The Law Society (Acting Through the Solicitors Regulation Authority) v John Blavo
| Jurisdiction | England & Wales |
| Judge | and,Lord Justice Lewison,Lord Justice Patten,Lord Justice Moylan |
| Judgment Date | 16 October 2018 |
| Neutral Citation | [2018] EWCA Civ 2250 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A2/2017/1504 |
| Date | 16 October 2018 |
[2018] EWCA Civ 2250
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
IN BANKRUPTCY
HIS HONOUR JUDGE KLEIN
SITTING AS A JUDGE OF THE HIGH COURT
[2017] EWHC 561 (Ch)
Strand, London, WC2A 2LL
Lord Justice Patten
Lord Justice Lewison
and
Lord Justice Moylan
Case No: A2/2017/1504
Mr Richard Coleman QC and Ms Chloe Carpenter (instructed by Monro Wright & Wasbrough LLP) for the Appellant
Mr Mark Cawson QC (instructed by Radcliffes Le Brasseur Solicitors) for the Respondent
Hearing dates: 15 th and 16 th May 2018
Introduction
The Law Society, acting through the Solicitors Regulation Authority (“the SRA”), appeals from the order of His Honour Judge Klein, sitting as a Deputy High Court Judge, dated 8 th May 2017 setting aside two statutory demands served by the Law Society on Mr Blavo, the Respondent to the appeal.
The statutory demands, dated 12 th November 2015 and 18 th February 2016, were served under s. 268(1)(a) of the Insolvency Act 1986 (“the 1986 Act”) and claimed debts of £151,816.27 and £643,489.20 for “costs incurred” by the Law Society “in respect of the intervention into (Mr Blavo's) practice recoverable as a debt pursuant to paragraph 13 Schedule 1 Solicitors Act 1974”. The intervention in Mr Blavo's practice had occurred simultaneously with an intervention in Blavo & Co Solicitors Ltd (“the Company”).
The single ground of appeal advanced by the SRA is that the judge was wrong to decide that the debts the subject of the statutory demands were not debts for liquidated sums within the meaning of s. 267(2)(b) of the 1986 Act.
Mr Blavo has filed a Respondent's Notice seeking to uphold the judge's order on different or additional grounds. Diffuse grounds were advanced which included at least one point which was clearly outside the proper scope of this appeal. At the hearing of the appeal Mr Cawson QC, who did not appear below, rightly accepted this. In support of his argument, that the judge should have set the statutory demands aside under r. 6.5(4)(b) of the Insolvency Rules 1986 (“the 1986 Rules”) on the basis that the debts were disputed on substantial grounds, he focused his case on points which can be summarised as: (i) that Mr Blavo had no practice which could have been the subject of any intervention but, if he did, it was not co-extensive with the Company's “business” and, accordingly, the costs incurred by the SRA had to be apportioned as between the interventions because he could not be liable for the costs of the intervention in the Company; and (ii) that the contention that the statutory scheme limited the manner in which Mr Blavo can challenge the intervention, and accordingly the costs incurred, would be contrary to Mr Blavo's rights under Article 6 and Article 1 of the First Protocol of the European Convention on Human Rights (“A1P1”).
The issues raised by this appeal can, therefore, be summarised as follows:
(i) Was the judge wrong to decide that the sums claimed in the statutory demands were not debts “for a liquidated sum” under s.267(2)(b) of the 1986 Act?;
(ii) (a) What was the extent of Mr Blavo's practice, if any, and was it co-extensive with the Company's business?;
(b) If it was not co-extensive, in the absence of any apportionment is it established that the costs incurred in the intervention in his practice exceed the £5,000 bankruptcy level?;
(iii) Does the statutory scheme breach Mr Blavo's rights under the ECHR?
The above matters were respectively categorised in the arguments as (i) The Liquidated Sum issue; (ii) the Co-Extensiveness issue; and (iii) the Exclusive Remedy issue. I use these descriptions in this judgment.
Background
I take the background from the succinct summary contained in the judgment below, reported as Blavo v Law Society [2017] 1 WLR 4514:
“2. Mr Blavo is a solicitor and was a director (and, by October 2015, the sole director) of and the sole shareholder in Blavo & Co Solicitors Ltd (“the company”) through which vehicle legal services were provided. The company was regulated by the Solicitors Regulation Authority (“SRA”). For regulatory purposes Mr Blavo was a “manager” of the company. By mid-2015 the company was operating from 18 offices throughout the country. It employed 200 staff and had contracts with 150 consultants. Mr Blavo explains in a witness statement, that he believes the company was one of the largest providers of legal aid services in the country. It held contracts with the Legal Aid Agency (“the LAA”) for the provision of work including in relation to mental health tribunals. Following an investigation by it, the LAA terminated the company's legal aid contracts with effect from 1 October 2015. On 13 October 2015 the panel of adjudicators sub-committee of the SRA resolved to intervene into the company. The grounds for the intervention were expressed to be that there was reason to suspect dishonesty on the part of a manager or employee of the company and to protect the interests of clients (or former or potential clients) of the company or the beneficiaries of any trusts of which the company was a trustee. On the same day the panel of adjudicators sub-committee resolved to intervene into Mr Blavo's “practice at Blavo & Co Solicitors Ltd”. The ground for that intervention was expressed to be because “there is reason to suspect dishonesty on your part in connection with your practice”. Unsurprisingly, following the withdrawal of the LAA contracts and after the intervention into it, the company went into liquidation. It is the costs of the intervention, from 15 October 2015 to 20 January 2016, into the company and Mr Blavo's practice which are the underlying subject matter of the statutory demands.”
