The Institute of Chartered Accountants In England And Wales, R (On the Application Of) v The Lord Chancellor and Secretary of State For Justice

The Lord Chancellor deciding whether to designate an approved regulator under the Legal Services Act 2007 is not confined to checking compliance with the Legal Services Board’s internal governance rules. He must form his own judgment, consistently with the statutory purposes of protecting regulatory independence and the public interest.

The decision-maker may take account of regulatory complexity, consumer confusion, regulatory layering and evidence concerning risks to the standing of English and Welsh notarial acts. Reasons need be intelligible and adequate, but need not answer every argument or give reasons for each reason. Where an application covers several activities, the Lord Chancellor must consider whether designation should be granted for some activities but refused for others.

The claimant sought judicial review of the Lord Chancellor’s refusal to designate it as an approved regulator and licensing authority for five additional reserved legal activities under the Legal Services Act 2007: rights of audience, conduct of litigation, reserved instrument activities, notarial activities and administration of oaths.

The Legal Services Board had recommended approval. The Lord Chancellor refused the application, relying on concerns about governance and independence, regulatory layering, the proposed limitation to taxation services, notarial recognition overseas and the claimed complementarity of the activities with accountancy services. The central issues were whether he applied the correct legal standard, adequately explained his reasons and separately considered partial designation.

1. Governance and independence. The Lord Chancellor was not legally required to treat the Legal Services Board’s internal governance rules as the sole benchmark. The statutory scheme created separate stages: scrutiny and recommendation by the Board, decision by the Lord Chancellor and, where applicable, parliamentary approval. The Act did not require the Lord Chancellor to accept the Board’s assessment or to apply only its rules.
2. His discretion was nevertheless constrained by the statutory purposes in sections 29 and 30 of the Legal Services Act 2007. He had to form his own view whether the proposed arrangements sufficiently protected regulatory independence. The court found no error of law in his approach, no established mistake of fact and no irrational reliance on the Board’s concerns about the proposed arrangements. A predictive decision-maker could take a cautious view of future governance and attach greater weight to concerns expressed by the specialist regulator than that regulator had itself done.
3. Regulatory layering. The Act contemplated that individuals working in alternative business structures might be subject to different regulatory regimes, but did not make such complexity desirable or require the Lord Chancellor to approve proposals which would inevitably create it. He was entitled to regard the proposed absence of individual authorisation by the claimant, and the resulting regulatory layering, as contrary to the public and consumer interest.
4. Reasons. The reasons duty required an intelligible and adequate explanation of the principal controversial issues. It did not require a decision-maker to address every piece of evidence, every submission or the reasons for each reason. The explanations concerning taxation services, notarial services and complementarity were adequate. The Lord Chancellor was entitled to rely on evidence-based concerns about possible overseas effects on notarial acts.
5. Partial designation. The Lord Chancellor was required to consider whether orders should be made for one or more activities even if he rejected designation for all five. His decision letter did not adequately show that he had considered designation limited to the administration of oaths, or explain why the existing safeguards and enhanced monitoring would be insufficient for that activity.
6. The claim was dismissed concerning rights of audience, conduct of litigation, reserved instrument activities and notarial activities. The decision was quashed only insofar as it concerned administration of oaths and remitted to the Lord Chancellor for reconsideration.

This was a first-instance judicial review in the Divisional Court of the Queen’s Bench Division. The court dismissed the claim concerning four reserved legal activities but quashed and remitted the decision concerning administration of oaths.