Law Society Interventions Again

The recent judgment of HHJ Behrens QC in Wright & Others v Law Society [2002] unreported, 4 September 2002, considered whether the intervention powers conferred upon the Law Society (the Society) under the Solicitors Act 1974 were compliant with Article 1 of the First Protocol to the European Convention on Human Rights. Article 1 of the First Protocol establishes the right to the peaceful enjoyment of one's possessions, subject to the public interest and conditions provided for by law and international law. This issue was the subject of a judgment earlier this year in Holder v Law Society [2002] EWHC 1559, considered in our earlier e-bulletin dated 16 August 2002. However, the Judge in Wright took a different approach to this issue to that of the Judge in Holder.

On 23 August 2002 the Society resolved to intervene in the practice of a firm, of whom the Applicants were current partners, on the grounds that there were breaches of the Solicitors Accounts Rules and the Society had reason to suspect dishonesty on the part of the Applicants. On 27 August 2002 the Society gave notice of this resolution to the Applicants. At the same time the Applicants’ bank accounts were frozen. The Applicants applied to Court to prevent the intervention taking place.

One of the grounds relied upon by the Applicants was that the Society’s decision to intervene infringed their right to peaceful enjoyment of possessions under Article 1 of the First Protocol. This was on the basis that a full intervention would have an immediate and irreversible adverse effect on the Applicants’ practice, the Applicants would be unable to practise in the immediate future, and their careers may well be ruined.

The Applicants placed considerable reliance on Holder, where the Judge had said that he could not conclude that there was no real prospect of the solicitor establishing at trial that the effect of the exercise of the Society’s statutory intervention powers in that case was so draconian that it amounted to an interference with his rights under Article 1 of the First Protocol.

In Wright, the Society accepted that the effect of the intervention was draconian but contended that it was necessary in the public interest that the intervention should continue unless and until a High Court Judge ordered it to be withdrawn.

HHJ Behrens QC was prepared to assume (without deciding) that the effect of an intervention was to deprive the Applicants of the peaceful enjoyment of some of their possessions. However, the Judge stated that he had "considerable difficulty" with the approach of Peter Smith J in Holder for two reasons.

First, he expressed doubt as to whether the Human Rights Act should affect the exercise by the Society of its statutory intervention powers. This was because the Society was required to take into account the public interest before deciding whether to exercise its powers of intervention, and the public interest required a balance to be struck between the draconian effect of intervention and the need to protect the clients of the solicitor, others who may deal with him in a professional capacity, other members of the profession who had to contribute to the Solicitors Compensation Fund, and the general reputation of the profession.

Secondly, the Judge doubted the jurisdiction of the Court to adopt the sort of solution envisaged by the Judge in Holder, namely that statutory intervention was not always necessary and if there were other alternatives the Court would act on the evidence and might make a lesser order such as the appointment of a Receiver. In respect of this latter point, the Judge took the view that intervention in its full form was a statutory remedy entrusted by Parliament to the Society to regulate the profession and it was not open to the Courts to devise a different and less draconian remedy: if such a power existed, it should be provided for by Parliament.

The Judge therefore concluded that the intervention should be allowed to proceed.

Practical implications

The approach of the Court in Wright to the application of the right to peaceful enjoyment of possessions under Article 1 of the First Protocol in respect of the exercise of the Society’s statutory intervention powers was significantly different to that of the Court in Holder.

Although the Courts took a different approach one general principle remains: in the exercise of statutory powers regulators must consider any alternative ways of fulfilling a regulatory function and choose the least onerous way that satisfies those objections. The Judge in Wright was more sympathetic than the Judge in Holder towards the Law Society. He was satisfied that the Society was already required to act in the public interest and also that the range of options open to the Society was much more limited.

© Herbert Smith 2002

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