Sheikh v Law Society of England & Wales

On an application to withdraw a statutory intervention in a solicitor’s practice, the central question is whether the intervention should continue in the light of all material before the court. Unless the validity of the original intervention is challenged, the court need not make a free-standing determination of dishonesty.

The court must balance the future risks of reinstatement against the potentially catastrophic consequences of continuing intervention. It must give proper weight to the Law Society’s regulatory expertise and assessment of risk. Relevant material includes post-intervention conduct and the solicitor’s regulatory history. Intervention for breaches of accounts rules does not legally depend upon suspected dishonesty, although proportionality and the availability of lesser regulatory measures remain relevant.

The Law Society intervened in a sole practitioner’s practice under Schedule 1 to the Solicitors Act 1974. It relied on suspected dishonesty and breaches of the Solicitors Accounts Rules. The intervention removed control of practice money and documents and suspended the solicitor’s practising certificate.

On applications under paragraphs 6(4) and 9(8) of Schedule 1, Park J directed withdrawal of the intervention notices: [2004] EWHC 1409 (Ch). He considered that the suspicion of dishonesty had been dispelled and that the established accounts-rule breaches did not justify intervention. The Law Society appealed, principally challenging his treatment of the evidence, his understanding of accounts-rule breaches and his approach to whether intervention should continue.

The central issue was the proper scope of the court’s inquiry when deciding whether intervention notices should be withdrawn.

1. The appeals were allowed in the limited terms sought by the Law Society. Park J’s approach was flawed and the applications under paragraphs 6(4) and 9(8) of Schedule 1 to the Solicitors Act 1974 should have been dismissed. Because the Society no longer sought to re-intervene on the original notices, the Court confined relief to setting aside specified parts of the order of 25 July 2005 and releasing the Society from its undertaking. Chadwick LJ gave the judgment, with which Tuckey and Moore-Bick LJJ agreed.

2. Unless the validity of the original resolution or notices is challenged, the single issue is whether the notices should now be withdrawn. That issue must be decided on all material available at the hearing. The court is not confined to the grounds or evidence on which the Society originally intervened. The commonly stated two-stage formulation must therefore be applied with care.

3. The court must weigh the risks of restoring the solicitor to practice against the severe consequences of continuing intervention. It must have proper regard to the Society’s view as the statutory regulator and as the body whose members underwrite compensation-fund risks. Past regulatory history and post-intervention conduct are relevant insofar as they inform the assessment of future risk.

4. There was no free-standing need to determine whether the solicitor was dishonest. The question was whether the evidence had dispelled the objectively supported suspicion sufficiently to make withdrawal safe. The judge placed excessive reliance on demeanour and did not critically reconcile the oral evidence with earlier explanations, documentary material and serious inconsistencies. He also failed to evaluate the evidence as a whole, including conduct involving an intended deception of a bank.

5. Paragraph 1(1)(c) permits intervention for failure to comply with the accounts rules whether or not dishonesty is suspected. Where dishonesty is absent, proportionality may require consideration of lesser regulatory measures. Nevertheless, the court should be slow to replace the Society’s expert assessment that lesser measures would not adequately secure compliance.

6. The Society should identify its reasons for intervention with sufficient specificity to permit a focused response. Courts should use active and expedited case management because delay can destroy the practice and deprive the solicitor of an effective remedy.

1. Court of Appeal (Civil Division): In [2006] EWCA Civ 1577, held that the withdrawal applications should have been dismissed, but granted only the limited relief sought because the Law Society did not seek to revive the original intervention.
2. Court of Appeal (permission): In [2006] EWCA Civ 705, permission to appeal was granted on three grounds and the evidential material was confined to specified matters.
3. High Court, Chancery Division: Park J directed withdrawal of the intervention notices and made consequential orders: [2004] EWHC 1409 (Ch). The Court of Appeal held that the applications under Schedule 1 to the Solicitors Act 1974 should instead have been dismissed.