Hayes v The Law Society

LORD JUSTICE AULD: Mr Justice Pitchers will give the first judgment.

MR JUSTICE PITCHERS: This is an appeal by the appellant under section 49 of the Solicitors Act 1974 from the refusal of the Solicitors' Disciplinary Tribunal to make an order for costs in his favour against the Law Society following the dismissal by them of two allegations of conduct unbefitting a solicitor. Those allegations were (i) that he included charges and disbursements in bills that he knew, or ought to have known, could not be justified; and (ii) that he provided misleading information to a client.

The appellant became a partner in a firm, Warner Cranston. He took with him from his previous firm a client, whom I will refer to as P, a businessman. For a time P controlled a number of companies, most, if not all, of which are now in liquidation. He was himself bankrupt. It was the appellant's case that P was a thoroughly dishonest businessman who employed dishonest business strategies to avoid paying his debts. One such tactic was to make unjustified complaints.

The appellant carried out a substantial amount of work for him. Whether out of general prudence or because he knew of P's reputation for not paying his professional bills, the appellant ensured that his firm retained money on account of costs. His firm's instructions were terminated in 1999. In due course they submitted a bill and handed over the files to the client. P went through those files and alleged that the appellant had claimed for work he had not carried out or for disbursements to which he was not entitled. He made a complaint to the Law Society, which made its slow progress through its disciplinary system finally coming to a hearing on 13/14 October 2003.

The complaint was based on three aspects of the final bill.

On 5 August 1998 one of the appellant's partners, Mr Davis, attended by invitation a business and social event which was promoted by one of the organisations in which P had an interest. He travelled from London for that purpose. Mr Davis authorised the charge to the client for the reimbursement of his first-class return train fare, but made no charge for his time. The appellant, who was the solicitor principally dealing with Mr P, included that train fare as a disbursement in the subsequent bill. The judgment as to whether the train fare was to be charged to the client was made by Mr Davis himself as a professional judgment. The appellant was not consulted. Mr Davis considered a charge was proper as the inferred purpose of his attendance was that the client was "parading a new team of lawyers". It was argued against the appellant that this should not have been charged to the client.

Much more substantial was the second allegation the appellant had to meet, which revolved round a meeting on 18 November 1998. On that day the appellant met two other professionals, a financial intermediary and an architect, for lunch in London. They were advising the same clients with which this case is concerned at the same time in relation to the same problems as those which required the advice and assistance of the appellant. Mr P did not attend. It was the appellant's case that this had been a business meeting during which the various problems that their joint client was facing were discussed. The appellant concluded, as a matter of professional judgment, that both the time taken and the cost of the meal were proper matters to be charged to the client, making due allowance for the travelling time and the expenses capable of being shared and apportioned elsewhere.

This lunch meeting on 18 November was the core of the case against the appellant. The allegation against him in this respect was that this had been a "jolly" at which no business matters of any kind were discussed over a period of some four hours. If this were right, the appellant had been guilty not merely of professional misconduct in claiming the cost from his client, but probably a criminal offence as well. This unfavourable view of the meeting was supported by the evidence of the other two professional men who had attended it.

This was a very serious allegation. The appellant's case in answer to it was not just a denial of the facts, but the suggestion that this was a manufactured, entirely unjustified allegation, known to be so by Mr P, advanced for tactical reasons as a means of imposing pressure on the appellant and his firm in an attempt to secure a reduction or repayment of costs.

The third matter that was complained of concerned the wording of the bills that were finally submitted by the appellant. It relied on the fact that the cost of the lunch on 18 November 1998, when charged as a disbursement, had inaccurately been described as "travel" in the three bills on which the charge appeared, as one third of the total divided amongst the linked clients by reference to the matters discussed.

The case against the appellant was left open to the tribunal on the basis that he might have done this deliberately to conceal the true nature of the claim for lunch but, in reality, it was a long stop allegation very much subsidiary to the main allegation made against him. The appellant's case was simply that this was the way that the accounts office of the firm had categorised the disbursement on the basis of the documentation which he had completed, absolutely accurately, and supported by the necessary receipts and bills.

The tribunal heard evidence over two days. The main participants gave evidence and were cross-examined. The tribunal delivered its findings. They not only dismissed the charges against the appellant but found for him on all important matters of fact. They said:

That could hardly have been a more resounding victory in relation to what really mattered in the case. However, the tribunal were critical of the way in which the costs of the lunch had been documented. They criticised the appellant for not making an attendance note of the meeting, not reporting back to the client and describing the total expenditure as "travel". They also said that the costs should have been properly apportioned between the three bills. They concluded:

In relation to the appellant's submission that he should have his costs, they said:

The power to award costs before a Solicitors Disciplinary Tribunal is to be found in section 47(2)(i) of the Solicitors Act 1984, which provides that:

Also relevant to the order made in this case is Rule 22 of the Solicitors (Disciplinary Proceedings) Rules 1994:

It is agreed by both sides in this appeal that the correct modern approach to appeals against decisions of tribunals of this sort is to be found in Langford v Law Society [2002] EWCA 2802 Admin. In that case Rose LJ said at paragraph 14:

In Rowe v Lindsey (unreported) 28 June 2001, this court considered the application of these principles to an order for costs before the Solicitors' Disciplinary Tribunal. Stanley Burnton J said at paragraph 18:

The tribunal declined to award the appellant his costs, saying that he was to a considerable extent the author of his own misfortune in failing to make sure that his bills were clear and transparent when delivered. The respondents to this appeal seek to support the order on those grounds, relying in particular upon the wording of Rule 22 of the Rules.

