Law reports

LEGAL PROFESSION

Dishonesty – Law Society – money laundering – professional conduct

Hugh David Bryant (2) Reginald Bench v Law Society: DC (Lord Justice Richards, Mr Justice Aikens): 21 December 2007



The appellant solicitors (H and R) appealed against a decision of the Solicitors Disciplinary Tribunal, finding them guilty of professional misconduct and dishonesty. H and R were in practice together. For several years they had acted for a company (N), which procured guarantee insurance on behalf of its clients.



The appellants drafted a standard form of agreement for use between N and its clients. There was nothing inherently dubious about N’s role or the standard agreement. N subsequently entered into a new contract for guarantee insurance without using the standard agreement. The principal difference was that the arrangement fee payable to N was to be paid into the appellants’ client account, to be held by them on behalf of N.



N entered into five further transactions with five different clients, none of which used the standard form of agreement. The nature of instructions to the appellants with regards to the six transactions was non-standard, and the appellants failed to carry out necessary checks and enquiries. The appellants were investigated by the respondent Law Society and brought before its tribunal on the grounds of professional misconduct and dishonesty. The tribunal found a charge of dishonesty and seven charges of professional misconduct against H largely substantiated, and ordered that he be struck off the roll of solicitors. It found R’s involvement to have been much more limited and not to have been dishonest and ordered him to be suspended from practice for three years. The appellants submitted that (1) the tribunal had not applied the correct legal test in finding that H had been dishonest; (2) it had erred by refusing to consider character references that were relevant to the question of H’s propensity to be dishonest; and (3) the allegations brought by the Law Society had not been proved.



Held: (1) The correct test to be applied when considering dishonesty was one that included both an objective and a subjective element, Twinsectra Ltd v Yardley [2002] UKHL 12, [2002] 2 AC 164, and Bultitude v Law Society [2004] EWCA Civ 1853, (2005), The Times, 14 January, applied. The tribunal should have asked itself firstly whether H had acted dishonestly by the ordinary standards of reasonable and honest people, and, secondly, whether H had been aware that by those standards he was acting dishonestly. There was no evidence to show that the tribunal had asked itself the second of those questions, and at no point did the tribunal articulate with any clarity the test that it was applying. The tribunal’s finding of dishonesty was vitiated by a serious legal error.



(2) The tribunal erred by refusing to take into account evidence of H’s good character. The character references in support of H were cogent evidence of positive good character and were of direct relevance to the issue of dishonesty, Donkin v Law Society [2007] EWHC 414 (Admin), [2007] 157 NLJ 402 applied. The tribunal’s finding of dishonesty against H could not stand.



(3) The tribunal was correct to conclude that each of the six transactions were dubious in the sense that no reasonable solicitor who had properly investigated the matter would have acted for his client in respect of them and that the appellants should have so concluded. The terms of the contracts involved did not make sense and the nature of instructions were unusual, while the appellants only carried out minimum checks and failed to act with due caution. The tribunal erred in finding the remaining six claims against the appellants largely substantiated. Not all the allegations had been proved. It was clear that the appellants were both guilty of conduct unbefitting a solicitor, but to a much lesser extent than that found by the tribunal. H’s penalty of being struck off the roll of solicitors was replaced by a suspension of two years, and R’s penalty of a three-year suspension was replaced by a suspension of nine months.



Appeals allowed in part.



Gregory Treverton-Jones QC (instructed by Radcliffes LeBrasseur) for the appellants; Geoffrey Williams QC, Jonathan Goodwin (instructed by Lonsdales) for the respondent.



SOCIAL WELFARE

Closure – community care assessments – disability equality duty – local government



R (on the application of (1) Priti Hansraj Chavda (2) Margaret Fitzpatrick (3) (by her daughter and litigation friend Pamela Fitzpatrick) (3) Milton George Maos) v Harrow London Borough Council: QBD (Admin) (Judge Mackie QC): 20 December 2007



The claimants (C) applied for judicial review of a decision of the defendant local authority (H) to restrict adult care service to people with critical needs. C had all been in receipt of community care services from H, pursuant to section 2(1) of the Chronically Sick and Disabled Persons Act 1970. H proposed that, owing to financial constraints, it would limit provision of care services to people with need categorised as critical under the Fair Access to Care Services guidance, issued by the relevant secretary of state under section 7 of the Local Authority Social Services Act 1970. In setting eligibility for care criteria, local authorities had to take account of the guidance, their own resources, local expectations and local costs, and also various acts, including the Disability Discrimination Act 1995 and the Human Rights Act 1998. After H’s proposal, an equalities impact assessment was made and a report prepared for H’s cabinet. The assessment addressed different groups of service users and found a risk of impact on various individuals, but it did not address the disability equality duty owed by H under section 49A of the 1995 Act. A summary with the report simply stated that implementing the proposal could result in potential conflict with that Act. H adopted the proposal, but did not implement it.



