Background
Following an investigation by the Office of the Supervision of Solicitors into the claimant solicitor’s practice, the Society exercised its statutory intervention powers to vest the claimant’s practice monies into its control and to require the claimant to deliver practice documents to its agent. The intervention powers were exercised by the Society on the basis that it had evidence that the claimant was in serious breach of the Solicitors’ Accounts Rules, had removed large sums of money from his client account, and had made a potentially fraudulent misuse of the Solicitors’ Compensation Fund to repay personal debts to moneylenders. The Court noted that the claimant had not disputed these allegations in any credible way. The claimant subsequently appealed against an order granting the Society summary judgment to dismiss the claimant’s application to withdraw the notice of intervention.
The claimant contended that the Society’s statutory intervention powers infringed Article 1 of the First Protocol of the Convention and sought a declaration of incompatibility in respect of this power under section 4 of the Human Rights Act 1998 i.e. a declaration by the Court that the Society’s intervention power as set out in the 1974 Act was incompatible with the Convention.
The claimant submitted that under no circumstances could the statutory power of intervention be justified. This was on the basis that the exercise of the Society’s intervention powers would always result in the effective destruction of the practice of the solicitor concerned, the destruction of any goodwill in the practice and any recoverability of work in progress, and would effectively leave him without recourse. The claimant argued that this was disproportionate and an infringement in particular of his right to undisturbed possession of his property under Article 1 of the First Protocol to the Convention.
Balancing the exercise of statutory powers in the public interest with the rights of the individual
Peter Smith J said that the Society’s statutory intervention power was draconian, on the basis that it was quite clear that an intervention would in most cases destroy the practice. The Judge also noted that judicial review would not provide an effective remedy in this situation, nor was there any cause of action for damages or any right to compensation in the event that the intervention was set aside. Balancing the rights of the individual i.e. Mr Holder, against the public interest i.e. the State’s interest in ensuring that the conduct of solicitors is maintained to the highest professional standards of integrity, the Judge held that the statutory power of intervention was a necessary power and not contrary to the Human Rights Act.
However, Peter Smith J did accept that the intervention power could in some cases infringe the right to peaceful possessions set out in Article 1 of the First Protocol: he could envisage situations where the exercise of the intervention power in the manner in which the 1974 Act permitted it to be exercised would not be necessary. If this resulted in interference with the right to possession of property, the Judge considered that this procedure would infringe the claimant’s right to property under the Human Rights Act. Whether there was in fact an infringement of the Human Rights Act was a question of fact and degree in each case. On this basis, Peter Smith J could not conclude that there was no real prospect of the claimant establishing at trial that his human rights had been infringed. He accordingly allowed the claimant’s appeal: an outcome which may appear surprising in light of the apparent evidence of dishonesty obtained by the Society in relation to the claimant.
Practical implications
The decision of the Court in Holder v Law Society emphasises the need for regulators, when exercising powers enshrined in primary or secondary legislation, to carefully consider the proportionality of their actions on a case by case basis. In doing so, regulators must carry out a balancing exercise between the rights of the individual affected by the exercise of the powers and the public interest in exercising the powers in each case.
This will involve an examination of whether the measure in issue is a suitable means of achieving the legitimate aim, whether the objective could have been achieved without impinging so heavily on the individual’s rights, and whether the measure has a disproportionate effect in light of the objective’s importance. In particular, consideration should be given to alternative ways of fulfilling a particular objective on the part of the regulator: in Holder the Court accepted that the exercise of the Society’s statutory intervention powers might be required on occasions, but alternatively it may be a that a lesser form of intervention would be appropriate. For example, in respect of Mr Holder the Court saw no reason why a receivership could not have been contemplated by the Society as an adjunct to the exercise of the intervention power, either in advance of or in tandem with the intervention itself.
The message from Holder appears to be that, where a less onerous form of action is available to the regulator which would sufficiently protect the public interest and also have a less onerous impact upon the individual concerned, this option should be adopted if at all possible. A similar analysis should be carried out by all regulators who are in a position to impose sanctions on those they regulate, particularly where one course of action could lead to closing down a business or preventing someone from earning a livelihood.
© Herbert Smith 2002
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