By Iain Miller, a partner at London firm Kingsley Napley, who acted pro bono for CILEX in successfully appealing the High Court decision in Mazur
Miller: Court has removed any ambiguity
As many will be aware, the Court of Appeal published its much-awaited judgment on Mazur on 31 March. On 13 April, the Law Society issued a revised guidance note on Mazur and the conduct of litigation.
This is in large part an amended version of the guidance issued after the High Court decision, but it includes the following passage under the heading ‘Consequences of a breach’:
“This means that the non-authorised individual themselves and/or their employer/firm may be liable where:
- there is no authorised individual involved at all in the tasks
- these have not been appropriately delegated and supervised, or
- the non-authorised individual has acted outside the scope of their delegated authority
Breach could result in imprisonment or a fine, or both. This may also amount to contempt of court……Acting without authorisation will also comprise a breach of your regulatory obligations and may result in disciplinary action.”
Early this week the Law Society sought a declaration from the Court of Appeal which would affirm its interpretation of the judgment as presented in the guidance, meaning that, in effect, a firm or solicitor could commit the criminal offence of carrying on the conduct of litigation by not having adequate supervision.
The Law Society’s interpretation was not shared by many of the other parties. My view and that of others is the Law Society’s guidance was wrong in so far as it sought to conflate adequate supervision with the criminal offence.
Throughout the hearing, the Court of Appeal had been keen to avoid circumstances such as those the Law Society was now presenting as a consequence of the judgment, whereby satellite litigation may arise on the question of whether, for example, the supervision of a paralegal was “adequate” with reference to regulatory rules and guidance.
On 22 April, the Court of Appeal confirmed that it also disagreed with the analysis presented by the Law Society. It has now made small changes to the judgment to remove any ambiguity. Against this background, it may be helpful to expand on what the issue relates to.
The Mazur question
The High Court decision concerned to the question of whether, under the Legal Services Act 2007, it was possible for authorised individuals to supervise non-authorised persons in relation to tasks that amounted to the conduct of litigation.
This question arose because there is no express provision allowing acting under supervision in the statutory wording concerning the conduct of litigation in contrast to some of the other reserved legal activities.
The Mazur problem
The High Court found that it was not possible for non-authorised persons to work under supervision and they could only ‘assist’ the authorised person.
This decision created three distinct issues. First, it internalised within law firms and not-for-profit bodies the criminal offence of carrying on the conduct of litigation. If inadvertently delegation went too far within a firm, and beyond the ill-defined ‘assist’, the individuals concerned would commit a criminal offence.
This problem was exacerbated by other recent cases, most notably Baxter v Doble [2023] EWHC 486 (KB) which said that whether someone was conducting litigation was a question of fact and degree and needed to be looked at in all the circumstances.
It was therefore easy to inadvertently drift into the criminal offence. It was not just the task itself that was relevant but also how many and in what context.
Second, if the conduct was a criminal offence, then the costs incurred would be irrecoverable in litigation. As such it was open to a paying party to challenge costs on the basis that an individual was doing more than assisting.
The indications post-High Court was that dealing with such challenges was becoming a significant draw on court time.
Third, there was the regulatory obligation. If a criminal offence was committed, that was likely to be misconduct.
Collectively all three issues were significant for law firms. As Lord Justice Birss observed: “Putting it neutrally, the judge’s decision led to a great deal of comment and discussion and, as I have said, a ‘real world impact’.”
The Mazur solution
On appeal, the Court of Appeal found that the conduct of litigation could be undertaken under supervision as a matter of construction of the Legal Services Act.
It also clarified that Baxter v Doble was a case that related to a situation where work was carried on outside regulated legal practices, and no authorised person was involved.
As such its ‘fact and degree’ analysis did not apply to a regulated law firm operating through authorised persons such as solicitors.
For those firms, it was simply the tasks themselves listed in the Act that were relevant in defining the scope of the conduct of litigation, for which the court gave helpful guidance as to the statutory meaning.
In relation to the criminal offence, it determined that this would not be committed in a regulated environment so long as the non-authorised person was acting “for and on behalf of” the authorised person.
This straightforward test avoided the detailed factual enquiry required in relation to the High Court’s ‘assist’ test.
Whilst the court did not analyse it in these terms, this is essentially an agency-type analysis which permits either prior approval by the authorised person or an adoption of the acts after the fact.
This meant that the boundaries of the criminal offence were clear for law firms and the risk of prosecution or costs challenges were limited to those rare cases where the participation of an authorised person was a sham.
Separately, it is of course important that work conducted within law firms is properly supervised but this is a regulatory issue to be dealt with by regulators as part of their supervision and enforcement.
This is clear from the following passages in the Court of Appeal judgment.
First paragraph 187 of Lord Justice Birss’ judgment: “v) An unauthorised person may lawfully perform any tasks, which are within the scope of the conduct of litigation, for and on behalf of an authorised individual such as a solicitor or appropriately authorised CILEX member, provided the authorised individual retains responsibility for the tasks delegated to the unauthorised person (both formal responsibility and the responsibilities identified at section 1(3) of the 2007 Act). In that situation, the authorised individual is the person carrying on the conduct of litigation.
“vi) The delegation of tasks by the authorised individual to the unauthorised person requires proper direction, management supervision and control, the details of which are a matter for the regulators. The authorised individual must put in place appropriate arrangements. The degree of appropriate control and supervision will always depend on the circumstances.
“This is hardly surprising. It is described in the 1946 Managing Clerk’s article (see [130]-[133] above) and recognised in the SRA’s 2019 guidance on solicitor’s supervision cited by the LCN in argument (see [104] above).
“It was also reflected in a passage in the SRA’s 2022 Guidance on Effective Supervision cited by counsel for CILEX. The concept was also inherent in the distinction drawn by the SRA and adopted by the Law Society between cases in which prior approval was required and others in which it was not.”
Second, Lady Justice Andrews at paragraph 198: “I agree. In essence, the question in any given set of circumstances will be whether the unauthorised person, in carrying out whatever tasks which fall within the scope of ‘conduct of litigation’ have been delegated to him or her, is in truth acting on behalf of the authorised individual.
“If they are, it is the authorised individual who is conducting the litigation. But if the reality is that the litigation is not being conducted by the unauthorised person for and on behalf of the authorised individual, they will be committing an offence.”
In so far as there was any ambiguity, the court has now amended paragraph 25,27 and 187(vii) of the judgment and has added an additional paragraph 31A.
The Law Society guidance
If the Law Society’s interpretation had been correct, it raised the real practical issue that the effectiveness or otherwise of the supervision within a law firm put it at risk of committing a criminal offence.
Supervision is classically a matter for the regulators, not the courts, and it would be odd if the court intended that the effectiveness of supervision was determinative either in a criminal prosecution or a costs challenge.
This would be a different version of the real-world impact referred to by Lord Justice Birss. It is now beyond any doubt that this is not what was intended.
However, it remains important that firms do have adequate and appropriate supervision arrangements, as it is likely that the Solicitors Regulation Authority and other regulators will, post Mazur, be alert to the need to maintain high standards of supervision in relation to all of the reserved legal activities.
No doubt the Law Society will now need to amend its guidance.