Gadd v Solicitors Regulation Authority

This is a renewed application for permission to appeal. The application was rejected on the paper by the Right Honourable Sir Stephen Sedley. It relates to a judgment of Sharp J in which she upheld an application for summary judgment which had been brought by the Law Society in response to an application which had been made by the claimant (the applicant before us today), Mr Christopher Gadd.

The background is this. Mr Gadd was a solicitor who was employed for a while in the solicitors' firm, WB Legal LLP. (WBL). He was a member of that firm between 31 August 2008 and 30 March 2009. WBL entered into administration on 3 April 2009. At some time thereafter, he practised as a solicitor through CGL, which effectively was his own firm. CGL was subject to the intervention procedure operated by the Solicitors Regulation Authority. That intervention was made on 7 December 2009. It is a draconian procedure. The effect of it is to prevent the solicitor dealing with the funds of the firm. The basis of intervention, which is set out in Schedule 1 of the Solicitors Act, arises where, amongst other matters, there is reason to suspect dishonesty on the part of the solicitor and failure to comply with the accounts rules. The effect, as I say, is effectively to freeze the assets and to prevent the solicitor utilising them in any way.

There is a short period during which a person may apply to the High Court for an order directing the Law Society to withdraw the intervention notice. Paragraph 6(4) of Schedule 1 to the Solicitors Act provides that a person served with the notice must within eight days of service, on not less than 48 hours' notice, apply to the court for that purpose. That was not done in this case. Instead, Mr Gadd took proceedings against the Law Society, which he instituted more than 12 months after the intervention.

The basis of his complaint is that Sharp J wrongly dismissed his application and upheld the summary judgment on behalf of the Law Society. The basis of her judgment, in turn, was, putting it very succinctly, that the obligation to challenge the intervention within eight days was compatible with the European Convention on Human Rights; that there was binding authority of this court in the case of Holder v the Law Society to that effect; that the procedure adopted by Mr Gadd was effectively an abuse of process because it sought to circumvent that established procedure; that in any event one of the bases on which Mr Gadd submitted he was not able to comply with the procedure was that he had no resources, but an application could have been made for money to be released so that he could pursue his case. The conclusion of the judge was in any event that on the facts, bringing this case so long after the intervention, the case could not sensibly get off the ground.

The challenge, very attractively advanced today by Mr Metcalfe, is essentially as follows. First, he says, contrary to the view of the judge, she was not bound by the decision in Holder to conclude that there could never be cases where it would be appropriate to allow proceedings to take place after the eight-day period prescribed by the statute. His submission is that it is a wrong reading of Holder, and in particular that some observations of Staughton LJ in that case suggest that at least it is arguable that paragraph 6(4) should be read down so that at least in exceptional cases it would be legitimate for proceedings to be taken to challenge an intervention outside that period.

He says that this is such a case for two reasons in particular: first, the impecuniosity of Mr Gadd: he simply did not have the resources. He also submits that the judge was wrong in saying that Mr Gadd could have applied to the SRA in order to release some of the frozen practice money to enable him to initiate the claim. He has referred us to correspondence between Mr Gadd and the Law Society in which Mr Gadd has pressed to have the basis of that power made clear and Mr Metcalfe submits that they have failed to do so. He also relies on the fact that the information which constituted the basis for the intervention, namely the forensic investigation report on WB Legal dated 18 November 2009, was not in fact provided to Mr Gadd on the date of the intervention itself. Although he did ask for it at that time, it was not in fact provided to him until it was sent by letter dated 17 December, which he received on 21 December, and that is already some 14 days after the hearing. So, submits Mr Metcalfe, if one takes into account those two considerations in particular, this was a case where it was quite unreasonable to expect Mr Gadd to pursue the proceedings within the eight-day period. Moreover, it conflicted with his Convention rights under Article 1 of Protocol 1 to impose a strict rule to the effect that once he was outside the eight-day limit he could not pursue his claim at all.

As to the question of resources, we are not at all satisfied that that is a justifiable basis for taking the view that it would not be possible for the applicant to have taken the proceedings as required by paragraph 6(4). In the case of Holder, the court referred to an earlier decision of Pine v the Law Society [2001] EWCA Civ 1574, where the Vice Chancellor had considered a similar argument to the effect it was a breach of Article 6 not to provide legal assistance to somebody who is unable to afford it in proceedings of this kind. The Vice Chancellor had rejected that submission and held that it was not incompatible with Convention law to fail to provide legal assistance in the circumstances of that case. Carnwath LJ in the Holder case took the same view in relation to those proceedings.

We see no material difference here. It is suggested that this was a particularly complex case. We do not think that it was any more complex than any other. Even if we assume - and we are prepared to do so in favour of the applicant - that there may be exceptional cases where one could read down paragraph 6(4) so as to allow for applications out of time in exceptional cases, nonetheless we are not satisfied that impecuniosity was a justification for applying that principle here.

Mr Gadd is a solicitor who should be well capable of dealing with the nature of the allegations that were made against him, which essentially involved breaches of the Code of Conduct and breaches of the accounting rules. It was not arguably necessary, it seems to us, that he should be allowed legal representation. In any event, the failure to provide legal assistance is not specifically what is relied on here. It is said that the financial problems he faced justifies a conclusion that the eight-day limitation period should not apply in the circumstances of this case. But it is difficult to see why that problem has any bearing on the limitation period itself because his impecuniosity can last a considerable time.

The second ground relied on, as I have indicated, is that the information was not provided to Mr Gadd until 21 December. Quite why the forensic report, which is the basis of the intervention, was not made available to Mr Gadd at the same time as he was notified of the intervention itself I find difficult to understand. One would have thought that the Law Society would, as a matter of course, make that document available. For myself, I can see some merit in the contention that it may be difficult for Mr Gadd to pursue proceedings until he receives that report. He could, I think, have done so in fact in the circumstances of this case because the basis of his complaint about the intervention is essentially that he had acted in good faith and co-operated with the authorities in relation to the wind-up of WBL, and therefore there was no basis for inferring that he had behaved dishonestly. Those were matters that were known to him at the point when he received the original notice of intervention.

I do recognise that there may certainly be some circumstances where an applicant is prejudiced without seeing the basis on which the intervention is made. But even allowing for the possibility that this would justify under Convention principles, and in particular Article 6, some departure from the eight-day period, it was plainly critical for Mr Gadd to act very speedily thereafter. He did take certain steps in order to get himself put back on to the register so that he could practise as a solicitor in the interim period, but he took no steps in relation to the intervention itself for some 12 months. The whole purpose of this ex parte procedure is to protect interests of creditors, and the reason for a need for a speedy challenge is to protect the interests of creditors and clients of the firm. But it is also to protect the solicitor's own position because the longer the delay, and the longer the period for which assets are frozen, the more damaging it is to the standing and goodwill of the firm.

So, in my view, whatever the merits of the contention that there may be exceptional cases where the claim can be pursued outside the eight-day limit, I am not at all satisfied that it is justified in proceedings that were taken in this case. I think there is no reasonable prospect for saying that the paragraph 6(4) could be read down so as to allow a challenge so much later than the period specified in that rule.

So for those reasons in particular I would come to the conclusion that there should be no permission to appeal in this case.

I agree. I would add only that I too was concerned about the delay in the transmission of the forensic investigation report, but, for the reasons given by my Lord, in this case that delay does not explain the very substantial delay after 21 December 2009 until the challenge was made.