THE COURT'S POWER TO REGULATE NON-LAWYERS INVOLVED IN LITIGATION: REFERENCE TO ARBITRATION
There are several interesting aspects of the Court of Appeal’s decision in Assaubayev -v- Michael Wilson & Partners Ltd  EWCA Civ 1491. One of the points is the power of the courts over non-lawyers providing legal and litigation services. The other issue is the granting of a stay so that the matters could be referred to arbitration as provided for by contract.
THE CASE AT FIRST INSTANCE
The claimants were seeking declarations. The defendant is a company, incorporated in the British Virgin Islands, described as a “legal advisor”. Its managing director was a solicitor. Fees totalling $8,906.030.02 were sent out in relation to various disputes the defendant acted for on behalf of the claimants.
The claimants issued Part 8 proceedings seeking an order setting aside a retainer; a delivery of a solicitor’s bill of costs and detailed assessment of the bill.
The defendant sought a stay of the claims on the grounds that there was an arbitration clause in the contract.
One of the grounds raised by the defendant was that the company was not, in fact, a solicitor and not subject to supervision of the court as a solicitor. The judge at first instance held that:
- The claimants’ claims for relief under the Solicitors Act 1974 should be struck out. The defendant was not a solicitor.
- The judge considered whether he had any supervisory role in relation to the defendant. He decided to defer that issue until the arbitral tribunal decided whether (a) it had any jurisdiction; (b) whether the claims were valid.
THE ISSUES ON APPEAL
The claimants appealed arguing, inter alia, that the court should be the sole arbiter of matters relating to matters of supervision of cases of this kind.
The Court of Appeal did not determine the issue of whether there was a breach of the Solicitors Act. However it did consider the generally supervisory role of non-solicitors.
- I shall assume for the moment that the Appellants are right and that MWP was in breach of both sections 20 and 24 of the 1974 Act. On that hypothesis it might be necessary to determine whether or not the Court’s supervisory jurisdiction extends to ordering that MWP shall not be entitled to any (or some part) of its costs; or to ordering some form of assessment of all or some of them.
- There appears to be no decided case in which that has ever been done. There may well be good reason for this. A person or body who contravenes section 20 or section 24 (1) commits a criminal offence and cannot recover from his client the price or cost of his illegal acts. In relation to acting as a solicitor section 25 expressly provides that no costs shall be recoverable by an unqualified person (although it is debatable whether that applies to a body corporate: see 131  of the judgment). Where a criminal offence has been committed or section 25 applies the client thus has no need to invoke the Court’s inherent jurisdiction (although it might, in some circumstances, be a speedier method of procedure).
- I incline to the view (a) that the Court’s inherent jurisdiction extends to those who act as, or pretend to be, solicitors when they are not; and (b) that, if so, there is no sound reason why the jurisdiction must be confined to making orders for the return of monies obtained in the character of a solicitor. As to (a) I regard the Court as entitled to proceed on the basis that someone who has falsely claimed to be an officer of the court cannot claim not to be subject to the Court’s jurisdiction over its officers because, contrary to his representation, he is not one. I do not regard the enactment of section 25 as ruling out any such jurisdiction, particularly when similar provisions were in force in section 12 of the Attorneys and Solicitors Act 1872. The same applies in respect of section 20 given that similar provisions were enacted in section 45 of the Solicitors Act 1932. It was against that statutory background that the decisions in In re Hulm and In re Hurst & Middleton were reached.
- As to (b), if one of the keystones of the doctrine is:
“that the man has, by virtue of his assumption of the position and privilege of a solicitor, either obtained something which he ought not to have obtained … or done some act for which there would be a remedy in the Court if it were an act done by an officer of the Court, and … the man has done the act or obtained the property by the assumption of the privilege and position of a solicitor“
then a body corporate which has presumed to act as a solicitor and to charge for so doing, if that is what has been done, should, as it seems to me, come within the ambit of the jurisdiction since he has obtained or sought to obtain something qua solicitor. The jurisdiction is, in essence, one of the Court’s creation and its application in those circumstances does not appear to me to exceed the proper bounds of curial creativity.
