Assaubayev & Ors v Michael Wilson & Partners, Ltd

Introduction and overview

This appeal was, in its original form, concerned solely with a question of forum: whether a substantial part of the claim should be stayed in favour of arbitration. However the points argued on the appeal have involved wider questions, including as to whether certain statutory and non-statutory jurisdictions can be invoked in litigation, and the extent to which certain questions are capable of being arbitrated. Disputes between the parties arise, in part, because the defendant conducted litigation in London when it was not entitled to do so. This conduct on the part of the defendant involved the commission of criminal offences. There is debate as to the precise offences committed, but there can be no doubt that the defendant was guilty of serious wrongdoing in this regard.

The claim has been brought in the Senior Courts Costs Office of the High Court (the “Costs Office”). The wider questions, however, do not commonly arise in the Costs Office and raise, or have the potential to raise, important questions as to the jurisdiction of the High Court.

The appeal is brought by the defendant against an order of Master Campbell dated 10 September 2012 (“the September order”). The September order refused an application by the defendant which, as revised, would have stayed a substantial part of a claim (the “Costs Office claim”) begun by a Part 8 claim form issued in the Costs Office on behalf of seven claimants on 16 August 2011. The claim form sought substantive relief which the court is empowered to grant by the Solicitors Act 1974 (“the 1974 Act”). The stay was sought primarily under section 9 of the Arbitration Act 1996 (“the 1996 Act”), and alternatively under the court’s inherent jurisdiction to stay its own proceedings (“the inherent stay jurisdiction”).

The 1996 Act provides:

9.

Stay of legal proceedings

(1)

A party to an arbitration agreement against whom legal proceedings are brought (whether by way of claim or counterclaim) in respect of a matter which under the agreement is to be referred to arbitration may (upon notice to the other parties to the proceedings) apply to the court in which the proceedings have been brought to stay the proceedings so far as they concern that matter.

…

(4)

On an application under this section the court shall grant a stay unless satisfied that the arbitration agreement is null and void, inoperative, or incapable of being performed.

…

30.

Competence of tribunal to rule on its own jurisdiction

(1)

Unless otherwise agreed by the parties, the arbitral tribunal may rule on its own substantive jurisdiction, that is, as to—

(a)

whether there is a valid arbitration agreement,

(b)

whether the tribunal is properly constituted, and

(c)

what matters have been submitted to arbitration in accordance with the arbitration agreement.

(2)

Any such ruling may be challenged by any available arbitral process of appeal or review or in accordance with the provisions of this Part.

The approach to be taken when considering a stay of court proceedings under s 9 of the 1996 Act is now clear. The court’s approach in this regard, once it has been established that the court itself has jurisdiction, was described in paragraphs 72 to 80 of the judgment of Aikens LJ, with whom Laws LJ and Mann J agreed, in Joint Stock Company “Aeroflot-Russian Airlines” v Berezovsky [2013] EWCA Civ 784 (“Aeroflot”). For convenience only, I summarise that approach in 7 stages:

In the previous paragraph I have used the term “jurisdiction-competence” to refer to the tribunal’s power to rule on its own substantive jurisdiction. Such a power is conferred in the present case by section 30 of the 1996 Act. Thus in the present case any decision by the tribunal as to its own jurisdiction under stages (3) or (7) of my summary of Aeroflot will, under section 30(2), be subject to challenge by any available arbitral process of appeal or review or in accordance with the provisions of Part I of the 1996 Act.

The Costs Office claim asked the court:

I make four initial comments in this regard:

I noted at section A1.3 above that an alternative claim for detailed assessment was made in relation to 26 invoices listed in a schedule. Confusingly, the schedule in fact listed 27 invoices. It is common ground that at least 15 of the 27 invoices concerned work said to have been done under the July retainer. They comprised an unnumbered invoice for an engagement fee, followed by 13 numbered invoices prefixed “APD 001” and listed under the heading “Polyus Gold Dispute”, along with an invoice KA-SF 001/01 listed under the heading “Success Fee”. There is a dispute as to whether two further invoices (“the Terra Raf invoices”) were for work said to have been done under the July retainer. Without seeking to resolve that dispute, I shall refer to the part of the claim which concerned the July retainer and work said to have been done under it as “the July retainer Costs Office claim”, and to the remainder of the claim as “the non-July retainer Costs Office Claim”.

When issued, the application for a stay (“the initial stay application”) concerned “all further proceedings in this action.” By the time of the hearing before the master, however, the defendant had revised its stance. It was in relation to the July retainer Costs Office claim that the defendant’s counsel made oral submissions seeking a stay. I shall refer to the application thus revised as “the revised initial stay application”. The master agreed with the defendant that the July retainer Costs Office claim fell within an arbitration agreement between the parties. He nevertheless concluded that a stay under section 9 of the 1996 Act should be refused because the arbitration agreement was, in the words of section 9(4) of the 1996 Act, “null, void, inoperative or incapable of being performed”. He reached that conclusion because it would be unjust to permit the defendant to benefit from an agreement for arbitration of a claim for work done “when it was pretending it was an English solicitor.” To do so, he said, would be to flout the principle that no-one can take advantage of their own wrong. I shall refer to this principle as the “no reliance on wrongful benefits principle”. For similar reasons the master refused a stay under the inherent supervisory jurisdiction of the court, adding that arguments in favour of a stay must give way to the other side’s “legitimate opportunity” to seek an order for assessment of bills rendered by the defendant.

As noted in section A1.3 above, under the 1974 Act the Part III relief may be claimed against a solicitor. Section 87(1) of the 1974 Act defines “solicitor” to mean a solicitor of the Senior Courts. Sections 1, 1A and 1B of the 1974 Act deal with the qualifications for practising as a solicitor. Section 3 of the 1974 Act prescribes when the Law Society may and must admit a person to be a solicitor.

Under the Administration of Justice Act 1985 (“AJA 1985”) the Part III relief may also be granted against a “recognised body”. The term “recognised body” is defined in section 9 of AJA 1985 to mean a body recognised by the Law Society as suitable to undertake the provision of solicitor services or other relevant legal services. Such a body may, but need not, be a body corporate: see ss 9(1)(a) and 9A (1).

Thus there is an apparent statutory restriction on the Part III relief. The two relevant statutes make express provision for that relief to be granted against a solicitor and against a recognised body. On the face of the statutes, the grant of the Part III relief is restricted to claims against solicitors and recognised bodies: there is no express statutory provision for it to be granted against anyone else.

The master did not decide whether Part III applied to the defendant. He left that over for later consideration. At the hearing of the appeal I was asked to make a definitive finding as to whether the court has jurisdiction over the defendant. The allegations of jurisdiction advanced at the hearing of the appeal ranged more widely than Part III. Nevertheless it seems to me desirable to begin within a definitive answer to the question whether the court has jurisdiction (“Part III jurisdiction”) to decide the claims to the Part III relief, these being the only claims in the claim form as it stood at the time of the hearing before the master. The potential consequences of the answer are important, and the answer will give a structured base from which to consider other questions as to jurisdiction.

As to potential consequences:

There are seven claimants. The first five are members of a prominent Kazakhstani family, the Assaubayevs. They are not the only members of this family, but for convenience in this judgment I shall use the term “the family” to mean these five individuals. The sixth and seventh claimants are Hawkinson Capital Inc (“Hawkinson”) and JSC Credit Altyn Bank (“Credit Altyn”). Both are companies which are or were associated with various activities of one or more of the family. More about the claimants will be found at sections A2.7, B1 and B2 below.

The defendant is Michael Wilson and Partners, Ltd (“MWP”), a company incorporated in the British Virgin Islands (“BVI”). It described itself as a legal and business advisor, licensed to practice law in Kazakhstan, and with offices in Kazakhstan and Azerbaijan. The first witness statement of Michael Earl Wilson dated 27 January 2012 (“Wilson 1”) explained that he is the managing director of MWP. Prior to the issue of the Costs Office claim form MWP said that the 1974 Act was of no application to it or its business (see section B12 below). In these proceedings it has, with a varying degree of qualification, maintained that fundamental stance. More about MWP will be found at section B3 below. The degree to which MWP has qualified that stance is dealt with at section D6 below.

I noted in section A1.4 above that the part of the Costs Office claim which MWP asked the master to stay was the July retainer Costs Office claim. Putting on one side the Terra Raf invoices (see section A1.4 above), the July retainer Costs Office claim concerned fees amounting to a total principal sum of US$8,187,668.56, said by MWP to be chargeable under the July retainer. That total sum comprised:

MWP says that these fees were properly charged for a considerable amount of work (“the claimed July retainer work”) done in Kazakhstan, London, Moscow, Tashkent and elsewhere, much of it with great urgency, by its managing director and employees in Kazakhstan and visiting other locations, leading to a successful outcome. The original claim asserted that in relation to the fees identified at (a) to (c) above there had been payments which on my calculation would total $3,426,820.30. However I do not need to determine the precise amount. It is common ground that of the fees thus identified more than $3m has been paid. It is also common ground that of the fees thus identified more than $4m has not been paid, and that in so far as interest has accrued on late payments or unpaid amounts no payments of interest have been made.

Prior to the issue of the Costs Office claim MWP, asserting that it was entitled to do so under the July retainer, on 8 July 2011 lodged a request for arbitration with the London Court of International Arbitration (“LCIA”). In that request MWP, as claimant in the arbitration proceedings, claimed amounts which were said in the body of the request to be due by way of outstanding fees for the claimed July retainer work, along with interest on late payments and outstanding sums. More about the LCIA arbitration will be found at section B12 below.

More than two and a half years later, for reasons that in part are described below, neither the assertions in the arbitration proceedings nor those in the Costs Office claim have been the subject of any examination on the merits.

For convenience I have used a number of abbreviations and short forms. They are listed in Annex 1 to this judgment, along with brief notes to assist the reader.

The initial stay application was founded on the existence in the July retainer of the arbitration agreement alleged in the July 2011 request for arbitration. MWP’s primary case was that under section 9 of the 1996 Act the court was required to stay the Costs Office claim. Its secondary case was that, even if the court were not required to stay the Costs Office claim in favour of arbitration, it ought to do so under the court’s inherent stay jurisdiction. Questions have been raised not merely as to whether the arbitration agreement was, as found by the master, “null, void, inoperative or incapable of being performed”, but also as to whether there was indeed an arbitration agreement at all. For convenience I shall in this judgment refer to the “arbitration agreement” on the basis that this term means “the July retainer arbitration agreement alleged by MWP”, unless the context otherwise requires.

The Costs Office claim was lodged on 16 August 2011 by Reed Smith LLP (“Reed Smith”) on behalf of the claimants, along with a witness statement dated 15 August 2011 (“Beale 1”) of Mr Patrick Beale, a solicitor at Reed Smith. It was issued and allocated to the master. Also lodged on that day was a request for permission to serve the claim on MWP out of the jurisdiction. The request was supported by a second witness statement, also dated 15 August 2011, (“Beale 2”) made by Mr Beale. More about that request will be found in Annex 2 to this judgment.

On 19 August 2011 the master granted the request for permission to serve the claim on MWP out of the jurisdiction. However the claim was not served until 14 December 2011. The reason given by the claimants for this delay was that they deferred arrangements for service until 2 December 2011, when the arbitrator refused applications that he rule on jurisdiction before proceeding to deal with the merits of MWP’s claim.

MWP acknowledged service on 13 January 2012, saying that it would contest jurisdiction. In the event, however, it did not apply to set aside service, nor did it seek a stay on grounds that England would be an inappropriate forum. Instead, the initial stay application, issued on 27 January 2012, relied only upon the existence of an arbitration agreement. The hearing of the initial stay application was delayed, partly because there was an unsuccessful attempt by MWP to transfer the claim to the Commercial Court.

The seventh and last claimant in the Costs Office claim was Credit Altyn, a Kazakh bank. Pursuant to a resolution dated 29 October 2011, it is currently in the management control of the Kazakhstan Financial Market Services Commission (“FMSC”). A letter was sent by Reed Smith to the court on 17 February 2012 in this regard. On 30 May 2012 Reed Smith lodged an application for a declaration that it had ceased to be the solicitor acting for Credit Altyn in the Costs Office claim. By order of the same date, sealed on 1 June 2012, the master granted the declaration sought. In these circumstances Credit Altyn has taken no active part in the Costs Office claim since February 2012. Accordingly I shall refer to the first six claimants (i.e. all claimants other than Credit Altyn) as “the active claimants”.

The hearing of the initial stay application was eventually listed for three hours on 21 June 2012. The stay sought at the hearing was revised so as to be confined to reliance upon the July retainer. The time estimate proved to be woefully inadequate. This was symptomatic of a case in which the arguments had even at this early stage become elaborate and unstructured, and in which the parties had not co-operated in advance to ensure an orderly presentation of the issues. After extending the hearing time on 21 June, and sitting for an additional day on 24 June, the master reserved judgment. On 10 September 2012 he made the September order refusing a stay. His judgment giving detailed reasons for the September order was handed down on 26 October 2012. For convenience, I set out the September order in full:

Decision

1.

The application dated 27 January 2012 for an order staying all further proceedings in this action is dismissed.

2.

I find that there is a concluded arbitration agreement and the issues in the proceedings are within its scope (S.9 (1) Arbitration Act 1996).

3.

However, I am also satisfied that the arbitration agreement is null, void, inoperative or incapable of being performed viz devoid of legal effect (S.9(4)).

4.

I reach the conclusion in 3 because I am satisfied that the defendant, in coming on the court record in the Chancery Division proceedings on behalf of Baurzhan and Aidar Assaubayev, held the firm out as English Solicitors. Having done so and having agreed that the [July] retainer is subject to the law of England and Wales, the defendant cannot (1) benefit from its assertion that it was not acting in those proceedings as English solicitors in order (2) to exclude the Claimants’ rights under the Solicitors Act 1974, whilst at the same time, proceeding with an arbitration of its fees under the 1996 Act.

5.

For the avoidance of doubt, time for applying for permission to appeal this decision will not run until the full reasons have been given in writing.

At a case management hearing on 8 July 2013 the master made an order which, among other things, granted permission for amendments to the claim form identifying additional or alternative relief sought by the active claimants. Those amendments (“the 2013 amendments”) were filed with the court on 26 September 2013. I shall refer to the claim prior to and after the 2013 amendments as “the original claim” and “the amended claim” respectively.

The 2013 amendments add to the claim in the following respects:

The amended claim involves fundamental changes from the original claim:

Paragraph 5 of Master Campbell’s order of 8 July 2013 fixed 12 and 13 December 2013 as the dates for the hearing of four preliminary issues concerning both the July retainer Costs Office claim and the non-July retainer Costs Office claim. In advance of this hearing paragraph 6 of the order required MWP on 7 to 10 October 2013 to provide facilities for inspection of its files in London. On 6 September 2013 Bean J granted MWP permission to appeal paragraph 6 of the order of 8 July 2013 (“the inspection appeal”), and stayed the operation of that paragraph pending the decision on the inspection appeal. He directed that the inspection appeal be heard after the present appeal and by the same court. An application that MWP provide security for the costs of that appeal was fixed to be heard on 1 October 2013.

On 24 September 2013 MWP issued an application (“the second stay application”) which in broad terms sought that almost all of the non-July retainer Costs Office claim be stayed pursuant to a separate arbitration agreement. The application notice said that the application needed to be heard by a High Court Judge. It was listed to be heard with the present appeal.

By order of Popplewell J dated 30 September 2013:

The master refused permission to appeal on 20 November 2012. An application to this court for permission to appeal was refused by Swift J on the papers, but was granted by Turner J at an oral hearing on 11 February 2013. An oral hearing of the appeal was scheduled to take place in May 2013, but this date had to be vacated when MWP failed to comply with an order for security for costs. The result has been that more than a year after the master’s decision the appeal came on for hearing. It was argued before me, sitting with assessors Master Rowley and Mr David Harris, on 3 and 4 October 2013.

On behalf of MWP Mr David Holland QC and Mr Paul Joseph advanced submissions in support of amended grounds of appeal. Ground 1 was a broad assertion that the Master wrongly refused a stay. The specific grounds of appeal were grounds 2 to 6 as follows:

2.

… the Master misconstrued and wrongly applied the test laid down in the authorities for refusing a stay under section 9(4) [of the 1996 Act].

3.

The Master wrongly failed, as he should have done (and as was conceded by the Respondents), to hold that the Appellant was not a solicitor within the terms of [the 1974 Act].

4.

The Master misinterpreted and misapplied the principle (set out in the case of Alghussein v Eton College [1988] 1 WLR 587) that “no man can benefit from his own wrong”.

5.

The Master wrongly held that the arbitration agreement was “null and void, inoperative or incapable of being performed”.

6.

The Master wrongly refused to grant a stay pursuant to the inherent jurisdiction of the court.

At the close of Mr Holland’s oral submissions I asked him about the history of the “not a solicitor” point asserted in ground 3, and the potential consequences if the point were sound. At section A2.12 below I give my account of my reasons for thinking that the point was of fundamental importance, and the submissions that were made to me in that regard.

On behalf of the active claimants Mr Nicholas Bacon QC and Mr George McDonald submitted at paragraph 6(b) of their skeleton argument, relying on five arguments in support, that MWP’s criticisms of the master’s judgment were misplaced. The five arguments in support were itemised:

(i)

There is a principle of law, correctly applied by Master Campbell, that a party cannot benefit from its own wrongdoing;

(ii)

On MWP’s case and/or Master Campbell’s findings, no fees are recoverable by MWP (pursuant to s.20, s.21 and s.25 of the Solicitors Act 1974 or at common law). As such, MWP’s application for a stay and the appeal are redundant and/or otiose as MWP is merely causing the parties to incur costs with no potential benefit and/or the arbitration clause is accordingly invalid;

(iii)

MWP cannot rely on the purported principle of statutory interpretation that where Parliament has imposed a statutory duty and expressly stipulated a remedy for its breach then that is the only remedy available, as the principle is inapplicable;

(iv)

The court can exercise the same supervisory and/or statutory jurisdiction it has over solicitors over those who purport to be solicitors; and

(v)

Master Campbell was entitled to dismiss the application without determining whether or not MWP was a solicitor. [Alternatively, if relevant, MWP was estopped, or contracted, into the Solicitors Act 1974.]

I have placed the alternative part of argument (v) in square brackets because, for ease of analysis, I shall separate it out and call it argument (vi). There was another argument in support, at paragraph 59 of the skeleton argument, to the effect that “the bill to be delivered and assessed is that of Mr Wilson”. For convenience I number it as (vii). I shall refer to these seven arguments taken together as the “active claimants’ supporting arguments”. On this basis arguments (vi) and (vii) are:

[(vi)] Alternatively [to argument (v)], if relevant, MWP was estopped, or contracted, into the Solicitors Act 1974.

[(vii)] The bill to be delivered and assessed is that of Mr Wilson as opposed to MWP … . Further, the court has jurisdiction over Mr Wilson as an officer of the court … . Mr Wilson is not entitled to hide behind the corporate veil. In the premises, MWP’s arguments as to the exact status of MWP are irrelevant. The court can, and only the court can, assess Mr Wilson’s bill.

As noted in section E below, argument (iii) is essentially part of argument (ii), for it seeks to reply to a possible answer to argument (ii). More generally, I observe that arguments (ii) to (iv), (vi) and (vii) asked that the court make findings which the master had not made. Presumably by oversight, this had not been expressly identified in the respondents’ notice dated 11 March 2013.

There were, however, six grounds for upholding the master’s order expressly set out in the respondents’ notice. Ground 6 was specific to Hawkinson and asserted that Aidar had no authority to agree on its behalf to the arbitration clause. Grounds 1 to 5 were:

1.

The arbitration clause is null, void, inoperable or incapable of being performed, as:

(a)

[MWP] is not entitled to contract out of, or usurp, the court’s jurisdiction under the Solicitors Act 1974; and/or

(b)

[MWP] is not entitled to contract out of, or usurp, the court’s supervisory and/or inherent jurisdiction over solicitors (or those who purport to be solicitors);

2.

The following issues in the Part 8 proceedings are not arbitrable:

(a)

An assessment pursuant to the Solicitors Act 1974 and/or the application of Part III of the Solicitors Act 1974;

(b)

The applicability and application of the court’s supervisory and inherent jurisdiction over solicitors (or those who purport to be solicitors);

(c)

The applicability and application of s 20 – s 25 of the Solicitors Act 1974;

(d)

Whether or not the retainer is champertous and/or unenforceable pursuant to s.58 of the Courts and Legal Services Act 1990;

3.

The arbitration clause is unenforceable pursuant to the Unfair Terms in Consumer Contracts Regulations 1999 and/or the court’s supervisory or inherent jurisdiction and/or is ineffective pursuant to the Unfair Contract Terms Act 1977;

4.

As the arbitration clause ousts the jurisdiction of the court and the arbitrator, it is unlawful and/or illegal at common law; and/or

5.

If the principle that no man can benefit from his own wrongdoing is only a canon of construction, … then, as a matter of construction, the arbitration clause is inapplicable to the present dispute between the parties.

The respondents’ notice recognised that grounds 5 and 6 would require the court to overturn the master’s decisions that there was an arbitration agreement between the parties and that relevant parts of the Costs Office claim fell within it. In that regard, while it asserted that the active claimants did not need permission to appeal, if necessary the active claimants applied for permission to appeal.

In later parts of this judgment I summarise particular aspects of the arguments advanced at the hearing.

At the hearing counsel made submissions as to criminal offences and associated civil entitlements under the 1974 Act. At a late stage in the preparation of my judgment it seemed to me that possible offences under later statutes needed consideration. I asked the parties for a joint note which would, among other things, deal with the impact of statutes other than the 1974 Act.

In response I received a series of submissions culminating on 5 December 2013. Those submissions, however, did not seem to me to have grappled with key provisions in the more recent legislation. This led to a further round of submissions from the parties. When I reviewed those submissions in January 2014 it seemed to me that there remained features of the statutory provisions which called for closer analysis. Written submissions in that regard were provided by MWP on 24 January 2014. The active claimants lodged a response on 28 January 2014. MWP’s replies were lodged on 3 February 2014. Additional submissions commenting on a recently reported case were then lodged during the period 4 to 6 February 2014. I am grateful to the parties’ legal teams for the help which they have provided in this way.

I mentioned in section A2.10 that at the close of Mr Holland’s oral submissions I asked him about the history of the “not a solicitor” point. What troubled me was something which, on reflection, I believe can properly be likened to an elephant in the room. In MWP’s grounds of appeal, it was ground 3 which contended that MWP “was not a solicitor”. As I understood the argument, MWP intended by this term to refer both to solicitors and recognised bodies and asserted that MWP was neither a solicitors’ firm nor a recognised body, with the consequence that MWP was not an entity against which Part III relief could be granted. If that contention were right:

In answer to my question about the history of the point, Mr Holland explained that he had not been instructed in the early stages, and could only speculate that an application to stay under the 1996 Act had been thought preferable to an application to set aside service. I asked Mr Holland whether it would not be better to decide definitively, not on an interim basis, whether the court had jurisdiction under Part III. Mr Holland submitted that the court could say that the arbitrator should decide that point, subject to any appeal from the arbitrator’s award. He noted that the court, if unable at this stage to decide whether the proceedings fall within an arbitration agreement, could either direct a trial of that issue or grant a stay under its inherent stay jurisdiction without resolving the issue. More generally, Mr Holland submitted that the court could direct trial of any issue, but it would have to allow the appeal first. Once the appeal was allowed then the court could direct trial of the proposed issue.

At the start of his submissions on behalf of the active claimants opposing the appeal, Mr Bacon noted that the master’s case management order of 8 July 2013 (see section A2.9 above) had directed that similar sorts of questions be tried as preliminary issues. Mr Bacon made a proposal that the court should make a final determination now. In that determination the court would decide whether it had jurisdiction over MWP, would decide “the legitimacy of the retainer”, and would decide whether MWP is entitled to claim its fees. On those matters Mr Bacon commented that the court would not hear much more by way of legal argument at the trial of a separate issue than it would hear during the course of the submissions on the present appeal.

In his submissions in reply Mr Holland did not dissent from that proposal.

