The Solicitors Regulation Authority spent nearly £800,000 intervening into one of the biggest legal aid firms in the country, it has emerged in a judgment overturning a decision to set aside statutory demands served on the sole director to recover costs.
In a judgment published yesterday, the Court of Appeal, in The Law Society (acting through the Solicitors Regulation Authority) and John Blavo, ruled that there were no grounds to set aside two statutory demands, which had been served on John Blavo under the Insolvency Act. The demands were in relation to debts of £151,816.27 and £643,489.20 for costs incurred by the regulator when it intervened into Blavo & Co, which had 18 offices, in 2015.
The Court of Appeal was asked to consider whether the bankruptcy judge was wrong to decide that the sums claimed were not debts 'for a liquidated sum', the extent of Blavo's practice and whether the statutory scheme breached Blavo's human rights.
The judgment states that the essence of Blavo's challenge to the demands 'was that none of the intervention costs were payable by him personally because "I cannot be said to have personally had any client practice at the company". The costs "must relate to the intervention into the company because all of the client work, including all of the legal aid work, was carried out by the company rather than any individual for the company".
Blavo submitted that the SRA 'was mistakingly acting as though Mr Blavo had been, or could be treated as having been, a sole practitioner'. He also argued in his witness statement that the claim for costs 'has not been assesed and is not a liquid claim'.
The SRA said Blavo was liable for the intervention costs 'because his "practice (activities as a solicitor) extended at least to the totality of the activities" of the company. They were co-extensive. This was based on the fact that Mr Blavo was involved in the company as sole director and sole shareholder'.
Lord Justice Moylan, giving the Court of Appeal's lead judgment, said Blavo was 'clearly "involved" in legal practice because of his involvement in the company as manager and an interest holder... The company's status in the regulatory framework depended on Mr Blavo, as the sole owner, being a solicitor. Additionally, its status depended on Mr Blavo being a solicitor with a practising certificate certainly at the date of the interventions, if not previously, because he was the sole manager'.
Moylan said there were 'powerful public policy reasons' why an intervention must be challenged within a very short period: 'Put simply it is in the public interest as well as in the interests of the solicitor that any challenge must be made and addressed very quickly'.
He said there was no reason to permit Blavo to seek to challenge the interventions: 'As set out in his statement, he considered whether to do so at the time and decided not to challenge the decision to intervene. It is now too late for him to seek to do so.’
Moylan allowed the appeal and dismissed Blavo's notice. Lord Justice Lewison and Lord Justice Patten agreed.
Last week the High Court reserved judgment in a case over a £22m row between the lord chancellor and Blavo following a seven-day hearing.