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

Costs incurred by the Law Society in exercising intervention powers under paragraph 13 of Schedule 1 to the Solicitors Act 1974 constitute a liquidated debt. The statutory formula identifies the liable person and the recoverable costs, and produces an ascertainable figure. A statutory right to detailed assessment does not alter that character.

A solicitor’s practice is not confined to personally conducted client work. It may include activities as a manager and interest holder of an authorised body where those roles are held in the solicitor’s professional capacity. The scope of the practice remains fact-sensitive. The statutory time-limited procedure for challenging an intervention is compatible with Convention rights and cannot later be circumvented by disputing liability for intervention costs.

The Law Society, acting through the SRA, served statutory demands on Mr Blavo for intervention costs of almost £800,000. The interventions were made simultaneously into Mr Blavo’s practice and into Blavo & Co Solicitors Ltd, a recognised body of which he was sole director and shareholder.

His Honour Judge Klein, sitting as a judge of the High Court, set the demands aside. He held that intervention costs were not debts for a liquidated sum: [2017] EWHC 561 (Ch); reported as [2017] 1 WLR 4514. The Law Society appealed. Mr Blavo’s respondent’s notice contended that his practice was not co-extensive with the company’s business and that the statutory scheme unlawfully prevented a later challenge to the interventions.

The central issues were whether the debts were liquidated, whether the intervention in the company exceeded that in Mr Blavo’s practice, and whether the exclusive statutory remedies breached Convention rights.

1. Appeal allowed and respondent’s notice dismissed. The demands should not have been set aside. The costs claimed under paragraph 13 of Schedule 1 to the Solicitors Act 1974 were debts for a liquidated sum within section 267(2)(b) of the Insolvency Act 1986.

2. Applying McGuiness, a liquidated debt is a pre-ascertained liability. Paragraph 13 supplied the requisite statutory machinery: it made the costs incurred by the Society for the intervention payable by the solicitor and recoverable as a debt. Once the costs had been incurred, that machinery produced the amount due. The fact that those costs comprised solicitors’ fees did not import the ordinary rule governing an unagreed claim by a solicitor for remuneration.

3. The right to seek a detailed assessment under section 71 of the Solicitors Act 1974 did not make an otherwise liquidated statutory debt unliquidated. Assessment and the character of the debt were distinct questions. Section 70(3)(b), which permits assessment even after judgment for costs, supported that conclusion.

4. Mr Blavo was practising as a solicitor through the recognised body. His roles as sole manager and interest holder were held in his capacity as a solicitor and were essential to the company’s status as an authorised body. On these facts, his practice extended to the whole of the company’s business. The intervention in the company therefore did not exceed the intervention in his practice. The result could differ where the facts establish a narrower individual practice.

5. The terms “firm” and “practice” in Schedule 1 had to be construed consistently with the modern regulatory framework. They could include an authorised body through which a solicitor practised. Paragraph 13A did not restrict a solicitor’s primary liability under paragraph 13 merely because the solicitor was also a manager.

6. The statutory eight-day procedure for challenging intervention notices was compatible with Articles 6 and 1 of the First Protocol to the Convention. Its short timetable served compelling public-interest reasons. Mr Blavo could not avoid it by mounting a late collateral challenge to the interventions through the costs demands.

• Court of Appeal (Civil Division): Allowed the Law Society’s appeal and dismissed Mr Blavo’s respondent’s notice: [2018] EWCA Civ 2250.
• High Court: His Honour Judge Klein, sitting as a judge of the High Court, set aside the statutory demands on the ground that the intervention costs were not liquidated debts: [2017] EWHC 561 (Ch); [2017] 1 WLR 4514. That order was reversed.