It is now accepted that MWP neither is nor ever has been a solicitor, and neither is nor ever has been a recognised body. The active claimants advance a knockout contention (argument (ii) identified in section A2.10 above) that no fees are recoverable by MWP, this being the alleged effect of sections 20, 21 and 25 of the 1974 Act or of relevant common law principles. For reasons given in section E below I cannot decide issues arising on that contention in the way sought by the active claimants. I deal in section G6 below with Hawkinson’s separate knockout contention that Aidar lacked authority to bind Hawkinson to the July retainer. I conclude in that regard that under the inherent stay jurisdiction I should grant a stay of paragraph 10 of the amended claim so that the arbitrator can decide the point pursuant to section 30 of the 1996 Act (see paragraph 73 of the judgment of Aikens LJ in Aeroflot noted in section A1.2 above).

In these circumstances, for reasons given below, I consider that I can and should determine definitively that the court does not have Part III jurisdiction over MWP. In that regard I hold in section F below that, as regards the original claim, ground 3 of appeal succeeds. The result, however, is not that sought at the hearing before the master. I do not hold that the July retainer Costs Office claim, as it stood at the time of the order under appeal, should be stayed pending arbitration. Instead, as the court has no jurisdiction to deal with the original claim, the appropriate order is that the original claim be struck out.

If that course had been taken at the hearing, two broad questions could have arisen:

The parties have not expressly analysed the matter in that way. However, prior to the 2013 amendments, the respondents’ notice and the parties’ skeleton arguments assumed that on the appeal this court could decide the substance of both the permissible claims question and the new claims stay question. I am content to deal with those questions, as it seems to me that they are questions which could have been argued before the master if he had reached the conclusion that the court lacked jurisdiction over MWP under Part III.

It might be thought that in large part the permissible new claims question is now disposed of by the master’s order permitting the 2013 amendments. My conclusion that there is no Part III jurisdiction will mean that in the amended claim passages referring to the Part III claims will need to be struck out. Subject to that, I would have expected that any objection that these were not permissible new claims would have been raised by way of opposition to the relevant part of the 2013 amendments. That did not happen. However, in its written Response to the respondents’ notice in the present appeal MWP made two relevant assertions:

As to the new claims stay question, for the reasons given and to the extent described in section G below, I allow the appeal on certain aspects of this question, as well as on the Part III jurisdiction question. In substitution for the master’s order, I will make an order which:

The family, associated entities, MWP & key events

The members of the family are nationals of Kazakhstan. At relevant times they had homes there, in England, and elsewhere. Each member of the family had been a defendant in English proceedings (“the Jenington action”) in the Chancery Division of the High Court in June 2010. The experience cannot have been a pleasant one. The claim had been brought by three companies. They were Jenington International Inc ("Jenington", a company incorporated in the BVI), Kazakhgold Group Limited ("Kazakhgold", a company incorporated in Jersey but whose shares at the time were listed on the main market of the London Stock Exchange) and JSC MMC KazakhAltyn ("KazakhAltyn", a Kazakhstan incorporated company).  Those companies had obtained from Peter Smith J a worldwide freezing order (“the Peter Smith order”) against the family and others on 23 June 2010. The order specified information to be supplied by way of disclosure of whereabouts and details of assets, and a requirement for the surrender of passports belonging to members of the family. Three of them were served here and complied with this requirement. The result was that they were unable to leave this country for some months. Meanwhile, notification was given to banks and others of the Peter Smith order and, where appropriate, of comparable orders obtained in other jurisdictions. The overall effect on the family, both personally and financially, must have been little short of devastating, at least in relation to their activities outside Kazakhstan. More about the Jenington action will be found in sections B2, B4 and B6 to B10 below.

A judgment of Vos J (“the Vos judgment”), dealing with an interlocutory dispute in the Jenington action, was delivered on 15 September 2010. At paragraph 65(3) Vos J described the family as “close-knit”. Vos J noted (at paragraph 6) that in the Jenington action they had at that time disclosed assets allegedly worth $853 million. At paragraph 65(8) he noted that of these assets some $450 million were “in offshore discretionary trust”. The Vos judgment records (at paragraph 29) that certain assets were admitted to be held in Hawkinson, now the sixth claimant in the Costs Office claim, and formerly a defendant in the Jenington action. It is alleged by MWP that other assets of the family were held elsewhere, including in Credit Altyn.

The Vos judgment for convenience used first names for members of the family. I shall do the same, with no disrespect intended. The family comprised the first five defendants in the Jenington action, although not in the same order as in the Costs Office claim. The sixth defendant in the Jenington action was a Jersey company, Gold Lion Holdings Limited (“GLH”). GLH is not a claimant in the Costs Office claim. MWP alleges that GLH, too, held family assets. The seventh defendant in the Jenington action was Hawkinson. The Jenington action was not brought against Credit Altyn.

Dealing in turn with the personal claimants in the Costs Office claim:

Hawkinson is the sixth claimant. It is a company incorporated in the BVI. It was the seventh defendant in the Jenington action and is the eighth respondent in the arbitration. Hawkinson is the last of the “active claimants”, as defined in section A2.7 above.

In circumstances described in section A2.7 above Credit Altyn, the seventh claimant, did not appear and was not represented at the hearing before the master. This was also the case at the hearing before me. Credit Altyn was not a defendant in the Jenington action. It is the eighth respondent in the arbitration.

Although GLH is not a claimant in the Costs Office claim, it is convenient to summarise its position. As noted in section B2.1 above, GLH is incorporated in Jersey, is not a claimant in the Costs Office claim, and was the sixth defendant in the Jenington action. GLH is the seventh respondent in the arbitration. In its response to MWP’s notice of arbitration, GLH has objected to the jurisdiction of the arbitrator, alleging that the July retainer was not signed by any person having authority on its part to do so. GLH also says that it is ultimately wholly owned by a trust company operated by RBC Trust Company (International) Limited, part of the Royal Bank of Canada group, as trustee for a discretionary trust.

Michael Earl Wilson is the managing director of MWP. In a witness statement in support of MWP’s claim in the arbitration Mr Wilson described MWP in this way:

4.

MWP is a limited liability company, specialising in and providing legal and business consulting services in Kazakhstan, Azerbaijan, Central Asia, the Caucasus, Russia and the Ukraine, incorporated in the … BVI … in 1998. It has a Branch Office in Almaty, Kazakhstan, and a Representative Office in Baku, Azerbaijan. In its two offices in Almaty and Baku, respectively, MWP employs about 50 people, with the larger office being in Almaty. MWP obtained and has had a licence to practice law in Kazakhstan since 1998. MWP employs Kazakh, Azeri, Russian, Kyrgyz, Ukrainian, Serbian, English and Australian qualified lawyers. Only two of MWP’s employees (myself in 1984, and Mr R.A. Chudzynski in 2005) qualified as solicitors in England and Wales, but neither of us resides or practices in that jurisdiction.

Later in that statement Mr Wilson explained the background to MWP’s relationship with the family:

15.

I was the founding and managing partner of Baker & McKenzie in Kazakhstan, Central Asia and the Caucasus from August 1994 until July 1998, which included forming the office of Baker & McKenzie in Almaty from scratch in August 1994. During that time, I introduced and brought the Assaubayevs to Baker & McKenzie as clients, acting for them and one of their entities LLP Aksam Snab. The Assaubayevs followed me to MWP in 1998, since when MWP has a long and successful history of acting for the Respondents, and their corporate vehicles, and in relation to a wide variety of matters, projects and things.

16.

Initially in late 1999/early 2000, MWP acted for the Respondents when they first looked to acquire, operate and manage the gold-mining exploration business, assets and subsoil-use rights of the former State Joint Stock Company, Kazakhaltyn, and to raise financing in relation thereto. Since 2002, MWP acted for Kazakhaltyn, under an engagement letter signed by the Fifth Respondent [Sanzhar], in his capacity as Kazakhaltyn’s First Vice-President … .

17.

Further, MWP acted for the Assaubayevs and their various vehicles in relation to an oil base project in Aktau, Mangistau Oblast, Kazakhstan, which they owned with a Turkish partner. MWP also introduced them to the opportunity, and acted for them in relation to the proposed reverse-takeover and acquisition of EuroGold, and its gold mining, exploration and processing assets in Romania and Ukraine, and also in the proposed acquisition of the Jeeroy Gold Mine (involving the Russian oligarch Boris Berezovsky, and the Georgian oligarch Badri Patarkatsishvili), and the Taldy-Bulak Gold Mines in Kyrgyzstan, the Bakyrchik Gold Mines in Kazakhstan, and also introduced them to and acted for them in relation to their proposed acquisition of the gold mining assets of Emperor Mines in Fiji, and Papua New Guinea.

A feature of MWP’s dealings with the family prior to the July retainer was that, as recorded in paragraph 2(1) of the July retainer, previous work by MWP for the family had not been reimbursed, and an arbitration award in that regard had not been paid. Mr Wilson said that while an English judgment would not be recognised by the Kazakh courts, an arbitration award would be recognised and enforced, and for that reason the provision for arbitration in the July retainer was of considerable importance to MWP. No evidence to the contrary was lodged by the claimants.

In Beale 1 Mr Beale described the Jenington action as “a major piece of commercial litigation.” I have given in section B1 above a description of the claimants in that action and of the Peter Smith order. By way of background, Mr Beale explained that  issues and disputes had arisen in 2010 between, amongst others, OJSC Polyus Gold (a company incorporated in Russia), Polyus International, Jenington, Kazakhgold and their various subsidiaries, related companies and affiliates including KazakhAltyn.  The disputes arose, amongst other things, out of dealings in the shares of Kazakhgold in 2009 and the proposed reverse takeover of OJSC Polyus Gold by Kazakhgold in 2010.  Mr Beale said that the claimants, by which I think he must have meant the family, were all former directors of Kazakhgold and had, indirectly, held a significant percentage of the shares in Kazakhgold until their acquisition by Jenington. It was in relation to these issues and disputes, said Mr Beale, that MWP “provided legal services and advice” to the claimants.

The Vos judgment at paragraph 9 gave more detail about the allegations against the active claimants in the Jenington action:

Until August 2009, putting the matter broadly, the defendants controlled Kazakhgold and KazakhAltyn. Once Jenington took control of Kazakhgold and KazakhAltyn they discovered some alleged defalcations by the defendants and had brought these proceedings claiming, amongst other things:

(1)

that the defendants diverted funds from Kazakhgold and KazakhAltyn pursuant to sham contracts in the period 2007 to 2009. What is alleged here is that Kazakhgold raised US$200million on the euro bond market in November 2006, to be used to construct three CIP (carbon in pulp) plants in Kazakhstan but that sum was paid away to sham contractors through an intermediary Real Invest.

(2)

that the defendants breached their fiduciary duties to Kazakhgold in respect of three contracts between Kazakhgold and MAED BVI (MAED), a company in which the defendants had a secret beneficial interest and to which they were entitled to 50 per cent of the profits.

(3)

damages for fraudulent misrepresentations concerning Kazakhgold’s production and sales figures and working capital expenditure, allegedly made by the defendants in relation to the acquisition of Jenington and its parent company, Polyus, of 50.1 per cent of Kazakhgold, from [GLH] for some US$254million. The production and sales figures were allegedly inflated by fictitious sales to a company called Transgold in the UAE and the working capital expenditures under the sham contract were represented to be genuine.

As set out in sections B1 and B2.1 above, the immediate background to the July retainer was that all five family members had had their assets frozen, ostensibly world wide. In addition Kanat, Marusya and Sanzhar had had their houses searched, and had their passports removed so that they could not leave the United Kingdom. Aidar’s departure from the United Kingdom had the consequence that he had not been subject to the latter indignity, but it also had the consequence that in the event of a return by him to the United Kingdom he faced a strong likelihood of an application against him for contempt of court, with a real possibility that he would be imprisoned if found to have been in contempt.

The letter dated 2 July 2010 which I have referred to as the July retainer was addressed by MWP to each of the claimants, along with GLH. The letter described itself as a “Letter of Engagement” in which MWP set out the terms and conditions of its engagement by the addressees. It recorded that the addressees, acting jointly and severally, had engaged MWP to provide them and their affiliates with “legal services in relation to the Kazakhstani aspects” of certain issues and disputes, and in that regard made reference to Kazakhgold and KazakhAltyn. It set out terms as to MWP’s remuneration which included a substantial success fee.

Material parts of the July retainer were set out at paragraph 18 of the master’s judgment of 26 October 2012. I repeat them here, with the addition of numbering of sentences in paragraphs 3 and 8, and of italics for two passages noted in the next paragraph:

Dear Madam and Sirs

Letter of Engagement

This letter sets out the terms and conditions of our engagement.

1.

Engagement of scope of work

We are pleased that all of the above persons and entities, acting jointly and severally and accepting joint and several liability for all fees and costs, have selected Michael Wilson and Partners Limited (MWP) with effect from 2^nd July 2010, to provide you and your affiliates ("you") with legal services in relation to the Kazakhstani aspects of the issues in dispute that have arisen with and involving Mikhail Prokhorov, Suleiman Karimov, OJSC Polyus Gold, Polyus International, Jenington International Inc. and their subsidiaries, related companies, affiliates, persons and entities (collectively hereafter referred to as "Polyus") relating to and involving whether directly or indirectly, Kazakh Gold Plc and KazakhAltyn JS, and its businesses, affairs assets and liabilities (the "Project"), together with such other services as you may request MWP to carry out, from time to time…

…

3.

Billing, Payment and Success fees.

[3.1] Details of the basis of our fees and disbursements are set out in schedule 2 attached to this letter.

[3.2] MWP will issue bills at frequent intervals (usually monthly). MWP require our bills to be paid promptly and in any event within ten(10) days after they are issued …

[3.4] We have also agreed that MWP will be entitled to bill, charge and be paid a success-fee equivalent to fifty percent (50%) of its professional fees, plus disbursements at 7.5% of such fees and VAT at 12% on such fees and disbursements, in the event of success being achieved for you in relation to the Project with such "success" being defined as any one or more of the following:

(1)

an amicable settlement being signed between you, Polyus and/or KazakhGold Plc and JSC MMC KazakhAltyn; …

…

8.

Governing Law and Disputes.

[8.1] This letter shall be governed by and construed in accordance with the substantive laws of England and Wales, in force from time to time…

[8.2] The parties shall endeavour to settle any dispute, controversy or claim between them arising out of or relation to this Letter, or the breach, termination or invalidity thereof (a “Dispute”), by way of amicable and friendly negotiations. [8.3] If the Parties fail to come to an agreement with respect to the substance of the Dispute within thirty (30) calendar days after receipt of a notice indicating the presence of a Dispute and its substance, such Dispute shall be resolved as set out below.

[8.4] At the absolute discretion of MWP, any Dispute may be referred to mediation conducted under the London Court of International Arbitration ("LCIA") Mediation Procedure then in force. [8.5] The mediator shall be agreed by the Parties within fifteen (15) calendar days after the date of referral of the Dispute to the LCIA, or, in default of agreement, shall be appointed by the LCIA.

[8.6] If the Dispute is not settled by mediation within sixty (60) calendar days of the appointment of a mediator, or such further period as the parties shall agree in writing, or MWP does not wish to mediate the Dispute in any event, the Dispute shall be settled at MWP’s absolute discretion either by (i) the courts of Kazakhstan or (ii) the courts of the country where your registered office or principal place of business is situated (or the country of your domicile or residence if you are individual) or (iii) arbitration before the London Court of International Arbitration ... [8.7] If MWP chooses arbitration then at the election of MWP there shall either be a sole (1) arbitrator or three (3) arbitrators. ...

…

[8.12] The place of mediation or arbitration shall be London, England, the English language shall be used throughout the mediation or arbitration proceedings and the mediator and arbitrator(s) must be fluent in the English language.

…

Schedule 1

Summary of Key Personnel

Michael E Wilson

Managing Director

Michael is the founding partner of an international law firm with a large presence in CIS and has been permanently resident in Kazakhstan since January 1995. …

Education: Manchester University, UK, 1980, Chester Law School, UK, 1981.

Business Associations: Member of the Law Society of England and Wales …

…

Richard A Chudzynski

Associate

Native English speaker.

Education: … admitted as a solicitor in England and Wales in 2005.

...

Schedule 2

Schedule of fees and charges

Payment Details

…

5.

Payment by wire transfer in US dollars Please remit to the following account:

Account Name: Michael Wilson Partners...

Bank Address PO Box 181, 27-32 Poultry London EC2P 2BX…."

In the master’s detailed reasons he noted that the July retainer differed in certain respects from MWP's standard terms. Paragraph 6 of MWP’s standard terms contained a statement that MWP was not, and had never been, a firm of solicitors and that the requirements of the Solicitors Act 1974 and the Solicitors Code of Conduct had no relevance or application to MWP or any of its employees. That disclaimer was omitted from the July retainer. Further, the July retainer contained the passages in italics above, passages which were not present in the standard terms.

It is not in dispute that a great deal of work was done by MWP over the following weeks and months.

When the Costs Office claim form was lodged Beale 1 said (at paragraph 8) that MWP provided legal services and advice to the claimants pursuant to the July retainer. Paragraphs 23 onwards of Beale 1 made numerous references to the July retainer (using Mr Beale’s terminology of “Engagement Letter”) with no suggestion that this document had not been agreed between the parties. Beale 2, made in support of the application to serve out of the jurisdiction, said at paragraph 5 that the claim “arises under an engagement letter dated 2 July 2010 between the parties …”. At paragraph 17 onwards Beale 2 (again using Mr Beale’s terminology of “Engagement Letter”) relied upon the July retainer as bringing the case within the court’s jurisdiction to serve out where a claim is made in respect of a contract governed by English law, and in support of an assertion that the English court is the natural forum for the claim. However, the current stance of the family is that they cannot recall signing, but accept for present purposes that they did in fact sign, the July retainer. As appears from Annex 2 to this judgment, this stance was first advanced on 20 February 2012, and was apparently put forward as the stance of all the active claimants. However, both at the hearing before the Master and at the hearing before me, Hawkinson has departed from this stance and has said that it denies that the July retainer was signed with its authority. This is ground 6 in the respondents’ notice (see section A2.10 above and section G6 below).There is no evidence from Credit Altyn giving any reason to doubt that the July retainer was duly signed on its behalf.

These changes of the position, both those by the family and Hawkinson putting in issue whether relevant signatures were genuine, and the claim by Hawkinson that there was a lack of authority involve the adoption after the claim was brought of stances which ought to have been identified before commencing proceedings. Had that been done then those stances could properly be expected to have been explained in Beale 1 and Beale 2. This, and other apparent omissions from Beale 1 and Beale 2, cause me concern. The reasons for my concern are set out in Annex 2 to this judgment.

I noted in section A2.9 above that on 24 August 2010 the August retainer was entered into as a separate letter of engagement between MWP and Aidar. There is no dispute that it was signed by MWP and Aidar on 24 August 2010.

The August retainer was of a different nature from the July retainer. In particular, MWP undertook in the August retainer to act for Aidar personally with respect to his involvement as a defendant in the Jenington action.

Accordingly the scope of work as described in the August retainer was significantly different from that in the July retainer. Material parts of the August retainer include:

Dear Sir

Letter of Engagement

This letter sets out the terms and conditions of our engagement.

Engagement and Scope of Work

We are pleased that you have selected MWP to act for you personally ("you") with effect from 24^th August 2010 with respect to your involvement as a Defendant in claim No: HC10C02125 before the Chancery Division of the English High Court in relation to the issues and dispute that have arisen with and involving Jenington International Inc, Kazakh Gold PLC and KazakhAltyn MMC JSC (the "Project") together with such other services that you may request MWP to carry out from time to time....

8.

Governing Law and Disputes

This letter shall be governed by and construed in accordance with the substantive laws of England and Wales, in force from time to time…[the same clause relating to mediation and arbitration as was in the July retainer was then set out]

Mr Wilson’s third witness statement dated 5 March 2012 (“Wilson 3”) gave an account of how this came about. In that account he referred to Allen & Overy LLP and Cleary Gottlieb, which at material times acted as legal representatives for certain other defendants in the Jenington action, as “A&O” and “CGSH” respectively. Paragraphs 19 to 27 of Wilson 3 stated:

19.

On or about 12 August 2010, Polyus made an application to debar [Aidar] from defending the proceedings, and also for judgment in default to be entered against him. … For reasons which they have failed ever properly to explain, neither A&O nor CGSH was prepared to go on the record for [Aidar] as well. In all probability, the reason for their refusal was because they realised that going on the record for the [Aidar] would make it difficult for the Claimants to continue to maintain, vis-à-vis the Court and Polyus, that [other defendants in the Jenington action] Claimants 1, 2, 4, 6 and various of their other entities and trusts were not communicating with each other. [Aidar] and [Baurzhan] wanted to maintain that neither of them was aware of the freezing and disclosure orders made against them and, therefore, that neither of them had deliberately acted in contempt of court and/or failed to comply with the orders and injunctions which the Court had made against all of the Claimants, as well as GLH, their trusts and other entities.

20.

Accordingly, in mid-August 2010, all of A&O, CGSH, the Claimants and GLH asked MWP if it would be willing to act for and represent [Aidar], in relation to the English proceedings. MWP informed them that it did not wish to do so, because it was fully committed, if not over-stretched, in acting for the Claimants and GLH relating to a whole variety of strategic and crucial matters, including political, lobbying, PR, business, commercial, criminal, administrative, legal and other matters in Kazakhstan, Kyrgyzstan, Russia, Romania, the Isle of Man, Kentucky, the Cayman Islands and elsewhere and also because it is not and never was an English firm of solicitors, does not practice English law, and does not have a London office.

21.

Instead, MWP advised the Claimants, GLH and A&O and CGSH, that they, themselves, should do so, and that they, and not MWP, should act for and go on the record for the Third Claimant, and instruct counsel on his behalf, and that MWP could not understand why they did not want to do so. At that time, CGSH had already identified a barrister that they had already preliminarily briefed and wanted to instruct to act for [Aidar], being Stephen Auld QC of One Essex Court. A&O and CGSH asked MWP several times, but MWP refused. CGSH even told Stephen Auld QC, that they and the Claimants, not MWP, would be responsible for his fees and costs. The Claimants, GLH, A&O and CGSH continued to ask MWP to agree to go on the record for [Aidar], explaining that they were extremely worried that, if they were seen to act for [Aidar], and go on the record for him in the English proceedings, it would be difficult for them to maintain, as they had done to date, vis-à-vis Polyus and the Court, that [Aidar] and [Baurzhan] were not communicating and aware of the English proceedings, and the orders made against them and, further, that [Hawkinson] and GLH were independent, separate and distinct entities, not necessarily controlled by [the family], although, in reality, they are and always were.

22.

After continual requests and pressure from A&O, CGSH, the Claimants and GLH, and also because they explained that in all likelihood, there would only be one or two hearings involving issues relating to [Aidar] (because the focus was on the other defendants) before the long summer recess, and because MWP had already commenced settlement discussions with Polyus and their lawyers, including as to a Memorandum of Understanding (drafted and negotiated by MWP in Kazakhstan and Moscow, which was actually signed on 18 September 2010), which would provide for a commercial resolution of all matters in dispute, including importantly a stay of all litigation, and in order to help and assist the Claimants and GLH, as its clients, MWP reluctantly agreed with the requests of A&O, CGSH, the Claimants and GLH.

23.

This agreement to go on the record for the Third Claimant was on the strict condition and understanding that A&O and CGSH would provide MWP, at their cost, with all necessary background information and documents, including access to A&O’s “Ringtail” litigation data-room, that A&O and CGSH would take the overall lead and management, and would guide and advise MWP in acting for [Aidar] each and every step of the way, and as to all documentation and correspondence. This included all issues of English law and practice because A&O and CGSH understood that MWP was not and has never been a firm of English solicitors. MWP discussed with A&O and CGSH arranging for another firm, such as Healys LLP or CJ Jones LLP to be engaged and go on the record, rather than MWP, but CGSH and [Aidar] did not want to do this, as it would delay matters due to the complex KYC procedures and, further, because it would cause further costs. MWP was to be part of their “team” and, in effect, as the nominee for A&O and CGSH. In particular, CGSH organised matters so that MWP was not responsible for the fees and costs of Stephen Auld QC, but instead, that A&O, CGSH, the Claimants and GLH were, as it is proven by the fact that CGSH, not MWP, paid Stephen Auld QC.

