Swain v The Law Society
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE OLIVER,LORD JUSTICE STEPHENSON |
| Judgment Date | 31 July 1981 |
| Judgment citation (vLex) | [1981] EWCA Civ J0731-1 |
| Docket Number | 81/0300 |
| Court | Court of Appeal (Civil Division) |
| Date | 31 July 1981 |
and
[1981] EWCA Civ J0731-1
Lord Justice Stephenson
Lord Justice Oliver
and
Lord Justice Fox
81/0300
1979 S. No. 5105
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
GROUP B
(MR. JUSTICE SLADE)
Royal Courts of Justice,
MR. JOHN BOWYER (instructed by Messrs. Lovell Son & Pitfield, Solicitors, London WC1R 5LP, agents for Messrs. Pethybridges, Solicitors, Torrington) appeared on behalf of the 1st Plaintiff (Appellant).
MR. ROBERT ALEXANDER Q.C., MR. PATRICK PHILLIPS Q.C. and MR. CLIFFORD SMITH (instructed by Messrs. Slaughter & May, Solicitors, London EC2V 5DB) appeared on behalf of the Defendant (Respondent).
In this appeal two practising Solicitors of the Supreme Court challenge two things done by the Law Society: first, the validity of the Solicitors' Indemnity Rules which regulate a solicitor's professional indemnity insurance scheme of the Society; second, the Society's right to retain for its own purposes commission received under the scheme. On 17th March 1980 Mr. Justice Slade in a reserved judgment of nearly 30 pages, reported in (1980) 1 Weekly Law Reports, 1335, answered both challenges in favour of the Law Society. Mr. Bowyer has renewed the plaintiffs' challenges and attacked the learned judge's decision on both questions.
If the importance of the case to the whole solicitors' profession and the pains taken by the plaintiffs' counsel to present their case to this court in 26 grounds of appeal supported by the fullest argument were my only guide, I should find it necessary to give a judgment at least as long as that of the learned judge and probably a great deal longer and less lucid. But we have the advantage of his full, clear and correct statement of all the relevant matters, facts and issues, and it would be idle to repeat, and impossible to improve, what he has done so well. I can therefore confine my opinion to stating where I am in agreement with his judgment and where and why I have the misfortune to differ from it, even though I may thereby fail to discuss every point taken in argument before us.
The first of the two questions raised by the plaintiffs' originating summons was whether "upon the true construction of section 37 of the above-mentioned Act"—that is, the Solicitors Act 1974—"and of the rules hereinafter mentioned the Council of the Law Society had no power to make all or any of the Solicitors' Indemnity Rules 1975, the Solicitors' Indemnity Rules 1978 and the Solicitors' Indemnity Rules 1979 and the said rules are accordingly null and void". I agree with the judge's general approach to this question, with the answer he gave and with his reasons for refusing the first declaration requested by the plaintiffs.
The recommendations of a Special Committee of the Law Society made in 1972 were finally implemented in the Solicitors Act 1974. That Act provided for (inter alia) the maintenance and administration of a Compensation Fund (by s.36 and Schedule 2) and for professional indemnity (by s.37). It is in the latter section, if anywhere, that must be found the Society's authority for the single compulsory professional indemnity insurance scheme, including the Solicitors' Indemnity Rules, which is the subject of this appeal. I therefore set out this section, which provides:
"37. (1) The Council, with the concurrence of the Master of the Rolls, may make rules (in this Act referred to as 'indemnity rules') concerning indemnity against loss arising from claims in respect of any description of civil liability incurred—
(a) by a solicitor or former solicitor in connection with his practice or with any trust of which he is or formerly was a trustee;
(b) by an employee or former employee of a solicitor or former solicitor in connection with that solicitor's practice or with any trust of which that solicitor or the employee is or formerly was a trustee.
(2) For the purpose of providing such indemnity, indemnity rules—
(a) may authorise or require the Society to establish and maintain a fund or funds;
(b) may authorise or require the Society to take out and maintain insurance with authorised insurers;
(c) may require solicitors or any specified class of solicitors to take out and maintain insurance with authorised insurers.
