The Law Society v Michael John Elsdon and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Newey |
| Judgment Date | 12 May 2015 |
| Neutral Citation | [2015] EWHC 1326 (Ch) |
| Docket Number | Case Nos: HC2014001898 & A70CF063 |
| Date | 12 May 2015 |
| Court | Chancery Division |
[2015] EWHC 1326 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Rolls Building, Royal Courts of Justice
7 Rolls Buildings, Fetter Lane
London, EC4A 1NL
Mr Justice Newey
Case Nos: HC2014001898 & A70CF063
Mr Timothy Dutton QC and Mr Andrew Peebles (instructed by Devonshires Solicitors) for the Claimant
Mr Jeremy Barnett (Direct Access) for the Defendants
Hearing dates: 31 March & 1 April 2015
Further written submissions: 2 & 7 April 2015
The question raised by this case is whether the intervention of the Solicitors Regulation Authority ("SRA") into the practice of Mr Michael Elsdon and Sai-Donne Limited ("Sai-Donne") should be withdrawn.
Basic facts
Mr Elsdon qualified as a solicitor in 1985 and practised under his own name between 1989 (or perhaps 1988) and the end of February 2013. At that stage, he acquired the goodwill and other assets of a practice that a Mr and Mrs Woolacott had been carrying on as Woolacott & Co. Mr Elsdon became a partner in a new Woolacott & Co in March 2013, and Mr and Mrs Woolacott left the practice in, respectively, April and May. Later in the year, Woolacott & Co ceased to exist, and Sai-Donne took over work previously conducted by that firm. It had already taken over Mr Elsdon's personal work.
Sai-Donne had been authorised as a "licensed body" for the purposes of the Legal Services Act 2007 by March 2013. It has two directors: Mr Elsdon and his wife Mrs Marianne Elsdon, who is not a lawyer. The head office is at the Elsdons' home address in Barnstaple, Devon. There are also branch offices in Lancing, West Sussex, and North Walsham, Norfolk.
On 8 December 2014, the SRA decided to intervene into the practice of Mr Elsdon and Sai-Donne. Notices advising the Elsdons and Sai-Donne of the intervention were sent on the following day. Shortly afterwards, Mr Elsdon and Sai-Donne applied for the intervention to be withdrawn.
The Decision of the Adjudication Panel records that it decided to intervene into Mr Elsdon's practice on the following grounds:
"a) There is reason to suspect dishonesty on the part of Michael Elsdon.
b) There is a failure by Michael Elsdon to comply with rules made by the SRA.
c) It is necessary to protect the interests of clients (or former clients) of Michael Elsdon or to protect the interests of the beneficiaries of any trust of which he is or was a trustee."
Very similar grounds were given for intervening in Sai-Donne:
"a) Sai-Donne Limited has failed to comply with the terms of its licence which requires it to ensure compliance with regulatory arrangements imposed by the SRA
b) There is reason to suspect dishonesty on the part of Mr Elsdon, a manager of Sai-Donne Limited in connection with that body's business; and
c) It is necessary to protect the interests of clients (or former clients) of Sai-Donne Limited or to protect the interests of the beneficiaries of any trust of which Sai-Donne Limited or Michael Elsdon (as a manager of that body) is or was a trustee."
Legal framework
Intervention powers
The Law Society (of which the SRA is a functionally independent arm performing regulatory functions) is empowered to intervene in a solicitor's practice in certain circumstances by the Solicitors Act 1974. Paragraph 1 of schedule 1 to the Act states that such powers can be exercised where (among other things):
"(a) the Society has reason to suspect dishonesty on the part of–
(i) a solicitor, or
(ii) an employee of a solicitor, or
(iii) the personal representative of a deceased solicitor,
in connection with that solicitor's practice or former practice or in connection with any trust of which that solicitor is or formerly was a trustee or that employee is or was a trustee in his capacity as such an employee;
…
(c) the Society is satisfied that a solicitor has failed to comply with rules made by virtue of section 31, 32 or 37(2)(c);
…
(m) the Society is satisfied that it is necessary to exercise the powers conferred by Part 2 of this Schedule (or any of them) in relation to a solicitor to protect–
(i) the interests of clients (or former or potential clients) of the solicitor or his firm, or
(ii) the interests of the beneficiaries of any trust of which the solicitor is or was a trustee."
The Law Society (through the SRA) makes rules as to professional practice, conduct, discipline and accounting matters pursuant to sections 31 and 32 of the 1974 Act, to which reference is made in paragraph 1(c) of the schedule to the Act.