24.

Accordingly, A&O, with the approval of CGSH, drafted an Acknowledgement of Service on behalf of [Aidar], which it asked MWP to sign, and which A&O then filed in the Chancery Division of the High Court, on behalf of [Aidar]. Furthermore, CGSH instructed Stephen Auld QC to commence work and he drafted a letter to the Judge and an affidavit for the Third Claimant in response to the debarring and contempt default judgment applications made against him, which MWP helped to settle by liaising as to the facts with the Third Claimant who was then in Kazakhstan.

25.

On 27 August 2010, while hearings were underway in relation to the other defendants, there was a short hearing relating to certain limited and relatively small matters involving [Aidar]. At that hearing, orders were made requiring [Aidar] to comply with the existing freezing and disclosure orders and, in particular, to explain why he had left the country, to apologise to the Court and to give disclosure of his worldwide assets. A&O, CGSH, Stephen Auld QC and MWP (in Kazakhstan) assisted [Aidar] in preparing an appropriate affidavit, based upon and largely tracking similar affidavits previously drafted, prepared, approved, filed and served by A&O and CGSH, and filed in Court for Claimants 1, 2 and 4, and Hawkinson where CGSH were also acting for the Sixth Claimant. There was also an application by Polyus to obtain access to CCTV footage at [Aidar’s] apartment in London in order to try and prove he had wrongly fled the country, which A&O, CGSH, Stephen Auld QC, James Drake (now QC), and also MWP (in Kazakhstan) assisted [Aidar] in relation to. In addition, the gmail, yahoo and other email accounts of [the family] were accessed by Polyus, in the presence of supervising solicitors. A&O and junior counsel were present, as also was Mr Marko Radosavljevic, a Serbian (not English) qualified lawyer employed by MWP.

26.

In addition, Polyus made an application to have [Aidar] medically examined in Almaty, Kazakhstan by their chosen specialist. [Aidar] took the position that he had not actually “fled” England, in contempt and in order to avoid compliance with the freezing and disclosure orders against him, but because he had had a serious car accident and needed to urgently return to Almaty, Kazakhstan in accordance with pre-planned arrangements for medical treatment in Kazakhstan. A&O, CGSH, Stephen Auld QC and James Drake took the lead in these matters, with MWP nominally on the record acting for [Aidar], in the circumstances I have described above.

27.

The matters relating to [Aidar] were rather a side-show, and certainly not the main focus of the English proceedings. [Aidar] was never cross-examined, … . No defences or counterclaims were ever filed by any of the Claimants, or GLH, because the litigation did not proceed that far, principally due to the summer recess, and also especially because of the stay, which took effect as early as on 18 September 2010 when the Memorandum of Understanding was signed (though commercially, the parties respected the stay before that). On that date, [Kanat, Marusya and Sanzhar] were given their passports back and returned to Kazakhstan, where [Aidar] had always remained, together with [Baurzhan].

On 31 August 2010 an Acknowledgment of Service was filed on behalf of Aidar in the Jenington action. It used form “N9 Response pack (10.08) Crown Copyright 2008”, which I shall refer to as “the 2008 response pack form.” As completed, the Acknowledgement of Service stated that documents about the claim should be sent to “Michael Wilson & Partners” at an address in Barnes, London SW13 (“the Barnes address”). A signature then appeared above the description, “(defendant’s solicitor)”. A box describing the position or office held by the signatory was completed so as to describe the signatory as an “Associate”.

It is now accepted by MWP that it was responsible for the lodging of this acknowledgment of service. While such responsibility was not specifically admitted in the evidence before the master, in his fourth witness statement dated 7 June 2012 (“Wilson 4”) Mr Wilson gave certain information about the Barnes address, in particular that it was the rented family home of an employee of MWP. At paragraph 19 of Wilson 4 Mr Wilson said:

Although this address has occasionally, and as a matter of logistical convenience, been given as a correspondence address, it is not and has never been a business address of MWP. It is not and has never been, an office of MWP.

The active claimants say that work done by MWP during the period between 31 August 2010 and 30 March 2011 included:

On 30 March 2011 an Acknowledgment of Service was filed on behalf of Baurzhan in the Jenington action. By this time agreements had been reached between the parties to the Jenington action under which there would be a settlement of disputes in all jurisdictions (see section B10 below).

The acknowledgment of service on behalf of Baurzhan stated that documents about the claim should be sent to “Michael Wilson & Partners, Limited” at the Barnes address. On this occasion the form was signed without any express indication as to whether the signatory was or was not the defendant’s solicitor. The box in which to describe the position or office held stated “Director”. The form used for this purpose was “Number 9 Response Pack (04.06)”, which I shall refer to as “the 2006 response pack form”.

It is now accepted by MWP that it was responsible for the lodging of this acknowledgement of service.

There is no suggestion that at any time there was a separate letter of engagement between MWP and Baurzhan of the kind that was entered into between MWP and Aidar. Nor has it been suggested by MWP that, in its interactions with the court on behalf of Baurzhan, MWP was acting for Baurzhan alone, rather than acting under the July retainer.

The active claimants say that work done by MWP in April and May 2011 included:

Mr Wilson’s evidence gave an account of how the Jenington action was the subject of settlement discussions which eventually led to that action coming to an end. Key points, in which it was said that MWP played a significant role, in Mr Wilson’s account were:

MWP’s invoices for work done pursuant to the July retainer are dealt with in section A2.2 above. During the period September 2010 to May 2011 MWP rendered ten invoices to Aidar for work done pursuant to the August retainer. More about the August retainer invoices will be found in section B13 below.

On 9 April 2011 Baurzhan emailed lawyers and others involved in the Jenington litigation stating that MWP no longer represented any of “the Assaubayev family or their interests in this matter”. The email added that until such time that alternative counsel could be instructed, Aidar and Baurzhan would be represented by Cleary Gottlieb.

MWP’s response was to dispute that any such termination was effective.

It is common ground that on 2 May 2011 Cleary Gottlieb filed a notice of change of solicitors, by which they came on the record for Aidar and Baurzhan.

The July retainer and the August retainer both gave MWP the right (see sentence [8.6] in section B5 above) to insist that disputes be referred to arbitration before the LCIA. As noted in section A2.3 above, on 8 July 2011 MWP lodged with the LCIA a request for arbitration.

The request for arbitration sought payment from the claimants in these proceedings and from GLH of sums allegedly due under the July retainer. In a response lodged on 5 August 2011 by Baker & McKenzie on its behalf, GLH denied that the July retainer was signed with its authority.

On 8 August 2011 the claimants lodged their response with the LCIA. In it they said that the English court had sole jurisdiction to determine whether or not MWP’s fees are recoverable. They added that they wished to exercise statutory rights under the 1974 Act, and that they would issue a claim in that regard. MWP responded in an email the following day in which, among other things, it asserted the fundamental stance noted in section A1.3 above: the 1974 Act was of no application to MWP or its business.

There are two additional features to mention. They concern the scope of the arbitration, and the current position in the arbitration.

The scope of the arbitration was described in the request for arbitration in a section entitled “Basis of the Claim”. This made it clear that the claim was for work done pursuant to the July retainer, including a claim to a success fee under that retainer. The request for arbitration asserted that success was achieved on 17 May 2011, when Kazakhgold announced that all relevant conditions to the settlement deed of 11 April 2011 had been satisfied.

Despite this description, however, the invoices accompanying the request for arbitration included ten that had been rendered to Aidar under the terms of the August retainer. More information about them is given in section B13 below. These ten invoices were later withdrawn from the arbitration. As noted by the master, Wilson 1 stated in paragraph 30 that the ten invoices had been

included in [the bundle of invoices accompanying the request for arbitration] by mistake and have since been removed from it. MWP's Request for Arbitration referred only to MWP's claims against all the Claimants and GLH under the Engagement Letter [i.e. the July retainer], and not to any claims it may have against Third Claimant [i.e. Aidar], pursuant to the Separate Engagement Letter [i.e. the August retainer] concluded with him alone.

Turning to the present position in the arbitration, the decision of the master on 10 September 2013 was simply that MWP’s application for a stay of the Costs Office proceedings should be refused. The arbitrator, noting that no order of the court prevented the arbitration from continuing, directed that the hearing of the arbitration should proceed on 24 September 2012 as previously scheduled. In order to prevent this Reed Smith on behalf of the active claimants issued a claim form in the Commercial Court (2012 Folio 1219), seeking an injunction prohibiting MWP and the arbitrator from progressing or taking any further steps in the arbitration. By an order dated 19 September 2012 Field J granted the injunction sought against MWP.

I noted earlier that the schedule to the claim form listed twenty seven invoices, and in that regard I identified fifteen of them that were for work said to have been done under the July Retainer. Each of those invoices is addressed to “Messrs Assaubayevs”.

Of the twelve other invoices, ten concerned work said to have been done for Aidar during the period 23 August 2010 to 29 April 2011 under the August retainer. They were rendered to Aidar for work including, among other things, acting for him and going on the court record on his behalf in the Jenington litigation. The invoice amounts are for a total of $713,340.79. MWP has acknowledged that of this total more than $600,000 has been paid. These invoices are headed “AKA UK Proceedings” and are numbered AKA-UK 001/01 to AKA-UK 001/10. Each of these invoices is addressed to “Mr Aidar K Assaubayev”.

The two remaining invoices have the heading “Terra Raf Trans Trading and Montvale Investments Ltd vs Altyn Oil LLP US$5m Debt Recovery”. These are the invoices referred to in section A1.4 above as the “Terra Raf invoices”. They are number TRT 001/01 in an amount of $4,864.16 for work done between 1 and 26 November 2010, and number TRT 001/02 in an amount of $156.52 for work done in December 2010. Both of these invoices have been paid. Each was addressed to “Mr Aidar K Assaubayev.” It is not necessary for present purposes to decide whether they were for work said to have been done under the July retainer.

The master’s reasons for the September order

Returning to the master’s reasons for refusing the initial stay, at this stage I supplement sections A1.4 and A2.8 above. In the September order the master said that MWP had held itself out as English solicitors, and could not benefit from its assertion that it had not been acting as English solicitors in order to exclude the other side’s rights. Detailed reasons for the decision were handed down on 26 October 2012. In paragraph 5 of those reasons he explained:

5.

The Court has yet to decide whether the relief sought under the Act should be granted and it is important to stress at the outset of this judgment what the application it addresses is not. Although [counsel for the claimants] has invited the court in paragraph 66 of his skeleton to make orders reflecting the [Part III relief] sought …, it is only MWP's application for a stay with which the court was seised on 21 and 24 June 2012. Indeed, thus far, the parties' attention has been directed only at (i) whether these proceedings should be transferred to the Commercial Court … and (ii), this application. For that reason, whether there should or should not be an assessment under the Act is not within the scope of this judgment. Instead, it is limited to the relief sought in the application notice, namely MWP's case that the proceedings under the Act should be stayed and that the arbitration should continue on the basis that there was a valid arbitration agreement incorporated into the retainer which existed between MWP and the claimants.

The master reached conclusions at paragraphs 72 to 77 that there had indeed been an arbitration agreement, and at paragraph 78 that the July retainer Costs Office claim fell within it. He noted at paragraph 79 that in view of this finding he must order a stay under section 9(1) unless the arbitration agreement fell foul of section 9(4). In that regard he stated at paragraph 82 that the “key issue” was “whether something has happened which has rendered the agreement to arbitrate null and void, inoperative and incapable of being performed”. After a review of evidence (paragraphs 83 to 101) he concluded that something had indeed happened which had that effect. His analysis is set out at paragraphs 102 to 105 of his detailed reasons:

102.

In my judgment, none of this evidence supports Mr Wilson's claim that MWP was acting "nominally" in a side-show, still less that MWP was not acting as a firm of solicitors at all and did not provide legal services in England. The documents simply do not bear that out. First, as I have said, the narratives to the bills charge for work that a firm of English solicitors conducting High Court litigation would do and, in this case MWP did do in the Jenington litigation. Second, the fact and circumstances of MWP going on the court record can lead to no other conclusion in my view [than] that in doing so, MWP was holding itself as a firm of English solicitors with a place of business within the jurisdiction. Third, there are the variations MWP introduced to its standard engagement letter by the removal of the clause stating that MWP was not a firm of solicitors to which either the Act or the Code applied, and the addition of material informing the Claimants that Mr Wilson was a member of the Law Society and that Mr Chudzynski was admitted as an English Solicitor. They lead to the obvious inference being drawn that MWP was qualified to handle the Jenington litigation in the English Courts and that it was willing to do so. If that was not the case, why did MWP remove from the standard form of engagement letter the very term upon which Mr Wilson is now relying to assert that MWP was not an English solicitor with a business presence in England?

103.

If I am right, what is the consequence of these findings upon the agreement to arbitrate? In my judgment it is to render the agreement null and void, inoperative and incapable of being performed because were it to be otherwise, MWP would be benefiting from its own default. That default is that having submitted to a retainer letter that was subject to English law, MWP pretended to be a firm of English solicitors by doing things that only English Solicitors can do, such as going on the court record, corresponding with Jenington's solicitors on behalf of clients, issuing applications in the High Court, briefing counsel, signing orders and generally doing as an English solicitor would do, and then rendering bills to the Claimants for the work involved. Yet in contrast to the English solicitor, when it has come to the checking of those bills to ensure that they are fair and reasonable, it is MWP's contention that it should not be subject to the same statutory scrutiny as the English solicitor, even though the charges relate to work done as if MWP was an English solicitor and indeed was done when MWP was pretending to be an English solicitor.

104.

MWP's justification for this, when confronted by a complaint about fees, is that the Act has no application because MWP is an off-shore BVI and is immune from its operation. That is an unattractive submission. Were it to prevail, I would agree with Mr Bacon that it would enable any foreign lawyer to masquerade as an English solicitor, do work as an English solicitor but then to argue in the event of a dispute about fees, that the clients could not make use the statutory rights they would be able to exercise, had the work been done by a legal representative falling within the category of "solicitor" set out in CPR 3.2. For that reason, I am satisfied that MWP should not be permitted to benefit from such a masquerade. To do so would be to flout the principle set out in Alghussein v Eton College and the long line of authorities recited therein, succinctly encapsulated by Lord Jauncey on page 594 at D that "no man can take advantage of his own wrong" . It would enable MWP to have arbitrated, sums it has charged the Claimants for acting as an English solicitor when it says it has not, and at the same time, to deprive those same Claimants of the opportunity to argue before this court, that the fees claimed for work done when MWP purported to be an English solicitor, should be assessed under the Act. Were a stay to be granted, such an outcome would be manifestly unjust to the Claimants. For that reason, I consider that MWP, being in breach of the terms of the engagement letter for the reasons given here and in paragraph 103, cannot rely on the agreement to arbitrate for its own advantage and that, accordingly, the agreement is null, void and inoperative.

105.

If I be wrong in my finding that MWP held itself out as English solicitors, the position for MWP is no better. Suppose that Mr Wilson is right and that MWP never acted in this capacity and did not carry on or have a business address within the jurisdiction, indeed that the address that he inserted in the Form N 9 was just "a correspondence address" (Wilson 4 paragraph19). The upshot, in my judgment, is that identified by Mr Bacon: a reserved activity will have been carried out in breach of section 20 of the Act, possibly a criminal offence will have been committed under s.20(2), an address for service will have been given that is not a business address and the High Court in the Jenington litigation will have been misled into believing that MWP was a legal representative as defined in CPR 3.2 when it was not. To permit MWP to rely on the arbitration agreement in these circumstances would again, in my view, enable MWP to take advantage of its own wrong doings. For that reason, the agreement to arbitrate would be null and void even if Mr Wilson were to be correct in his assertion that MWP is not and never has been a firm of English solicitors.

As to a stay under the inherent supervisory jurisdiction, the master noted MWP’s evidence that an arbitration award in its favour would be enforceable in Kazakhstan while a court order to the same effect would not. That, he held at paragraphs 107 to 109, must be subordinate to the family’s “legitimate opportunity to seek an order for the assessment of the very substantial bills that MWP has rendered.”

The master added at paragraph 110:

110.

… in rejecting MWP's application, I am not saying that MWP is an English solicitor when it is not, in the sense that I am exercising a jurisdiction which cannot be conferred on the court by agreement or estoppel. The limit of the decision is that, for the purposes of this judgment, I do not need to make a finding about whether he/MWP was a solicitor and/or is subject to the Act. It is sufficient to find that in MWP holding itself out as and having behaved as a solicitor, it would be unjust for it to benefit from the arbitration clause, in relation to deciding how much MWP should be paid for work done when it was pretending it was an English solicitor. Moreover, it would be a further injustice to the Family, in my judgment, if MWP were able to have an arbitration award enforced for work done during that pretence, before those responsible for satisfying that award (the Claimants) have had an opportunity in these proceedings to decide whether the fees are at least capable of being assessed by this court under the Act. For that reason, Mr Holland's argument on estoppel either does not arise or, if it does, is misplaced.

The master’s concern was described in paragraph 103 of his judgment as being that, having pretended to be a firm of English solicitors, an insistence by MWP on arbitration amounted to saying that it should not be subject to the same statutory scrutiny as an English solicitor. Putting the matter in that way assumes that an English solicitor could not rely on an arbitration clause – for if an English solicitor could rely on an arbitration clause then MWP was not seeking to put itself in any better position than an English solicitor would have been in. However while he had recited the arguments for and against a proposition that relief under Part III could be given by an arbitrator, the master had not addressed those arguments in his judgment.

Perhaps for this reason at paragraph 110 the master put the point a little differently, saying that the claimants should have an opportunity for a determination “whether the fees are at least capable of being assessed by this court under the [1974] Act.” Here it may be that the benefit lost by arbitration, as contemplated by the master, would be the opportunity to establish that there was Part III jurisdiction and then argue that claims to Part III relief could not be arbitrated.

At paragraph 43 of his detailed reasons the master recorded Mr Holland’s submission that MWP was neither a solicitor nor a recognised body under AJA 1985. Elsewhere, however, on occasion the master spoke simply of relief available against an “English solicitor”. In paragraph 103 he referred to MWP pretending to be “a firm of English solicitors”. The position prior to AJA 1985 was that a firm of solicitors would be a partnership of individuals all of whom would be solicitors. At that time civil procedure in the High Court was governed by the Rules of the Supreme Court, and under RSC Order 6 rule 5 and RSC Order 18 rule 6 writs and pleadings served on behalf of a party acting by a solicitor were required to be indorsed with the name of the party’s solicitor or the solicitor’s firm. Once AJA 1985 was in force however, a firm of solicitors might take the form of a body corporate provided that it was recognised by the Law Society. This did not result in any change to RSC Order 6 rule 5 and RSC Order 18 rule 6, nor did it need to if one took the view that a recognised body could still be described as the solicitor’s “firm”.

It is, I think, implicit in his order and detailed reasons that in a number of places the master was using the term “solicitor” as shorthand for “solicitor or recognised body”. In section D6 below I give reasons for thinking that court forms often use the same shorthand. Shorthand of this kind can be a convenient course. However, it may carry dangers which need to be borne in mind.

I said in section A2.8 above that by the time of the hearing before the master the arguments had become elaborate and unstructured, and the parties had not co-operated in advance to ensure an orderly presentation of the issues. Criticisms of that kind were not made by the master. Standing back from the case, however, I think it important to draw attention to these features. In my view they had an adverse effect not only at the hearing before the master, but also at the hearing before me.

Underlying the master’s reasoning in both paragraphs 103 and 110 was a concern that a stay should not be granted if it would prevent invocation of the court’s jurisdiction. The materials before him, however, did not include any structured analysis of the options open to the court in order to meet that concern. By the time of the hearing what was before him was a welter of allegations and counter-allegations, many of them couched in terms of broad generality and lacking rigorous consideration of relevant statutory provisions. If the parties had co-operated in order to prepare a structured analysis of the courses that could be taken by the court, or even if just one of the parties had stood back from the fray and prepared such an analysis, then the importance of an early determination of Part III jurisdiction would have achieved greater prominence. It would resolve not merely whether the July retainer Costs Office claim should be struck out, but whether the whole of the original claim should be struck out. Moreover, taking this course would permit an alternative way of addressing the master’s concern. This would have been to defer hearing argument on the revised initial stay application pending determination of whether the court had jurisdiction to grant the Part III relief.

In paragraph 111 of his judgment the master noted deferral of a decision on the stay application as one of a number of possible courses which he eschewed. By this time, however, he had heard two days of what he described as “wide ranging” submissions. It does not appear from his judgment that the parties presented him with a structured analysis enabling identification of the advantages of deferring argument on the stay application. If this had been identified as a possible course the master might well have taken a case management decision to hear submissions on it at the outset. If he had heard submissions on case management at the outset, and had then decided to adopt the course of deferring argument on the stay application, there might have been a prospect that the remaining time at the hearing on 21 June 2012 would enable argument on the Part III jurisdiction question to be completed. Moreover, a structured analysis identifying this and other options might, if prepared in advance of the 21 June 2012 hearing, have highlighted to the parties that it was desirable to confine that hearing to argument on the Part III jurisdiction question, so that there could then be a more focused review of the consequences summarised in section A1.6 above.

Regulation of those conducting litigation

Regulation of the legal profession has changed radically since 1974. It has become much more complex. The conduct of litigation is one of a number of different regulated activities. In order to give an overview of regulation of the conduct of litigation during the period July 2010 to April 2011 it is necessary to refer to four different statutes. For convenience I shall also set out in section D5 below provisions in the Solicitors Code of Conduct that are said to be relevant. More generally:

The 1974 Act was supplemented by the Administration of Justice Act 1985 (“AJA 1985”). At Annex 3 to this judgment I set out relevant provisions in the 1974 Act, as in force during the period July 2010 to April 2011 inclusive. For each such provision Annex 3 also sets out, within square brackets and in italics, any relevant supplementary provision in AJA 1985. In addition I set out in section D6.1 below extracts from the wording of sections 19 to 27 of the 1974 Act during the period 1 October 1993 to 31 December 2009.

Relevant parts of this statute, as in force during the period July 2010 to April 2011 inclusive, are set out in Annex 4 to this judgment.

Relevant sections of CLSA 1990, as in force during the period July 2010 to April 2011 inclusive, are set out in Annex 5 to this judgment. Annex 5 additionally sets out certain provisions no longer in force by July 2010 because they had been repealed.

Relevant sections of the Legal Services Act 2007 (“LSA 2007”), as in force during the period July 2010 to April 2011 inclusive, are set out in Annex 6 to this judgment. Annex 6 additionally sets out certain provisions brought into force on 1 October 2011.

Also said to be relevant are certain provisions in the Solicitors Code of Conduct 2007 as amended ("the Code"). They are set out in Annex 7.

In the course of Mr Bacon’s oral submissions he drew my attention to MWP’s first invoice under the July retainer, and noted that it referred to disputes in Kazakhstan, Jersey, the BVI and England. I asked whether his case was that courts in each of those jurisdictions could assess the bill. Mr Bacon replied that it was only in London that MWP’s work on all these disputes could be assessed. By way of example, Mr Bacon noted that Kanat, Marusya and Sanzhar had at certain times been represented in the Jenington action by Allen & Overy. As clients of a London firm they could apply to the Costs Office to interrogate an invoice for work done by the firm in Jersey or Belgium. Mr Bacon accepted that MWP had done a great deal of work outside England that anyone could do, but submitted that it was work concerning legal proceedings in England.

I asked my assessors whether they could assist on this aspect. Their advice, which I reported to the parties in open court, was that under the practice of the Costs Office a firm with a foreign branch could include the work of the foreign branch in a Costs Office assessment. Equally, however, the foreign branch might be able to seek assessment in the foreign jurisdiction of a bill for its work, and look to the client for payment of the assessed bill there.

Neither side suggested that this practice of the Costs Office was wrong. It is a practice adopted in cases where the firm in question is an entity over which the court has Part III jurisdiction. The existence of this practice does not assist me in deciding whether the court has Part III jurisdiction over MWP. Nor does it assist me on any of the other issues which I need to decide.

