Re a Debtor (No 88 of 1991)
| Jurisdiction | England & Wales |
| Judgment Date | 25 June 1992 |
| Date | 25 June 1992 |
| Court | Chancery Division |
Solicitor - Costs - Action to recover - Solicitors serving statutory demand within one month of delivering bill of costs - Whether service of statutory demand constituting “action … brought” - Whether statutory demand and bankruptcy petition founded thereon to be set aside -
The debtor received legal advice from a firm of solicitors who rendered their bill on 31 July 1991. Having received no response they served a statutory demand on the debtor on 21 August 1991 and issued a bankruptcy petition based on the demand on 20 September. The debtor obtained an order from the county court that the statutory demand and bankruptcy petition be set aside on the ground that the service of the statutory demand had contravened the provision in section 69(1) of the Solicitors Act 1974F1 that “no action shall be brought” to recover any costs due to a solicitor within one month of the bill having been delivered.
On the solicitors' appeal: —
Held, allowing the appeal, that although “action” in section 69 of the Solicitors Act 1974 was to be construed liberally it could extend only to forms of legal process and did not embrace a statutory demand, the service of which was merely part of the statutorily prescribed procedure for obtaining remedies afforded to creditors by a bankruptcy order and did not of itself initiate legal proceedings; that a solicitor was therefore not debarred by section 69(1) from serving a statutory demand for payment of his costs before the expiration of one month from the date of delivery of his bill of costs; and that, accordingly, since the statutory demand and petition were valid, they would be remitted to the district judge for hearing (post, pp. 1029E–F, G–1030A, 1031E).
The following cases are referred to in the judgment:
Debtor (No. 1 of 1987), In re A [
Debtor (No. 490-SD-1991), In re A [
Gilmartin (A Bankrupt), In re [
Laceward Ltd., In re [
The following additional cases were cited in argument:
Boston (Martin) & Co. v. Levy [
Brockman, In re [
Gedye, In re (
Ray v. Newton [
Appeal
On 28 January 1992 District Judge Harris sitting in the Liverpool County Court granted the debtor's application to set aside a statutory demand dated 15 August 1991 which had been served on the debtor on 21 August 1991 by the creditors, Marshalls, a firm of solicitors, in respect of their unpaid bill of 31 July 1991, and dismissed the bankruptcy petition founded on that demand, which had been issued on 20 September 1991, on the basis that the service of the statutory demand had contravened section 69(1) of the Solicitors Act 1974.
By a notice of appeal dated 25 February 1992 the creditors appealed on the ground, inter alia, that the service of a statutory demand was not the bringing of an action and therefore did not contravene section 69 of the Solicitors Act 1974.
The facts are stated in the judgment.
Marc Brittain for the creditors.
Angharad Start for the debtor.
25 June. The following judgment was handed down.
SIR DONALD NICHOLLS V.-C. This appeal raises a short point not without interest to solicitors generally. The appeal is by a firm of solicitors, Marshalls, against a decision by District Judge Harris sitting in the Liverpool County Court on 28 January 1992. The judge set aside a statutory demand Marshalls had served on the debtor and, in consequence, dismissed a bankruptcy petition founded on that demand.
The historyThe debtor was a director of a company. On 30 April 1991 he sought legal advice from Marshalls concerning an order that he attend before the court in Manchester for examination by the liquidator of the company. The affidavit evidence of Mr. O'Connell, a partner in Marshalls, is that the debtor was told that the firm did not undertake legal aid work any longer. The financial limits for legal aid were outlined to him. Mr. O'Connell indicated that, on what the debtor told him, he would not be eligible for legal aid. Mr. O'Connell explained Marshalls' terms of business. On 17 May Marshalls wrote to the debtor confirming these terms, and mentioning that he might be entitled to legal aid with regard to litigation. The debtor's affidavit evidence is in sharp conflict: he was given no advice on whether he might be eligible for legal aid, Mr. O'Connell was aware of his dire financial circumstances, the costs implications of the course recommended were not discussed, and he did not receive the letter.
On the debtor's instructions a summons was issued in Manchester by Coleman & Co., as agents for Marshalls, seeking disclosure of the liquidator's report on the basis of which the court had made the order for the examination...
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