Legal Services Bill [HL]

House of Commons

Session 2006 - 07
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Legal Services Bill [HL]

Legal Services Bill [HL]
Schedule 16 — The Law Society, solicitors, recognised bodies and foreign lawyers
Part 2 — The Administration of Justice Act 1985 (c. 61)
285

virtue of this Act or any rules applicable to the
relevant person by virtue of section 9 of this Act;
(c)
a complaint that the relevant person has acted in
contravention of section 41 of the 1974 Act or
paragraph 9(2) of this Schedule or of any
5
conditions subject to which a permission has been
granted under that section or for the purposes of
paragraph 9(2) of this Schedule;
(d)
a complaint that the relevant person has knowingly
acted in contravention of an order under section
10
43(2) of the 1974 Act or of any conditions subject to
which a permission has been granted under such
an order.”
105
In paragraph 17 of that Schedule (procedure on applications and
complaints)—
15
(a)
for “(7)” substitute “(9)”,
(b)
in paragraph (a)—
(i)
omit “11(1), 15(2) or”,
(ii)
omit “13(3) or”, and
(iii)
after “16(1)” insert “or (1A)”, and
20
(c)
in paragraph (c) after “body” insert “or, in the case of a complaint as
is mentioned in paragraph 16(1A), to a manager or employee of such
a body”.
106
In paragraph 18 of that Schedule (powers of Tribunal with respect to
recognised bodies)—
25
(a)
in sub-paragraph (1) after “this Schedule” insert “(other than
paragraph 16(1A)”,
(b)
in paragraph (b) of that sub-paragraph for “section 34 of the 1974
Act” substitute “any requirement imposed by or by virtue of this
Act”,
30
(c)
omit paragraph (d) of that sub-paragraph and the “or” immediately
preceding it,
(d)
in sub-paragraph (2) omit “not exceeding £3,000”, and
(e)
omit sub-paragraphs (3) and (4).
107
After that paragraph insert—
35
“18A  (1)
Where, on the hearing of any complaint made to it under
paragraph 16(1A) of this Schedule, the Tribunal is satisfied that a
manager or employee of a recognised body—
(a)
has been convicted as mentioned in paragraph (a) of
paragraph 16(1A),
40
(b)
has failed to comply with any requirement imposed by or
by virtue of this Act or any rules applicable to the relevant
person by virtue of section 9 of this Act, or
(c)
has acted as mentioned in paragraph (c) or (d) of
paragraph 16(1A),
45

the Tribunal may, if it thinks fit, make one or more of the orders
referred to in sub-paragraph (2).
      (2)
Those orders are—

Legal Services Bill [HL]
Schedule 16 — The Law Society, solicitors, recognised bodies and foreign lawyers
Part 2 — The Administration of Justice Act 1985 (c. 61)
286

(a)
an order directing the payment by the relevant person of a
penalty to be forfeited to Her Majesty;
(b)
an order requiring the Society to consider taking such steps
as the Tribunal may specify in relation to the relevant
person;
5
(c)
if the person is not a solicitor, an order which states one or
more of the matters mentioned in sub-paragraph (3);
(d)
an order requiring the Society to refer to an appropriate
regulator any matter relating to the conduct of the relevant
person.
10
      (3)
The matters referred to in sub-paragraph (2)(c) are—
(a)
that as from the specified date—
(i)
no solicitor or employee of a solicitor shall employ
or remunerate, in connection with the practice
carried on by that solicitor, the person with respect
15
to whom the order is made, and
(ii)
no recognised body, or manager or employee of
such a body, shall employ or remunerate that
person, in connection with the business of the
recognised body,
20

