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	Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> McKenzie v Law Society Of Scotland [1999] ScotCS 168 (9 July 1999) URL: http://www.bailii.org/scot/cases/ScotCS/1999/168.html Cite as: [1999] ScotCS 168

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The petitioner Ronald McKenzie formerly carried on business as McKenzie, Solicitor in Kilmarnock. By interlocutor of 5 November 1997, the Scottish Solicitors' Discipline Tribunal dismissed an appeal by Mr. McKenzie against a finding and determination made by the Council of the Law Society of Scotland. Mr. McKenzie appeals against that interlocutor.

Before turning to the interlocutor and the basis of the appeal, it is convenient to set out the background. In April 1989, a Mr. Robert Bruce sustained injury in the course of his employment. In or about 1992, he brought a reparation action against his employers in Greenock Sheriff Court, the solicitor then acting for him being a Mr. Douglas Wright. At the beginning of 1993, the representation of Mr. Bruce in the reparation action was taken over from Mr. Wright by Mr. McKenzie, who had already given some assistance to Mr. Wright in connection with the proceedings. (On 7 January 1993, Mr. McKenzie wrote Mr. Bruce a letter, to which Mr. Bruce did not reply. We shall return to the terms of that letter). The action proceeded, but an extra-judicial settlement was agreed: the defenders were to pay £10,000, and the pursuer's agreed judicial expenses (£3,565.39). In November 1993, the defenders' solicitors sent Mr. McKenzie a cheque for £8,541.20, representing the principal sum of £10,000 after deduction of £1,458.80 of recoverable benefits payable to the Compensation Recovery Unit; and in December they sent Mr. McKenzie further cheques, amounting to £3,372.35, representing the agreed judicial expenses net of £193.05 of expenses previously awarded in favour of the defenders. The total amount received by Mr. McKenzie from the defenders was thus £11,913.55. Also in December 1993, Mr. McKenzie paid Mr. Bruce sums totalling £6,471.73. That figures represents the amount of £11,913.55 received from the defenders, after deduction of £5,441.82.

Mr. McKenzie had provided Mr. Bruce with a copy of his cash account, showing all these figures (with an unexplained discrepancy of one penny). In that cash account, the makeup of the deduction of £5,441.82 is shown as follows:

In that computation of deductions, the figure of £503.48 (which appears at head (1) as a deduction, and is carried into head (2), subject to a deduction) represents Mr. McKenzie's calculation of Mr. Wright's account for work done prior to January 1993. The figure of £2,572.78 represents the balance of the agreed judicial expenses of £3,565.39 after taking out the figure of £992.61 shown as outlays. The parenthesis at head (1) is thus computing Mr. McKenzie's "share" of that balance, by removing Mr. Wright's "share". The fact that at head (2) the awards amounting to £193.05 (which the defenders had retained) are deducted from Mr. Wright's £503.48, leaving him only £310.43, reflects these awards in favour of the defenders having been made when Mr. Wright was acting. So far as the computation of Mr. McKenzie's fees is concerned, it is of course to be noted that after calculating his "share" of the agreed judicial expenses of £3,565.39, by deducting Mr. Wright's share, he has proceeded to multiply his own share by two, producing the (slightly erroneous) figure of £4,138.78 as the total of fees due to him. This "doubling" may for convenience be referred to as the "100% mark-up" and is of central significance in relation to a number of the matters which we will require to consider.

Mr. Bruce enlisted the help of the Citizens Advice Bureau, inter alia to clarify the position in relation to the amount of Mr. McKenzie's fee, and in particular the 100% mark-up. Thereafter Mr. Bruce made a complaint to the Law Society. In the Note accompanying their interlocutor of 5 November 1997, the Discipline Tribunal observe that the original letter of complaint was not produced to the Tribunal. But they say that from the documents lodged with the Appeal, it was disclosed that a Complaints Committee of the Law Society identified Mr. Bruce's complaints as:

The Tribunal's Note further narrates that the Committee referred the matter to a solicitor member to act as reporter; that the reporter arranged for the Law Society's Complaints Investigator to meet Mr. Bruce on 28 August 1996; that a copy of the Note of Interview was sent to Mr. McKenzie by letter dated 5 November 1996; and that subsequently the Reporter prepared a Report setting out the facts and circumstances of Mr. Bruce's Complaint, a copy of this Report being sent to Mr. McKenzie by letter dated 31 January 1997. It is said that in the covering letter Mr. McKenzie was invited to make representations on the matter, in writing, within 14 days; that subsequently the Reporter set down certain conclusions, a copy of these being intimated to Mr. McKenzie by letter dated 10 April 1997; and that on this occasion in the covering letter Mr. McKenzie was particularly directed to the recommendations of the Reporter, and was asked to state within 14 days whether the Reporter's proposed disposal was acceptable. In the Law Society's Answers to the Appeal to the Tribunal, it was stated that Mr. McKenzie did not respond to either of the letters of 31 January or 10 April 1997. This statement was apparently not challenged in Mr. McKenzie's own appeal document, which was adjusted subsequent to the lodging of the Law Society's Answers.