Mr Andrew Hopper QC argues, on behalf of the appellant, that he has won on everything that mattered in this case. He had successfully rebutted the argument that he had been deliberately dishonest in all respects, not merely in relation to the Davis' train journey and the lunch, but in relation to the purpose of the description of the lunch expenses in the bill. It was expressly rejected by the tribunal that that had been dishonest.

Mr Hopper further argues that, had the only allegation been honest but inappropriate lack of clarity in the bills, the matter would never have come to an oral hearing and would have been resolved without any disciplinary complaint at all. There was, he argues, no causal connection between the lack of clarity in the bill and the allegations made. He adds that, when this complaint was first raised by the Law Society, the appellant provided to them an explanation for the way in which the matter was dealt with in the bills and all the documentation supporting it, which demonstrated that not only had the disbursements been made, but they were properly billed to the clients concerned.

I agree with the arguments advanced by Mr Hopper. This was not a case where the solicitor's fault had led an honest client mistakenly to believe that he had been wrongly charged for an item, it gave a dishonest client the pretext to attempt to get out of paying fees that he knew to be due and owing. The author of the appellant's misfortune was his dishonest client who made bogus complaints against him and supported them with perjured evidence. Although the sums involved were small, the appellant was faced with as serious an allegation as could be faced by a professional man; namely, that he had knowingly and dishonestly charged a client for work that he had not done and then tried to conceal it by false accounting. He had no option to defend those charges with the utmost vigour. He was resoundingly vindicated by the tribunal in relation to the matters that were of real concern in the case. All that is said against him is that he failed to correct an honest misdescription of items in bills that were properly claimed. Yet, he is faced with paying all his own costs amounting to £100,000. That cannot be just.

The tribunal made adverse finding against the appellant which fell well short of a finding of unbefitting conduct. Bearing in mind the wording of paragraph 22 of the Rules, they clearly had power to reflect that in their costs order. However, in my judgment, before deciding how the findings that they made were properly to be reflected in the order, they were bound to consider what impact the conduct of the solicitor of which they were critical had had on the costs incurred. This calculation cannot be exact, but there must be a reasonable and just balance between the order made and what had occurred in the proceedings. There must also be a causal connection between the default and the incurring of costs.

It may be that, in an extreme case, it would be possible to say that, but for the solicitor's default, the unsuccessful proceedings would never have been started or would never have come as far as they did with all the costs that were incurred. There was no such finding here, nor could there properly have been such a finding. If the tribunal intended to make such a finding by saying that the appellant was largely the author of his own misfortune, that was inconsistent with their earlier findings that he did not intend to mislead the client and that there was no sinister background (to use their expression) to the way the disbursement was divided between the bills.

Had what they found been the original allegation, there would never have been any proceedings at all. It would not have been a matter of disciplinary proceedings, but a matter of detailed assessment of the bill of costs. This was a case which was going to proceed in any event, bearing in mind that there was a clear, albeit untruthful evidence of the client, supported by two equally untruthful witnesses.

I have come to the conclusion that the decision by the tribunal was so clearly wrong that we should interfere with it. The appellant had succeeded on all the important matters in the case. He had succeeded on all the matters which caused costs to be incurred. He would have been proceeded against however impeccable his billing. In my judgment, this was not a case where the appellant should have been deprived of any of his costs.

I would allow the appeal to the extent of substituting for the order of the tribunal an order that the appellant receive his costs of and incidental to the hearing from the respondents.

LORD JUSTICE AULD: I agree for the reasons given by my Lord and with the order proposed by my Lord. The appeal is allowed.

MR HOPPER: I am grateful. The matter of the costs of the appeal, I ask for an order for the appellant's costs. There has been a schedule submitted. My learned friend has had an opportunity of looking at it. The figure in that schedule is £12,985.76.

LORD JUSTICE AULD: I do not think I have seen that. I have seen Mr Cadman's summary of costs, but I have not seen yours. (Handed). Mr Cadman has had a copy of that, I am sure, has he not, Mr Hopper?

MR HOPPER: He has, my Lord.

MR CADMAN: I take no issue with regard to the bill of costs and would ask for summary assessment.

LORD JUSTICE AULD: We will have a quick look at it. £12,985. Thank you Mr Cadman, the court will assess the costs of the appellant in the sum set out in the summary assessment, namely £12,985.76. We are grateful to you Mr Hopper and you Mr Cadman for the assistance you have given.