A party appealed against a finding that an agreement as to fee sharing with a solicitors’ firm, being in breach of the Solicitors Practice Rules, was unenforceable and void.
Held: The appeal failed as to illegality, but succeeded on a quantum meruit. Bingham LJ summarised the arguments of the plaintiff: ‘(1) In the absence of any statutory or other legal restriction everyone is free to make any contract they like and such contracts are enforceable. (2) While the Solicitors Act confers power on the Law Society to make rules to regulate the conduct of solicitors, the Law Society has no power to regulate the conduct of the public at large who are not solicitors. (3) Thus, while the Law Society may lawfully forbid solicitors to make fee-sharing agreements, it has no power to forbid anyone else, nor to ordain that such agreements shall be unenforceable save by solicitors. (4) In the absence of an effective legal prohibition a non-solicitor party who makes a fee-sharing agreement with a solicitor is entitled to enforce it. (5) it would be repugnant if the party prohibited from making such an agreement (the solicitor) were free to take the benefits accruing to him under the agreement, but were then entitled to plead the illegality of the agreement when called upon to pay the consideration due to the other contracting party, particularly when (as assumed here) that party is ignorant of the prohibition binding on the solicitor.’ He then rejected the arguments, saying: ‘(1) Section 31 confers power on the Law Society to make, with the concurrence of the Master of the Rolls, subordinate legislation governing the professional practice and conduct of solicitors. (2) When making such subordinate legislation the Law Society is acting in the public interest and not (should there be any conflict) in the narrower interests of the solicitors’ profession: see Swain v the Law Society [1983] 1AC 598. The concurrence of the Master of the Rolls is required as a guarantee that the interests of the public are fully safeguarded. (3) By rule 3 of the Practice Rules, and by the Referral Code, solicitors are permitted to accept referrals and introductions only provided that introducers are not rewarded by commission or otherwise. (4) By rule 7 solicitors are prohibited from sharing fees or agreeing to do so. (5) Thus there is a prohibition on the making by solicitors of agreements of the kind assumed to have been made in this case. (6) Although it is true that the prohibition is only imposed in terms on solicitors, and they alone are liable to imposition of a professional penalty for breach, a contract requires the concurrence of at least two parties and the effect of the prohibition, if observed, is to outlaw the making of such agreements. (7) There are substantial reasons why, in the public interest, such agreements should be outlawed, some of those reasons being described by Lightman J. (8) It follows that it would defeat the public interest, which rule 7 in particular exists to promote, if a non-solicitor party to a fee sharing agreement could enlist the aid of the court to enforce against a solicitor an agreement which the solicitor is prohibited from making. (9) If the court were to allow its process to be used to enforce agreements of this kind, the risk would inevitably arise that such agreements would abound, outwith the knowledge of the Law Society, to the detriment of the public.
This is in my judgment plainly a case in which the relevant legislation (rule 7) prohibits not only the act but the contract to perform it also.’
Addressing the ‘restitutionary’ claim for payment at the contractual rate, Lord Bingham said: ‘If, contrary to his first submission, the contract between the parties was illegal and unenforceable, Mr McCombe contended that the plaintiff was entitled to pursue a claim in quasi-contract or restitution. In the pleading, and before the judge (and initially before this court), that claim was pursued as a ground for claiming 50 per cent of legal aid fees earned by the defendant, namely the same reward as would have been recovered under the alleged agreement if it had not been illegal or unenforceable. In response to questions by the court, however, Mr. McCombe accepted that if recovery under the contract was precluded on the grounds of public policy, the plaintiff could scarcely hope to recover exactly the same relief by relabelling his ground of claim. He would, as was acknowledged have no ground for claiming 50 per cent, save by reference to the contract which the court has held to be illegal and unenforceable.’
Robert Walker LJ spoke of the claim in quantum meruit: ‘In the present case, by contrast, it was common ground that the judge should approach the summons under R.S.C., Ord 14A on the footing that the claimant was innocent in the sense of being unaware of the prohibition on fee-sharing contained in rule 7 of the Solicitors’ Practice Rules. Rule 7 was not of course made for the purpose of protecting persons in the position of the claimant. It was made for the benefit and the protection of the general public, as the judge clearly explained in a passage already read by Lord Bingham of Cornhill C.J. Nevertheless, the claimant may be able to establish at trial that he was not culpable, or was significantly less culpable than the defendant solicitors, and that they should not be unjustly enriched as the result of unremunerated services such as interpreting and translating actually performed by the claimant for the solicitors’ clients. Remuneration which the claimant received on that basis would be a proper disbursement and would not, it seems to me, involve either a payment for introduction or the sharing of part of the solicitors’ own profit costs.’
Judges:
Lord Bingham LCJ, Otton LJ, Robert Walker LJ
Citations:
[2000] CP Rep 87, [1999] 3 All ER 699, [1999] 2 Costs LR 169, [2000] 1 WLR 1815, [1999] EWCA Civ 3037
Links:
Statutes:
Jurisdiction:
England and Wales
Citing:
Cited – Swain v The Law Society HL 1983
The Solicitors’ Practice Rules had the force of a statute, being rules made by the Council of the Law Society with parliamentary sanction for the protection of that section of the public who might be in need of legal advice, assistance or oversight. . .
Appeal From – Mohammed v Alaga and Co (A Firm) ChD 2-Apr-1998
A party to an agreement to share in solicitors’ fees contrary to professional rules was unable to enforce it in any way. . .
Leave to Appeal – Mohammed v Alaga and Co (A Firm) CA 2-Nov-1998
(Application for Leave) An agreement between solicitors and non-solicitors for the payment of a fee for introductions was illegal and unenforceable. Where however the non-solicitor provided services as part of the arrangement, a claim against the . .
Cited by:
Cited – Westlaw Services Ltd and Another v Boddy CA 30-Jul-2010
The claimant said that it was due sums from the estate of the deceased solicitor. The executors said that the agreement was unlawful in that it had amounted to an agreement to share fees with an unauthorised body.
Held: The agreement was . .
Cited – Patel v Mirza SC 20-Jul-2016
The claimant advanced funds to the respondent for him to invest in a bank of which the claimant had insider knowledge. In fact the defendant did not invest the funds, the knowledge was incorrect. The defendant however did not return the sums . .
Lists of cited by and citing cases may be incomplete.
Legal Professions, Contract
Updated: 29 April 2022; Ref: scu.421332