Lord Lowry, in Harrison v Tew [1990] 2 AC 523 at p. 529, cited as “an appropriate introduction” what was said by Sir Frederick Lawton in the Court of Appeal in that case:

Ever since the late Middle Ages the courts have exercised a disciplinary jurisdiction over attornies and solicitors as officers of the court: see Holdsworth, A History of English Law , 3rd ed. (1923), vol. III, p. 392. By the beginning of the 17th century the behaviour of some attornies and solicitors was such that Parliament decided to impose some degree of regulation of them. It did so by the statute 3 Jac. 1, c. 7. The mischief which Parliament wanted to regulate was identified: 'For that through the abuse of sundry attornies and solicitors by charging their clients with excessive fees and other unnecessary demands, such as were not, nor ought by them to have been employed or demanded, whereby the subjects grow to be overmuch burdened.' It was enacted that attornies and solicitors should obtain a 'ticket' (i.e. a receipt) for any fees paid to specified third parties and render a true bill to their clients. This statute seems to be the origin of the modern practice of delivering bills of costs.

The question which arose in Harrison v Tew concerned section 70 of the 1974 Act. At that time the 1974 Act used the original terminology of “taxation”, rather than the terminology of “assessment” introduced by LSA 2007. Using that terminology, section 70 included the following:

70 Taxation on application of party chargeable or solicitor

(1)

Where before the expiration of one month from the delivery of a solicitor’s bill an application is made by the party chargeable with the bill, the High Court shall, without requiring any sum to be paid into court, order that the bill be taxed and that no action be commenced on the bill until the taxation is completed.

(2)

Where no such application is made before the expiration of the period mentioned in subsection (1), then, on an application being made by the solicitor or, subject to subsections (3) and (4), by the party chargeable with the bill, the court may on such terms, if any, as it thinks fit (not being terms as to the costs of the taxation), order –

(a)

that the bill be taxed; and

(b)

that no action be commenced on the bill, and that any action already commenced be stayed, until the taxation is completed.

(3)

…

(4)

The power to order taxation conferred by subsection (2) shall not be exercisable on an application made by the party chargeable with the bill after the expiration of 12 months from the payment of the bill.

…

The decision of the House of Lords was that the claimant was not entitled to invoke the inherent supervisory jurisdiction to refer a bill for what is now called assessment, and was then called taxation, more than 12 months from the date of payment. The reason was that when imposing a time limit of 12 months from the date of payment, s 70(4) of the 1974 Act, echoing earlier statutory provisions, was a negative enactment ousting the inherent supervisory jurisdiction to refer a bill where that would be in conflict with what the enactment laid down.

In reaching his decision in Harrison v Tew Lord Lowry, in the context of the inherent supervisory jurisdiction enabling the court to refer a bill, drew a contrast with a case where the enactment in question is not a negative provision. Thus at page 536 Lord Lowry affirmed that the common law – and thus the inherent supervisory jurisdiction – can co-exist with a statutory provision with which it is not inconsistent.

That there are both disciplinary and other aspects of the court’s inherent supervisory jurisdiction was explained by Balcombe LJ, with whom Kerr and Neill LJJ agreed, in Udall (t/a Udall Sheet Metal & Co) v Capril Lighting Ltd [1988] 1 Q.B. 907 at pages 916 to 918:

In my judgment the true position is as follows. There are three ways in which a party who seeks to force a professional undertaking given by a solicitor can proceed:

(1)

By an action at law, if there is a cause of action.

(2)

By an application to the court to exercise its inherent supervisory jurisdiction.

(3) By an application to The Law Society. In the Professional Conduct of Solicitors (The Law Society, 1986) it is stated in paragraph 15.02:

"A solicitor who fails to honour the terms of a professional undertaking is prima facie guilty of professional misconduct. Consequently, the council will require its implementation as a matter of conduct."

However,

"Neither the council nor the tribunal have power to order payment of compensation or to procure the specific performance of an undertaking if a solicitor declines to implement it. The only step open to the council is to take disciplinary action for failure to honour the undertaking."

It is the second of these methods with which this case is concerned, and I turn now to consider this jurisdiction. I should say at once that I do not accept Mr. Munby's submission that the enforcement of undertakings is in some way separate and distinct from the general question of professional misconduct. The true position is as follows.

(1) The nature of the summary jurisdiction is explained in the following passage from the speech of Lord Wright in Myers v. Elman [1940] A.C. 282, 319:

"The underlying principle is that the court has a right and a duty to supervise the conduct of its solicitors, and visit with penalties any conduct of a solicitor which is of such a nature as to tend to defeat justice in the very cause in which he is engaged professionally, as was said by Abinger C.B. in Stephens v. Hill (1842) 10 M. & W. 28. The matter complained of need not be criminal. It need not involve peculation or dishonesty. A mere mistake or error of judgment is not generally sufficient, but a gross neglect or inaccuracy in a matter which it is a solicitor's duty to ascertain with accuracy may suffice. Thus, a solicitor may be held bound in certain events to satisfy himself that he has a retainer to act, or as to the accuracy of an affidavit which his client swears. It is impossible to enumerate the various contingencies which may call into operation the exercise of this jurisdiction. It need not involve personal obliquity. The term professional misconduct has often been used to describe the ground on which the court acts. It would perhaps be more accurate to describe it as conduct which involves a failure on the part of a solicitor to fulfil his duty to the court and to realise his duty to aid in promoting in his own sphere the cause of justice. This summary procedure may often be invoked to save the expense of an action. Thus it may in proper cases take the place of an action for negligence, or an action for breach of warranty of authority brought by the person named as defendant in the writ. The jurisdiction is not merely punitive but compensatory. The order is for payment of costs thrown away or lost because of the conduct complained of. It is frequently, as in this case, exercised in order to compensate the opposite party in the action."

(2) Although the jurisdiction is compensatory and not punitive, it still retains a disciplinary slant. It is only available where the conduct of the solicitor is inexcusable and such as to merit reproof: R. & T. Thew Ltd. v. Reeves (No. 2) (Note) [1982] Q.B. 1283, 1286.

(3)

If the misconduct of the solicitor leads to a person suffering loss, then the court has power to order the solicitor to make good the loss occasioned by his breach of duty: Marsh v. Joseph [1897] 1 Ch. 213, 244-245, per Lord Russell of Killowen C.J.

(4)

Failure to implement a solicitor's undertaking is prima facie to be regarded as misconduct on his part, and this is so even though he has not been guilty of dishonourable conduct: see United Mining and Finance Corporation Ltd. v. Becher [1910] 2 K.B. 296, and in particular the argument of the successful applicants, at p. 301; John Fox v. Bannister, King & Rigbeys, post, p. 925. However, exceptionally, the solicitor may be able to give an explanation for his failure to honour his undertaking which may enable the court to say that there has been no misconduct in the particular case: see Fox's case, post, p. 930D-G.

(5)

Neither the fact that the undertaking was that a third party should do an act, nor the fact that the solicitor may have a defence to an action at law (e.g. the Statute of Frauds), precludes the court from exercising its supervisory jurisdiction: see Ex parte Hughes, 5 B. & Ald. 482; In re Greaves (1827) 1 Cr. & J. 374 . However, these are factors which the court may take into account in deciding whether or not to exercise its discretion and, if so, in what manner.

(6)

The summary jurisdiction involves a discretion as to the relief to be granted: per Lord Wright in Myers v. Elman [1940] A.C. 282, 318. In the case of an undertaking, where there is no evidence that it is impossible to perform, the order will usually be to require the solicitor to do that which he had undertaken to do: see In re A Solicitor [1966] 1 W.L.R. 1604.

(7)

Where it is inappropriate for the court to make an order requiring the solicitor to perform his undertaking, e.g. on the grounds of impossibility, the court may exercise the power referred to in paragraph (3) above and order the solicitor to compensate a person who has suffered loss in consequence of his failure to implement his undertaking: see John Fox v. Bannister, King & Rigbeys. It is stated in the text books (see Cordery on the Law Relating to Solicitors , 7th ed. (1981), p. 122; Halsbury's Laws of England , 4th ed., vol. 44 (1983), para. 255, pp. 193-194) that the court will not enforce an undertaking which is incapable of being performed ab initio. If this statement means no more than that the court will make no order in vain, then I would not quarrel with it. If, however, it is intended to suggest that the court will not order compensation for breach of an undertaking which is ab initio incapable of performance, then it is difficult to understand the principle on which it is based and I doubt whether it is an accurate statement of the law. It appears to depend on the authority of Peart v. Bushell, 2 Sim. 38, and I agree with the criticism of that case made by Hamilton J. in United Mining and Finance Corporation Ltd. v. Becher [1910] 2 K.B. 296, 306. However, the point does not arise in the present case and I need not consider it further.

Solicitors and their clients can, like other contracting parties, seek to have disputes between them resolved by making a claim under the court’s ordinary jurisdiction. If a claim is brought in the ordinary jurisdiction then relevant rules of law and procedure under that ordinary jurisdiction will apply, but will give way to mandatory special provisions.

Thus if a solicitor’s claim for fees is made in the ordinary jurisdiction then a client can insist, if requirements under the 1974 Act are satisfied, that the special procedure of assessment must be followed. If those requirements are not satisfied, then under the ordinary jurisdiction the solicitor must prove that the fees claimed are reasonable: see the decision of the Court of Appeal in Turner & Co v O Palomo SA [1999] 4 All ER 353. As the solicitor has yet to be paid, section 70 of the 1974 Act does not bar an assessment.

Similarly if a client uses the ordinary jurisdiction to make a claim for an account, then that claim may, as is generally the case with claims for an account, be met by establishing the requirements for a defence of settled account: see the decision of the House of Lords in Harrison v Tew above.

The 1974 Act creates criminal offences. Among other things:

Where an unqualified person acts as a solicitor, the 1974 Act makes express provision not only as to criminal law liabilities but also as to certain civil law entitlements. As to this:

On aspects of the areas of disagreement identified above, counsel cited two cases concerning professional advisors who were claims consultants and tax experts respectively. In each case it was argued, not that the professional advisors pretended to be solicitors, but that they “acted as a solicitor”. Both cases were decided prior to LSA 2007. At the relevant time the 1974 Act included section 19, which under the heading “Rights and privileges of solicitors” expressly conferred rights of practising and rights of audience. This section was repealed by LSA 2007, which also repealed sections 22, 23 and 27 and made changes to the wording of sections 20, 24, 25 and 26 of the 1974 Act. I identify the differences below by setting out the wording during the period 1 October 1993 to 31 December 2009, underlining words which were later omitted, and striking through words which were later inserted:

Solicitors Act 1974 c. 47

Part I: RIGHT TO PRACTISE AS A SOLICITOR

…

Rights and privileges of solicitors

19.— Rights of practising and rights of audience.

(1)

Subject to subsection (2), every person qualified in accordance with section 1 may practise as a solicitor—

(a)

in the Supreme Court;

(b)

in any county court;

(c)

in all courts and before all persons having jurisdiction in ecclesiastical matters; and

(d)

in all matters relating to applications to obtain notarial faculties,

and shall be entitled to all the rights and privileges, and may exercise and perform all the powers and duties, formerly appertaining to the office or profession of a proctor in the provincial, diocesan or other jurisdictions in England and Wales.

(2)

Nothing in subsection (1) shall affect the provisions of section 94 of the Supreme Court Act 1981, section 13 or 60 of the County Courts Act 1984 or any other enactment in force at the commencement of this Act which restricts the right of any solicitor to practise as such in any court.

(3)

Nothing in subsection (1) or (2) shall prejudice or affect any right of practising or being heard in, before or by any court, tribunal or other body which immediately before the commencement of this Act was enjoyed by virtue of any enactment, rule, order or regulation or by custom or otherwise by persons qualified to act as solicitors.

Unqualified persons acting as solicitors

20.— Unqualified person not to act as solicitor.

(1)

No unqualified person shall —

(a)

act as a solicitor, or as such issue any writ or process, or commence, prosecute or defend any action, suit or other proceeding, in his own name or in the name of any other person, in any court of civil or criminal jurisdiction; or

(b)

act as a solicitor in any cause or matter, civil or criminal, to be heard or determined before any justice or justices or any commissioners of Her Majesty's revenue.

(2)

Any person who contravenes the provisions of subsection (1) —

(a)

shall be is guilty of an offence and liable on conviction on indictment to imprisonment for not more than two years or to a fine or to both; and

(b)

shall be guilty of contempt of the court in which the action, suit, cause, matter or proceeding in relation to which he so acts is brought or taken and may be punished accordingly.

21.

Unqualified person not to pretend to be a solicitor.

Any unqualified person who wilfully pretends to be, or takes or uses any name, title, addition or description implying that he is, qualified or recognised by law as qualified to act as a solicitor shall be guilty of an offence and liable on summary conviction to a fine not exceeding the fourth level on the standard scale.

22.— Unqualified person not to prepare certain instruments.

(1)

Subject to subsections (2) and (2A), any unqualified person who directly or indirectly—

(a)

draws or prepares any instrument of transfer or charge for the purposes of the Land Registration Act…, or makes any application or lodges any document for registration under that Act at the registry, or

(b)

draws or prepares any other instrument relating to real or personal estate, or any legal proceeding,

shall, unless he proves that the act was not done for or in expectation of any fee, gain or reward, be guilty of an offence and liable on summary conviction to a fine not exceeding level 3 on the standard scale.

(2)

Subsection (1) does not apply to—

(a)

a barrister or duly certificated notary public;

…

(b)

any public officer drawing or preparing instruments or applications in the course of his duty;

(c)

any person employed merely to engross any instrument, application or proceeding;

and paragraph (b) of that subsection does not apply to a duly certificated solicitor in Scotland.

(2A) Subsection (1) also does not apply to any act done by a person at the direction and under the supervision of another person if—

(a)

that other person was at the time his employer, a partner of his employer or a fellow employee; and

(b)

the act could have been done by that other person for or in expectation of any fee, gain or reward without committing an offence under this section.

(3)

For the purposes of subsection (1)(b), “instrument” includes a contract for the sale or other disposition of land (except a contract to grant such a lease as is referred to in section 54(2) of the Law of Property Act 1925 (short leases)), but does not include—

(a)

a will or other testamentary instrument;

(b)

an agreement not intended to be executed as a deed other than a contract that is included by virtue of the preceding provisions of this subsection;

(c)

a letter or power of attorney; or

(d)

a transfer of stock containing no trust or limitation thereof.

…

[Section 22A, repealed by LSA 2007, dealt with enforcement powers of local weights and measures authorities.]


23.— Unqualified person not to prepare papers for probate etc.

(1)

Subject to subsections (2) and (3), any unqualified person who, directly or indirectly, draws or prepares any papers on which to found or oppose—

(a)

a grant of probate, or

(b)

a grant of letters of administration,

shall, unless he proves that the act was not done for or in expectation of any fee, gain or reward, be guilty of an offence and liable on summary conviction to a fine not exceeding the first level on the standard scale.

(2)

Subsection (1) does not apply to a barrister or duly certificated notary public.

(3)

Subsection (1) also does not apply to any act done by a person at the direction and under the supervision of another person if—

(a)

that other person was at the time his employer, a partner of his employer or a fellow employee; and

(b)

the act could have been done by that other person for or in expectation of any fee, gain or reward without committing an offence under this section.

24.— Application of penal provisions to body corporate.

(1)

If any act is done by a body corporate, or by any director, officer or servant of a body corporate, and is of such a nature or is done in such a manner as to be calculated to imply that the body corporate is qualified or recognised by law as qualified to act as a solicitor—

(a)

the body corporate shall be guilty of an offence and liable on summary conviction to a fine not exceeding the fourth level on the standard scale, and

(b)

in the case of an act done by a director, officer or servant of the body corporate, he also shall be guilty of an offence and liable on summary conviction to a fine not exceeding the fourth level on the standard scale.

(2)

For the avoidance of doubt it is hereby declared that in sections 20, 22 and 23 references to unqualified persons and to persons include references to bodies corporate. section 20 the reference to an unqualified person and the reference to a person both include a reference to a body corporate.

…

25.— Costs where unqualified person acts as solicitor.

(1)

No costs in respect of anything done by any unqualified person acting as a solicitor shall be recoverable by him, or by any other person, in any action, suit or matter.

(2)

Nothing in subsection (1) shall prevent the recovery of money paid or to be paid by a solicitor on behalf of a client in respect of anything done by the solicitor while acting for the client without holding a practising certificate in force if that money would have been recoverable if he had held such a certificate when so acting.

…

26.

Time limit for commencement of certain proceedings.

Notwithstanding anything in the Magistrates' Courts Act 1980 1, proceedings in respect of any offence under section 21, 22 or 23 may be brought at any time before the expiration of two years from the commission of the offence or six months from its first discovery by the prosecutor, whichever period expires first.

…

27.

Saving for persons authorised to conduct legal proceedings.

Nothing in this Part shall affect any enactment empowering an unqualified person to conduct, defend, or otherwise act in relation to any legal proceedings.

The first case cited, Piper Double Glazing Ltd v DC Contracts Co, was a decision of Potter J sitting in the High Court with assessors, on an appeal from a taxation by Deputy Master Rodgers. A limited liability company, describing itself as “claims consultants”, had acted for the successful party in two building arbitrations. Potter J’s judgment, reported at [1994] 1 WLR 777, dealt with two preliminary issues. Only the first of these is relevant for present purposes. It asked:

Where in an arbitration conducted in England or Wales in accordance with English law: (i) a party is represented by a person who is neither a qualified solicitor nor a barrister (‘the unqualified person’), but who provides services and performs functions similar to those provided or performed by a solicitor or barrister; and (ii) an award is made by the arbitrator in favour of that party, which includes a direction that another party should pay the first party’s costs of the arbitration; … does the court, on a proper construction of… sections 20 to 25 of the Solicitors Act 1974, have power to allow any amount for the costs incurred by the unqualified person in relation to the conduct of the arbitration?

One of the objections urged by the paying party was that the answer to the preliminary issue must be “no”, as otherwise the receiving party would recover costs contrary to section 25 of the 1974 Act. Potter J rejected the objection, stating at page 786:

While I do not doubt that costs incurred in an arbitration are indeed costs incurred “in any action, suit or matter,” and while it also appears to be the position that acts done by representatives of the claims consultants in this context were acts by “unqualified persons” so far as the Solicitors Act 1974 is concerned, it does not appear to me that they were “anything done by … [such persons] … acting as a solicitor.”

So far as I am aware, the claim consultants have not at any stage held themselves out as solicitors, but have at all times acted specifically as “claims consultants” in relation to their representation of the claimant. Section 25 of the Solicitors Act 1974 is linked and, in my view, falls to be construed with the sections which precede it. Those sections are penal in nature and relate to unqualified persons acting as solicitors (section 20), pretending to be solicitors (section 21), drawing or preparing instruments of transfer or charge etc., the drawing of which is limited to solicitors and certain other exempted professions (section 22) and preparing papers for probate, etc.: section 23. By section 24 of the Act of 1974 those penal provisions are applied to bodies corporate. In these circumstances, it seems clear to me that the words “acting as a solicitor” are limited to the doing of acts which only a solicitor may perform and/or the doing of acts by a person pretending or holding himself out to be a solicitor. Such acts are not to be confused with the doing of acts of a kind commonly done by solicitors, but which involve no representation that the actor is acting as such. On that basis it seems plain to me that the claims consultants did not “act as a solicitor” in conducting the arbitration on behalf of the claimant. Accordingly, on the basis of the facts existing in this case, I answer the first preliminary issue in the affirmative.

The second case cited, Agassi v Robinson (Inspector of Taxes) (Costs) [2005] EWCA Civ 1507, [2006] 1 W.L.R. 2126, was a decision of the Court of Appeal (Brooke, Dyson and Carnwath LJJ sitting with Master Hurst as an assessor). It dealt with a question of costs which had been adjourned following Mr Agassi’s successful appeal, reversing a decision of Lightman J that fees arising from endorsement contracts were assessable to tax. Mr Agassi used Tenon Media, instead of using solicitors, to conduct his appeal. It was possible to do this because Mr Christopher Mills of Tenon was licensed to instruct counsel under the Bar’s Licenced Access Scheme. Mr Mills was a member of the Chartered Institute of Taxation, and the adjourned issue involved the costs treatment of fees paid to him. The Inland Revenue objected to an award of those fees as costs on the grounds that this would contravene section 25 of the 1974 Act.

Mr Agassi’s application for costs succeeded in part. The Court of Appeal’s judgment, given by Dyson LJ, held that Mr Agassi was a litigant in person. The judgment gave guidance on what would or would not contravene section 25. The costs were referred for assessment accordingly.

At the time relevant to Mr Agassi’s appeal the provisions of sections 19 to 27 of the 1974 Act were those set out above.

At paragraph 20 of its judgment the court noted what was, in effect, a concession on the part of Mr Agassi:

20.

It is common ground that, whatever costs may be recoverable by a litigant in respect of professional services such as those provided by Tenon to Mr Agassi, they cannot include the cost of any activities which are unlawful. It is therefore necessary to consider what legal restrictions there are on litigation conduct by persons who are not solicitors.

At paragraph 29 of its judgment the court made an observation that the phrase “act as a solicitor” was ambiguous and could mean “pretend to be a solicitor”. In section 20(1)(a), as then worded, the words “or as such” (which now no longer appear) suggested the latter meaning. The court noted, however, that the authorities established that in order to prove a breach of section 20(1) it was not necessary to show that the unqualified person pretended to be a solicitor.

At paragraphs 30 to 49 the court reviewed both domestic and Australian authorities. In the course of that review the court noted what had been said by Potter J in Piper Double Glazing as set out above. The court’s conclusion, at paragraph 49 of the judgment, was:

Having regard to: (a) the need to give section 20(1) a restrictive interpretation; and (b) the approach to the meaning of “acting as a solicitor” that has been adopted in the cases (as encapsulated in the Piper Double Glazing case [1994] 1 WLR 777), we would hold that the Piper Double Glazing test should be applied in the present case.

The court turned in paragraphs 50 to 52 to note the provisions of section 22 (now repealed) and provisions in the Civil Procedure Rules which require that certain acts be done either by the party or that party’s “legal representative”, defined to include an “authorised litigator” as defined in CLSA 1990. In paragraphs 53 to 56 the court discussed provisions of CLSA 1990. The court then, under the heading “lawful activities: a summary” said this at paragraph 57:

57 The interrelationship between the 1974 and 1990 Acts seems to us to be as follows. An authorised litigator is not an unqualified person within the meaning of the 1974 Act: section 28(6) of the 1990 Act. A person who is not an authorised litigator may not exercise the right to conduct litigation within the meaning of the 1990 Act and may not act as a solicitor within the meaning of section 20(1) the 1974 Act and may not draw or prepare an instrument contrary to section 22(1) of the 1974 Act. If he purports to do any of these things, he will not be entitled to recover his costs for doing so. A person who does not have a current practising certificate and who is not an authorised litigator within the meaning of the 1990 Act acts as a solicitor in breach of section 20(1) of the 1974 Act at least if he: (a) issues proceedings; (b) performs any ancillary functions in relation to proceedings; or (c) draws or prepares an instrument relating to legal proceedings contrary to section 22(1) of the 1974 Act.

In a concluding section the court commented at paragraphs 81 to 84:

81 At first sight, it might seem regrettable that Mr Agassi should not be entitled to recover all of Tenon's fees, provided that they are reasonable and proportionate. But so to hold would undermine the delicate balance struck by CPR r 48.6(3) and conflict with the established understanding of what is allowable as a disbursement. Furthermore, as has been pointed out by Mr Drabble and Mr Carr, if Mr Agassi is entitled to recover Tenon's reasonable and proportionate fees under CPR r 48.6, so too would a litigant in person be able to recover the reasonable and proportionate fees of any person who provides general assistance in litigation. In view of the restricted ambit of section 20(1) of the 1974 Act and of the definition of the “right to conduct litigation” in the 1990 Act, there would be ample scope for any unqualified and unregulated person to provide general assistance in litigation, secure in the knowledge that the litigant in person, if successful, would recover the cost of that assistance as a disbursement. It may be said that there is nothing wrong with that, since the court can exercise control by limiting recovery to what is reasonable and proportionate. But, important though this mechanism of control undoubtedly is, it would at best be an imperfect tool for controlling the activities of unskilled and unregulated persons, who are immune from the specific sanctions inherent in the wasted costs jurisdiction of the court. In any event, it should not be overlooked that most cases settle out of court.

