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John Blavo v Law Society [2017] EWHC 561 (Ch)

"In November 2015 the Law Society served a statutory demand on Mr Blavo claiming that he owed it £151,816.27. In February 2016 the Law Society served a second statutory demand on Mr Blavo claiming that he owed it a further £643,489.20. On 14 December 2015 Mr Blavo applied to set aside the first statutory demand. On 11 March 2016 Mr Blavo applied to set aside the second statutory demand. ... It is the costs of the intervention, from 15 October 2015 to 20 January 2016, into the company and Mr Blavo's practice which are the underlying subject matter of the statutory demands. ... It follows from all I have said that I have concluded that the statutory demands in this case should be set aside because the debts in question are not for liquidated sums."

Related judgments

ICLR

The ICLR have kindly agreed for their WLR (D) case report to be reproduced below.

The WLR Daily case summaries

[2017] WLR (D) 254

Chancery Division

In re Blavo

Blavo v Law Society of England and Wales

[2017] EWHC 561 (Ch)

2016 Dec 16, 2017 Feb 20, 21; March 29

Judge Klein sitting as a High Court judge

Bankruptcy— Debt— Statutory demand— Solicitors Regulation Authority intervening in solicitor’s practice and in his company— Statutory demands served for costs of interventions— Solicitor applying for statutory demands to be set aside— Whether debt claimed amounting to liquidated sum— Insolvency Act 1986 (c 45), s 267(2)(b) — Solicitors Act 1974, Sch 1, Pt II, para 13

The applicant was a solicitor, a director of and the sole shareholder in the company, a vehicle through which legal services were provided. The company was regulated by the Solicitors Regulation Authority (“SRA”). The SRA intervened in the company and also in the applicant’s practice. The company subsequently went into liquidation. The Law Society served two statutory demands upon the applicant in respect of the costs of the interventions into the company and his practice. The applicant applied to have the statutory demands set aside under rule 6.5(4)(d) of the Insolvency Rules 1986 on grounds, including that the sums claimed by the demands were not liquidated sums within the meaning of section 267(2)(b) of the Insolvency Act 1986 so that a bankruptcy petition could not be presented. The Law Society contended that paragraph 13 of Pt II of Schedule I to the Solicitors Act 1974 provided that intervention costs were recoverable from the solicitor as a statutory debt and that the labelling of the solicitor’s liability as such was enough to satisfy the requirements of section 267(2)(b) of the 1986 Act.

On the application—

Held, application granted. Where the intervening agent was a solicitor, it was difficult to see how, generally and in principle, the costs liable to be paid under paragraph 13 of Pt II of Schedule 1 to the 1974 Act could be a pre-ascertained liability. Generally, the liability of a solicitor for the statutory debt under paragraph 13 of the 1974 Act was not a liability for a liquidated sum. The statutory demands were to be set aside because the debts in question were not for liquidated sums (paras 42, 47, 54, 59, 60).

Pine v Law Society [2002] EWCA Civ 175; [2002] 1 WLR 2189, CA applied.

Pyke v Law Society [2006] EWHC 3489 (Ch)Not on Bailii disapproved.

Adrian Francis (instructed by Radcliffes Le Brasseur) for the applicant.

Chloe Carpenter (instructed by Monro Wright & Wasbrough LLP) for the Law Society of England and Wales.

Reported by: Sarah Addenbrooke, Barrister

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