- The judge did not find it necessary to decide this question; and nor do I. I shall assume, for the moment, that the supervisory jurisdiction of the Court is as extensive as is contemplated in the previous paragraph. That begs the question as to whether, on that assumption, the judge was right to stay the claim for arbitration. One of the grounds on which he did so was that he declined to determine summarily the Appellants’ argument that “if the principle that no-one can benefit from their own wrongdoing is only a canon of construction, then, as a matter of construction, the arbitration clause is inapplicable to the present dispute between the parties“. Accordingly he considered  that he should stay the Appellants’ claims under the inherent stay jurisdiction in accordance with the decision of this court in JSC “Aeroflot- Russian Airlines” v Berezovsky  EWCA Civ 784so that the arbitrator could decide the issue of the existence of the arbitration agreement pursuant to section 30 of the 1996 Act.
COULD THE DISPUTE BE REFERRED TO ARBITRATION?
The claimants argued that the matter could not be referred to arbitration. This argument was rejected by the Court of Appeal.
- I can see no good reason why MWP should be disentitled to rely on the arbitration clause – an agreement separate to that contained in the body of the Retainer – because the Appellants allege that MWP is unable to claim any fees on account of illegality; nor why, as a matter of construction, the clause should be inapplicable. There is nothing illegal about the right to have disputes referred to arbitration and the arbitrator is well able to decide whether the Appellants’ illegality points are well founded.
- The critical question is whether, on the present assumptions, a stay should have been refused because it would be contrary to the public interest for matters to be decided in the arbitration when they were also part of the subject matter of the Court’s supervisory jurisdiction. The Appellants submit that the effect of the stay ordered by the judge is to “bifurcate” the Court’s supervisory jurisdiction, so that it is, in effect, partly sub contracted to the arbitrator. If the Court is to exercise that jurisdiction it will need to determine whether MWP has acted unlawfully, which will in part depend on the facts.
- Further, the Appellants submit, it is unclear what the judge contemplated would be the status of the arbitrator’s decision, once it was reached. What the judge said was this:
“if the active claimants are granted the relief which they seek, it will not be necessary for them to continue to invoke the court’s inherent supervisory jurisdiction. To the extent that they are not granted such relief, and consider that nevertheless there is some good basis for continuing to invoke the inherent supervisory jurisdiction, then the court will have the advantage of being able to consider what the arbitrator may have said on relevant aspects. On that basis it seems to me that the claims to relief in paragraphs 5 to 9 should be stayed, as a matter of case management under the inherent stay jurisdiction pending the arbitration.“
It is thus not apparent – the Appellants say – whether the judge contemplated that a decision of the arbitrator would simply be something for the Court to consider; or whether it would be binding in some way, and, if so, on whom.
- These are not in my judgment valid objections. There are some circumstances in which a dispute may not be arbitrable. A statutory provision or a rule of public policy may, in rare circumstances, render an arbitration agreement ineffective in so far as it purports to bind the parties to an arbitral determination of the issues sought to be referred. In such a case the arbitration agreement would – per Longmore LJ in Fulham Football Club (1987) Ltd v Richards  Ch 333  – be either “null and void” or, perhaps, “inoperative” within the meaning of section 9 (4) of the 1996 Act.
- I can, however, see no valid reason why in this case the public interest should require the arbitrator not to consider the issues that have been referred to him. These are, in essence, the legality of MWP’s actions (including whether the Retainers are champertous), the effect of any such illegality on the recoverability of costs and, if relevant, the reasonableness of the costs claimed. These issues are covered by the terms of the arbitration agreements and well within an arbitrator’s reach. As the judge rightly held  the relief sought (cancellation or an assessment) is not such as to render the claims incapable of arbitration. The fact that the arbitrator cannot exercise the Court’s supervisory jurisdiction is no reason to refuse a stay. No one is asking him to exercise that jurisdiction. In any event, the fact that an arbitrator cannot give all the remedies which a Court could give does not afford any reason for treating an arbitration agreement as of no effect: Fulham Football Club .
