The High Court has rebuffed a bid by the foremost accountancy body in England and Wales to regulate all reserved legal services.
The Institute of Chartered Accountants in England and Wales (ICAEW) applied for judicial review of a decision by the lord chancellor to reject the institute’s request, arguing his decision to deny its application was unlawful and should be reversed.
But Lord Justice Leggatt and Mrs Justice Andrews, sitting in the administrative court, largely dismissed that challenge. The court ruled the lord chancellor had scope within the Legal Services Act to apply his discretion, and he had been entitled to raise concerns about the independence of the ICAEW’s representative and regulatory functions.
The only caveat was that the lord chancellor was not considered to have sufficiently broken down the ICAEW’s application, and so the decision on regulating the administration of oaths should be reconsidered. Otherwise, the application for judicial review was unsuccessful.
In The Institute of Chartered Accountants In England And Wales, R (On the Application Of) v The Lord Chancellor and Secretary of State For Justice, the court heard the ICAEW had been a designated regulator since 2014 for reserved probate services. The unexpected level of demand from accountancy firms prompted the organisation to apply for the right to regulate the other five reserved legal activities, including rights of audience and conduct of litigation. This would effectively allow accountancy firms to complement their existing services on taxation by offering related legal services.
But despite backing from the Competition and Markets Authority and approval from the Legal Services Board, former lord chancellor David Lidington opted in September 2017 not to make the relevant orders. His decision notice said he did not consider governance arrangements to be sufficiently independent of the ICAEW’s representative functions, and safeguards in place for probate services were not considered to stand the test of time if their scope was expanded.
As the court noted, Lidington thought it ‘one thing for accountancy practices to be expert in taxation, but quite another for them to be proficient in the conduct of civil or criminal litigation in the courts’.
The ICAEW argued in court the lord chancellor applied the wrong test of independence and ‘fundamentally misunderstood’ its proposed internal governance arrangements. But the court found no evidence Lidington made an error of law, and said nothing in the act precluded him from exercising his own judgment of independence.
‘[He] was entitled to scrutinise and form his own judgment about the adequacy of the ICAEW’s proposed arrangements,’ said the judges. ‘The Lord Chancellor was not bound to assume or to endorse the LSB’s judgment that the proposed arrangements would prove to be sufficiently robust and transparent. He was entitled to take a more cautious approach.’
The judges did conclude that the Lord Chancellor failed to explain why he had not dealt with each reserved activity separately. If such an exercise had happened, there was enough reason to reject the ICAEW’s application for each one except the administration of oaths.
Duncan Wiggetts, ICAEW executive director of professional Standards, said he was disappointed and surprised by today’s decision and that it 'makes a lottery of all future applications'.
Currently, the ICAEW says its members who offer taxation services in competition with lawyers are at a disadvantage because they do not have professional privilege and are unable to conduct cases in the courts. The application sought to level that playing field.
Wiggetts added: 'Today’s judgment undermines the important role of the LSB in determining applications by confirming that, irrespective of its recommendation, the lord chancellor can impose his own unspecified and undisclosed test to determine a regulators suitability.'