Case No: A3/2015/2213
Neutral Citation Number: [2016] EWCA Civ 306
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE 
CHANCERY DIVISION
(MR JUSTICE NEWEY)
Royal Courts of Justice
Strand
London, WC2A 2LL

Date: Monday, 1 February 2016

Before:

LORD JUSTICE KITCHIN

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	the law society	
Respondent/
Claimant	
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(1) MICHAEL JOHN Elsdon
(2) MARIANNE JOSEPHINE JANE ELSDON
(3) SAI-DONNE LIMITED 	

Applicants/
Defendants	

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DAR Transcript of WordWave International Ltd trading as DTI
8th Floor, 165 Fleet Street,  London EC4A 2DY
Tel No: 020 7404 1400  Fax No: 020 704 1424
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(Official Shorthand Writers to the Court)

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Mr Christian Elsdon appeared on behalf of the Applicants

The Respondent did not attend and was not represented

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Judgment (Approved)

Lord Justice Kitchin:
1.	This is an application for permission to appeal against the order made by Newey J on 15 June 2015 following the handing down of his judgment on 12 May 2015.  Permission to appeal was refused on the papers by Patten LJ by order dated 25 November 2015.  The applicants (Mr Elsdon, Mrs Elsdon and Sai-Donne Limited) have requested that this decision be reconsidered at an oral hearing which has come on before me today.  Mr Elsdon is unwell and accordingly with my permission has been represented, as have the other applicants, by Mr Elsdon’s son, Mr Christian Elsdon.

2.	The background relevant to this application may be summarised as follows.  The case concerns an intervention by the Solicitors Regulation Authority (“SRA”) into the practices of Mr Elsdon and Sai-Donne.  Mr Elsdon qualified as a solicitor in 1985 and practised on his own account until 2013 when he acquired the goodwill and assets of a practice known as Woolacott.  Soon after, Woolacott ceased to exist and Sai-Donne (a licensed body for the purposes of the Legal Services Act) took over the work previously conducted by that firm.  It has two directors, Mr Elsdon and Mrs Elsdon.  Mrs Elsdon is not a lawyer.  

3.	The SRA decided to intervene into the practices of Mr Elsdon and Sai-Donne in December 2014.  Notices advising Mr and Mrs Elsdon and Sai-Donne of the intervention were sent to them and soon afterwards Mr Elsdon and Sai-Donne applied for the intervention to be withdrawn.  It is Newey J’s judgment on that application which led to the order which is the subject of this application for permission to appeal.  

4.	The decisions to intervene were based upon the grounds that there was reason to suspect dishonesty on the part of Mr Elsdon, that there had been a failure by Mr Elsdon and Sai-Donne to comply with the relevant SRA rules and that it was necessary to protect the interests of the clients or former clients of Mr Elsdon and Sai-Donne or to protect the interests of the beneficiaries of the trusts of which Mr Elsdon or Sai-Donne were or had been trustees.  

5.	The judge began by directing himself as to the legal framework provided by the Solicitors Act 1974 and the Legal Services Act 2007.  He referred to the relevant authorities as to the meaning of dishonesty in this context and continued, entirely correctly, that this court explained in Sheikh v The Law Society [2006] EWCA Civ 1577, [2007] 3 AER 183 that overcharging in probate matters can potentially justify intervention on the basis of suspected dishonesty.  In that case this court also explained the approach to be adopted upon an application such as that before the judge.  Put shortly, the court must weigh the risks of reinstating the solicitor in his or her practice against the potentially catastrophic consequences to the solicitor and the inconvenience and perhaps real harm to his or her own existing clients if the intervention continues.  In weighing the risks of reinstatement the court must have regard to the views of the Law Society as the professional body charged by statute with the regulation of solicitors and as the body whose members are obliged to underwrite those risks.  Where the suspicion of dishonesty is challenged then the court is required to consider whether the suspicion of dishonesty has been dispelled by the other evidence before the court such that the court can safely direct withdrawal of the intervention notice.  