82 The obvious solution to the problems raised by this case is for an organisation such as the Chartered Institute of Taxation to become an “authorised body” within the meaning of section 28(5) of the 1990 Act, and for those members who wish to conduct litigation to become authorised litigators and thereby “legal representatives” within the meaning of CPR r 2.3(1). Section 28 would permit the institute to limit its application to a right to conduct a particular category of litigation, such as litigation falling within the scope of the permission granted by the Bar Council under the Licensed Access scheme. The reasonable and proportionate fees of any such litigator would be recoverable by a litigant in person as legal services under CPR r 48.6(3)(b) .

83 The adoption of this course could lead to the members of the institute being qualified to conduct litigation in this small and carefully defined field pursuant to the statutory arrangements set out in sections 28 and 29 of the 1990 Act. Until this happens, there will be a limited range of functions (such as issuing a notice of appeal or issuing some preliminary applications) which its members may not perform, because this is work that can only be performed by a solicitor or the litigant in person himself.

84 The importance of restricting the right to conduct litigation to those granted such rights by an authorised body is that those who exercise such rights owe an overriding duty to the court to act with independence in the interests of justice (section 28(2A)), together with a duty to comply with rules of conduct of that body which have been approved for the purposes of section 28. This is why the CPR make so many special provisions that embrace the rights and duties of the litigant's legal representative, if appointed, and do not give similar rights and duties to a representative of the litigant who is not a legal representative. So long as members of the institute continue to act as Tenon acted in this case without the rights and duties that flow from the possession of a statutory right to conduct litigation (in however limited a field), then this will disadvantage their clients as compared with those who instruct an authorised litigator. But this is very much a matter in relation to which the institute (and other similar bodies) must weigh up the advantages and disadvantages of seeking the status of authorised litigator for its members.

It may be noted that Law Society v United Services Bureau Ltd does not appear to have been cited either to Potter J in Piper Double Glazing or to the Court of Appeal in Agassi. Nor is there any express reference in those cases to AJA 1985. Of course those two cases were not cases where the unqualified person claimed to be a solicitor. Nonetheless the failure to draw the court’s attention to Law Society v United Services Bureau Ltd is surprising as regards Piper Double Glazing, for the claims consultant in the latter case was a limited liability company. As regards Agassi, the crucial question appears to have been the status of Mr Mills, and thus the Court of Appeal did not need to consider the position for bodies corporate. Moreover, as I explain in section D6.4, it may also be important to bear in mind that what was said in those cases concerned the statutory framework prior to LSA 2007.

As noted in section A1.5 above, the term “recognised body” is defined in section 9 of AJA 1985 to mean a body recognised by the Law Society as suitable to undertake the provision of solicitor services or other relevant legal services. Section 9(3) of AJA 1985 is the statutory provision rendering inapplicable relevant provisions of sections 20 and 24(2) of the 1974 Act if the unqualified person is a “recognised body”. In my view this drafting technique is unfortunate. Section 9(3) of AJA says, in effect, that an unqualified person is freed from liability for certain criminal offences if it acts as a solicitor when it is not a solicitor or if it pretends, falsely, to be a solicitor. Even with the benefit of that freedom I doubt whether members of a profession which requires the highest standards of probity consider it satisfactory to misrepresent their status. Court forms used both in the Jenington action (for example the 2008 and 2006 response pack forms referred to in sections B6 and B8 above) and the present proceedings (for example, when Reed Smith came off the record for Credit Altyn) are commonly filled in by recognised bodies using parts of the form applicable to solicitors, because the form contains no provision for them to do otherwise. I query whether recognised bodies completing such forms in that way are indeed describing themselves as solicitors, for it seems to me arguable that they could say that the form (like the master: see section C3 above) uses the term “solicitor” as shorthand for “solicitor or recognised body”. For these and other reasons the offences committed by MWP when it used the forms identified in sections B6 and B8 above may not have been (as was initially suggested) an offence under either s 20 or s 24 of the 1974 Act. Subject to consideration of whether there may have been an offence under section 10(1) of AJA 1985 (see the next paragraph) the criminal offending involved in MWP’s use of those forms may have been limited to an offence (now conceded by MWP) under s 14(1) of LSA 2007: see section D6.4 below.

Section 10 of AJA 1985 prohibits the doing of certain things. In particular, section 10(1) provides that a body shall not describe itself or hold itself out as a body for the time being recognised under section 9 unless it is so recognised. By section 10(2) a body contravening subsection (1) commits an offence and is liable on summary conviction to a fine not exceeding the fourth level on the standard scale. In certain circumstances its officers, members of its governing body or partners may, under later provisions in section 10 be similarly liable.

Nothing in AJA 1985 creates any separate criminal offence of acting as a recognised body (as opposed to doing the things prohibited in section 10) when not so recognised.

Nothing in AJA 1985 expressly affects civil entitlements where a body either (1) describes itself or holds itself out as a recognised body at a time when it is not recognised, or (2) acts as a recognised body at a time when it is not recognised.

Relevant provisions in CLSA 1990 as in force during the period July 2010 to April 2011 inclusive are set out in Annex 5. As will be seen, ss 58 and 58A affected civil entitlements in relation to conditional fee agreements. Nothing else in CLSA 1990 expressly affected civil entitlements relevant for present purposes. Also set out in that Annex are certain provisions no longer in force by July 2010 because they had been repealed by LSA 2007. Among those provisions I specifically identify sections 28(6) and 70, as they may have relevance to a proper understanding of the case law. In particular:

LSA 2007 repealed the provisions of CLSA 1990 specifically identified in section D6.3 above. It introduced the defined expressions “legal activity” and “reserved legal activity”. It will be seen from Annex 6 to this judgment that under section 12 of LSA 2007 the conduct of litigation is a reserved legal activity. Under section 13(1), entitlement to carry on a reserved legal activity is, since the coming into force of that section, to be determined solely in accordance with LSA 2007. In general, under section 13(2), only an authorised person or an exempt person will be entitled to carry on a reserved legal activity. For present purposes it suffices to note that a person may be authorised by an approved regulator, and that among such regulators are the Solicitors Regulatory Authority exercising functions previously exercised by the Law Society. Those authorised by the Solicitors Regulatory Authority include recognised bodies under AJA 1985.

By section 14(1) it is an offence for a person to carry on a reserved legal activity unless that person is entitled to carry on that activity. Subsection (2) gives a defence where an accused shows that the accused did not know, and could not reasonably have been expected to know, that the offence was being committed. Subsection (3) sets out penalties to which an offender is liable on summary conviction and on conviction on indictment. In the latter case, the penalties are imprisonment for a term not exceeding two years or a fine, or both. Subsection (4) clarifies that an offence involving the purported exercise of a right of audience or a right to conduct litigation in relation to any proceedings or contemplated proceedings will constitute contempt of the court concerned, for which the offender may be punished accordingly. It is accepted by MWP that on the occasions when it filed acknowledgements of service for Aidar and Baurzhan it committed an offence under section 14(1) of LSA 2007.

As noted above, the repeal by LSA 2007 of various provisions of CLSA 1990 included s 28(6). By that subsection it was provided that ss 20, 22 and 25 of the 1974 Act did not apply to any act done in the exercise of a right to conduct litigation (see section D6.3 above). The parties were not able to identify any provision in LSA 2007 continuing this disapplication. Nor did they identify any provision in LSA 2007 expressly affecting civil entitlements relevant for present purposes. As regards obligations owed to the court by those authorised to conduct litigation, s 188 continues the duty to act with independence in the interests of justice previously imposed by s 28(2A) of CLSA 1990 as amended (cited at paragraph 84 of the Agassi judgment, see section D6.1 above). A duty to comply with relevant regulatory arrangements of an approved regulator is imposed by s 176 on a regulated person in certain circumstances, but this duty is not expressly stated to be owed to the court. Ancillary provisions, brought into force on 1 October 2011, are found in sections 90 to 92.

Under section 16 of LSA 2007 it is an offence, in certain circumstances, for a person who is entitled to carry on a reserved legal activity to do so through a person who is not entitled to do so. Subsection (4) provides a defence where the accused shows that the accused took all reasonable precautions and exercised all due diligence to avoid committing the offence. Subsections (5) and (6), dealing with penalties and contempt of court, are in similar terms to section 14(3) and (4).

An offence involving the pretence of being entitled to carry on a reserved legal activity is created by section 17 of LSA 2007. It may be committed in two ways. The first arises under section 17(1)(a), by which it is an offence for a person wilfully to pretend to carry on a reserved legal activity when that person is not so entitled. The second arises under section 17(1)(b), under which it is an offence for a person, with the intention of implying falsely that that person is entitled to carry on a reserved legal activity, to take or use any name, title or description. Subsection (2) makes provision for penalties in similar terms to those found in section 14(3). There is, however, no provision concerning contempt of court of the kind found in section 14(4) and 16(6).

General provisions concerning offences committed by bodies corporate and unincorporated bodies are set out in section 197 of LSA 2007. By subsections (1) and (2), offences by a body corporate committed with the consent or connivance of, or attributable to any neglect on the part of, an officer or manager member of the body corporate, that officer or manager member (as well as the body corporate) is guilty of the offence and liable to be proceeded against and punished accordingly. Similar provision is made for unincorporated bodies in subsections (6) and (7).

In a first set of written submissions lodged in December 2013 the parties were in agreement that “an acknowledgment of service on behalf of a party is a reserved activity which only a solicitor may perform”. I asked for assistance on the italicised words. In a second set of submissions lodged later in December 2013 the parties explained that they had in mind what was said in paragraph 57 of the Court of Appeal’s judgment in Agassi. In that paragraph the Court of Appeal considered that a person would act as a solicitor in breach of section 20(1) of the 1974 Act at least if that person “(a) issues proceedings; (b) performs any ancillary functions in relation to proceedings; or (c) draws or prepares an instrument relating to legal proceedings contrary to section 22(1) of the 1974 Act.” It seems to me at least arguable that in this regard the Court of Appeal had in mind a natural person. Moreover, I question whether it is right to assume that this analysis is unaffected by the changes arising from LSA 2007. Example (c) will no longer arise – there is no section 22 to be contravened. Examples (a) and (b) concern matters which might be thought to echo words previously in section 20 and now repealed. The words in question contemplate that only a solicitor would “as such issue any writ or process, or commence, prosecute or defend any action, suit or other proceeding.” Those words have now gone, reflecting the different regulatory structure now found in LSA 2007.

Section 90(4) of the 1974 Act, and section 212(1) of LSA 2007, state that the Act in question (with immaterial exceptions) applies only to England and Wales. AJA 1985 does not make express provision in this way. Section 88 of AJA 1985 merely states that (with immaterial exceptions) the Act does not extend to Scotland or Northern Ireland. Nonetheless on elementary principles legislation of this kind would usually be regarded as inapplicable outside the United Kingdom.

MWP accordingly makes an assertion that these statutes are not concerned to control (whether by civil regulation or by the criminal law) activities carried on abroad and which do not involve the provision of legal services in England and Wales. The active claimants do not accept the assertion, and in any event say that on a proper construction of the July retainer MWP was obliged to comply with these statutes not merely in relation to the provision of legal services in England and Wales but generally in relation to everything it did pursuant to the retainer. For present purposes I do not need to decide who is right.

MWP concedes, adopting the wording of what was described as common ground in Agassi, that at common law recoverable costs cannot include the cost of any activities which are unlawful. As I understand it, this concession about the position at common law is limited to circumstances where it is demonstrated that the activity involved the commission of a criminal offence, including any requisite mental element. I do not understand this to be disputed by the active claimants.

At the hearing of the appeal arguments were put forward on whether the court’s inherent supervisory jurisdiction may be exercised against those who act as if they were, or who pretend to be, a solicitor or other person authorised to conduct litigation. I discuss those arguments in section G below.

Active claimants’ suggested knockout blow

The active claimants’ arguments (ii) and (iii) can be divided into assertions:

[1] on MWP’s case and/or Master Campbell’s findings, no fees are recoverable by MWP (pursuant to ss 20, 21 and 25 of the Solicitors Act 1974 or at common law);

[2] by way of reply to a possible answer to assertion [1] (as set out in more detail in the active claimants’ argument (iii) at section A2.10 above), the fact that s 25 of the 1974 Act gives an express remedy does not oust other remedies;

[3] it follows from assertion [1] that MWP’s application for a stay and the appeal are redundant and/or otiose as MWP is merely causing the parties to incur costs with no potential benefit; and/or

[4] it follows from assertion [1] that the arbitration clause is invalid.

I deal with assertion [4] in section G below. What I refer to as “the active claimants’ suggested knockout blow” is the contention that because of what is asserted at [1] the court should summarily reach the conclusion at [3]. In essence, the argument here is that the court ought to decide now either that sections 20, 21 and 25 of the 1974 Act, or that the common law doctrine of champerty, have the consequence that no fees can be recovered by MWP.

This argument seems to me to be impossible to accept, even if I assume assertion [2] to be correct. First, in Hayter v Nelson [1990] 2 Lloyd’s Rep 265 the court rejected an argument that an agreement to refer differences to arbitration could be circumvented by one side inviting a court to conclude summarily that the other side is indisputably wrong. The argument relied on wording in section 1 of the Arbitration Act 1975. In order to confirm the position, that wording was omitted from section 9 of the 1996 Act: see Departmental Advisory Committee on Arbitration Law, Report on The Arbitration Bill (February 1996) at paragraph 55. It seems to me that this would be a complete answer to the suggested knockout blow. Second, however, as the principle in Hayter v Nelson was not relied on by MWP I set out below why, independently of that principle, in the present case I cannot summarily conclude that assertion [1] is correct.

I do not underestimate the seriousness of MWP’s wrongdoing in filing acknowledgments of service for Aidar and Baurzhan. I have set out in section B6 above Mr Wilson’s account of the circumstances in which this happened in relation to Aidar. The master at paragraph 87 of his judgment held Mr Wilson’s account to be “wholly implausible”. I do not consider that it is possible on a summary basis to reject Mr Wilson’s evidence in this way. That said, the filing of those acknowledgements of service was plainly wrong. It is admitted that it involved breaches of s 14 of LSA 2007. Even on his own account Mr Wilson cannot excuse what happened in this regard.

It is asserted by the active claimants that there were other breaches of (at least) s 14 of LSA 2007. Particular matters that are relied upon as individual instances of breach of statutory obligations include:

At the present stage I do not need to make findings as to whether the matters at sub-paragraphs (1) to (6) above involved criminal offences going beyond those committed by MWP when it acknowledged service on behalf of Aidar and Baurzhan. On the material before me these matters, like the acknowledgements of service, all appear to be capable of being characterised as consequences of a decision or decisions to engage in serious wrongdoing by going on the record for Aidar and Baurzhan. A crucial question may be whether there was a decision taken, or understanding reached, that MWP would at some time in the future go on the record for one or more of the claimants if the family considered it desirable for this to happen, and when any such decision was taken or understanding was reached.

Insofar as the suggested knockout blow relies on sections 20, 21 and 25 of the 1974 Act, the active claimants’ primary case is that either in the July retainer or in the surrounding circumstances there were representations by MWP that it was an English solicitor’s firm and that accordingly MWP’s work pursuant to the retainer constituted “acting as a solicitor” within the meaning of section 25. As to this, I have indicated in section D6 above reasons for doubting whether sections 20, 21 and 25 assist the active claimants. Putting that on one side, while the master appears to have accepted that MWP held itself as an English solicitor’s firm, I have no hesitation in concluding that I cannot resolve this summarily in the way that the active claimants seek. My reasons are:

I turn to the suggestion that the common law doctrine of champerty has the consequence that no fees can be recovered by MWP. In my view this assertion cannot give rise to a knockout blow. It involves a factual premise that from the outset the July retainer was concerned with the conduct of litigation here. For the reasons given above, no such factual premise can be made good on a summary basis. It follows that I do not need to deal at this stage with other objections arising in so far as the active claimants base their case on champerty.

For all these reasons the suggested knockout blow is not established.

Part III jurisdiction over MWP

This section is concerned with whether the claimants can invoke Part III jurisdiction against MWP. I accept Mr Bacon’s invitation to give a definitive decision on this question because the answer will determine whether the original claim should be struck out and because I can determine the question definitively on the basis of the material before me.

None of the grounds in the respondents’ notice identified a basis for asserting that the court had Part III jurisdiction over MWP. Nor did arguments (i) to (v) of the active claimants’ supporting arguments. In this section I examine the remaining arguments. Argument (vi) asserts that Part III jurisdiction arose either by estoppel or by contract. Argument (vii) appears to be that Part III jurisdiction arose because Mr Wilson is a solicitor. It is convenient to take argument (vii) first. I examine it in section F2 below before turning in section F3 to argument (vi).

What I have called argument (vii) was set out at paragraph 59 of the active claimants’ skeleton argument. This paragraph contained a number of assertions. The essential assertions were these:

the bill to be delivered and assessed is that of Mr Wilson … [who] as an officer of the court … is not entitled to hide behind the corporate veil. …

In his oral submissions Mr Holland submitted that bills of MWP were what they said they were – bills rendered by it. It was a different entity from Mr Wilson. The fact that Mr Wilson was an English solicitor made no difference, and to ignore the separate legal personality of MWP was “just wrong”.

No attempt was made in Mr Bacon’s oral submissions to answer these points. When developing other contentions Mr Bacon submitted that the July retainer was always designed to cover work by Mr Wilson personally in London, but he did not identify any basis for saying that Mr Wilson’s status as a solicitor of itself brought MWP within Part III.

Mr Holland’s points in this regard are, as it seems to me unanswerable. There is no reason why MWP, as the party undertaking to do work pursuant to the July retainer, should not in accordance with sentence [3.2] (see section B5 above) render its own bills for that work. Argument (vii) does not even begin to demonstrate what would be needed in order to pierce the corporate veil. Moreover even if the corporate veil were pierced, that would have the consequence that someone other than MWP was exposed to liability. It would not assist the present claim, which is advanced against MWP.

Accordingly the active claimants’ argument (vii) fails.

Argument (vi) of the active claimants’ supporting arguments asserted that MWP was estopped, or contracted, into the 1974 Act. As noted by the master in his judgment at paragraphs 59 to 66, the active claimants said that MWP had held itself out and acted as a solicitor or recognised body in numerous respects, and had drafted the July retainer in such a way as to make it plain that Mr Wilson intended the 1974 Act to apply.

As also noted by the master in his judgment, MWP responded in principle that Part III jurisdiction was confined by statute to the grant of relief against solicitors and recognised bodies, that because it was neither of these the court lacked jurisdiction, and that neither agreement nor estoppel can confer jurisdiction which the court does not have. MWP added that in any event the active claimants’ factual case was not made out: see paragraphs 40 to 43 of the master’s detailed reasons. In a written statement for the hearing before Turner J, MWP introduced a further point, saying that the master had effectively added a new remedy to those set out in the Act.

Nowhere does the 1974 Act provide that, if an unqualified person acts as a solicitor, then his bills are to be subject to assessment as if he were a solicitor. But that is what the master has held and he was wrong to do so.

The issues of principle as to jurisdiction were not resolved by the master. In paragraph 110 of his judgment he said that it was not necessary for him to do so: see section C1 above. As also appears from section C1 above, however, at paragraphs 102 to 104 of his judgment the master concluded that MWP had acted as, and had held itself out as acting as, a firm of English solicitors.

On the point of principle:

In these circumstances I observe that even if I were to apply the principles in Yaxley v Gotts as summarised above they would not, in my view, lead to the conclusion that Part III jurisdiction could arise by estoppel or contract. I agree that the purpose of Part III is to protect clients of solicitors and provide them with a mechanism for the assessment of fees. There is nothing in Part III, however, to suggest that it is intended to protect clients from “delinquents masquerading as solicitors”. Nor is there anything in any other part of the Act to suggest that Part III is intended to protect clients of those who are not solicitors. On the contrary, the provisions in Part I, dealing at sections 20 to 26 with unqualified persons acting as solicitors, conspicuously fail to say that an unqualified person who is not a solicitor is to be treated as a solicitor for the purposes of Part III or any other part of the Act.

MWP is neither a solicitor nor a recognised body, and thus does not fall within the statutory jurisdiction enabling the grant of Part III relief. For the reasons given in sections F2 I conclude that Mr Wilson’s status as a solicitor does not bring MWP within Part III. For the reasons given in section F3 I hold that neither estoppel nor contract can create Part III jurisdiction where it would not otherwise exist. This does not mean that the active claimants cannot raise questions as to the reasonableness of MWP’s charges. They could invoke the ordinary jurisdiction (and it may be that they have done this by asking for assessment and/or moderation in paragraph 5 of the amended claim), and if the disputes are properly before the arbitrator they can do so in the arbitration.

My conclusion in section F3 makes it unnecessary, in order to reach my conclusion that there is no Part III jurisdiction against MWP, to decide whether the July retainer was a contract by which MWP undertook to comply with the Solicitors Code of Conduct (see Annex 7 to this judgment) or purported to make itself liable to remedies available against those permitted to act as solicitors, or whether MWP represented that it was liable to such remedies. For reasons given in section E above I cannot decide these points summarily.

My conclusions in sections F2 and F3 make it unnecessary to decide whether parties can lawfully agree that a claim for Part III relief shall be the subject of arbitration rather than court proceedings. The point is not an easy one, and as it does not arise I think it preferable to express no view upon it.

The new claims

The new claims in part purport to be founded on the Part III jurisdiction relied on in the original claim. The invocation of that jurisdiction must be struck out for the reasons given in section F above. Once that has been done, applying the reasoning in section A2.9 above, the new claims can be categorised as follows:

It is convenient to deal first with issues concerning the inherent supervisory jurisdiction. I do so in sections G2, G3 and G4 below. In sections G5 and G6 below I turn to issues concerning the ordinary jurisdiction. I summarise my conclusions on the new claims in section G7.

As regards the active claimants’ invocation of the inherent supervisory jurisdiction, I deal below with three questions:

In this section I deal with the first of those questions. Questions (2) and (3) are dealt with in sections G3 and G4 below.

On the first question, Mr Bacon relies upon two reported cases, one decided in 1892 and the other in 1912, both of them concerned with individuals who were alleged to be what Mr Bacon termed “delinquents”. Neither counsel has been able to identify any reported case in the last 100 years in which this question has been further examined. I discuss the two cases below. Before doing so, however, I observe that – as explained in section D above – the structure of the legal profession today is significantly different from its structure 100 years ago. While section 50(1) of the 1974 provides that admitted solicitors continue to be officers of the court, there is no statutory provision establishing that recognised bodies or others now entitled to conduct litigation are also officers of the court. By section 188 of LSA 2007 they have a duty to the court to act with independence in the interests of justice. Under s 176 of that Act they have a duty to comply with the regulatory arrangements of the relevant regulator, and under sections 90, 91 and 92 certain others have duties in that regard, but none of these duties is stated to be owed to the court.

The first case relied on by Mr Bacon is In re Hulm & Lewis [1892] 2 QB 261. Mr Lewis was not a solicitor, but by holding himself out as such had secured Mr Cohen as a client. In the belief that Mr Lewis was a solicitor, a master had required him to deliver documents and an account to Mr Cohen. Mr Cohen alleged that the order had been disobeyed, and sought to issue a writ of attachment against Mr Lewis for contempt of court in disobeying the order. Pollock B refused leave to issue the writ because it had been disclosed that Mr Lewis was not a solicitor. On appeal the Divisional Court (Mathew and Collins JJ) ordered that the writ should issue. There was no appearance on the appeal by or on behalf of Mr Lewis.

In argument Mathew J referred to Wilton v Chambers 7 A & E 524, in which securities obtained on account of professional services rendered by a person who was at the time off the roll of attornies owing to the operation of a statutory provision were ordered to be given up and cancelled. In his judgment he said that Wilton v Chambers showed that the disclosure that Mr Lewis was not a solicitor was no answer to the master’s order.