C contended that H’s decision-making process (1) failed to take into account their rights under the European Convention on Human Rights; (2) did not comply with the disability equality duty owed by H under section 49A of the 1995 Act.



Held: (1) It was clear from the authorities that the questions of violation of convention rights did not arise when a local authority took a decision that potentially violated such rights, but rather when an individual contended that a violation of convention rights had occurred. In the present case, there was not enough material to inform an assessment of the issue, and C’s claim for a breach of their human rights was premature, R (on the application of Madden) v Bury MBC [2002] EWHC 1882 (Admin), [2002] 5 CCL Rep 622 doubted, R (on the application of Begum) v Denbigh High School Governors [2006] UKHL 15, [2007] 1 AC 100 and Belfast City Council v Miss Behavin’ Ltd (Northern Ireland) [2007] UKHL 19, [2007] 1 WLR 1420 applied.



(2) There was a general duty on the local authority under section 49A to have due regard to considerations listed therein, R (on the application of Elias) v Secretary of State for Defence [2006] EWCA Civ 1293, [2006] 1 WLR 3213, and Eisai Ltd v National Institute for Health and Clinical Excellence (NICE) [2007] EWHC 1941 (Admin), [2007] LS Law Medical 617 applied. Those were important duties that included the need to promote equality of opportunity, and to take account of disabilities even where that involved treating the disabled more favourably than others.



There was no evidence that the legal duty and its implications were drawn to the attention of the decision-makers who should have been informed, not just of the disabled as an issue, but of the particular obligations that the law imposed. It was not enough for the summary attached to the report to refer obliquely to potential conflict with the 1995 Act. Such a reference did not give a busy councillor any idea of the serious duties imposed on the local authority by the Act, and the authority could not weigh matters properly in the balance without being aware of what its duties were, and did not.



It was important that H’s decision-makers were aware of the special duties owed to the disabled before decisions were taken. It was not enough to accept that H had a good disability record and to assume that somehow the message would have gotten across. An important reason why the laws of discrimination had moved from derision, to acceptance, to respect over the last three decades was the recognition of the importance, not only of respecting rights, but also of doing so visibly and clearly by recording the fact. Accordingly, H’s decision-making process had not complied with section 49A.



Application granted in part.



Stephen Cragg (instructed by Public Law Project) for the claimants; Roger McCarthy QC, Deidre Fottrell (instructed by the local authority solicitor) for the defendant.



HOUSING

Agreed costs – bills of costs – detailed assessment – two sets of solicitors instructed

(1) Carl Harris (2) Susan Collete Hartless v Moat Housing Group South Ltd: QBD (Mr Justice Christopher Clarke): 20 December 2007



The appellants (H) appealed against a costs judge’s decision that they were only entitled to detailed assessment of one bill of costs. The respondent housing association (M) had obtained a without notice anti-social behaviour injunction, a possession order, and an anti-social behaviour order against H. H had appealed the various orders. They had initially been represented by one firm of solicitors, but transferred instructions to a second firm when they were granted public funding. H’s appeals were successful and the court made three orders for costs in respect of the appeals.



The first and second solicitors agreed that they would submit separate bills, but omitted to inform M of that fact. The second solicitors then lodged notices of assessment of costs, referring to costs orders one and three. The bill did not include the first solicitors’ costs. M agreed to pay the second solicitors approximately £39,000 plus VAT in settlement of H’s costs of the appeal. After the agreement had been reached, the first solicitors lodged a notice of assessment of costs in respect of costs order one, and submitted a bill of £53,000. The costs judge dismissed the first solicitors’ request for assessment and decided that M was entitled to rely on the original notice served by the second solicitors. H submitted that while part 47 of the Civil Procedure Rules (CPR) and practice direction 47 of the CPR envisaged that only one notice or bill would be served, there was nothing that stipulated that that must be so. They argued that though the bill had not been divided into separate parts for each solicitor, that did not lead to the automatic disallowance of the costs. Furthermore, they submitted that there was no clear evidence that the agreement as to costs had been on the basis that the first bill constituted the entire claim: M knew that the first solicitors had been instructed and the bill clearly had not included their costs. Finally, H maintained that the agreement as to costs could be avoided for mistake.



