Solicitor—Charging—Client—Commission

Queen’s Bench Division (Divisional Court)

Waller LJ and Treacy J

20 December 2006

Under r 10 of the Solicitors’ Arrangement Rules 1990, an arrangement between a
solicitor and a property search firm whereby the latter charges a fixed price for a search but, unbeknown to the lay client, the
solicitor subsequently recovered £20 gross from the search firm, cannot properly be described as commission.

Gregory Treverton-Jones QC and Fenella Morris (instructed by Penningtons) for the Law Society.
Andrew Hopper QC (instructed by Hacking Ashton) for the solicitors.

The solicitors were formerly partners in a firm, Adcocks. The firm entered into an arrangement with a company (the arrangement), under which the company would carry out local authority and other searches for the firm in conveyancing matters.

Under the arrangement, the lay client would be charged the nominal full cost of the searches, but after that fee had been paid by Adcocks, the latter invoiced the company for ‘commission’ amounting to a gross sum of £20 after October 2000, a lesser amount being charged beforehand. No mention of the arrangement between Adcocks and the company for the company to pay Adcocks commission was made to Adcocks’ clients, who were charged the cost of the searches as a disbursement. Adcocks’ terms of business were silent on the point.

The Law Society was critical of the failure to tell the clients of the full cost of the searches. The society applied to the
Solicitors’ Disciplinary Tribunal against the solicitors, contending that the arrangement amounted to conduct unbefitting a solicitor.
The tribunal acceded to an application to strike out the proceedings, on the ground that the society could not succeed. The
society appealed under s 49 of the Solicitors Act 1974.

Waller LJ:

The question was whether there was a case for the solicitors to answer. A critical issue in considering that question was the true construction of r 10. If the solicitors were to have any answer to the allegations that they were making a secret profit, it could only be supplied by r 10.

Rule 10 was concerned with commission and, in his Lordship’s view, what the solicitors were doing had nothing to do with receiving a commission. It was not a case of the solicitors putting a third party in touch with a client and thereafter receiving a commission for having done so. What the solicitors did was to have an arrangement under which they effectively received a discount from the price which the company was charging them, dressed up as a commission. Thus r 10, on its proper construction, provided no answer to the conduct of the solicitors in this case.

It followed that the tribunal was wrong in the construction of r 10. That might, at first sight, indicate that the case should be remitted to the tribunal for reconsideration of the allegations made against the solicitors and, in particular, whether their reliance on r 10 was conduct unbefitting a solicitor. It was totally within the discretion of the court whether it did remit the matter. There were various reasons why in this case it would be wrong to do so.

First, despite the clear view his Lordship had formed about the proper construction of r 10, there was no doubt that other highly respectable and influential people in the Law Society had taken a different view. Even where conduct had been criticised the view had been maintained that r 10 was applicable to the type of arrangement that there was with the company in this case.

It was thus inconceivable that any tribunal could find that the solicitors were in any way dishonest. It also seemed very unlikely that the tribunal would hold that the respondents had acted in a way unbefitting a solicitor.
The solicitors might not, however, completely escape criticism.

It was a fundamental principle that a solicitor put the best interest of his client first and he had a clear and high duty to operate a system of client care which included full and detailed costs information. Although the solicitors’ scheme on the face of it complied with the letter of the practice rule and the guidance, it could be argued that regularly taking commission for routine work was a matter that could very easily have been included in a client care letter, dealing with full costs information as was evidenced by the fact that, when concern about the arrangement had been expressed to the solicitors, they had included such information.
Treacy J agreed.