Casson & Anor v The Law Society

Where a court, tribunal or statutory adjudicator has discretion whether to make an award, the resulting sum does not exist as a debt or liability until the award is made. A prospective risk of an award is not itself a contingent liability. This principle applies where the award is subject to further steps before it becomes enforceable. A concurrent liability in tort or contract does not convert a separate statutory complaints process into an existing bankruptcy debt. The Court of Appeal’s decision in Day v Haine did not alter that principle because it concerned a protective award whose making was effectively required by the statutory and European law context.

The appellants, formerly partners in a solicitors’ firm, appealed under section 49 of the Solicitors’ Act 1974 against findings by the Solicitors’ Disciplinary Tribunal. They had failed to pay compensation directed by adjudicators following complaints of inadequate professional services. The appellants argued that the liabilities were bankruptcy debts under the Insolvency Act 1986, because the underlying services had been provided before their bankruptcies and the liabilities had therefore been released on discharge.

The Tribunal rejected that argument, reprimanded the appellants, ordered costs, and made an enforcement order concerning one adjudicator’s direction. The central issue on appeal was whether the adjudicators’ awards constituted bankruptcy debts before they were made.

The appeals were dismissed. The Tribunal’s decisions of 1 May 2008 and 21 October 2008 were clearly correct.

1. Glenister v Rowe [2000] Ch 76 and R. (Steele) v Birmingham City Council and The Secretary of State for Work and Pensions [2007] 1 All ER 73 established a general principle. Where an adjudicator or court retains a discretion whether to make an award, the sum awarded does not exist as a debt or liability until the award is made. Before then there is only a risk of liability.

2. Day v Haine and The Secretary of State for Business Enterprise and Regulatory Reform [2008] ICR 1102 did not affect that principle. The Court of Appeal distinguished Glenister and Steele because a protective award arose in a different employment-law and European-law context. The word “may” in the relevant legislation was treated as empowerment rather than a genuine discretion, and the award was effectively required following the employer’s breach.

3. The statutory complaints procedure involved several discretionary stages. The Legal Complaints Service was not required to investigate every complaint. An adjudicator had discretion whether to take any step under Schedule 1A to the Solicitors’ Act 1974, including directing compensation. Even after such a direction, it was not enforceable unless a complaint was made to the Tribunal and the Tribunal exercised its further discretion to make an enforcement order.

4. The appellants’ liabilities therefore arose after their bankruptcies and were not released on discharge under sections 281(1) and 382 of the Insolvency Act 1986. Any concurrent liability in tort or contract did not alter the separate nature of the statutory complaints process.

5. The remaining grounds concerning means, human rights, accidental timing and professional indemnity insurance had no merit and did not affect the central bankruptcy issue. The appeals were dismissed.

• High Court (Administrative Court): appeals from the Solicitors’ Disciplinary Tribunal were dismissed.