6.	After setting out the relevant rules the judge then turned to consider the evidence before him in relation to a number of matters with which Mr Elsdon had been intimately involved.  The first and major matter concerned the estate of a Mrs Lilley.  The judge set out the facts which he was able to derive in large part from the correspondence and other documents before him.  Mrs Lilley died in 2008 and under her will her estate was to be shared between her three children, Mr Lilley, Mr Nind and Mrs Mackenzie.  Mr Lilley and Mr Elsdon were named as executors.  It was a relatively small estate amounting to about £159,000, almost all of which was accounted for by Mrs Lilley’s home which was sold some three years later for £157,000.  However, and by the time the SRA intervened some six years after Mrs Lilley’s death, Mr Lilley had received nothing at all from the estate and his siblings had been paid less than £26,000 each.  In contrast, Mr Elsdon had taken more than £50,000 excluding a sum of nearly £2,000 withdrawn in respect of the fees of an expert, Professor Hodkinson, but which were never paid to him, and £900 in respect of counsel’s fees and, most importantly, despite Mr Elsdon’s bills totalling some £54,000 having been assessed by Master Gordon-Saker at just under £8,000.  Further, Mr Elsdon had brought proceedings against Mr Lilley as his co-executor notwithstanding that the other beneficiaries had renounced any benefit from the proceedings, the police had declined to proceed themselves and the amounts at stake were relatively small.   The judge thought that with Mr Elsdon as executor things had gone very seriously wrong.
  
7.	The judge proceeded to highlight a number of concerns arising from Mr Elsdon’s bills.  First, the enormous amount by which they had been reduced upon assessment by Master Gordon-Saker indicated overcharging on a very substantial scale.  Second, Mr Elsdon paid himself nearly £40,000 including two-thirds of the gross amounts of the bills assessed by Master Gordon-Saker only days after the bills had been reduced to just under £8,000.  Mr Elsdon pointed out that neither Mr Nind nor Mrs Mackenzie objected to his bills, but as the judge observed, it was hard to imagine that Mr Elsdon believed that this entitled him to behave in the way that he did.  Mr Nind and Mrs Mackenzie were not his clients and he did not bill them for anything.  The only relevant bills were addressed to Mrs Lilley’s executors.  Third, Mr Elson prepared a further bill in January 2013 in the sum of over £20,000 based upon a charging rate of £275 despite the Master’s criticisms of that rate and, further, he withheld that bill from Mr Lilley until November 2013.  Fourth, the judge could see no justification for Mr Elsdon and Sai-Donne withdrawing and retaining nearly £2,000 in respect of Professor Hodkinson’s fee when the professor had not himself been paid anything and indeed Mr Elsdon was disputing his fee.  Moreover, Mr Elsdon thought it fit to charge Mr Nind and Mrs Mackenzie for a counsel’s fee of £900 when he had instructed the barrister to represent him in the assessment proceedings.  

8.	This is merely an outline, but the judge accepted that these matters were indicative of dishonesty.  The judge was careful not to make a finding of dishonesty but concluded that the matters which I have summarised gave good reason to suspect dishonesty.  In other words, there was good reason to suspect that Mr Elsdon realised that by the standards of ordinary and reasonably honest people his conduct was dishonest.  

9.	The judge then proceeded to deal with various other matters, namely the way Mr Elsdon dealt with the estate of Mrs Glass; Mr Elsdon’s conduct in relation to instructions given to him by Mr Thompson in relation to an application to the Court of Protection; Mr Elsdon’s conduct in relation to the estates of Mr Gregory and Ms Reid; and Mr Elsdon and Sai-Donne’s conduct in relation to instructions from a Mr Marchant in relation to the sale of a commercial property.  There followed a summary of various dealings by Mr Elsdon with the Legal Ombudsman in relation to work carried out for a Ms Parker, a Ms Ellis and a Mr Istae, and finally in relation to various dealings with the Law Society.

10.	The judge considered these further matters taken together were also of considerable concern.  There was, he thought, evidence of overcharging, the taking of inappropriate steps to deter challenges to fees being made or pursued and evidence of a lack of cooperation with the SRA and the Legal Ombudsman.  There was, concluded the judge, good reason to think that these further matters also involved breaches of the code.  

