Blavo v The Law Society (Acting Through the Solicitors Regulation Authority)

The intervention powers under the Solicitors Act 1974 may operate in parallel against a recognised body and against a solicitor who manages it. The statutory demand procedure is not an appropriate means of mounting a collateral challenge to the legitimacy of an intervention; such a challenge must be brought through the statutory eight-day procedure. Intervention costs recoverable under the Act are generally not a liquidated sum where they remain subject to detailed assessment. A statutory demand based on such costs must therefore be set aside unless the liability has been fixed by agreement, assessment or an equivalent binding process.

The Law Society served two statutory demands on John Blavo for costs incurred in interventions into his practice and into Blavo & Co Solicitors Ltd. He applied to set both demands aside. The applications were transferred from the County Court to the High Court.

The issues included whether the Administration of Justice Act 1985 had removed the power to intervene into a solicitor’s own practice, whether the legitimacy of the interventions could be challenged in response to the demands, and whether the claimed intervention costs were debts for liquidated sums under the Insolvency Act 1986.

1. The applications succeeded. The statutory demands were set aside.

2. The Administration of Justice Act 1985 extended the intervention regime to recognised bodies. It did not repeal or remove the parallel power to intervene into the practice of a solicitor who was a manager of such a body. The statutory scheme contemplated that a manager could also have a practice.

3. Intervention powers were, in substance, public law powers. The statutory eight-day application was the sole route for challenging the decision to intervene and its legitimacy. Raising alleged illegitimacy as a defence to the claimed intervention costs would be an impermissible collateral challenge and an abuse of process.

4. A solicitor’s practice was not confined to a client practice. Responsibilities such as compliance with the SRA Accounts Rules could form part of that practice, and intervention costs could be incurred even if investigation disclosed that the solicitor held no client documents or money.

5. Under section 267(2)(b) of the Insolvency Act 1986, the relevant question was whether the debt was for a liquidated sum, not merely whether it was recoverable as a debt. Intervention costs under Schedule 1, Part II, paragraph 13 of the Solicitors Act 1974 were generally not pre-ascertained where the intervening solicitor’s costs remained capable of detailed assessment under section 71. The absence of any binding agreement, assessment or estoppel meant that the liabilities here were unliquidated.

6. The court declined to follow Pyke v Law Society to the extent that it treated every such liability as liquidated. The remaining arguments, including whether the debts were below the bankruptcy level, did not require determination.

The applications were made in the County Court at St Albans. On 21 June 2016 they were transferred to the High Court, and on 5 July 2016 the Registrar directed that they be heard by a High Court judge. The High Court determined both applications and set aside the statutory demands.