except in accordance with a Society permission;
(b)
that as from the specified date no recognised body or
manager or employee of such a body shall, except in
accordance with a Society permission, permit the person
with respect to whom the order is made to be a manager of
25
the body;
(c)
that as from the specified date no recognised body or
manager or employee of such a body shall, except in
accordance with a Society permission, permit the person
with respect to whom the order is made to have an interest
30
in the body.
      (4)
For this purpose a person has an interest in a body if the person
has an interest in the body within the meaning of Part 5 the Legal
Services Act 2007 (see sections 72 and 109 of that Act).
      (5)
Subsections (1) to (1C), (3) and (4) of section 44 of the 1974 Act
35
(offences in connection with orders under section 43(2) of that Act)
apply in relation to an order under sub-paragraph (2)(c) as they
apply in relation to an order under section 43(2) of that Act, except
that references in those subsections to provision within section
43(2)(a), (b) or (c) of that Act are to be read as references to
40
provision within sub-paragraph (3)(a), (b) or (c).
      (6)
Section 44(2) of the 1974 Act, paragraph 16(1)(d) and (1A)(d) of
this Schedule and paragraph 15(3A) of Schedule 14 to the Courts
and Legal Services Act 1990 apply in relation to an order under
sub-paragraph (2)(c) as they apply in relation to an order under
45
section 43(2) of the 1974 Act.
      (7)
For the purposes of sub-paragraph (2)(d) an “appropriate
regulator” in relation to the relevant person means—
(a)
if the person is an authorised person in relation to a
reserved legal activity for the purposes of the Legal
50

Legal Services Bill [HL]
Schedule 16 — The Law Society, solicitors, recognised bodies and foreign lawyers
Part 2 — The Administration of Justice Act 1985 (c. 61)
287

Services Act 2007, any relevant approved regulator (within
the meaning of that Act) in relation to that person, and
(b)
if the person carries on activities which are not reserved
legal activities, any body which regulates the carrying on
of such activities by the person.”
5
108
In paragraph 20 of that Schedule (powers of Tribunal in respect of legal aid
complaints), in sub-paragraph (1)—
(a)
for “an officer” substitute “a manager”,
(b)
for “director” substitute “manager”, and
(c)
for “legal aid work” substitute “providing representation funded by
10
the Legal Services Commission as part of the Criminal Defence
Service”,

and omit sub-paragraph (2).
109
In paragraph 21 of that Schedule (revocation of recognition by reason of
default by director)—
15
(a)
in sub-paragraph (1), in paragraph (a) for “director” substitute
“manager”,
(b)
in paragraph (b) of that sub-paragraph for “director” (in both places)
substitute “manager”,
(c)
in paragraph (c) of that sub-paragraph for “director” (in both places)
20
substitute “manager”,
(d)
in sub-paragraph (3) for “director” (in both places) substitute
“manager”, and
(e)
after that sub-paragraph insert—
    “(4)
The reference in paragraph (c) of sub-paragraph (1) to a
25
person employed by a recognised body includes a
reference to a person who was so employed at the time of
the conduct leading to the making of the order referred to
in that paragraph.”
110
In paragraph 23 (orders as to remuneration for non-contentious business)—
30
(a)
the existing provision becomes sub-paragraph (1) of that paragraph,
(b)
in that sub-paragraph for “regulating (in accordance with paragraph
22)” substitute “prescribing (by virtue of paragraph 22) general
principles to be applied when determining”,
(c)
in that sub-paragraph for paragraph (b) substitute—
35
“(b)
in paragraph (d), the reference to the solicitor or
any employee of the solicitor who is an authorised
person were a reference to any manager or
employee of the recognised body who is an
authorised person.”, and
40
(d)
after that sub-paragraph insert—
    “(2)
In this paragraph “authorised person” means a person
who is an authorised person in relation to an activity
which is a reserved legal activity, within the meaning of
the Legal Services Act 2007 (see section 18 of that Act).”
45
111
For paragraph 24 of that Schedule (effect of contentious business

Legal Services Bill [HL]
Schedule 16 — The Law Society, solicitors, recognised bodies and foreign lawyers
Part 2 — The Administration of Justice Act 1985 (c. 61)
288