Following upon these events, on 30 June 1997, the Law Society sent a letter to Mr. McKenzie, containing a formal notice in terms of section 42A(1) of the Solicitors (Scotland) Act 1980, referring to the complaint by Robert Bruce, and notifying Mr. McKenzie that in terms of section 42A(1) of the Solicitors (Scotland) Act 1980, the Council of the Law Society "have considered a complaint of inadequate professional services against you at the instance of the above named and have found the complaint to be justified and therefore uphold the complaint". The letter continues thus:

Mr. McKenzie having appealed against this finding and determination, and the Discipline Tribunal having considered the Appeal and having heard parties, the interlocutor of 5 November 1997 was issued, dismissing the Appeal.

In presenting his appeal to this court, from the decision of the Discipline Tribunal, Mr. McKenzie, who represented himself, emphasised that the sole ground of appeal was that the Law Society did not have jurisdiction to make the finding and determination which they had made. That being the contention, and the sole contention, we are not asked to alter the Law Society's finding and determination in any specific respect: the submission as we understand it is that we should simply recall the Discipline Tribunal's interlocutor, and quash the finding and determination made by the Law Society.

However, before we turn to the question of jurisdiction, there are certain matters of detail which we think call for some comment from us. The Determination has two parts. The second, requiring payment to Douglas Wright, Solicitors of £310.43, does not appear to us to raise any problem: the sum is derived from Mr. McKenzie's own accounts, and if the decision was within jurisdiction, the position would be that it has not been paid, and should be. The first part of the Determination seems to us to be less straightforward. First, this part of the Determination is said to be in terms of section 42A(2)(a)(i). That provision empowers the Council, having upheld the complaint, to determine that the amount of the fees and outlays to which the solicitor shall be entitled for the services shall be nil. That does not appear to be what the Council did. Subsection (2)(a)(ii) empowers the Council in the same circumstances to determine that the amount of the fees and outlays to which the solicitor shall be entitled for the services shall be "such amount as the Council may specify in the Determination". It may be that they had head (ii) in mind. But they have neither referred to head (ii), nor specified any amount as the amount of the fees and outlays to which Mr. McKenzie is to be entitled. It is only after a determination in terms of either head (i) or head (ii) that there is a power to direct the solicitor to comply with such of the requirements set out in subsection (3) as appear to the Council to be necessary, to give effect to the determination. And it is only in subsection (3) that reference is made to a requirement to "refund" whether wholly or to any specified extent any amount already paid by or on behalf of the client in respect of the fees and outlays of the solicitor in connection with the services. The Council appear to have moved directly to a requirement to refund. This is, to put it no higher, very unsatisfactory.

Moreover, perhaps partly because of this telescoping which appears to have occurred, we find it very hard to understand the selection of the figure of £2,572.78 as the amount which Mr. McKenzie is to refund to Mr. Bruce. We appreciate of course that in determining an amount of fees under subsection (2)(a) the Council have effectively an unfettered discretion. And since Mr. McKenzie has effectively retained a fee of £4,138.78, as well as outlays of £992.61, a determination of any amount below those ceilings would prima facie be within the Council's powers. Correspondingly, they could require Mr. McKenzie to refund such part of the amounts retained as Mr. McKenzie was not entitled to in terms of their determination under subsection (2)(a). Nonetheless, the selection of £2,572.78 as the amount to be refunded makes us wonder whether there has perhaps been some confusion or mistake. Leaving aside the question of outlays, and ignoring the minor arithmetical error as to the pence, Mr. McKenzie's calculation of his fees takes that figure of £2,572.78 as a starting point. Before applying the 100% mark-up, the fee which he has taken is some £2,069. If he were to receive that fee, the amount paid by the defenders in respect of expenses would be exhausted, but there would be no inroad into the sum which they paid as damages. The defenders sent a cheque for £8,541.20 as damages. Mr. Bruce has received £6,471.73. The shortfall is £2,069.47. Apart from errors over pence, that reflects precisely the effect of Mr. McKenzie applying the 100% mark-up to his "share" of the expenses actually recovered. If, in terms of the Council's determination, Mr. McKenzie "refunds" to Mr. Bruce fees of £2,572.78, then (ignoring pence) Mr. Bruce would have received a total of £9,044. That is £503 more than the defenders paid as the agreed damages (after deduction of the payments due to the CRU). If the Council thought that Mr. Bruce should receive his full entitlement in damages, with no inroad into these for expenses, and if they thought that Mr. McKenzie should only obtain fees up to the limit of what had been recovered as expenses from the defenders, that would perhaps be comprehensible, and the amount to be "refunded" would be the £2,069 odd taken by him because of the 100% mark-up. In ordering refund of £2,572.78, rather than £2,069 odd, it appears to us to be possible that the Council have overlooked the fact that out of the total agreed expenses, £503.48 has been attributed to Mr. Wright (or putting it another way, £310.43 has been attributed to him out of the net expenses paid, including outlays, of £3,372.35). It is not clear to us why the pursuer should receive more than the total damages to which he was entitled by the agreement, and, as it were, make an inroad into the sums which were expressly in respect of agreed expenses. If that was the intention, and if the figure of £2,572.78 has some rational basis as an appropriate refund in terms of section 42A(3) of the 1980 Act, in order to give effect to a determination in terms of section 42A(2)(a), then the absence of any such determination on the face of the Council's decision is peculiarly unfortunate. Quite apart from the fundamental question of jurisdiction which is raised in this appeal to us, we think it at least questionable whether the Council have acted intra vires in their purported exercise of powers under section 42A(2). We return to this matter after dealing with the issue of jurisdiction.