- I do not regard the language of bifurcation or other similar expressions as apt. The fact that the consideration by the Court whether to exercise is own jurisdiction might cover some of the same ground as that of the arbitrator does not mean that in staying the claims the Court is ceding to the arbitrator any part of its jurisdiction. The arbitrator is carrying out a function of his own. Prima facie the arbitrator’s findings would bind the parties but it may be that the doctrine of issue estoppel (whose operation can be prevented in special circumstances) is inapplicable insofar as the Appellants seek to invoke the Court’s own jurisdiction, and, in any event, no decision of the arbitrator can foreclose the decision of the Court itself as to the exercise by it of its jurisdiction.
- Mr Diwan, junior counsel for the Appellants, was, therefore, right to accept, as he did, that there was no public policy consideration preventing the arbitrator from addressing the claims referred to him arising under the “ordinary” jurisdiction. That being so the remaining question is whether the judge’s decision, by way of case management, was flawed. Insofar as that decision was a matter of discretion we should only interfere with it if the judge has exceeded the permissible bounds of his discretion by ignoring relevant or taking in to account irrelevant factors or being clearly in error.”
EXERCISE OF THE COURT’S DISCRETION TO STAY THE ACTION
The Court then considered whether reference to arbitration was within the discretion of the court.
- There is nothing, in my view, unsatisfactory, about the Court ordering a stay. I say that for a number of reasons.
- First, as the judge pointed out, if the Appellants are successful before the arbitrator, the Court will not need to consider the exercise of any supervisory jurisdiction. If and insofar as they fail before the arbitrator (because MWP is not shown to have acted unlawfully and its fees are held to be recoverable) there is likely to be nothing left for the supervisory jurisdiction to do.
- Mr Diwan submitted that an unfair situation might arise if there was an award in being which MWP could enforce in circumstances where the Court might wish (or be persuaded) to consider exercising its own jurisdiction. Even if the Court were to grant injunctive relief this would not necessarily prevent enforcement abroad. This could be unfair. The Court might take a different view as to whether any fees were recoverable or in respect of the period for which they would be.
- The better course, he submitted, was for everything to be decided in the one forum, namely the Court, which could decide everything once and for all. He told us that the arbitrator had, before the order of Field J of 19 September 2012 restraining the progress of the arbitration, been adopting a streamlined procedure; that all evidence had been exchanged; the arbitrator had rejected a number of disclosure requests, in particular for MWP’s files; and had listed the matter for a 3-4 day hearing. Since the family had indicated that they would not seek to give live evidence, the arbitrator had indicated that most of the issues might be determined on a burden of proof basis. By contrast, he suggested, the Court might wish to go into the matter in more detail with wider disclosure.
- It is not apparent to me that matters were put to the judge in these terms. What is apparent from his paragaph  is that he did not think that, if the Appellants failed before the arbitrator, they would necessarily seek to invoke the Court’s jurisdiction, although he plainly contemplated that as a possibility.
- The successful invocation of the Court’s supervisory jurisdiction in those circumstances seems to me somewhat remote. It assumes (a) that the Court might be minded to consider the exercise of its residual jurisdiction, if it decides that it has one, in circumstances where an award in favour of MWP has been made and either not appealed or not successfully appealed; (b) that it decides to carry out a further fact finding exercise; and (c) that it reaches a different conclusion. The possibility of this happening is not of much weight in the scales.
- In my view the judge was fully entitled to consider it appropriate to await the upshot of the arbitration before determining whether the Court had the jurisdiction claimed and considering whether and how to exercise it. The Court is entitled to manage a case in which its jurisdiction is invoked in whatever way seems to it to be appropriate. That is both an incident of the jurisdiction itself and in any event open to the Court under CPR 3.1.
- Second, the resolution of disputes by arbitration was something to which MWP was contractually entitled. There seems to me no good reason for denying MWP that benefit; and good reason for extending it to them since, according to Mr Wilson’s evidence, an arbitral award would be enforced in Kazakhstan but not a judgment of the Court.
- Third, the case is, on analysis, scarcely one of discretion at all. The argument that MWP is disentitled to rely on the arbitration agreement has fallen away: see  above.”