agreements) substitute—
“24   (1)
This paragraph applies in relation to a contentious business
agreement made between a recognised body and a client.
      (2)
A provision in the agreement that the body shall not be liable for
the negligence of any of its managers or employees shall be void if
5
the client is a natural person who, in entering that agreement, is
acting for purposes which are outside his trade, business or
profession.
      (3)
A provision in the agreement that the body shall be relieved from
any responsibility to which it would otherwise be subject in the
10
course of carrying on its business as a recognised body shall be
void.
      (4)
A provision in the agreement that any manager of the body shall
be relieved from any responsibility to which the manager would
otherwise be subject in the course of the carrying on by the body
15
of its business as a recognised body shall be void.”
112
In paragraph 25 of that Schedule (effect of supervening incapacity on
contentious business agreements)—
(a)
for sub-paragraph (1)(b) substitute—
“(b)
a relevant insolvency event occurs in relation to the
20
body;”,
(b)
in sub-paragraphs (2) and (3)—
(i)
for “taxation” (in each place) substitute “assessment”, and
(ii)
for “taxing officer” (in each place) substitute “costs officer”,
(c)
in sub-paragraph (3) for “any officer” substitute “any manager”, and
25
(d)
after that sub-paragraph insert—
    “(4)
For the purposes of this paragraph a relevant insolvency
event occurs in relation to a recognised body if—
(a)
a resolution for a voluntary winding-up of the
body is passed without a declaration of solvency
30
under section 89 of the Insolvency Act 1986;
(b)
the body enters administration within the meaning
of paragraph 1(2)(b) of Schedule B1 to that Act;
(c)
an administrative receiver within the meaning of
section 251 of that Act is appointed;
35
(d)
a meeting of creditors is held in relation to the body
under section 95 of that Act (creditors’ meeting
which has the effect of converting a members’
voluntary winding up into a creditors’ voluntary
winding up);
40
(e)
an order for the winding up of the body is made.”
113
In paragraph 26 of that Schedule (taxations with respect to contentious
business)—
(a)
in the paragraph heading for “Taxations” substitute “Assessments”,
(b)
the existing paragraph becomes sub-paragraph (1) and in that sub-
45
paragraph —
(i)
for “taxation” substitute “assessment”,
(ii)
for “taxing officer” substitute “costs officer”,

Legal Services Bill [HL]
Schedule 16 — The Law Society, solicitors, recognised bodies and foreign lawyers
Part 2 — The Administration of Justice Act 1985 (c. 61)
289

(iii)
after “the body” (in the second place) insert “or any manager
or employee of the body”, and
(iv)
for “any solicitor, being an officer” substitute “any authorised
person, being a manager”, and
(c)
after that sub-paragraph insert—
5
    “(2)
In this paragraph “authorised person” means an
authorised person, in relation to an activity which is a
reserved legal activity, within the meaning of the Legal
Services Act 2007.”
114
In paragraph 28 (power of court to order recognised body to pay over
10
clients’ money) after “client” (in the third place) insert “or any manager or
employee of such a body”.
115
For paragraph 29 of that Schedule (actions to recover costs) substitute—
“29   (1)
Subsection (2A) of section 69 of the 1974 Act shall have effect in
relation to a bill of costs delivered by a recognised body as if for
15
paragraphs (a) and (b) there were substituted—
“(a)
signed on behalf of the recognised body by any manager or
employee of the body authorised by it to do so, or
(b)
enclosed in, or accompanied by, a letter which is so signed
and refers to the bill.”
20
      (2)
Subsection (2E) of that section shall have effect in relation to such
a bill as if for “the solicitor” there were substituted “the recognised
body”.”
116
In paragraph 30 (power of Society to inspect files relating to certain
proceedings), for paragraph (b) substitute—
25
“(b)
for the appointment of an administrative receiver within
the meaning of section 251 of the Insolvency Act 1986; or”.
117
In paragraph 31 of that Schedule (bank accounts)—
(a)
omit “or (2)”, and
(b)
after “bank” insert “or building society”.
30
118
After that paragraph insert—
“31A
Where rules made under section 32(1) of the 1974 Act are applied
to managers or employees in accordance with section 9(2)(fb) of
this Act, section 85 of the 1974 Act shall apply in relation to a
manager or employee to whom the rules are applied who keeps an
35
account with a bank or building society in pursuance of any such
rules as it applies in relation to a solicitor who keeps such an
account in pursuance of rules under section 32.”
119   (1)
Paragraph 32 of that Schedule (intervention by Society) is amended as
follows.
40
      (2)
In sub-paragraph (1)(a)—
(a)
for “Council are” substitute “Society is”,
(b)
after “recognised body” insert “or a manager of such a body”, and
(c)
for “it” substitute “the body or manager”.
      (3)
Omit sub-paragraph (1)(b).
45

Legal Services Bill [HL]
Schedule 16 — The Law Society, solicitors, recognised bodies and foreign lawyers
Part 2 — The Administration of Justice Act 1985 (c. 61)
290