11.	The judge then came to draw his overall conclusions.  He said that it seemed to him that the original decision to intervene could not be impugned.  More importantly, as to whether the intervention should be withdrawn in the light of all the evidence before him, he proceeded entirely properly to weigh the risks of reinstating Mr Elsdon and Sai-Donne against the potentially catastrophic consequences to them and to their clients if the intervention were to continue.  The judge was satisfied that the risks attached to withdrawing the intervention outweighed those of continuing with it.  There was, he thought, clear and cogent evidence of dishonesty and breaches of the code and rules.  Neither Mr Elson nor Sai-Donne could safely be entrusted with the administration of estates or other work.  That, moreover, was the position of the Law Society.  There was reason to think that Mr Elsdon had lost his ethical compass.  The judge therefore concluded that the intervention notices should not be withdrawn.

12.	At a subsequent hearing on 15 June the judge considered an unissued application by Mr Elsdon for the hearing to be adjourned but decided that it should not be adjourned.  He proceeded to dismiss the applications of Mr Elsdon and Sai-Donne for the withdrawal of the intervention resolution and he required them to pay the Law Society’s costs to be assessed if not agreed.  He also ordered them to pay the sum of £95,165 inclusive of VAT by way of an interim payment on account of costs.  

13.	The applicants, Mr Elsdon and Sai-Donne, now apply for permission to appeal on 65 grounds supported by a statement of facts running to in excess of 500 pages.  Mr Christian Elsdon has this morning focused on particular matters to which he invites me to have regard.  I have also given careful consideration to the submissions that he has filed with the court in advance of this hearing and which he has elaborated during the course of his oral submissions to me.  

14.	It is submitted first of all that the various interlocutory orders made in these proceedings had the consequence of placing the applicants at a material disadvantage.  So, for example, it is said that the Law Society was permitted to serve witness statements after those of the applicants; that the applicants had no right to cross-examine the Law Society’s witnesses; and that the Law Society was permitted to adduce expert evidence but that the applicants were not.  In addition Mr Christian Elsdon has forcibly submitted to me that no fixed date was obtained for the hearing with the result that the applicants were able to instruct counsel only one working day before the hearing actually began.  Moreover, so Mr Christian Elsdon has continued, in consequence the barrister instructed, Mr Jeremy Barnett, invited counsel for the Law Society to open the case and, as Mr Christian Elsdon put it to me, that allowed Mr Barnett to pick the case up as it went along.  

15.	Despite the care with which Mr Christian Elsdon has made these submissions to me I do not accept that any of these grounds has a realistic prospect of success on appeal.  I have come to that conclusion for all of the following reasons.  First, and insofar as they concern interim directions and orders, none was the subject of any application for permission to appeal.  Moreover, it seems to me to be clear that Mr Elsdon had an opportunity to respond to any evidence filed by the Law Society and that the applicants were given an opportunity to put questions to or submit evidence in response to the evidence as to overcharging given by Ms Corbin, the expert who gave evidence on behalf of the Law Society.  

16.	Further, the nature of the substantive hearing before the judge, which took place over two days in March and April 2015, was the subject of directions given at a hearing in February 2015.  It seems to me that, bearing in mind the nature of the enquiry upon which the judge was required to embark and the issues which he was called upon to determine, the directions for the substantive hearing which were given reasonable and proportionate.

17.	As for the hearing itself, the applicants were, as I have said, represented by counsel, Mr Barnett, who was instructed on a direct access basis, and, as I have pointed out to Mr Christian Elsdon, there is no suggestion in the judgment that the judge felt the applicants were in any material way disadvantaged by the way in which the hearing was conducted or that Mr Barnett needed more time in order properly to prepare himself for the hearing.  