In advancing his argument as to jurisdiction, Mr. McKenzie submitted that the issue between himself and Mr. Bruce was essentially whether Mr. McKenzie's fees, in the event of success, would be based on a mark-up in the manner provided for by the Act of Sederunt (Fees of Solicitors in Speculative Actions) 1992 (S.I. 1992/1879), at paragraph 2(1). That paragraph provides as follows:

(b) the solicitor and the client agree that the solicitor shall be entitled to a fee

(c) the agreement is that the solicitor's fee for all work in connection with the

In the present case, the action had been successful. Agreed outlays and expenses had been recovered from the defenders, and calculated on a party and party basis. The dispute with Mr. Bruce was whether, with Mr. McKenzie's fee for all work being based on an account prepared as between party and party in terms of paragraph 2(1)(c), the fees element in the account was properly increased by the (maximum) figure of 100%. The issue between Mr. McKenzie and Mr. Bruce was one of contract.

That issue being essentially one of contract, it was submitted that in the exercise of their powers under section 42A(1) of the 1980 Act, the Council of the Law Society had no jurisdiction to resolve the contractual question upon which Mr. McKenzie and Mr. Bruce were at issue. Section 42A(1) was concerned with the situation where the Council received "a complaint that professional services provided by a solicitor in connection with any matter in which he has been instructed by a client were inadequate". Moreover, the Council were empowered to take the further steps mentioned in subsection (2) only if "after enquiry and after giving the solicitor an opportunity to make representations" they upheld the complaint. The only issue before the Council was that issue: whether the complaint that professional services were inadequate should be upheld. Just as, in relation to arbitration, it was for the courts to consider the existence and scope of either a contractual remit to arbitration, or a statutory provision for arbitration, so also, in relation to the powers of the Council, it was for the court to consider the scope of their jurisdiction under section 42A, and to determine what issues, within the scope of that jurisdiction, the Council could legally resolve. Specifically, there was here a question as to whether the matter which Mr. Bruce had effectively put before the Council was a matter of a kind which the statute permitted him to put before them. It was submitted that the question of the terms and effect of any contract between Mr. McKenzie and Mr. Bruce, regulating Mr. McKenzie's rights to fees, and perhaps introducing the right to prepare an account increasing the fees element by the 100% mark-up, was not an issue of a kind which the Council were empowered to consider or determine in terms of section 42A(1). The resolution of such a contractual matter was quite different from questions as to whether professional services had been inadequate. In purporting to determine this contractual issue, the Council had gone beyond its jurisdiction.

Approaching the matter from a somewhat different angle, Mr. McKenzie further submitted that, if the Council were entitled to consider the question of the contract between himself and Mr. Bruce, then he was entitled to set up that contract in the proceedings before them. Their jurisdiction upon the primary issue of inadequate services would depend on whether or not the contract was duly constituted, with the effect which he contended for. If his fee was a contractual one in terms of the Act of Sederunt, that would exclude the kind of questions which could arise where an account was taxed on an agent and client basis, and which could raise questions for an auditor or for the Law Society. In order to exclude such issues, and thus the effective jurisdiction of the Law Society, Mr. McKenzie accepted that he would have to prove that there was a "no win, no fee" contract; that the basic fee had been computed on a fair and reasonable party and party basis; that the mark-up had been restricted to the permitted maximum; and that these matters were indeed agreed between himself and Mr. Bruce. At one stage Mr. McKenzie appeared to be contending that he had been denied the opportunity to set up the alleged contract. His position subsequently appeared rather to be that the Council had had sufficient material to establish a contract by rei interventus, upon the basis of the letter which he had written to Mr. Bruce and the knowledge that thereafter Mr. Bruce had in fact used him as his solicitor in the action. That was the appropriate inference, with no alternative terms of engagement being put forward or suggested. (If he had been denied an opportunity to set up the contract, his contention was that he should be granted such an opportunity of proof, now).