The interventions were activated by the SRA serving two Notices on 13 th October 2015. One was addressed to “Blavo & Co Solicitors Limited Practising as: Blavo & Co Solicitors Limited”. The other was addressed to Mr Blavo “Practising as: Blavo & Co Solicitors Limited” and was in respect of “your practice at” the Company.
The decision to intervene “into the recognised body, Blavo & Co Solicitors Limited” was made on the following grounds:
“1. There is reason to suspect dishonesty on the part of a manager or an employee of the recognised body Blavo & Co Solicitors Limited.
2. To protect the interests of clients (or former and potential clients) of Blavo & Co Solicitors Limited or the beneficiaries of any trust of which it is or was a trustee.”
The decision to intervene into Mr Blavo's “practice at Blavo & Co Solicitors Limited” was made on the following ground:
“… there is reason to suspect dishonesty on your part in connection with your practice.”
The events which led to the interventions are set out in the “Decision of the Adjudication Panel” made in respect of both the Company and Mr Blavo's practice. These included that the Company “is wholly owned and controlled by Mr John Blavo who is its COLP and COFA” (i.e. Compliance Officer for Legal Practice and Compliance Officer for Finance and Administration). In “recent weeks, 11 of the firm's other directors have resigned, leaving Mr Blavo as the sole director”. The Legal Aid Agency (“the LAA”) had terminated the Company's legal aid contracts alleging “widespread “ false and fraudulent” claims perpetrated by the firm from the Legal Aid Fund” (paragraph 5.1 of the adjudication decision). The decision based its “Reason to suspect dishonesty” significantly on the following:
“Between April 2012 and March 2015, the firm made claims to the LAA for payment for attendance at Mental Health Tribunals in 20,942 mental health cases. The firm received over £22 million in fees from the LAA in relation to these cases. However, HMCTS has confirmed that the firm only made applications in 3,192 cases during this period of which only 2,053 were considered at Mental Health Tribunals. Therefore, more than 20,000 Mental Health Tribunal for which the firm made claims are not recorded in the records of HMCTS and do not appear ever to have taken place.”
In respect of Mr Blavo the decision states:
“The sheer scale of the alleged fraudulent activity of the firm is described above, and the fact that it occurred repeatedly over a three year period, suggest that John Blavo, as sole shareholder of the firm as well as a director and with managerial and financial control which that position gave him, knew or ought to have known that it was happening.”
In summary there was reason to suspect dishonesty by Mr Blavo “because of the degree of the alleged fraudulent activity, the period of time over which it apparently took place, and his standing within the firm”.
The interventions were conducted by the Law Society through lawyers engaged for that purpose. The costs totalled just under £800,000 as set out above.
The statutory demands served by the Law Society were addressed to Mr Blavo personally. As set out above they each claimed that the respective sums were due “for costs incurred between (specified dates) in respect of the intervention into the debtors (sic) practice recoverable as a debt pursuant to paragraph 13 Schedule 1 Solicitors Act 1974”. The Company had been compulsorily wound up on 30 th November 2015.
Mr Blavo applied to set aside the statutory demands relying on the “grounds” set out in his witness statement. In this he stated that he had considered whether to challenge the interventions but had “decided that there was no point doing so because the Company was being closed in any event”.
The essence of his challenge to the demands was that none of the costs of the interventions were payable by him personally because “I cannot be said to have personally had any client practice at the Company”. The...
To continue reading
Request your trial
-
Susan May King v Bar Mutual Indemnity Fund
...that (if that is the right word) by way of bankruptcy proceedings” (emphasis added). 53 Secondly, they rely on Blavo v Law Society [2018] EWCA Civ 2250. The statutory demand there arose out of an order pursuant to paragraph 13 of schedule 1 of the Solicitors Act 1974, which provided that s......
-
Town and Country Properties (GB) Ltd and Others v Patel and Others
...petitioning creditor's debt which satisfies the requirements of s.267.” Moylan LJ adopted the same approach in Blavo v Law Society [2018] EWCA Civ 2250. 42 I was referred to two examples of the MFAs relied upon by the Appellants. The first is what has been called a “wet signed” MFA dated 1......
-
Tang Siu Nam v Tang Chi Man
...English regime as draconian but “necessary for the protection of public interest”. That was adopted by Moylan LJ in Blavo v Law Society [2019] 1 WLR 1977 [2018] EWCA Civ 2250 (paragraph 77). Chadwick LJ had in Sheikh v Law Society [2007] 3 All ER 183 (paragraph 110) recognized the English r......