The Law Society v Elsdon & Ors

When deciding whether to withdraw a regulatory intervention into a solicitor’s practice, the court must balance the risks of reinstatement against the potentially serious consequences of continued intervention. It must consider the regulator’s views and whether the evidence has dispelled any suspicion of dishonesty sufficiently to make withdrawal safe. A finding of dishonesty is unnecessary. Overcharging does not invariably justify intervention, but may do so where it provides good reason to suspect dishonesty. Conduct before a licensed body was formed may nevertheless justify intervention after formation where the individual remains its directing mind and is responsible for the relevant work.

The Law Society intervened in the practices of Mr Elsdon and Sai-Donne, a licensed body of which Mr and Mrs Elsdon were directors. The intervention was based on suspected dishonesty, alleged breaches of relevant rules, and the need to protect clients, former clients and trust beneficiaries.

Newey J dismissed the applications to withdraw the intervention resolution and ordered payment of costs. Permission to appeal was refused on paper by Patten LJ. The applicants sought reconsideration at an oral hearing, raising procedural complaints and challenges concerning Sai-Donne’s separate legal personality, overcharging, dishonesty, and conduct predating its formation.

Application for permission to appeal refused. The applicants’ procedural and substantive grounds had no reasonable prospect of success.

1. The legal framework under the Solicitors Act 1974 and the Legal Services Act 2007 was correctly identified. On an application to withdraw an intervention, the court must balance the risks of reinstating the solicitor against the potentially catastrophic consequences to the solicitor and the inconvenience or real harm to clients if intervention continues. The court must also consider the Law Society’s views as the professional regulator whose members underwrite the relevant risks. The approach stated in Sheikh v The Law Society [2006] EWCA Civ 1577 was correctly applied.
2. The court need not decide whether the solicitor was dishonest. The issue is whether the suspicion raised by the evidence has been dispelled sufficiently for the court safely to direct withdrawal. The enquiry is substantially summary and may be determined principally by documentary evidence.
3. Overcharging does not necessarily justify intervention. In the circumstances of this case, however, the evidence of substantial overcharging could properly support intervention on the basis of suspected dishonesty. The judge was entitled to conclude that there was good reason to suspect dishonesty without making a finding of dishonesty or honesty.
4. Conduct occurring before Sai-Donne’s formation could not itself constitute a breach of the relevant rules by Sai-Donne. It could nevertheless provide proper grounds for protecting Sai-Donne’s clients and potential clients after formation, where Mr Elsdon was its directing mind and was responsible for the work in question.
5. The procedural directions were reasonable and proportionate. The applicants had opportunities to respond to evidence and to put questions or submit evidence concerning the overcharging evidence. There was no indication that the hearing caused material disadvantage.

The application was therefore refused.

1. Court of Appeal (Civil Division): Permission to appeal was refused on paper by Patten LJ on 25 November 2015. On oral reconsideration, Kitchin LJ refused permission.
2. High Court (Chancery Division): Newey J’s judgment of 12 May 2015 was followed by an order dated 15 June 2015 dismissing applications by Mr Elsdon and Sai-Donne to withdraw the intervention resolution and requiring payment of costs.