(3) Without prejudice to the generality of subsections (1) and (2), indemnity rules—
(a) may specify the terms and conditions on which indemnity is to be available, and any circumstances in which the right to it is to be excluded or modified;
(b) may provide for the management, administration and protection of any fund maintained by virtue of subsection (2)(a) and require solicitors or any class of solicitors to make payments to any such fund;
(c) may require solicitors or any class of solicitors to make payments by way of premium on any insurance policy maintained by the Society by virtue of subsection (2)(b);
(d) may prescribe the conditions which an insurance policy must satisfy for the purposes of subsection (2)(c);
(e) may authorise the Society to determine the amount of any payments required by the rules, subject to such limits, or in accordance with such provisions, as may be prescribed by the rules;
(f) may specify circumstances in which, where a solicitor for whom indemnity is provided has failed to comply with the rules, the Society or insurers may take proceedings against him in respect of sums paid byway of indemnity in connection with a matter in relation to which he has failed to comply;
(g) may specify circumstances in which solicitors are exempt from the rules;
(h) may empower the Council to take such steps as they consider necessary or expedient to ascertain whether or not the rules are being complied with; and
(i) may contain incidental, procedural or supplementary provisions.
(4) If any solicitor fails to comply with indemnity rules, any person may make a complaint in respect of that failure to the Tribunal.
(5) The Society shall have power, without prejudice to any of its other powers, to carry into effect any arrangement which it considers necessary or expedient for the purpose of indemnity under this section".
A heavier sanction for complying with indemnity rules is introduced by section 10 (1)(e) of the Act, which provides: "(1) Subject to sections 11 and 12, the Society shall issue a practising certificate to a person who applies for one, if it is satisfied, within 21 days of receipt of his application…. (e) that he is complying with any indemnity rules or is exempt from them". Read with section 1 (e) of the Act, this provision debars a solicitor (unless exempted) from practising if he does not comply with these rules. Their validity is thus of the greatest importance.
It is common ground that the rule-making powers of the Council of the Society are to be found in subsections (1), (2) and (3) of section 37 and that the only provisions which can authorise the Society's scheme and rules are subsections (2)(b) and (3)(c). So, as the judge said ( (1980) 1 Weekly Law Reports, 1341 at B), the present dispute as to the construction of the Act substantially concerns the meaning and effect of those two subsections. The judge thought (1333 F, and 1340 F of the report) that this rule-making power should be construed narrowly and restrictively in the light of the severity of the sanction against non-compliance. Mr, Alexander, for the Society, has submitted that on the contrary a practising certificate is a privilege qualifying its holder to serve the public, and the protection of the public calls for a more generous interpretation of the power. I do not think it matters; on any reasonable construction of the relevant provisions of section 37 the Scheme and rules are, in my judgment, well within them, as the judge held.
More important is the judge's construction of subsection (2) as exhaustive of the power conferred by subsection (1). I reject Mr. Alexander's submission that this was an error and agree with the judge for the reasons that he gave (1340 B to G) that it is improbable that the legislature should have intended to give the Council a free hand to select whatever method of providing indemnity the Council liked, subject only to the concurrence of the Master of the Rolls, and that if the legislature had intended that subsection (2) should operate "without prejudice to the generality of subsection (1)" it would have said so, That it expressly made the provisions of subsection (3) operate "without prejudice to the generality of subsections (1) and (2)" tells in favour of the judge's view, not, as Mr. Alexander subtly argued, against it.
I agree also with the judge (page 1350 B to E of the report) that commonsense suggests that the legislature had in mind three obvious possible alternative routes for providing a compulsory insurance scheme for solicitors: (1) the establishment and maintenance by the Society of its own fund; (2) a direction to solicitors to take out and maintain insurance policies with authorised insurers; and (3) group arrangements with insurers under which insurers bound themselves to grant insurance to individual solicitors, who paid a specified premium, and individual solicitors were required to pay the premiums and take up the insurance rights which had been arranged for them. I agree also that it would have been a strange omission if the section had provided for route number (1) in subsections (2)(a) and (3)(b) and route number (2) in subsections (2)(c) and (3)(d), but failed to provide for route...
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