Collins J agreed that the case was covered by Wilton v Chambers. He added:

If this person [Mr Lewis] were a solicitor the court could compel him to restore the money and documents, and the court must have the same power when he is shewn to have obtained possession of the money and documents by fraudulently pretending to be a solicitor.

The second case was In re Hurst & Middleton [1912] 2 Ch 520. It was a debenture-holder’s action in which Mr Evans was the solicitor for the plaintiff. In that capacity he received a net sum of £742. Mr Jones was a debt collector and former solicitor’s clerk who had a profit sharing arrangement with Mr Evans. Practically all of Mr Evans’s business, including the instant case, was introduced by Mr Jones. Mr Evans had no banking account, no safe, no furniture, and practically no clients of his own. Mr Jones took an active part in the conduct of the instant case, advancing out of pocket expenses and himself attending appointments in chambers and before the judge. Within a few hours of Mr Evans’s receipt of the £742 the bulk of it was handed to Mr Jones, who promptly paid £680 out of it into his own account. There was evidence that Mr Jones had also received, as representative of Mr Evans, other sums due to the plaintiff in amounts of £100 and £160. An order was made that Mr Evans should within 7 days lodge the £724 in court. When Mr Evans failed to comply, the plaintiff moved for an order that Mr Jones should within 7 days lodge the £680 in court. Mr Jones’s preliminary objection to jurisdiction was overruled by Eve J, who held that Mr Jones had assumed the privileges of a solicitor and carried on legal proceedings as an officer of the court, and was therefore amenable to the summary jurisdiction. The Court of Appeal (Farwell and Kennedy LJJ) allowed the appeal.

At p. 524 of the report Farwell LJ pointed out that Mr Jones did not obtain the money by holding himself out to be a solicitor, or in any way acting as a solicitor. He continued:

The money had gone into the hands of the solicitor on the record, and supposing he had stolen it from the solicitor on the record, however reprehensible his conduct, we should have no right to treat him as if he were a solicitor and use our summary jurisdiction over solicitors against him.

The exercise of this summary jurisdiction is a delicate matter, because it deprives the subject of his ordinary right of trial, and I certainly am not disposed to extend any such jurisdiction. Of course, all civil remedies, and all criminal also, are open to the present applicant against Jones, but it is quite another thing to say that the remedy is to be obtained by the use of the summary jurisdiction of the court against its own officers.

Reliance was placed on the case of In re Hulm & Lewis. I do not desire to express any opinion on that case at all, because to my mind it has no bearing on the present case. It was very peculiar. … The correctness of In re Hulm & Lewis is, of course, open to review in this court, but it is not necessary for us now to consider it. In this case there is no estoppel at all. …

Kennedy LJ said at pp 525 to 526:

I quite agree that this Court, and every Court, ought to be very careful in the exercise of this summary jurisdiction, which is no doubt, on occasion, a proper form of procedure, but the exercise of which nevertheless involves consequences which make this particular power of the Court one which the Court must exercise with the greatest caution. In the present case the plaintiff succeeded in obtaining a declaration in his favour from Eve J. based, in substance, upon an allegation that the present appellant, though not a solicitor, acted as a solicitor, and therefore, as an officer of the Court, can be dealt with summarily in regard to an alleged offence committed by him. I think, myself, that in order to succeed in such an application you must shew that the act which is the basis of the application is an act done by the man as a solicitor unqualified in fact, but representing himself in the transaction to be a solicitor; and, more than that, obtaining by that representation either some property of which it is sought to divest him, or doing some act for which a remedy is sought which the Court can summarily give.

This case wholly fails when you come to look at that which, to my mind, is the keystone of the success of such an application, namely, that the man has, by virtue of his assumption of the position and privilege of a solicitor, either obtained something which he ought not to have obtained (I do not desire to limit it - there may be other cases, but broadly that would be generally the case), and therefore the restitution of which is just, or done some act for which there would be a remedy in the Court if it were an act done by an officer of the Court, and if the man has done the act or obtained the property by the assumption of the privilege and position of a solicitor. In such a case the Court will exercise the power which it would be right to exercise if the man were an officer of the Court; and in such a case the man cannot be allowed to say that he is free from the jurisdiction of the Court because he is not, in fact, a solicitor, and therefore not an officer of the Court.

When you come to look at the case of In re Hulm & Lewis … I am willing to assume that it was quite rightly decided … there the court was dealing with a man who held himself out as a solicitor on the record ... and he got an advantage which he ought not to have got, by his wrongful assumption of the capacity of solicitor on the record.

Mr Bacon submits that these authorities show that the inherent supervisory jurisdiction extends so as to include the claims at new paragraphs 5 to 9. The reason is that the active claimants say that MWP did what Mr Lewis did – held itself out as a solicitor. Mr Bacon submits that the decision of the Divisional Court in In re Hulm & Lewis, as explained by the Court of Appeal in In re Hurst & Middleton, establishes that summary relief may be granted to deprive a delinquent of benefits obtained by the false pretence of being a solicitor. New paragraphs 5 to 9, he submits, seek exactly that relief.

Mr Holland’s contrary argument is that the Court of Appeal was not endorsing the Divisional Court’s decision in In re Hulm & Lewis, merely distinguishing it. So far as the present case is concerned, moreover, there is a statutory remedy under section 25, which will apply to such part of MWP’s bills as cover any work done when it acted as a solicitor. Enactment of that remedy, he submits, shows that MWP is not rendered liable to relief which would have been available if it were a solicitor.

In my view it is highly undesirable for this court at the present stage to seek to resolve this dispute. Even before the regulatory changes mentioned above the law as to the extent of the inherent supervisory jurisdiction was, as Farwell LJ said, “open to review”. In the light of the extensive regulatory changes there is a real possibility that the court might conclude that, save as regards the duty to act with independence in the interests of justice, it does not have inherent supervisory jurisdiction over non-solicitors entitled to conduct litigation, and that MWP’s wrongdoing involved no more than breaches of relevant provisions in LSA 2007 by holding itself out, not as a solicitor, but as entitled to conduct litigation. If so, it would be remarkable if in those circumstances MWP’s wrongdoing were to give rise to an inherent supervisory jurisdiction over MWP when entitlement under LSA 2007 to conduct litigation would of itself give rise to no such jurisdiction. In any event, in all the circumstances I consider that a determination as to the extent of the jurisdiction is best made at a stage when the facts are clearer than is currently the position. I stress that I am not concluding that the court lacks inherent supervisory jurisdiction over non-solicitors entitled to conduct litigation. I observe only that the existence of such a jurisdiction may call for consideration, and that at its present stage this case is neither suitable for that consideration, nor for consideration of the further question whether pretence as to such entitlement gives rise to the inherent supervisory jurisdiction.

The second question identified at the start of section G2 above concerns whether parties can lawfully agree that a claim for relief under the inherent supervisory jurisdiction shall be the subject of arbitration rather than court proceedings. MWP’s written response at paragraph 21 said:

In any event, there is no reason why this matter should not be arbitrated. The arbitrator is after all competent to rule on his own jurisdiction. Put another way, even if the court’s summary jurisdiction over solicitors applied, it would not without more render the arbitration clause null and void, inoperative and/or incapable of being performed within section 9(4) of the 1996 Act.

The first two sentences of this paragraph seem to say that the arbitrator could exercise the inherent supervisory jurisdiction. In his oral submissions Mr Holland’s emphasis was on the last sentence of the paragraph. I discuss the last sentence of the paragraph in section G4 below.

As regards the first two sentences, in my view it is plain that it cannot be right to suggest that the arbitrator could exercise the inherent supervisory jurisdiction. The inherent supervisory jurisdiction is inextricably linked to the court’s constitutional role in delivering justice. It remains a disciplinary jurisdiction inherent in the court and must, of necessity, be exercised by the court itself.

The third question identified at the start of section G2 concerns whether the matters asserted in paragraphs 5 to 9 of the amended claim warrant the invocation of the inherent supervisory jurisdiction. I noted earlier that the last sentence of paragraph 21 of MWP’s response said that even if the court’s summary jurisdiction over solicitors applied, it would not without more render the arbitration clause null and void, inoperative and/or incapable of being performed within section 9(4) of the 1996 Act.

In that regard Mr Holland stressed something which is well established, namely that the inherent supervisory jurisdiction co-exists with the civil and criminal law. This was pointed out by Farwell LJ in In re Hurst & Middleton. In the same case Kennedy LJ referred to the court under the inherent supervisory jurisdiction giving a remedy which the court can summarily give.

In the present case it seems to me that, at the present stage, there are insuperable difficulties in giving summary relief to the active claimants. The essential reason for this lies in something not said in new paragraphs 5 to 9, and which would need to be said in order to ask the court to exercise the inherent supervisory jurisdiction. What would need to be said in the new paragraphs 5 to 9 is what in section G2 above I recorded Mr Bacon as submitting, namely that relief under the inherent supervisory jurisdiction is sought against MWP in order to deprive it of benefits obtained by a false pretence. For the reasons given in section E above, as regards the alleged false pretence I am unable on a summary basis to make the findings which the active claimants seek. It matters not for this purpose whether the alleged pretence was that MWP was a solicitors’ firm or merely that it was entitled to conduct litigation in England.

Equally, however, I think it would be undesirable at the present stage to rule out the possibility that when the facts are more clearly established good ground may be shown for seeking to invoke the inherent supervisory jurisdiction. In the course of Mr Bacon’s oral submissions I suggested to him that the question may arise as to at what stage the court thought it would be right to exercise the inherent supervisory jurisdiction. He did not dissent. On the assumption that challenges to the jurisdiction of the arbitrator fail, it will be for the arbitrator to determine whether to grant (applying the principles which the court would apply under sections 20 to 25 of the 1974 Act and under the ordinary jurisdiction) the relief sought by the active claimants. If the active claimants are granted the relief which they seek, it will not be necessary for them to continue to invoke the court’s inherent supervisory jurisdiction. To the extent that they are not granted such relief, and consider that nevertheless there is some good basis for continuing to invoke the inherent supervisory jurisdiction, then the court will have the advantage of being able to consider what the arbitrator may have said on relevant aspects. On that basis it seems to me that the claims to relief in new paragraphs 5 to 9 should be stayed, as a matter of case management, under the inherent stay jurisdiction pending the arbitration.

For the reasons given in section A2.9 above I consider that paragraphs 5 to 9 of the amended claim include the seeking of the relief identified in those paragraphs under the ordinary jurisdiction. Moreover, putting on one side other reasons why in the present case the active claimants say that the arbitration agreement does not exist or that it is “null and void, inoperative, or incapable of being performed”, there is nothing in the nature of the relief sought as to render it incapable of arbitration. Thus, for example, I cannot see any difficulty in an arbitrator deciding whether an agreement is champertous, nor in deciding whether facts constituting a criminal offence have been proved. Arbitrators perform the latter task day in day out.

Other than the nature of the relief sought, the active claimants’ objections to arbitration, as regards new paragraphs 5 to 9, fall into two categories. The first category comprises alleged inability on the part of MWP to satisfy the test in section 9(1) of the 1996 Act. In that regard it is said in ground 5 of the respondents’ notice that if the principle that no-one can benefit from their own wrongdoing is only a canon of construction, then, as a matter of construction, the arbitration clause is inapplicable to the present dispute between the parties. Here, as it seems to me, a central part of reliance on the canon of construction and its alleged consequences will depend upon the arguments discussed in section E above. For the reasons given in that section I do not consider that I can decide those arguments summarily. Accordingly in accordance with principle (3)(b) in my summary of Aeroflot in section A1.2 above, I consider that I should direct a stay of the proceedings under the inherent stay jurisdiction so that the arbitrator can decide the issue of the existence of the arbitration agreement, pursuant to section 30 of the 1996 Act.

There is a further aspect of the present case affecting the existence of the arbitration agreement. This concerns the belated assertions on behalf of the active claimants that they may not have signed the July retainer. The family say that these assertions are not relied upon at the present stage. I do not accept that these assertions can be put on one side, and somehow revived later. In that regard I envisage that my order on the appeal should direct that any assertions that the claimants were not party to the July retainer must, if they are to be relied upon by any claimant at a later stage, be argued before the arbitrator.

The second category comprises allegations by the active claimants that under section 9(4) of the 1996 Act they can demonstrate that the arbitration agreement is null and void, inoperative and/or incapable of being performed. In that regard I take in turn relevant assertions in the respondents’ notice as summarised in section A2.9 above:

That leaves the arguments advanced by the active claimants in support of the master’s application of the no reliance on wrongful benefits principle, and alternative arguments based on more general principles concerning illegality and its effect on contractual entitlements. As with the arguments concerning consumer protection legislation (sub-paragraph (4) above), the issues that arise will, in my view, to a significant extent overlap with those identified in section E above. In the particular circumstances of the present case there will accordingly be a stay under the inherent stay jurisdiction.

New paragraph 10 reflects the contention set out in ground 6 in the respondents’ notice (see sections A2.10 and B5 above). It concerns Hawkinson alone, and asserts that it was not bound by the July retainer and therefore is under no obligation to pay MWP’s fees. In section A2.13 above I described it as “Hawkinson’s separate knockout contention”. However, for similar reasons to those identified in section G5 above concerning section 9(1) of the 1996 Act, this falls within principle (3)(b) in my summary of Aeroflot in section A1.2 above and will be the subject of a stay under the inherent stay jurisdiction.

For the reasons given in sections G1 to G6 above the active claimants’ claims under the inherent supervisory jurisdiction should be the subject of a stay under the inherent stay jurisdiction. The same result is reached as regards their claims under the ordinary jurisdiction.

Conclusion

A stage has been reached in the present case where issues can now be examined in a structured way. That examination has, for the reasons given in preceding sections, led me to the conclusion that all references to a claim under Part III must be struck out, and that as regards the remainder of the amended claim there should be a stay under the inherent stay jurisdiction. I ask the parties to seek to agree on consequential orders in the present proceedings, including as to the invoices under the August retainer and the Terra Raf invoices. I also ask the parties to consider what order should now be made in the Commercial Court proceedings (see section B12 above).

In the main body of the judgment, unless the context otherwise requires, the abbreviation and short forms listed in the first column below have the meaning set out in the second column. Notes in the third column are provided for ease of reference.

A2.4 The second matter omitted concerns the allegations now made that individual family members may not have signed the July retainer and that Hawkinson did not authorise it to be signed. Nothing in either Beale 1 or Beale 2 even hinted at any such “no contract” assertion. Indeed, Beale 2 expressly made the contrary assertion, relying on the July retainer as a contract between MWP and the claimants, including each of the family members and Hawkinson. The court has no information as to how such an astonishing omission occurred. Each family member has signed a witness statement dated 17 February 2012 asserting an inability to remember signing the July retainer. An officer of Hawkinson has signed a witness statement dated June 2012 saying that nobody had authority to sign the July retainer on its behalf. None of these statements even acknowledges that what is now said is inconsistent with what the court was told in August 2011. The first occasion on which the court was informed of any part of what is now said was in Mr Beale’s fourth witness statement (“Beale 4”) dated 20 February 2012 – and even then it is merely in a footnote. Beale 4 began with an introduction noting that Reed Smith no longer acted for Credit Altyn, and that references in the witness statement to “the claimants” did not include Credit Altyn. It then proceeded to set out relevant background to MWP’s application for a stay. In that context paragraph 8 of Beale 4 mentioned the July retainer (which it referred to as “the Engagement Letter”). When mentioning the July retainer Beale 4 added footnote 1 in these terms:

The Claimants’ evidence is that they cannot recall signing the Engagement Letter. However, for the purpose of the Defendant’s application for a stay dated 27 January 2012, they are content to proceed on the basis that they did sign the Engagement Letter. The Claimants’ position in respect of the Defendant’s application for a stay is without prejudice to (and they reserve) their position as to whether or not they did sign the Engagement Letter. This witness statement (and my previous witness statements) is also without prejudice to the Claimants’ position and/or the Claimants’ position as to whether or not they did sign the Engagement Letter is reserved.

Qualifications for practising as solicitor.

Unqualified person not to act as solicitor

No unqualified person is to act as a solicitor.

Any person who contravenes subsection (1) is guilty of an offence and liable on conviction on indictment to imprisonment for not more than 2 years or to a fine, or to both....

Unqualified person not to pretend to be a solicitor.

Application of penal provisions to body corporate.

If any act is done by a body corporate, or by any director, officer or servant of a body corporate, and is of such a nature or is done in such a manner as to be calculated to imply that the body corporate is qualified or recognised by law as qualified to act as a solicitor—

For the avoidance of doubt it is hereby declared that in section 20 the reference to an unqualified person and the reference to a person both include a reference to a body corporate.

Costs where unqualified person acts as solicitor.

No costs in respect of anything done by any unqualified person acting as a solicitor shall be recoverable by him, or by any other person, in any action, suit or matter.

Nothing in subsection (1) shall prevent the recovery of money paid or to be paid by a solicitor on behalf of a client in respect of anything done by the solicitor while acting for the client without holding a practising certificate in force if that money would have been recoverable if he had held such a certificate when so acting.

Jurisdiction of Senior Courts over solicitors.

Any person duly admitted as a solicitor shall be an officer of the Senior Courts.

Subject to the provisions of this Act, the High Court, the Crown Court and the Court of Appeal respectively, or any division or judge of those courts, may exercise the same jurisdiction in respect of solicitors as any one of the superior courts of law or equity from which the Senior Courts were constituted might have exercised immediately before the passing of the Supreme Court of Judicature Act 1873 in respect of any solicitor, attorney or proctor admitted to practise there.

Non–contentious business agreements.

Whether or not any order is in force under section 56, a solicitor and his client may, before or after or in the course of the transaction of any non–contentious business by the solicitor, make an agreement as to his remuneration in respect of that business ...

The agreement shall be in writing and signed by the person to be bound by it or his agent in that behalf.

Subject to subsections (5) and (7), the agreement may be sued and recovered on or set aside in the like manner and on the like grounds as an agreement not relating to the remuneration of a solicitor.

If on any assessment of costs the agreement is relied on by the solicitor and objected to by the client as unfair or unreasonable, the costs officer may enquire into the facts and certify them to the court, and if from that certificate it appears just to the court that the agreement should be set aside, or the amount payable under it reduced, the court may so order and may give such consequential directions as it thinks fit.

Subsection (7) applies where the agreement provides for the remuneration of the solicitor to be by reference to an hourly rate.

If, on the assessment of any costs, the agreement is relied on by the solicitor and the client objects to the amount of the costs (but is not alleging that the agreement is unfair or unreasonable), the costs officer may enquire into –

Contentious business agreements

Subject to [matters which do not arise] a solicitor may make an agreement in writing with his client as to his remuneration in respect of any contentious business done or to be done by him (in this Act referred to as a "contentious business agreement") providing that he shall be remunerated by a gross sum (or by reference to an hourly rate) or by a salary or by otherwise and whether at a higher or lower rate than that which he would otherwise have been entitled to be remunerated ...

Effect of contentious business agreements.

Subject to the provisions of this section and to sections 61 to 63, the costs of a solicitor in any case where a contentious business agreement has been made shall not be subject to assessment or (except in the case of an agreement which provides for the solicitor to be remunerated by reference to an hourly rate) to the provisions of section 69.

Subject to subsection (3), a contentious business agreement shall not affect the amount of, or any rights or remedies for the recovery of, any costs payable by the client to, or to the client by, any person other than the solicitor, and that person may, unless he has otherwise agreed, require any such costs to be taxed according to the rules for their assessment for the time being in force.

A client shall not be entitled to recover from any other person under an order for the payment of any costs to which a contentious business agreement relates more than the amount payable by him to his solicitor in respect of those costs under the agreement.

A contentious business agreement shall be deemed to exclude any claim by the solicitor in respect of the business to which it relates other than—

A provision in a contentious business agreement that the solicitor shall not be liable for his negligence, or that of any employee of his, shall be void if the client is a natural person who, in entering that agreement, is acting for purposes which are outside his trade, business or profession.

A provision in a contentious business agreement that the solicitor shall be relieved from any responsibility to which he would otherwise be subject as a solicitor shall be void.

Enforcement of contentious business agreements

No action shall be brought on any contentious business agreement, but on the application of any person who –

On any application under subsection (1) the court-

Where the amount agreed under any contentious business agreement is paid by or on behalf of the client or by any person entitled to do so, the person making the payment may at any time within twelve months from the date of payment, or within such further time as appears to the court to be reasonable, apply to the court, and, if it appears to the court that the special circumstances of the case require it to be re-opened, the court may, on such terms as may be just, re-open it and order the costs covered by the agreement to be [assessed] and the whole or any part of the amount received by the solicitor to be repaid by him.

Power of the court to order a solicitor to deliver bill etc

The jurisdiction of the High Court to make orders for the delivery by a solicitor of a bill of costs and for the delivery up or otherwise in relation to, any documents in his possession, custody or power, is hereby declared to extend to cases in which no business has been done by him in the High Court….

Action to recover solicitor's costs.

Subject to the provisions of this Act, no action shall be brought to recover any costs due to a solicitor before the expiration of one month from the date on which a bill of those costs is delivered in accordance with the requirements mentioned in subsection (2); but if there is probable cause for believing that the party chargeable with the costs—

The requirements referred to in subsection (1) are that the bill must be—

Assessment on application of party chargeable or solicitor.

Where before the expiration of one month from the delivery of a solicitor's bill an application is made by the party chargeable with the bill, the High Court shall, without requiring any sum to be paid into court, order that the bill be assessed and that no action be commenced on the bill until the assessment is completed.

Where no such application is made before the expiration of the period mentioned in subsection (1), then, on an application being made by the solicitor or, subject to subsections (3) and (4), by the party chargeable with the bill, the court may on such terms, if any, as it thinks fit (not being terms as to the costs of the assessment), order—

Where an application under subsection (2) is made by the party chargeable with the bill—

Supplementary provisions as to assessments

Every application for an order for the assessment of a solicitor’s bill or for the delivery of a solicitor’s bill … shall be made in the matter of that solicitor. [By paragraph 22 of Schedule 2 to AJA 1985 references in this section to a solicitor or to a client of a solicitor shall be construed as including a reference to a recognised body or to a client of such a body, and references to a client’s solicitor shall be construed as including a reference to any recognised body acting for a client.]

Interpretation.

In this Act, except where the context otherwise requires,—

Short title, commencement and extent

The provisions of this Act extend to England and Wales only, with the exception of [certain provisions affecting Scotland and Northern Ireland].

Incorporated practices

The Society may make rules--

(a) making provision as to the management and control of legal services bodies;

(b) prescribing the circumstances in which such bodies may be recognised by the Society as being suitable bodies to undertake the provision of any solicitor services or other relevant legal services;

(c) prescribing the requirements which (subject to any exceptions provided by the rules) must at all times be satisfied by bodies corporate so recognised if they are to remain so recognised; and

(d) regulating the conduct of the affairs of such bodies.

(3)

Despite section 24(2) of the 1974 Act, section 20 of that Act (prohibition on unqualified person acting as solicitor) does not apply to a recognised body; and nothing in section 24(1) of that Act applies in relation to such a body.

…

(6)

Schedule 2 (which makes provision with respect to the application of provisions of the 1974 Act to recognised bodies and with respect to other matters relating to such bodies) shall have effect.

(7)

Subject to the provisions of that Schedule, the Lord Chancellor may by order made by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament provide for any enactment or instrument passed or made before or in the same session as the Legal Services Act 2007 was passed and having effect in relation to solicitors to have effect in relation to recognised bodies with such additions, omissions or other modifications as appear to the Lord Chancellor to be necessary or expedient.

(8)

In this section--

'the 1974 Act' means the Solicitors Act 1974;

'authorised person' means an authorised person in relation to an activity which is a reserved legal activity (within the meaning of the Legal Services Act 2007);

'the Society' has the meaning given by section 87(1) of the 1974 Act; ...

...

'legally qualified' and 'legal services body' have the meaning given by section 9A;

'recognised body' means a body ... for the time being recognised under this section

'registered foreign lawyer' means a person who is registered under section 89 of the Courts and Legal Services Act 1990.