The Legal Services Act 2007 gives the Law Society similar powers to intervene in relation to a "licensed body" such as Sai-Donne. Paragraph 1 of schedule 14 to the 2007 Act provides for powers of intervention to be exercisable where one or more "intervention conditions" are satisfied. By paragraph 1(2), the "intervention conditions" include:
"(a) that the licensing authority is satisfied that one or more of the terms of the licensed body's licence have not been complied with;
…
(d) that the licensing authority has reason to suspect dishonesty on the part of any manager or employee of the licensed body in connection with–
(i) that body's business,
(ii) any trust of which that body is or was a trustee,
(iii) any trust of which the manager or employee of the body is or was a trustee in that person's capacity as such a manager or employee, or
(iv) the business of another body in which the manager or employee is or was a manager or employee, or the practice (or former practice) of the manager or employee;
…
(f) that the licensing authority is satisfied that it is necessary to exercise the powers conferred by this Schedule (or any of them) in relation to a licensed body to protect–
(i) the interests of clients (or former or potential clients) of the licensed body,
(ii) the interests of the beneficiaries of any trust of which the licensed body is or was a trustee, or
(iii) the interests of the beneficiaries of any trust of which a person who is or was a manager or employee of the licensed body is or was a trustee in that person's capacity as such a manager or employee."
Guidance as to the meaning of "dishonesty" in this context is to be found in Bryant v Law Society [2007] EWHC 3043 (Admin), [2009] 1 WLR 163. The Divisional Court there held that the decision of the Court of Appeal in Law Society v Bultitude [2004] EWCA Civ 1853 stood as "binding authority that the test to be applied in the context of solicitors' disciplinary proceedings is the Twinsectra test … as it was widely understood before [ Barlow Clowes International Ltd v Eurotrust International Ltd [2005] UKPC 37, [2006] 1 WLR 1476] …, that is a test that includes the separate subjective element" (see paragraph 153). The Court accordingly concluded (in paragraph 155) that, in the case before it, the tribunal "should … have asked itself two questions when deciding the issue of dishonesty: first, whether [the solicitor] acted dishonestly by the ordinary standards of reasonable and honest people; and, secondly, whether he was aware that by those standards he was acting dishonestly". This formulation echoed the House of Lords' seeming endorsement in Twinsectra Ltd v Yardley [2002] UKHL 12, [2002] 2 AC 164 of:
"a standard which combines an objective test and a subjective test, and which requires that before there can be a finding of dishonesty it must be established that the defendant's conduct was dishonest by the ordinary standards of reasonable and honest people and that he himself realised that by those standards his conduct was dishonest".
Overcharging in probate matters can, potentially, justify intervention on the basis of suspected dishonesty. In Sheikh v Law Society [2006] EWCA Civ 1577, [2007] 3 All ER 183, Chadwick LJ (with whom Tuckey and Moore-Bick LJJ agreed) said (in paragraph 65):
"In paragraph [68] of his judgment the judge had observed, correctly, that: 'If a solicitor charges a client too much there are clear protections for the client, in particular in non-contentious matters like probates the process of requiring the solicitor to obtain a remuneration certificate from the Law Society'. At paragraph [115] he said this:
'[115] … In any event the law provides means for the protection of clients against solicitors who show a tendency to overcharge their clients. In particular there is the remuneration certificate procedure, and of course (something which I have hinted at but not specifically mentioned yet) in contentious matters there are procedures for the assessment of costs by experienced Costs Judges and District Judges. Interventions are not needed to achieve such protection.'
The Law Society submits that that is too narrow a view of the circumstances in which it may be appropriate to use its intervention powers. It points out that an honest solicitor should be endeavouring to charge no more than he (or she) believes is due: 'The protection of the public entails placing the proper emphasis on the duty of the solicitor to consider fees honestly, and not to take advantage of clients by setting them higher than is reasonable in the first place, particularly in probate matters'. I agree: a fortiori where the solicitor, as sole executor, is himself (or herself) the client. It seems to me that evidence of persistent and deliberate overcharging in probate matters of that nature might well justify intervention on the basis of suspected dishonesty."
Applications for intervention notices to be withdrawn can be made under paragraph 6(4) of schedule 1 to the Solicitors Act 1974. This states:
"Within 8 days of the service of a notice under sub-paragraph (3), the person on whom it was served, on giving not less than 48 hours' notice in writing to the Society and (if the notice...
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Rajeswary Ramasmy v The Law Society
...of solicitors is relatively uncontroversial and has been recently explained in the decision of Newey J in The Law Society v Elsdon [2015] EWHC 1326 (Ch). For convenience I will set it out again. Much of this section is taken verbatim from that judgment. Intervention powers 7 The Law Society......