18.	It must also be remembered that the judge was not required to make a finding as to whether or not Mr Elsdon was or was not dishonest.  The issue for the judge was whether the suspicion of dishonesty raised by the materials upon which the Law Society relied had been dispelled such that he could safely direct the withdrawal of the intervention notices.  The process is in substance a summary one which allows the court to determine the outcome within a relatively short time of the intervention.  The judge carried out the task that was required of him and he did so largely by reference to the documents which (so it seems to me) spoke for themselves.  

19.	It is also contended that the judge erred in law and that he failed properly to have regard to the fact that Sai-Donne is a separate legal entity; that he wrongly proceeded upon the basis that the allegations of overcharging could properly found an intervention; that he fell into error in formulating the test of dishonesty in the way that he did; and that he wrongly found Sai-Donne responsible for acts which occurred before it even existed.  In that regard Mr Christian Elsdon has emphasised to me this morning that Sai-Donne employed a number of solicitors and other support staff.  

20.	Once again and despite the care with which Mr Christian Elsdon has advanced these submissions, I do not believe that any of the grounds which I have summarised has a reasonable prospect of success upon appeal.  The judge was in my view fully conscious that Sai-Donne is a separate legal entity and that it had two directors, Mr Elsdon and Mrs Elsdon.  However, it is also clear that Sai-Donne is and was an entity through which Mr Elson continued to carry on work as a solicitor.  So far as Mr Elsdon’s acts before the formation of Sao-Donne are concerned, it cannot be said that these activities constituted a breach of the relevant rules by Sai-Donne itself.  Nevertheless, that conduct could in my judgment amount to good and proper grounds for protecting Sai-Donne’s clients and potential clients following its formation.  Mr Elsdon was the directing mind of Sai-Donne in relation to the activities of which complaint is made and he was the person carrying out and responsible for the relevant work of Sai-Donne.  I am prepared to accept for the purposes of this application that Sai-Donne in fact employed a number of other solicitors and support staff, but that is not, so it seems to me, any answer to the particular allegations which justified the intervention in the context of this case.  They all arose from the actions of Mr Elsdon.

21.	As for the overcharging issue, I fully accept that this does not necessarily justify intervention, but in this case the judge directed himself entirely properly by reference to the principles explained by this court in the Sheikh case, and the question for him was whether or not the evidence of overcharging justified intervention on the basis of suspected dishonesty.  Nor is there any substance in the applicant’s contention that the judge fell into error in the way that he assessed dishonesty.  Once again, he identified the correct authorities and, focussing on Mrs Lilley’s estate, he came to the conclusion for the reasons which I have summarised that the way in which Mr Elsdon had proceeded was indicative of dishonesty.  He rightly did not make a finding of dishonesty or indeed honesty.  However, he was satisfied and so it seems to me was entitled to be satisfied that the various matters which he set out gave good reason to suspect dishonesty.  

22.	It has been urged on me by Mr Christian Elsdon that the judge failed to have proper regard to the fact that Mr Elsdon acted with the knowledge and consent of Mr Nind and Mrs Mackenzie.  I am unable to accept this submission.  By way of example, at paragraph 42 of the judgment the judge was conscious that in February 2013 Mr Nind and Mrs Mackenzie said that they were confident that Mr Elsdon had prepared the accounts with a lot of care and that the sums which he had remitted to them were the final amounts due to them.  Again, at paragraph 56, the judge recognised that Mr Elsdon pointed out that Mr Nind and Mrs Mackenzie did not object to his bills, but, as the judge went on to explain, this did not entitle Mr Elsdon to behave in the way that he did.  They were not the clients of Mr Elsdon and had not invoiced him.  Moreover, they would inevitably have based their views at least to some extent upon what Mr Elsdon had told them.

23.	Mr Christian Elsdon has advanced his submissions to me both in writing and orally this morning in a careful and measured way.  He expressed concern to me at the outset of his submissions that he might not do justice to his father’s case.  I would wish to reassure Mr Christian Elsdon that he has advanced his case carefully and in a measured way and I am most grateful to him.  Nevertheless, and despite all of his submissions both orally and in writing, I am satisfied that an appeal would not have a reasonable prospect of success.  Accordingly, this application must be dismissed.

Order: Application refused