'solicitor services' means professional services such as are provided by individuals practising as solicitors or lawyers of other jurisdictions;

and a person has an interest in a body if the person has an interest in the body within the meaning of Part 5 of the Legal Services Act 2007 (see sections 72 and 109 of that Act)].

9A. Legal services bodies

(1)

For the purposes of section 9, a 'legal services body' means a body (corporate or unincorporate) in respect of which--

(a) the management and control condition, and

(b) the relevant lawyer condition,

are satisfied.

(2)

The management and control condition is satisfied if--

(a) at least 75% of the body's managers are legally qualified,

(b) the proportion of shares in the body held by persons who are legally qualified is at least 75%,

(c) the proportion of voting rights in the body which persons who are legally qualified are entitled to exercise, or control the exercise of, is at least 75%,

(d) all the persons with an interest in the body who are not legally qualified are managers of the body, and

(e) all the managers of the body who are not legally qualified are individuals approved by the Society as suitable to be managers of a recognised body.

(3)

The Society may by rules under section 9 provide that, in relation to specified kinds of bodies, subsection (2) applies as if the references to 75% were to such greater percentage as may be specified (and different percentages may be specified for different kinds of bodies).

(4)

The relevant lawyer condition is satisfied in relation to a body if at least one manager of the body is--

(a) a solicitor,

(b) a registered European lawyer, or

(c) a qualifying body.

(5)

For that purpose a qualifying body is a body in respect of which--

(a) the management and control condition is satisfied...

(b) the relevant lawyer condition is satisfied by virtue of subsection (4)(a) or (b), and

(c) the services condition is satisfied.

(6)

For the purposes of this section the following are legally qualified--

(a) an authorised person who is an individual;

(b) a registered foreign lawyer (within the meaning of section 89 of the Courts and Legal Services Act 1990 (c 41));

(c) a person entitled to pursue professional activities under a professional title to which the Directive applies in a state to which the Directive applies (other than the title of barrister or solicitor in England and Wales);

(d) an authorised person which is a body in respect of which--

(i) the services condition is satisfied, and

(ii) the management and control condition would be satisfied if the references in subsection (2) to persons who are legally qualified were to persons who are legally qualified by virtue of paragraphs (a) to (c);

(e) a body which provides professional services such as are provided by individuals who are authorised persons or lawyers of other jurisdictions, and in respect of which the management and control condition would be satisfied if the references in subsection (2) to persons who are legally qualified were to persons who are legally qualified by virtue of paragraphs (a) to (c).

(f) a legal partnership which--

(i) was in existence immediately before the commencement of this paragraph,

(ii) since that time has continued to be a partnership of the kind mentioned in rule 12.01(1)(b), 12.02(1)(b) or 12.04(1)(c)(i) of the pre-commencement conduct rules (framework of practice), and

(iii) has not, since that time, had a body corporate (other than a body within paragraph (g)) as a member;

(g) a body corporate which--

(i) was recognised under section 9 immediately before the commencement of this paragraph, and

(ii) has since that time continued to satisfy the requirements of rule 14.03(1) and 14.04(1) to (3) or the requirements of rule 14.05(1) to (3) of the pre-commencement conduct rules (restrictions on directors, owners etc of incorporated practices);

(h) a body which-

(i) is an authorised person and satisfies the services condition, or

(ii) provides professional services such as are provided by individuals who are authorised persons or lawyers of other jurisdictions,

and which satisfies the requirements of rules under subsection (6C).

(6A) For the purposes of subsection (6)(f), a partnership is to be treated as the same partnership despite a change in membership, if any person who was a member before the change remains a member.

(6B) For the purposes of subsection (6)(f) and (g), the references in the pre-commencement conduct rules to a recognised body are to be construed as references to a body which was recognised under section 9 immediately before the commencement of subsection (6)(f) and (g).

(6C) The Society must make rules for the purposes of paragraph (h) of subsection (6) prescribing the requirements relating to management and control which must be satisfied by or in relation to a body for it to fall within that paragraph.

(7)

For the purposes of this section, the services condition is satisfied in relation to a body if the body provides only services which may be provided by a recognised body (having regard to rules under section 9(1A) and (1C)).

(8)

For the purposes of this section--

'authorised person' has the same meaning as in section 9;

'the Directive' means Directive 98/5/EC of the European Parliament and the Council, to facilitate practice of the profession of lawyer on a permanent basis in a Member State other than that in which the qualification was obtained;

'legal partnership' means a partnership in which a solicitor, a registered European lawyer or a recognised body is permitted to practise by virtue of rules made under section 31 of the Solicitors Act 1974 (c 47), as those rules had effect immediately before the commencement of subsection (6)(f);

…

'pre-commencement conduct rules' means rules under Part 2 of the Solicitors Act 1974 or section 9 of this Act, known as the Solicitors' Code of Conduct 2007, as those rules had effect immediately before the commencement of subsection (6)(f) and (g);

'recognised body' has the same meaning as in section 9;

'registered European lawyer' has the same meaning as in section 9 (subject to subsection (6B) above);

…

'the Society' has the meaning given by section 87(1) of the Solicitors Act 1974;

'specified' means specified in rules made by the Society;

and a person has an interest in a body if the person has an interest in the body for the purposes of section 9.

10 Penalty for pretending to be a body recognised under s 9

(1)

A body shall not describe itself or hold itself out as a body for the time being recognised under section 9 unless it is so recognised.

(2)

Any body which contravenes subsection (1) shall be guilty of an offence and liable on summary conviction to a fine not exceeding the fourth level on the standard scale.

(3)

Where an offence under this section committed by a body corporate is proved to have been committed with the consent or connivance of or to be attributable to any neglect on the part of an officer of the body corporate, that officer (as well as the body corporate) is guilty of the offence and is liable to be proceeded against and punished accordingly.

(4)

Where the affairs of a body corporate are managed by its members, subsection (3) applies in relation to the acts and defaults of a member in connection with the member's functions of management as it applies to an officer of the body corporate.

(5)

Proceedings for an offence under this section alleged to have been committed by an unincorporated body are to be brought in the name of that body (and not in that of any of its members) and, for the purposes of any such proceedings, any rules of court relating to the service of documents have effect as if that body were a corporation.

(6)

A fine imposed on an unincorporated body on its conviction of an offence under this section is to be paid out of the funds of that body.

(7)

If an unincorporated body is charged with an offence under this section, section 33 of the Criminal Justice Act 1925 (c 86) and Schedule 3 to the Magistrates' Courts Act 1980 (c 43) (procedure on charge of an offence against a corporation) have effect in like manner as in the case of a corporation so charged.

(8)

Where an offence under this section committed by an unincorporated body (other than a partnership) is proved to have been committed with the consent or connivance of, or to be attributable to any neglect on the part of, any officer of the body or any member of its governing body, that officer or member as well as the unincorporated body is guilty of the offence and liable to be proceeded against and punished accordingly.

(9)

Where an offence under this section committed by a partnership is proved to have been committed with the consent or connivance of, or to be attributable to any neglect on the part of, a partner, that partner as well as the partnership is guilty of the offence and liable to be proceeded against and punished accordingly.

(10)

In this section 'officer', in relation to a body corporate, means--

(a) any director, secretary or other similar officer of the body corporate, or

(b) any person who was purporting to act in any such capacity.

Extent …

With the exception of [certain provisions which are immaterial for present purposes], this Act does not extend to Scotland or Northern Ireland.

(1) In the provisions to which this paragraph applies –

This paragraph applies to the following provisions of the 1974 Act (which relate to the remuneration of solicitors in respect of contentious and non-contentious business), namely –

Any jurisdiction –

(1) Subsection (2A) of section 69 of the 1974 Act shall have effect in relation to a bill of costs delivered by a recognised body as if for paragraphs (a) and (b) there were substituted –

“(a)

signed on behalf of the recognised body by any manager or employee of the body authorised by it to do so, or

(b)

enclosed in, or accompanied by, a letter which is so signed and refers to the bill.”

Rights to conduct litigation.

The question whether a person has a right to conduct litigation, or any category of litigation, shall be determined solely in accordance with the provisions of this Part.

A person shall have a right to conduct litigation in relation to any proceedings only in the following cases—

(a)

where—

(i)

he has a right to conduct litigation in relation to those proceedings granted by the appropriate authorised body; and

(ii)

that body's qualification regulations and rules of conduct have been approved for the purposes of this section, in relation to [...] that right;

(b)

where paragraph (a) does not apply but he has a right to conduct litigation in relation to those proceedings granted by or under any enactment;

(c)

where paragraph (a) does not apply but he has a right to conduct litigation granted by that court in relation to those proceedings;

(d)

where he is a party to those proceedings and would have had a right to conduct the litigation, in his capacity as such a party, if this Act had not been passed.

(2A) Every person who exercises before any court a right of audience granted by an authorised body has—

(a)

a duty to the court to act with independence in the interests of justice; and

(b)

a duty to comply with rules of conduct of the body relating to the right and approved for the purposes of this section;

and those duties shall override any obligation which the person may have (otherwise than under the criminal law) if it is inconsistent with them.

Where, immediately before the commencement of this section, no restriction was placed on the persons entitled to exercise any right to conduct litigation in relation to a particular court, or in relation to particular proceedings, nothing in this section shall be taken to place any such restriction on any person.

In this section—

“authorised body” means —

(a)

the Law Society; ...

(aa) the General Council of the Bar;

(ab) the Institute of Legal Executives; and

(b)

any professional or other body which has been designated by Order in Council as an authorised body for the purposes of this section;

“appropriate authorised body”, in relation to any person claiming to be entitled to any right to conduct litigation by virtue of subsection (2)(a), means the authorised body—

(a)

granting that right; and

(b)

of which that person is a member;

“qualification regulations”, in relation to an authorised body, means regulations (however they may be described) as to the education and training which members of that body must receive in order to be entitled to, or to exercise, any right to conduct litigation granted by it ; and

Section 20 of the Solicitors Act 1974 (unqualified person not to act as a solicitor), section 22 of that Act (unqualified person not to prepare certain documents etc.) and section 25 of that Act (costs where unqualified person acts as a solicitor) shall not apply in relation to any act done in the exercise of a right to conduct litigation.

Offences.

If any person does any act in the purported exercise of a right of audience, or right to conduct litigation, in relation to any proceedings or contemplated proceedings when he is not entitled to exercise that right he shall be guilty of an offence.

If any person does any act in the purported exercise of any right granted to authorised practitioners by virtue of this Act when he is not an authorised practitioner he shall be guilty of an offence.

If any person—

(a)

wilfully pretends—

(i)

to be entitled to exercise any right of audience in relation to any proceedings, or contemplated proceedings; or

(ii)

to be entitled to exercise any right to conduct litigation in relation to any proceedings, or contemplated proceedings, when he is not so entitled;

(b)

wilfully pretends to be an authorised practitioner when he is not; or

(c)

with the intention of implying falsely that he is so entitled, or is such a practitioner, takes or uses any name, title or description,

he shall be guilty of an offence.

A person guilty of an offence under subsection (1) or (2) shall be liable—

(a)

on summary conviction, to imprisonment for a term not exceeding six months or to a fine not exceeding the statutory maximum or to both; or

(b)

on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine or to both.

A person guilty of an offence under subsection (3) shall be liable, on summary conviction, to a fine not exceeding level 4 on the standard scale.

A person guilty of an offence under this section, by virtue of subsection (1), shall also be guilty of contempt of the court concerned and may be punished accordingly.

Subsection (8) applies where an offence under this section is committed by a body corporate.

If the offence is proved to have been committed with the consent or connivance of or to be attributable to any neglect on the part of—

(a)

any director, secretary or other similar officer of the body corporate; or

(b)

any person who was purporting to act in any such capacity,

he (as well as the body corporate) shall be guilty of the offence and shall be liable to be proceeded against and punished accordingly.

Conditional fee agreements

A conditional fee agreement which satisfies all of the conditions applicable to it by virtue of this section shall not be unenforceable by reason only of its being a conditional fee agreement; but (subject to subsection (5)) any other conditional fee agreement shall be unenforceable.

For the purposes of this section and section 58A--

(a)

a conditional fee agreement is an agreement with a person providing advocacy or litigation services which provides for his fees and expenses, or any part of them, to be payable only in specified circumstances;

(b)

a conditional fee agreement provides for a success fee if it provides for the amount of any fees to which it applies to be increased, in specified circumstances, above the amount which would be payable if it were not payable only in specified circumstances; and

(c)

references to a success fee, in relation to a conditional fee agreement, are to the amount of the increase.

The following conditions are applicable to every conditional fee agreement--

(a)

it must be in writing;

(b)

it must not relate to proceedings which cannot be the subject of an enforceable conditional fee agreement; and

(c)

it must comply with such requirements (if any) as may be prescribed by the Lord Chancellor.

The following further conditions are applicable to a conditional fee agreement which provides for a success fee--

(a)

it must relate to proceedings of a description specified by order made by the Lord Chancellor;

(b)

it must state the percentage by which the amount of the fees which would be payable if it were not a conditional fee agreement is to be increased; and

(c)

that percentage must not exceed the percentage specified in relation to the description of proceedings to which the agreement relates by order made by the Lord Chancellor.

(4A) The additional conditions are applicable to a conditional fee agreement which--

(a)

provides for a success fee, and

(b)

relates to proceedings of a description specified by order made by the Lord Chancellor for the purposes of this subsection.

(4B) The additional conditions are that--

(a)

the agreement must provide that the success fee is subject to a maximum limit,

(b)

the maximum limit must be expressed as a percentage of the descriptions of damages awarded in the proceedings that are specified in the agreement,

(c)

that percentage must not exceed the percentage specified by order made by the Lord Chancellor in relation to the proceedings or calculated in a manner so specified, and

(d)

those descriptions of damages may only include descriptions of damages specified by order made by the Lord Chancellor in relation to the proceedings.

If a conditional fee agreement is an agreement to which section 57 of the Solicitors Act 1974 (non-contentious business agreements between solicitor and client) applies, subsection (1) shall not make it unenforceable.

The proceedings which cannot be the subject of an enforceable conditional fee agreement are types of proceedings not material to the present case ----

The requirements which the Lord Chancellor may prescribe under section 58(3)(c)--

(a)

include requirements for the person providing advocacy or litigation services to have provided prescribed information before the agreement is made; and

(b)

may be different for different descriptions of conditional fee agreements (and, in particular, may be different for those which provide for a success fee and those which do not).

In section 58 and this section (and in the definitions of 'advocacy services' and 'litigation services' as they apply for their purposes) 'proceedings' includes any sort of proceedings for resolving disputes (and not just proceedings in a court), whether commenced or contemplated.

A costs order made in proceedings may not include provision requiring the payment by one party of all or part of a success fee payable by another party under a conditional fee agreement.

Rules of court may make provision with respect to the assessment of any costs which include fees payable under a conditional fee agreement (including one which provides for a success fee).

Meaning of "reserved legal activity" and "legal activity"

In this Act "reserved legal activity" means—

(a)

the exercise of a right of audience;

(b)

the conduct of litigation;

(c)

reserved instrument activities;

(d)

probate activities;

(e)

notarial activities;

(f)

the administration of oaths.

Schedule 2 makes provision about what constitutes each of those activities.

In this Act "legal activity" means—

(a)

an activity which is a reserved legal activity within the meaning of this Act as originally enacted, and

(b)

any other activity which consists of one or both of the following—

(i)

the provision of legal advice or assistance in connection with the application of the law or with any form of resolution of legal disputes;

(ii)

the provision of representation in connection with any matter concerning the application of the law or any form of resolution of legal disputes…

Entitlement to carry on a reserved legal activity

The question whether a person is entitled to carry on an activity which is a reserved legal activity is to be determined solely in accordance with the provisions of this Act.

A person is entitled to carry on an activity (“the relevant activity”) which is a reserved legal activity where–

(a)

the person is an authorised person in relation to the relevant activity, or

(b)

the person is an exempt person in relation to that activity.

Subsection (2) is subject to section 23 (transitional protection for non-commercial bodies).

Nothing in this section or section 23 affects section 84 of the Immigration and Asylum Act 1999 (c. 33) (which prohibits the provision of immigration advice and immigration services except by certain persons).

Offence to carry on a reserved legal activity if not entitled

It is an offence for a person to carry on an activity (“the relevant activity”) which is a reserved legal activity unless that person is entitled to carry on the relevant activity.

In proceedings for an offence under subsection (1), it is a defence for the accused to show that the accused did not know, and could not reasonably have been expected to know, that the offence was being committed.

A person who is guilty of an offence under subsection (1) is liable–

(a)

on summary conviction, to imprisonment for a term not exceeding 12 months or a fine not exceeding the statutory maximum (or both), and

(b)

on conviction on indictment, to imprisonment for a term not exceeding 2 years or a fine (or both).

A person who is guilty of an offence under subsection (1) by reason of an act done in the purported exercise of a right of audience, or a right to conduct litigation, in relation to any proceedings or contemplated proceedings is also guilty of contempt of the court concerned and may be punished accordingly.

In relation to an offence under subsection (1) committed before the commencement of section 154(1) of the Criminal Justice Act 2003 (c. 44), the reference in subsection (3)(a) to 12 months is to be read as a reference to 6 months.

Carrying on of a reserved legal activity: employers and employees etc

This section applies for the interpretation of references in this Act to a person carrying on an activity which is a reserved legal activity.

References to a person carrying on an activity which is a reserved legal activity include a person (“E”) who–

(a)

is an employee of a person (“P”), and

(b)

carries on the activity in E's capacity as such an employee.

For the purposes of subsection (2), it is irrelevant whether P is entitled to carry on the activity.

P does not carry on an activity (“the relevant activity”) which is a reserved legal activity by virtue of E carrying it on in E's capacity as an employee of P, unless the provision of relevant services to the public or a section of the public (with or without a view to profit) is part of P's business.

Relevant services are services which consist of or include the carrying on of the relevant activity by employees of P in their capacity as employees of P.

Where P is an independent trade union, persons provided with relevant services do not constitute the public or a section of the public where–

(a)

the persons are provided with the relevant services by virtue of their membership or former membership of P or of another person's membership or former membership of P, and

(b)

the services are excepted membership services.

Subject to subsection (8), “excepted membership services” means relevant services which relate to or have a connection with–

(a)

relevant activities of a member, or former member, of the independent trade union;

(b)

any other activities carried on for the purposes of or in connection with, or arising from, such relevant activities;

(c)

any event which has occurred (or is alleged to have occurred) in the course of or in connection with such relevant activities or activities within paragraph (b);

(d)

activities carried on by a person for the purposes of or in connection with, or arising from, the person's membership of the independent trade union;

and such other relevant services as the Lord Chancellor may by order specify.

The Lord Chancellor may by order make provision about the circumstances in which relevant services do or do not relate to, or have a connection with, the matters mentioned in paragraphs (a) to (d) of subsection (7).

Subject to that, the Lord Chancellor may by order make provision about–

(a)

what does or does not constitute a section of the public;

(b)

the circumstances in which the provision of relevant services to the public or a section of the public does or does not form part of P's business.

The Lord Chancellor may make an order under subsection (7), (8) or (9) only on the recommendation of the Board.

If P is a body, references to an employee of P include references to a manager of P.

In subsection (7), “relevant activities”, in relation to a person who is or was a member of an independent trade union, means any employment (including self-employment), trade, occupation or other activity to which the person's membership of the trade union relates or related.

Offence to carry on reserved legal activity through person not entitled

Where subsection (2) applies it is an offence for a person (“P”) to carry on an activity (“the relevant activity”) which is a reserved legal activity, despite P being entitled to carry on the relevant activity.

This subsection applies if–

(a)

P carries on the relevant activity by virtue of an employee of P (“E”) carrying it on in E's capacity as such an employee, and

(b)

in carrying on the relevant activity, E commits an offence under section 14.

If P is a body, references in subsection (2) to an employee of P include references to a manager of P.

In proceedings for an offence under subsection (1), it is a defence for the accused to show that the accused took all reasonable precautions and exercised all due diligence to avoid committing the offence.

A person who is guilty of an offence under subsection (1) is liable–

(a)

on summary conviction, to imprisonment for a term not exceeding 12 months or a fine not exceeding the statutory maximum (or both), and

(b)

on conviction on indictment, to imprisonment for a term not exceeding 2 years or a fine (or both).

A person who is guilty of an offence under subsection (1) by reason of an act done in the purported exercise of a right of audience, or a right to conduct litigation, in relation to any proceedings or contemplated proceedings is also guilty of contempt of the court concerned and may be punished accordingly.

In relation to an offence under subsection (1) committed before the commencement of section 154(1) of the Criminal Justice Act 2003 (c. 44), the reference in subsection (5)(a) to 12 months is to be read as a reference to 6 months.

Offence to pretend to be entitled

It is an offence for a person–

(a)

wilfully to pretend to be entitled to carry on any activity which is a reserved legal activity when that person is not so entitled, or

(b)

with the intention of implying falsely that that person is so entitled, to take or use any name, title or description.

A person who is guilty of an offence under subsection (1) is liable–

(a)

on summary conviction, to imprisonment for a term not exceeding 12 months or a fine not exceeding the statutory maximum (or both), and

(b)

on conviction on indictment, to imprisonment for a term not exceeding 2 years or a fine (or both).

In relation to an offence under subsection (1) committed before the commencement of section 154(1) of the Criminal Justice Act 2003 (c. 44), the reference in subsection (2)(a) to 12 months is to be read as a reference to 6 months.

Authorised persons

For the purposes of this Act "authorised person", in relation to an activity ("the relevant activity") which is a reserved legal activity, means —

(a)

a person who is authorised to carry on the relevant activity by a relevant approved regulator in relation to the relevant activity (other than by virtue of a licence under Part 5), or

(b)

a licensable body which, by virtue of such a licence, is authorised to carry on the relevant activity by a licensing authority in relation to the reserved legal activity.

Exempt persons

In this Act, “exempt person”, in relation to an activity (“the relevant activity”) which is a reserved legal activity, means a person who, for the purposes of carrying on the relevant activity, is an exempt person by virtue of–

(a)

Schedule 3 (exempt persons), or

(b)

paragraph 13 or 18 of Schedule 5 (additional categories of exempt persons during transitional period).

A non-authorised person who is an employee or manager of a licensed body, or has an interest or an indirect interest, or holds a material interest, in a licensed body, must not do anything which causes or substantially contributes to a breach by–

(a)

the licensed body, or

(b)

an employee or manager of the licensed body who is an authorised person in relation to an activity which is a reserved legal activity,

of the duties imposed on them by section 176.]

The Head of Legal Practice of a licensed body must–

(a)

take all reasonable steps to ensure compliance with the terms of the licensed body's licence, and

(b)

as soon as reasonably practicable, report to the licensing authority any failure to comply with the terms of the licence.

Subsection (1) does not apply to the terms of the licence so far as they require compliance with licensing rules made under paragraph 20 of Schedule 11 (accounts) (as to which see section 92).

The Head of Legal Practice of a licensed body must–

(a)

take all reasonable steps to ensure that the licensed body, and any of its employees or managers who are authorised persons in relation to an activity which is a reserved legal activity, comply with the duties imposed by section 176, and

(b)

as soon as reasonably practicable, report to the licensing authority such failures by those persons to comply with those duties as may be specified in licensing rules.

The Head of Legal Practice of a licensed body must–

(a)

take all reasonable steps to ensure that non-authorised persons subject to the duty imposed by section 90 in relation to the licensed body comply with that duty, and

(b)

as soon as reasonably practicable, report to the licensing authority any failure by a non-authorised person to comply with that duty.]

The Head of Finance and Administration of a licensed body must take all reasonable steps to ensure compliance with licensing rules made under paragraph 20 of Schedule 11 (accounts).

The Head of Finance and Administration must report any breach of those rules to the licensing authority as soon as reasonably practicable.]

Duties of regulated persons

A person who is a regulated person in relation to an approved regulator has a duty to comply with the regulatory arrangements of the approved regulator as they apply to that person.

A person is a regulated person in relation to an approved regulator if the person–

(a)

is authorised by the approved regulator to carry on an activity which is a reserved legal activity, or

(b)

is not so authorised, but is a manager or employee of a person who is so authorised.

