Legal Services Commission v Aaronson & Ors

A dispute about a solicitor’s obligation to provide client files under statutory disclosure regulations may also be a dispute concerning an alleged breach of the parties’ contract. Where the contract contains an arbitration agreement covering such disputes, the court must stay the claim under section 9 of the Arbitration Act 1996, unless the agreement is shown to be invalid or inoperative. The contractual and statutory aspects should not be artificially separated where they arise from the same refusal to provide documents. A parallel court disclosure process should not proceed where the arbitration is already addressing the underlying dispute and can provide an effective inspection procedure.

The Legal Services Commission brought a Part 8 claim against a firm of solicitors and its partners seeking delivery of publicly funded client files which had not been billed. The Commission relied on regulation 3 of the Legal Services Commission (Disclosure of Information) Regulations 2000, having originally also relied on contractual provisions in the Standard Terms of Civil Contract.

The defendants applied for a stay on the basis that the dispute fell within the arbitration agreement in the Standard Terms and overlapped with three existing arbitrations concerning the parties’ financial and contractual disputes. The Deputy Master refused the stay on 14 February 2006. The central issue on appeal was whether the claim, although framed under the regulations, was a dispute concerning an alleged breach of contract and therefore subject to arbitration.

1. Appeal allowed. The claim was stayed.
2. The Standard Terms contained an arbitration agreement. Clauses 23.1 and 23.2 covered disputes concerning alleged breaches of the contract, and the contractual procedure led to arbitration after the specified review stages. The Commission’s demand for the files under clauses 3.8 and 3.15 would itself have been capable of review and arbitration.
3. The Commission had subsequently relied solely on regulation 3 of the Legal Services Commission (Disclosure of Information) Regulations 2000. The court accepted that the defendants had an arguable defence that section 22(1) of the Access to Justice Act 1999 did not authorise the regulation to confer a power to require documents. That issue was for the substantive claim, not the stay application.
4. The refusal to provide the files, if unjustified, could constitute both a breach of the contract and non-compliance with regulation 3. The regulatory and contractual issues were therefore sufficiently connected. Following the approach in Asghar v Legal Services Commission [2004] EWHC 1803 Ch, the words “disputes concerning alleged breaches of this Contract” were not to be read narrowly. The Commission could not choose to avoid the contractual arbitration process by relying only on the regulation.
5. The stay under section 9 of the Arbitration Act 1996 was mandatory. There was no suggestion that the arbitration agreement was null, void, inoperative or incapable of being performed.
6. In any event, the court would have stayed the proceedings under its inherent jurisdiction to prevent multiplicity of proceedings. The arbitration was already addressing the underlying financial disputes, and a separate delivery-up process would duplicate the inspection procedure. The Commission should be able to use inspection in the arbitration for quality-assurance purposes, subject to the arbitrator’s timetable and procedures.

1. High Court (Queen’s Bench Division): appeal allowed and the Part 8 claim stayed.
2. Deputy Master: application for a stay dismissed on 14 February 2006. Permission to appeal was initially refused.