      (4)
For sub-paragraph (1)(c) substitute—
“(c)
a relevant insolvency event occurs in relation to a
recognised body; or”.
      (5)
In sub-paragraph (1)(d)—
(a)
for “Council have” substitute “Society has”,
5
(b)
for “officer” substitute “manager”, and
(c)
for “that body’s” to the end substitute—
“(i)
that body’s business,
(ii)
any trust of which that body is or was a
trustee,
10
(iii)
any trust of which the manager or
employee is or was a trustee in his capacity
as such a manager or employee, or
(iv)
the business of another body in which the
manager or employee is or was a manager
15
or employee or the practice (or former
practice) of the manager or employee; or”.
      (6)
After sub-paragraph (1)(d) insert—
“(e)
the Society is satisfied that it is necessary to exercise the
powers conferred by Part 2 of Schedule 1 to the 1974 Act
20
(or any of them) in relation to a recognised body to
protect—
(i)
the interests of clients (or former or potential
clients) of the recognised body,
(ii)
the interests of the beneficiaries of any trust of
25
which the recognised body is or was a trustee, or
(iii)
the interests of the beneficiaries of any trust of
which a person who is or was a manager or
employee of the recognised body is or was a trustee
in that person’s capacity as such a manager or
30
employee;”.
      (7)
After sub-paragraph (1) insert—
   “(1A)
For the purposes of this paragraph a relevant insolvency event
occurs in relation to a recognised body if—
(a)
a resolution for a voluntary winding-up of the body is
35
passed without a declaration of solvency under section 89
of the Insolvency Act 1986;
(b)
the body enters administration within the meaning of
paragraph 1(2)(b) of Schedule B1 to that Act;
(c)
an administrative receiver within the meaning of section
40
251 of that Act is appointed;
(d)
a meeting of creditors is held in relation to the body under
section 95 of that Act (creditors’ meeting which has the
effect of converting a members’ voluntary winding up into
a creditors’ voluntary winding up);
45
(e)
an order for the winding up of the body is made.”
      (8)
Omit sub-paragraph (2).
120
For paragraph 33 of that Schedule (further grounds for intervention)—

Legal Services Bill [HL]
Schedule 16 — The Law Society, solicitors, recognised bodies and foreign lawyers
Part 2 — The Administration of Justice Act 1985 (c. 61)
291

(a)
for paragraph (a) substitute—
“(a)
the Society is satisfied that there has been undue
delay—
(i)
on the part of a recognised body in
connection with any matter in which it is or
5
was acting on behalf of a client or with any
trust of which it is or was a trustee, or
(ii)
on the part of a person who is or was a
manager or employee of a recognised body
in connection with any trust of which the
10
manager or employee is or was a trustee in
his capacity as such a manager or
employee;”, and
(b)
in paragraph (c) for “Council regard” substitute “Society regards”.
121
In paragraph 34 of that Schedule (powers of intervention on revocation of
15
recognition etc), in sub-paragraph (1) omit “corporate” (in both places).
122
In paragraph 35 of that Schedule (provision relating to the application of
Part 2 of Schedule 1 to the Solicitors Act 1974)—
(a)
in paragraph (a) omit “corporate”, and
(b)
omit “and” at the end of paragraph (b) and after paragraph (c)
20
insert—
“(d)
paragraph 6(2)(a) of that Schedule is to be
construed as including a reference to sums of
money held by or on behalf of the recognised body
in connection with any trust of which a person who
25
is or was a manager of the recognised body is or
was a trustee in his capacity as such a manager;
(e)
paragraph 9 of that Schedule is to be construed—
(i)
as if sub-paragraph (1) included a reference
to documents in the possession or under the
30
control of the recognised body in
connection with any trust of which a person
who is or was a manager or employee of the
recognised body is or was a trustee in his
capacity as such a manager or employee,
35
and
(ii)
as applying to such a manager or employee
and documents and property in his
possession or under his control in
connection with such a trust as it applies to
40
a solicitor and documents and property in
the possession or under the control of the
solicitor;
(f)
paragraph 11(1) of that Schedule is to be construed
as including a power for the Society to apply to the
45
High Court for an order for the appointment of a
new trustee to a trust in substitution for a person
who is a trustee, in his capacity as a manager or
employee of the recognised body; and
(g)
paragraph 13A of that Schedule is to be read as if
50
the references to a former partner were
references—