…

Duties of advocates and litigators

This section applies to a person who–

(a)

exercises before any court a right of audience, or

(b)

conducts litigation in relation to proceedings in any court,

by virtue of being an authorised person in relation to the activity in question.

A person to whom this section applies has a duty to the court in question to act with independence in the interests of justice.

That duty, and the duty to comply with relevant conduct rules imposed on the person by section 176(1), override any obligations which the person may have (otherwise than under the criminal law) if they are inconsistent with them.

“Relevant conduct rules” are the conduct rules of the relevant authorising body which relate to the exercise of a right of audience or the conduct of litigation.

The relevant authorising body is–

(a)

the approved regulator by which the person is authorised to exercise the right of audience or conduct the litigation, or

(b)

where the person is authorised to exercise the right of audience or conduct the litigation by the Board in its capacity as a licensing authority, the Board.

…

Offences committed by bodies corporate and unincorporated bodies

Where an offence committed by a body corporate is proved to have been committed with the consent or connivance of or to be attributable to any neglect on the part of an officer of the body corporate, that officer (as well as the body corporate) is guilty of the offence and is liable to be proceeded against and punished accordingly.

Where the affairs of a body corporate are managed by its members, subsection (1) applies in relation to the acts and defaults of a member in connection with the member's functions of management as it applies to an officer of the body corporate.

Proceedings for an offence alleged to have been committed by an unincorporated body are to be brought in the name of that body (and not in that of any of its members) and, for the purposes of any such proceedings, any rules of court relating to the service of documents have effect as if that body were a corporation.

A fine imposed on an unincorporated body on its conviction of an offence is to be paid out of the funds of that body.

If an unincorporated body is charged with an offence, section 33 of the Criminal Justice Act 1925 (c. 86) and Schedule 3 to the Magistrates' Courts Act 1980 (c. 43) (procedure on charge of an offence against a corporation) have effect in like manner as in the case of a corporation so charged.

Where an offence committed by an unincorporated body (other than a partnership) is proved to have been committed with the consent or connivance of, or to be attributable to any neglect on the part of, any officer of the body or any member of its governing body, that officer or member as well as the unincorporated body is guilty of the offence and liable to be proceeded against and punished accordingly.

Where an offence committed by a partnership is proved to have been committed with the consent or connivance of, or to be attributable to any neglect on the part of, a partner, that partner as well as the partnership is guilty of the offence and liable to be proceeded against and punished accordingly.

In this section–

“officer”, in relation to a body corporate, means–

(a)

any director, secretary or other similar officer of the body corporate, or

(b)

any person who was purporting to act in any such capacity.

…

Extent

Subject to subsections (2) and (3), this Act extends to England and Wales only.

Sections 195 and 196(1) and Schedule 20 extend to Scotland only (and, for the purposes of those provisions, this Part also extends there).

An amendment or repeal contained in this Act (and, for the purposes of such an amendment or repeal, this Part) has the same extent as the enactment or relevant part of the enactment to which the amendment or repeal relates.

A7.2 Rule 1 stated:

Rule 1: Core duties

1.01

Justice and the rule of law

You must uphold the rule of law and the proper administration of justice.

1.02

Integrity

You must act with integrity.

1.03

Independence

You must not allow your independence to be compromised.

1.04

Best interests of clients

You must act in the best interests of each client.

1.05

Standard of service

You must provide a good standard of service to your clients.

1.06

Public confidence

You must not behave in a way that is likely to diminish the trust the public places in you or the legal profession.

A7.3 The Guidance accompanying Rule 1 included:

Guidance to rule 1 – Core duties

General

1.

A modern just society needs a legal profession which adopts high standards of integrity and professionalism. Lawyers, law firms and those who work in them serve both clients and society. In serving society, you uphold the rule of law and the proper administration of justice. In serving clients, you work in partnership with the client making the client’s business your first concern. The core duties contained in rule 1 set the standards which will meet the needs of both clients and society. The core duties apply to solicitors, registered European lawyers (RELs), registered foreign lawyers (RFLs), recognised bodies, managers and employees of recognised bodies, and employees of recognised sole practitioners.

2.

The core duties perform a number of functions:

(a)

They define the values which should shape your professional character and be displayed in your professional behaviour.

(b)

They form an overarching framework within which the more detailed and context-specific rules in the rest of the Code can be understood, thus illuminating the nature of those obligations and helping you to comply

(c)

The core duties can help you to navigate your way through those situations not covered in the detailed rules, as no code can foresee or address every ethical dilemma which may arise in legal practice.

(d)

The core duties are fundamental rules. A breach may result in the imposition of sanctions.

3.

Where two or more core duties come into conflict, the factor determining precedence must be the public interest, and especially the public interest in the administration of justice. Compliance with the core duties, as with all the rules, is subject to any overriding legal obligations.

4.

It will be a breach of rule 1 if you permit another person to do anything on your behalf which would compromise or impair your ability to comply with any of the core duties.

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Integrity – 1.02

6.

Personal integrity is central to your role as the client’s trusted adviser and must characterise all your professional dealings – with clients, the court, other lawyers and the public.

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Best interests of clients – 1.04

8.

You must always act in good faith and do your best for each of your clients. Most importantly, you must observe:

(a)

your duty of confidentiality to the client - see rule 4 (Confidentiality and disclosure);

(b)

your obligations with regard to conflicts of interests – see rule 3 (Conflict of interests); and

(c)

your obligation not to use your position to take unfair advantage of the client – see 10.01 (Not taking unfair advantage).

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Public confidence – 1.06

10.

Members of the public must be able to place their trust in you. Any behaviour within or outside your professional practice which undermines this trust damages not only you but the ability of the legal profession as a whole to serve society.

A7.4 Rule 2 included:

Rule 2: Client relations

Introduction

Rule 2 is designed to help both you and your clients understand each other’s expectations and responsibilities. In particular, the purpose of 2.02 (Client care) and 2.03 (Information about the cost) is to ensure that clients are given the information necessary to enable them to make appropriate decisions about if and how their matter should proceed. Under rule 5 (Business management) a recognised body, a manager of a recognised body and a recognised sole practitioner must effect supervision and put in place management arrangements to provide for compliance with rule 2. The rule does not apply to your overseas practice but you must comply with 15.02.

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2.03

Information about the cost

(1)

You must give your client the best information possible about the likely overall cost of a matter both at the outset and, when appropriate, as the matter progresses. In particular you must:

(a)

advise the client of the basis and terms of your charges;

(b)

advise the client if charging rates are to be increased;

(c)

advise the client of likely payments which you or your client may need to make to others;

(d)

discuss with the client how the client will pay, in particular:

(i)

whether the client may be eligible and should apply for public funding; and

(ii)

whether the client’s own costs are covered by insurance or may be paid by someone else such as an employer or trade union;

(e)

advise the client that there are circumstances where you may be entitled to exercise a lien for unpaid costs;

(f)

advise the client of their potential liability for any other party’s costs; and

(g)

discuss with the client whether their liability for another party’s costs may be covered by existing insurance or whether specially purchased insurance may be obtained.

(2)

Where you are acting for the client under a conditional fee agreement, (including a collective conditional fee agreement) in addition to complying with 2.03(1) above and 2.03(5) and (6) below, you must explain the following, both at the outset and, when appropriate, as the matter progresses:

(a)

the circumstances in which your client may be liable for your costs and whether you will seek payment of these from the client, if entitled to do so;

(b)

if you intend to seek payment of any or all of your costs from your client, you must advise your client of their right to an assessment of those costs; and

(c)

where applicable, the fact that you are obliged under a fee sharing agreement to pay to a charity any fees which you receive by way of costs from the client’s opponent or other third party.

(3)

Where you are acting for a publicly funded client, in addition to complying with 2.03(1) above and 2.03(5) and (6) below, you must explain the following at the outset:

(a)

the circumstances in which they may be liable for your costs;

(b)

the effect of the statutory charge;

(c)

the client’s duty to pay any fixed or periodic contribution assessed and the consequence of failing to do so; and

(d)

that even if your client is successful, the other party may not be ordered to pay costs or may not be in a position to pay them.

(4)

Where you agree to share your fees with a charity in accordance with 8.01(h) you must disclose to the client at the outset the name of the charity.

(5)

Any information about the cost must be clear and confirmed in writing.

(6)

You must discuss with your client whether the potential outcomes of any legal case will justify the expense or risk involved including, if relevant, the risk of having to pay an opponent’s costs.

(7)

If you can demonstrate that it was inappropriate in the circumstances to meet some or all of the requirements in 2.03(1) and (5) above, you will not breach 2.03.

2.04

Contingency fees

(1)

You must not enter into an arrangement to receive a contingency fee for work done in prosecuting or defending any contentious proceedings before a court of England and Wales, a British court martial or an arbitrator where the seat of the arbitration is in England and Wales, except as permitted by statute or the common law.

(2)

You must not enter into an arrangement to receive a contingency fee for work done in prosecuting or defending any contentious proceedings before a court of an overseas jurisdiction or an arbitrator where the seat of the arbitration is overseas except to the extent that a lawyer of that jurisdiction would be permitted to do so.

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A7.5 The Guidance accompanying Rule 2 included:

Guidance to rule 2 – Client relations

General

1.

The requirements of rule 2 do not exhaust your obligations to clients. As your client’s trusted adviser, you must act in the client’s best interests (see 1.03) and you must not abuse or exploit the relationship by taking advantage of a client’s age, inexperience, ill health, lack of education or business experience, or emotional or other vulnerability.

2.

It is not envisaged or intended that a breach of 2.02, 2.03 or 2.05 should invariably render a retainer unenforceable. As noted in the introduction to this rule, the purpose of 2.02 and 2.03 is to ensure that clients are given the information necessary to enable them to make appropriate decisions about if and how their matter should proceed. These parts of the rule together with 2.05 require you to provide certain information to your client. Rules 2.02(3), 2.03(7) and 2.05(2) recognise that it is not always necessary to provide all this information to comply with the underlying purpose of the rule. Similarly, the information you are required to give to your client varies in importance both inherently and in relation to the individual client and the retainer. Consequently, the rule will be enforced in a manner which is proportionate to the seriousness of the breach. For example, if you were to fail to tell your client that they would be liable to pay another party’s costs in breach of 2.03(1)(f), this is likely to be treated as a more serious breach than your failure to advise your client about your right to exercise a lien for unpaid costs in breach of 2.03(1)(e).

You should note that a breach of rule 2 may provide evidence against a solicitor, an REL or a recognised body of inadequate professional services under section 37A of the Solicitors Act 1974. The powers of the Legal Complaints Service on a finding of an inadequate professional service include disallowing all or part of the solicitor’s or REL’s costs and directing the solicitor or REL to pay compensation to the client. Section 37A does not apply directly to an RFL, but solicitor and REL partners in a multi-national partnership (MNP) are subject to section 37A in respect of services provided by the MNP, and the MNP itself (and, therefore, all the partners) will be subject to section 37A as a recognised body.

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Information about the cost – 2.03

27.

The purpose of 2.03 is to ensure that the client is given relevant costs information and that this is clearly expressed. Information about costs must be worded in a way that is appropriate for the client. All costs information must be given in writing and regularly updated.

28.

Rule 2.03 recognises that there may be circumstances where it would be inappropriate to provide any or all of the information required. It will be for you to justify why compliance was not appropriate in an individual matter. For example, your firm may regularly do repeat work for the client on agreed terms and the client might not need the costs information repeated. However, the client should be informed, for example, of any changes in a firm’s charging rates.

29.

If you are an in-house solicitor or REL, much of 2.03 will be inappropriate if you are acting for your employer.

30.

This guidance does not deal with the form a bill can take, final and interim bills, when they can be delivered and when and how a firm can sue on a bill. All these matters are governed by complex legal provisions, and there are many publications that provide help to firms and clients. Advice on some aspects of costs is available from the Law Society’s Practice Advice Service.

31.

You will usually be free to negotiate the cost and the method of payment with your clients. It will not normally be necessary for the client to be separately advised on the cost agreement. Different cost options may have different implications for the client – for example, where the choice is between a conditional fee agreement and an application for public funding. In those circumstances clients should be made aware of the implications of each option.

32.

The rule requires you to advise the client of the circumstances in which you may be entitled to exercise a lien for unpaid costs. For more information see note 11 above.

33.

Clients may be referred to you at a stage when they have already signed a contract for a funding arrangement – see also rule 9 (Referrals of business). You should explain the implications of any such arrangement fully including the extent to which the charges associated with such an arrangement may be recovered from another party to the proceedings.

34.

There may be some unusual arrangements, however, where it should be suggested that the client considers separate advice on what is being proposed – for example, where you are to receive shares in a new company instead of costs. See also rule 3 (Conflict of interests) and 9.02(g) for details about your obligations to clients who have been referred to you.

35.

Rule 2.03 does not cover all the different charging arrangements possible or the law governing them. However, it does require that the chosen option is explained as fully as possible to the client. It also requires that if you have agreed to pay all, or part, of your fees to a charity in accordance with rule 8 (Fee sharing) the client must be informed at the outset of the name of the charity.

36.

It is often impossible to tell at the outset what the overall cost will be. Rule 2.03 allows for this and requires that you provide the client with as much information as possible at the start and that you keep the client updated. If a precise figure cannot be given at the outset, you should explain the reason to the client and agree a ceiling figure or review dates.

37.

Particular information will be of relevance at particular stages of a client’s matter. You should, for example, ensure that clients understand the costs implications of any offers of settlement. Where offers of settlement are made, clients must be fully informed of the amount to be deducted in respect of costs and how this figure is calculated. You should advise clients of their rights to assessment of your costs in such circumstances.

38.

When a potential client contact you with a view to giving you instructions you should always, when asked, try to be helpful in providing information on the likely costs of their matter.

Work under a conditional fee agreement or for a publicly funded client

39.

Rules 2.03(2) and (3) set out additional information which must be explained to the client when work is done under a conditional fee agreement or on a publicly funded basis. Conditional fee agreements are subject to statutory requirements and all agreements must conform to these. Where you are acting under a conditional fee agreement and you are obliged under a fee sharing agreement to pay to a charity any fees which you receive by way of costs from the client’s opponent or other third party, the client must be informed at the outset of the name of that charity.

Payments to others

40.

You must explain at the outset to your client any likely payment they will have to make. These could include court fees, search fees, experts’ fees and counsel’s fees. Where possible, you should give details of the probable cost and if this is not possible you should agree with the client to review these expenses and the need for them nearer the time they are likely to be incurred.

Contingency fees – 2.04

41.

A “contingency fee” is defined in rule 24 (Interpretation) as any sum (whether fixed, or calculated either as a percentage of the proceeds or otherwise) payable only in the event of success.

42.

If you enter into an arrangement for a lawful contingency fee with a client, what amounts to “success” should be agreed between you and your client prior to entering into the agreement.

43.

Under rule 24 (Interpretation), “contentious proceedings” is to be construed in accordance with the definition of “contentious business” in section 87 of the Solicitors Act 1974.

44.

Conditional fees are a form of contingency fees. In England and Wales a conditional fee agreement for certain types of litigation is permitted by statute. See section 58 of the Courts and Legal Services Act 1990 (as amended by section 27 of the Access to Justice Act 1999) and 2.03(2) above for more information.

45.

It is acceptable to enter into a contingency fee arrangement for non-contentious matters (see section 87 of the Solicitors Act 1974 for the definition of “non-contentious business”) but you should note that to be enforceable the arrangement must be contained in a non-contentious business agreement.

46.

An otherwise contentious matter remains non-contentious up to the commencement of proceedings. Consequently, you may enter into a contingency fee arrangement for, for example, the receipt of commission for the successful collection of debts owed to a client, provided legal proceedings are not started.

A7.6 Rule 10 included:

Rule 10: Relations with third parties

Introduction

Rule 10 draws together a variety of obligations linked by the need to deal with third parties in a proper manner. The rule as it applies to your overseas practice is modified by 15.10.

Rule

10.01

Not taking unfair advantage

You must not use your position to take unfair advantage of anyone either for your own benefit or for another person’s benefit.

…

A7.7 The Guidance accompanying rule 10 included:

Guidance to rule 10 – Relations with third parties

Not taking unfair advantage – 10.01

1.

Rule 10.01 does not only apply to your actions which arise out of acting for a client. For example, if you are personally involved in a road accident and use your position as a solicitor unfairly to harass or intimidate the other motorist, you would breach 10.01.

2.

Particular care should be taken when you are dealing with a person who does not have legal representation. You need to find a balance between fulfilling your obligations to your client and not taking unfair advantage of another person. To an extent, therefore, 10.01 limits your duty to act in the best interests of your client. For example, your duty may be limited where an unrepresented opponent provides badly drawn documentation. In the circumstances you should suggest the opponent finds legal representation. If the opponent does not do so, you need to ensure that a balance is maintained between doing your best for the client and not taking unfair advantage of the opponent’s lack of legal knowledge and drafting skills.

3.

You should take care, when dealing with an unrepresented third party, that any help given does not inadvertently create a contractual relationship with that party. For further information see Cordery on Solicitors. See also note 3 of the guidance to rule 2 (Client relations). You should also be careful, when dealing with unqualified persons, that you are not involved in possible breaches of the Solicitors Act 1974, in terms of the prohibitions relating to reserved work. For further details see 20.01 (Reserved work and immigration work) and the guidance to that rule.

4.

There may be situations where it is inappropriate for you to use your professional title in advancing your personal interests. You should consider public confidence in the profession – see 1.06 (Public confidence).

5.

It would be unfair to demand anything that is not recoverable through the proper legal process. This would include a letter of claim and any other communication with another party to the action. For instance, where you are instructed to collect a simple debt, you should not demand from the debtor the cost of the letter of claim, since it cannot be said at that stage that such a cost is legally recoverable.

6.

The following are some further examples of how you should act in order to ensure you comply with 10.01 and core duty 1.02 (Integrity):

(a)

If a person sends you documents or money subject to an express condition, you should return the documents or money if you are unwilling or unable to comply with the condition.

(b)

If you are sent documents or money on condition that they are held to the sender’s order, you should return the documents or money to the sender on demand.

(c)

If you ask anyone to supply copies of documents, you should expect to pay a proper charge for them.

A7.8 Rule 15 included:

Rule 15: Overseas practice

Introduction

Rule 15 is specific to overseas practice, which is defined in rule 24 (Interpretation) and means practice from an office outside England and Wales, except in the case of an REL, where it means practice from an office in Scotland or Northern Ireland.

Rule 15 applies the provisions of these rules to your overseas practice. Sometimes rule 15 disapplies one of these rules, or a provision in one of these rules, and in some cases substitutes alternative provisions.

Rule 15 also makes specific provisions in relation to accounts, deposit interest and professional indemnity, because the equivalent domestic rules do not apply to your overseas practice.

The purpose of applying different provisions to overseas practice is to ensure similar protection for clients but by way of rules which are more adaptable to conditions in other jurisdictions.

Rule

15.01

Core duties (rule 1) application, and conflicts of rules

The core duties

(1)

(a)

Rule 1 (Core duties) applies to your overseas practice.

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General application of these rules to overseas practice

(2)

(a)

Subject to (3) and (4) below, these rules apply, in relation to practice from an office outside the UK;

(i)

to a solicitor as an individual, whether or not the solicitor’s firm or employer is subject to these rules;

(ii)

to a solicitor-controlled recognised body (as defined in rule 24); and

(iii)

to a lawyer of England and Wales other than a solicitor, and to a non-lawyer, in relation to practice as a manager of a solicitor-controlled recognised body,

and notwithstanding the application of the rules to its solicitor managers and solicitor employees, a recognised body which is not a solicitor-controlled recognised body is not itself subject to these rules in relation to practice from such an office.

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Modification of these rules in relation to overseas practice

(3)

If this rule states that a rule or a provision of these rules does not apply to your overseas practice, you may disregard that rule or provision in relation to your overseas practice, but you must comply with any alternative provision which is substituted by this rule.

(4)

If compliance with any applicable provision of these rules would result in your breaching local law, you may disregard that provision to the extent necessary to comply with that local law.

15.02

Client relations (rule 2)

(1)

Rule 2 (Client relations) does not apply to your overseas practice but you must comply with (2) to (4) below.

…

(3)

If you are a sole practitioner, a partner in a partnership, or a recognised body to which this rule applies, you must not exclude or attempt to exclude by contract all liability to a client. …

(4)

(a)

(i)

You must not enter into an arrangement to receive a contingency fee for work done in prosecuting or defending any contentious proceedings before a court of England and Wales, a British court martial or an arbitrator where the seat of the arbitration is in England and Wales, except as permitted by statute or the common law.

(ii)

If you enter into a conditional fee agreement with a client in relation to such proceedings, you must explain, both at the outset and, where appropriate, as the matter progresses:

(A)

the circumstances in which the client may be liable for your costs, and whether you will seek payment of these from the client, if entitled to do so; and

(B)

if you intend to seek payment of any or all of your costs from the client, you must advise the client of their right to an assessment of those costs.

(b)

You must not enter into an arrangement to receive a contingency fee for work done in prosecuting or defending any contentious proceedings before a court of an overseas jurisdiction or an arbitrator where the seat of the arbitration is overseas except to the extent that a lawyer of that jurisdiction would be permitted to do so.

A7.9 The Guidance accompanying rule 15 included:

Guidance to rule 15 – Overseas practice

How these rules apply to overseas practice

1.

These rules apply, in different ways, to the following in respect of their overseas practice:

(a)

Solicitors;

…

2.

Because of the lighter touch regulation in respect of overseas practice, the rules regulate, in essence, the practice of individual solicitors and RELs in respect of their overseas practice (outside England and Wales for solicitors, and in Scotland and Northern Ireland for RELs), and the practice of recognised bodies. They also regulate individual non-solicitor lawyer and non-lawyer managers of recognised bodies. In some situations, the rules apply only to certain types of recognised body or solicitors involved in certain types of practice.

3.

The situation, in more detail, is as follows:

(a)

A solicitor, as an individual, is subject to these rules in relation to practice from an office outside England and Wales, whether or not the solicitor’s firm or employer is subject to the rules.

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Core duties – 15.01(1)

7.

Rule 1 (Core duties) applies to your overseas practice because these duties are fundamental to the legal profession. However, although lawyers’ professional cultures are usually similar, legal and professional requirements vary from jurisdiction to jurisdiction, and therefore the specific expectations of clients, local lawyers and the courts will be different. It may be necessary to clarify in advance what rules you are bound by in relation to your dealings with your client, the opposing party and the opposing party’s lawyer, and in particular it may be necessary to clarify in advance the rules by which the opposing party’s lawyer is bound.

In some jurisdictions all communications between lawyers (written or by word of mouth) are automatically regarded as not to be produced in court and as not to be disclosed to others, even the lawyers’ clients. In other jurisdictions such communications must be marked “confidential” before they are to be regarded in this way. On the other hand, in some jurisdictions (as will normally be the case for an English solicitor) the lawyer has to keep the client fully informed of all relevant communications from the lawyer acting for another party, and marking a letter “confidential” is no more than a reminder to the recipient that it is not to be disclosed to anyone but the other lawyer’s client. In some jurisdictions, if a lawyer wishes to indicate that a letter is sent in an attempt to settle a dispute, and is not to be produced in court, the lawyer should mark the letter as “without prejudice”.

These national differences give rise to many misunderstandings, so you need to be careful in conducting cross-border correspondence. Rule 16.05 lays down specific requirements in relation to cross-border correspondence in Europe.

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Client relations – 15.02

12.

This provision embodies three general principles.

(a)

You must account to your client for any commission or secret profit, unless your client agrees otherwise in full knowledge of the amount or approximate amount involved. However, the requirement does not apply if, in all the circumstances, it is not reasonable to pay the commission to the client, taking account of the wide differences in conditions outside England and Wales. For example, the general custom, or the custom in legal practice in that jurisdiction might make it reasonable to deal with commissions in a different way.

(b)

You must not attempt to exclude all liability to your client. For more information on limitation of liability, see the guidance to 2.07 where appropriate to your overseas practice.

(c)

You must not enter into an unlawful contingency fee arrangement (see also the guidance to 2.04).

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