Held: (1) Rule 47.6 of the CPR clearly provided that detailed assessment proceedings were commenced by the receiving party, serving both a notice of commencement and the bill of costs, not a bill of costs. The bill was the receiving party’s statement of what he claimed was due to him pursuant to whatever order entitled him to costs. If H was entitled to recover the cost of instructing more than one solicitor, PD 47 required them to include the costs of each solicitor separately in the bill. If they failed to include the costs of their previous solicitor, and the costs judge completed the final certificate, they could not claim a further assessment, Re Segalov (Deceased) [1952] P 241 applied. There was nothing in the CPR which qualified the position as stated in Segalov.



(2) Where there was an agreement for costs, the critical question was what had been agreed. If H had made it clear that the amount claimed was only part of their costs, and they would claim later for their first solicitors’ costs, they would not be prevented from making a claim in respect of those costs. There would have been a failure to comply with PD 47 but, subject to any sanction that the court thought fit to impose, there would be no reason why the court should not assess the remaining costs in dispute. If, on the other hand, what was settled was the amount of H’s costs pursuant to a particular order, the position would be different. If they had left some costs out of the bill and there had been a settlement of the bill, they could not recover more than the amount agreed. The second solicitors’ notices of commencement of assessment of the bill of costs were notices of H in respect of costs orders one and three. The second solicitors had indicated the sums which they would be prepared to accept in settlement of M’s liability under those costs orders.



(3) H’s argument that such an agreement could be avoided for mistake was incorrect. On the assumption that there was a mistake as to the terms of what was agreed, it was not common; it was not shown that M knew, or that any reasonable person in its position would have known, that H was under such a mistake. M had not acted in such a way as to render it inequitable for it to rely on the agreement made, that was particularly so in light of the fact that the agreement did not deal with the second costs order.



(4) No notice of commencement was ever served pursuant to the second costs order, and no bill had been prepared which purported to be a bill relating to it. In those circumstances, the agreement could not be regarded as compromising any liability of M in respect of the costs awarded to H under that order. H was not precluded from issuing a notice to commence assessment in respect of that order, which constituted a separate source of entitlement to costs.



Appeal dismissed.



Martyn McLeish (instructed by RJ Hawksley & Co) for the appellants; Philip Glen (instructed by Dutton Gregory) for the respondent.



COSTS

Assessment – costs orders – issues – patent claims

Monsanto Technology LLC v (1) Cargill International SA (2) Cargill PLC: ChD (Patents Ct) (Lord Justice Pumfrey):

21 December 2007



The court had to determine costs arising out of a patent action brought by the claimant (M) against the defendants (C). In major respects, the issues had largely been resolved in M’s favour, though it had failed on the validity of one of its claims and, in relation to infringement, had failed on a relatively short issue of construction.



Held: Until the Civil Procedure Rules (CPR) came into effect the court exercised a general control on costs by the process of certification. Following the CPR’s abolition of the requirement for certification the court was required, in awarding costs, to identify the overall winner of the proceedings. Save in the most exceptional circumstances, the overall winner was likely to be entitled to payment of all his costs that were not, or could not be, allocated to a particular issue.



In relation to costs that could properly be allocated to issues on which the overall winner had nevertheless lost, there were two questions. The first was whether he should recover his costs of that issue. That question had traditionally been answered by the process of certification. The second question was whether he should pay the otherwise unsuccessful party’s costs incurred in respect of that issue. That had to be answered, having regard not merely to the reasonableness or lack of it in raising the issue at all, but on it being established that there was something more than conduct justifying his being deprived of the costs of the issue in the circumstances. As one moved away from the general rule that the unsuccessful party would be ordered to pay the costs of the successful party, an increasingly strong justification was required. If there was justification for ordering the otherwise successful party to pay the costs of a particular issue to the other, it was a convenient rule of thumb to treat both parties’ costs of an issue as being equal to and double the deduction. For example, if a party failed to recover costs of an issue amounting to 15% of his total costs, he would be deducted 30% of his costs if the court concluded that he should also pay the costs of that issue to the other. Applying those principles to the present case, C, who had won on the infringement issue only on the construction point, did not receive their costs and were ordered to pay half M’s costs on that issue. M received its costs on the issue of validity, subject to a deduction for the single claim on which it failed.



Costs determined.



Michael Tappin, James Whyte (instructed by Powell Gilbert) for the claimant; Colin Birss (instructed by Taylor Wessing) for the defendants.