asking whether he had any files in respect of 16 specific and identified purchase transactions and if so whether Quinn might have access to them. The letter concluded:
“In addition to these individual files we would like access to the accounting documentation of [SBS] and in particular the bank statement reconciliations and any reports sent by the Accountants to the former partners of Southbank.”
In his reply the Intervention Agent indicated that his team had been unable to locate any of the files relating to the 16 specific transactions and was unable to provide access to general accounting documentation or bank statement reconciliations for the reasons previously explained in his letter of 10th February, namely “to preserve client confidentiality in accordance with its primary concern to protect the interests of the former clients and in accordance with the Code of Conduct”.
On 25th March 2009 Quinn commenced these proceedings by the issue of a Part 8 claim against the Law Society. The relief sought is an order that the Law Society do permit Quinn to inspect “all documents of South Bank Solicitors within [its] power and control” and to take copies thereof. The purpose for which that order is sought (as specified in paragraph 6f) is to consider whether Quinn is or is not obliged to indemnify Mr Ikoku. On 23rd October 2009 Peter Smith J dismissed the application for the reasons given in his judgment handed down that day and now reported at [2010] Lloyd's Rep. I. & R. 336. Quinn now appeals with the permission of the Master of the Rolls.
There is no issue in respect of files in respect of transactions where the client has made a claim against SBS which has been notified to Quinn. In such a case the Law Society takes the view that the making of the claim constitutes a waiver of client confidentiality and privilege and has allowed Quinn to have access to those files. In addition copies of all bank statements of SBS have been provided to Quinn. As to the remainder of the documents of SBS in the possession of the Law Society it appears to be common ground that they all contain information confidential to one or more former clients of SBS whose privilege has not been waived.
The Statutory Regulation of Solicitors
Before considering the detailed submissions of counsel for Quinn it is necessary to say something of the regulatory system. This is necessary in order to provide the context for some of the submissions of counsel for Quinn, in particular his contention that the insurance industry is thereby ‘meshed in’ to the supervisory jurisdiction of the Law Society as a conduit of information to alert the Law Society to the possibility of fraud.
The Law Society is the regulatory body for solicitors in England and Wales. A person is not qualified to act as a solicitor unless he has in force a practising certificate issued by the Law Society (Solicitors Act 1974 s.1(c)). The Law Society is responsible for the content of their education and training through the regulations it is entitled to promulgate (s.2). It makes rules as to professional practice, conduct and discipline (s.31), accounts and trust accounts (s.32), inspection of practice bank accounts (s.33A) and the production of Accountants' Reports (s.34). In any of the circumstances specified in Part I of Schedule 1 it may intervene in a solicitor's practice (s.35), it may make rules regarding the compensation of, amongst others, a client for loss occasioned by the conduct of a solicitor (s.36) and may require solicitors to fund a compensation fund (s.36A).
The Law Society annually makes rules requiring solicitors to carry insurance sufficient to provide them with an indemnity in respect of any description of civil liability (s.37). The Indemnity Insurance Rules (The Solicitors' Indemnity Insurance Rules 2007 being those applicable to this case) require each firm to have professional indemnity insurance with one or more qualifying insurers or to be admitted to the Assigned Risks Pool (“ARP”). In relation to the former the rules prescribe certain minimum terms to be found in Appendix 1 to both the rules and to Schedule 3 to the Qualifying Insurers Agreement which is entered into between the Law Society and the individual insurer. In relation to the latter the conditions of ARP insurance were prescribed by the rules and Schedules 1 and 2 to the Qualifying Insurers Agreement 2007. The benefit to an insurer from being a qualifying insurer may be tempered by the fact that he thereby becomes an insurer of the...
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