John Blavo v Law Society [2018] EWCA Civ 2250

Intervention costs statutory demands The Law Society successfully appealed against a decision to set aside two statutory demands (of £151,816.27 and £643,489.20) which had been served on John Blavo in relation to costs incurred in respect of the intervention into his practice.

ICLR

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The WLR Daily case summaries

[2018] WLR(D) 637

Court of Appeal

Blavo v Law Society

[2018] EWCA Civ 2250

2018 May 15, 16; Oct 16

Patten, Lewison, Moylan LJJ

Bankruptcy— Debt— Statutory demand— Law Society issuing statutory demands requiring solicitor to pay costs incurred during intervention into his practice— Whether debt claimed “liquidated sum”— Whether demands to be set aside— Solicitors Act 1974 (c 47), Sch 1, para 13 — Insolvency Act 1986 (c 45), s 267(2)(b)

The Law Society intervened under Schedule 1 to the Solicitors Act 1974 in both a solicitor’s practice and in a company providing legal services. In reliance on its right under paragraph 13 of Schedule 1 to recover from a solicitor any costs incurred by the society during an intervention as a “debt”, the society served two statutory demands on the sole director of the company, claiming the payment of sums incurred during the intervention. On the director’s application under rule 6.5(4) of the Insolvency Rules 1986, the judge set the statutory demands aside, holding that the debts were not “for a liquidated sum” within the meaning of section 267(2)(b) of the Insolvency Act 1986.

On the Law Society’s appeal—

Held, appeal allowed. There was no reason why expressly agreed fees could not be “for a liquidated sum” for the purposes of section 267(2)(b) of the Insolvency Act 1986. The basis or nature of a solicitor’s claim for their costs was separate to the entitlement to seek an assessment and that right did not turn what would otherwise be a claim for a liquidated sum into a claim for an unliquidated sum. The sum due under paragraph 13 of Schedule 1 to the Solicitors Act 1974 was a pre-ascertained liability due to be ascertained according to a pre-determined formula which when operated would produce a figure due for payment. In the present case, the director could not seek to challenge the sums claimed as “costs incurred” under paragraph 13. They required no further or preceding event to make them for a certain and fixed value because paragraph 13 provided for a means to ascertain the relevant amount. In the circumstances, there were no grounds to challenge the intervention and, accordingly, there were also no grounds to set the statutory demands aside (paras 108, 111, 115, 116, 120, 146, 147, 148).

Dicta of Patten LJ in McGuiness v Norwich and Peterborough Building Society [2012] 2 All ER (Comm) 265, CA applied.

Decision of Judge Klein sitting as a judge of the Chancery Division [2017] EWHC 561 (Ch); [2017] 1 WLR 4514 reversed.

Richard Coleman QC and Chloe Carpenter (instructed by Monro Wright & Wasbrough llp) for the Law Society.

Mark Cawson QC (instructed by RadcliffesLeBrasseur) for the company director.

Scott McGlinchey, Barrister