Accountants lose appeal over regulation refusal

Lidington: Decision upheld

The High Court has rejected a challenge from the Institute of Chartered Accountants in England and Wales (ICAEW) to the Lord Chancellor’s decision that its members should not be allowed to handle tax-related litigation, advocacy and legal instruments work.

Lord Justice Leggatt and Mrs Justice Andrews provided the ICAEW with only a crumb of comfort by deciding that the then Lord Chancellor time, David Lidington, had not properly explained why it should be prevented from regulating the administration of oaths.

The ICAEW said the ruling “undermines” the role of the Legal Services Board (LSB) and “makes a lottery of all future applications”.

In September 2017, Mr Lidington unexpectedly rejected the Legal Services Board’s recommendation that the ICAEW be granted the power to regulate rights of audience, the conduct of litigation, reserved instrument activities, notarial activities and the administration of oaths.

In each case the ICAEW, which already regulates probate services, said it would restrict its activities to tax work, which would allow accountants to claim legal professional privilege.

Leggatt LJ and Andrews J said it was not clear that the Lord Chancellor had given “separate consideration” to the issue of administration of oaths.

They said his decision letter did not explain “why the governance structure which was considered acceptable for the purpose of regulating probate activities, coupled with the enhanced monitoring regime suggested by the LSB, would not be adequate to protect the interests of consumers and the public” if the IACEW was allowed to regulate administration of oaths.

“Therefore, we consider that the appropriate course for us to take is to quash the decision in so far (but only in so far) as it concerned the administration of oaths and remit it to the Lord Chancellor for reconsideration.

“To that very limited extent, this application for judicial review succeeds; the decision otherwise stands.”

Delivering judgment in R (on the application of the ICAEW) v the Lord Chancellor [2019] EWHC 461 (Admin), Leggatt LJ and Andrews J said Mr Lidington “attached particular importance” to his first of five reasons for refusal, that the ICAEW’s proposed governance arrangements were not sufficiently independent of its representative functions.

The ICAEW argued that Mr Lidington had made a fundamental error of law in doing so, and had used his own test of independence which was different from, and more demanding than, the test which it said he was legally bound to apply.

But the judges said there were nothing in the Legal Services Act which stated that the Lord Chancellor had to use the LSB’s rules as the “sole benchmark of regulatory independence” and was “bound to accept” that independence had been achieved if its proposed governance arrangements complied with those rules.

“The very fact, however, that the LSB is required to make rules setting out requirements to be met for this purpose, and that those rules may be amended from time to time, shows that there is scope for judgment and differences of opinion about what particular requirements the internal governance arrangements of a body should have to satisfy in order to ensure that the statutory objectives are achieved.

“There is nothing in the Act which precludes the Lord Chancellor from exercising his own judgment on that question.

“Indeed, as the person given responsibility under the statute for deciding whether or not to make an order designating an applicant as an approved regulator, he is bound to do so.”

The judges concluded that there was “no evidence that the Lord Chancellor made an error of law in his approach to the issue of governance and independence, as alleged by the ICAEW”.

Duncan Wiggetts, executive director of professional standards at the ICAEW, said: “Today’s judgment undermines the important role of the LSB in determining applications by confirming that, irrespective of its recommendation, the Lord Chancellor can impose his own unspecified and undisclosed test to determine a regulator’s suitability. This makes a lottery of all future applications.

“The Legal Services Act was meant to open up the market for the provision of legal services to increase competition, leading to improvements in quality and helping drive down costs.

“It encouraged non-traditional legal services regulators to become part of the regulatory framework so that other professional services firms might enter the legal services market and our application was welcomed by the Competition and Markets Authority.

“The former Lord Chancellor’s decision, upheld in part by today’s judgment, has set that back. The government now needs to consider whether changes are needed to the Act to ensure that it delivers the more competitive market it promised.”

The LSB was an interested party to the appeal, as was the Notaries Society, which objected to the ICAEW having the power to regulate notarial work on the grounds it could damage the standing of English and Welsh notaries internationally.

    Readers Comments

  • stephen gordon ( solicitor and notary public ) says:

    its disappointing that ICAEW ‘s negative comments have been reported but no observation has been made on behalf of lawyers supporting The Lord Chancellor’s decision and the High Courts well considered rejection of the challenge which had no merit.

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