The letter of 7 January 1993 from Mr. McKenzie to Mr. Bruce was in the following terms:

Mr. McKenzie did not address us in detail upon the terms of this letter, but contended that it set out terms appropriate for the Act of Sederunt to be applied, with acceptance being implicit in Mr. Bruce's continuing to employ Mr. McKenzie as his agent. The Tribunal say that they can find no reason to depart from the Reporter's conclusion that this letter was "hopelessly vague". Mr. McKenzie disputed that description, and submitted that the letter was clear in setting out the terms of the bargain for which he contended. Mr. McKenzie also covered a number of other particular matters, but these appear to us to be peripheral, and not really to have a bearing upon the issue before this court.

On behalf of the Law Society of Scotland, counsel submitted that there was no need for any further enquiry: there had been an investigation and ample opportunity for Mr. McKenzie to respond. He had not answered either of the letters of 31 January or 10 April 1997. He had not disputed the fact that he had not answered these letters. (It was also to be noted that quite apart from the terms of the letter, Mr. Bruce himself had said, when precognosced, that there was never any understanding that his action would be pursued on a speculative basis; that he had been advised by Mr. McKenzie that the evidence was 'stacked against' his employers and that he was likely to win; and that the case was not handled by Mr. Wright on a speculative basis). Mr. McKenzie had had every opportunity to set up a contract, if there was one, in the terms for which he contended. But after enquiry, it had been held that he had failed to set up such a contract, and there was no basis upon which this court could or should now hold that the letter was sufficient. The description applied by the Reporter and upheld by the Tribunal was sound: the letter was hopelessly vague. Counsel, like Mr. McKenzie, dealt to some extent with the peripheral matters which we have mentioned; but in the circumstances we do not find it necessary to comment further upon these matters.

We are not persuaded that Mr. McKenzie's contentions as to absence of jurisdiction are well-founded. It will of course be appropriate, when the actions of a disciplinary body have to be looked at, to consider the scope of their remit, and to be satisfied that they have not gone beyond either its statutory boundaries or the specific complaint in question. But the specific complaints identified (failure to communicate, and delay and failure adequately to advise) cannot be criticised as beyond any of the relevant boundaries, and given the other material sent to Mr. McKenzie, the factual basis for these complaints appears to have been fairly in issue. These complaints being "in connection with matters arising from Mr. McKenzie's account for work carried out", we can see nothing improper, or beyond jurisdiction, in a consideration of the letter and any other facts which are said to have provided a contractual basis for the account in question. Indeed, a substantial part of Mr. McKenzie's argument is precisely that the contract was such as to undermine the complaint. While issues as to the contract might no doubt have arisen in other ways and in some other forum, they underlay the complaints which required to be dealt with, and were inextricably connected with them. We see no basis upon which it could be said that there was any absence of jurisdiction. Equally, the matters of fact and law relating to the contract appear to us to have been properly raised, with ample opportunity to Mr. McKenzie to respond. He has failed to establish what he wished to establish, and that is an end of the matter so far as the contract is concerned. The Tribunal deal very fully with the terms of the letter, and its failure to meet the requirements of the Act of Sederunt. We note that the letter refers to the maximum 100% mark-up, but see no advice or basis for choosing that rather than any lesser mark-up, far less any agreement. Otherwise we feel no need to add to what the Tribunal have said in that regard.

Mr. McKenzie concentrated on these matters of jurisdiction and contract. His appeal to this court did not really relate to the specific charges. That being so, it would not be appropriate for us to comment upon those charges, beyond saying that the original findings have been upheld by the Tribunal. We would only note that "inadequate professional services" are defined in section 65 of the 1980 Act as meaning professional services which are in any respect not of the quality which could reasonably be expected of a competent solicitor. Mr. McKenzie suggested that the concept of inadequacy "involves some element of professional defalcation or incompetence", neither of which was specifically charged. These are not in our opinion necessary elements of that concept.

But for the matters which we have mentioned in relation to section 42A(2) and (3), the appeal would fail. However, having regard to our comments in relation to those subsections, and what was purportedly done under them, we will put the case out By Order after issue of this opinion, so that these matters can be considered before any interlocutor is pronounced.