Negligence in Regulatory Investigations
Will circumstances ever arise where a regulated person is
able to succeed in a negligence claim against a regulator? This issue was
recently considered in the case of Miller v Law Society (The
Times, 3 June 2002), in the context of an allegedly negligent
investigation of a solicitor's practice.
The decision in Miller v Law Society
Mr Miller was a solicitor in sole practice. In August 1996, the Law
Society appointed an investigating accountant to inspect Mr Miller's
accounts. The accountant reported that the books did not comply with the
Solicitors Accounts Rules.
In October 1997, the Law Society intervened in Mr Miller's practice,
with the result that his funds were vested in the Society and his
practising certificate suspended. Under the Solicitors Act 1974, Mr Miller
had 8 days in which to give the Society 48 hours' notice and then issue an
application in the High Court to challenge the intervention. He failed to
The Solicitors Disciplinary Tribunal subsequently found that Mr Miller
had failed to keep proper accounts and had used client funds for the wrong
purposes. He was suspended from practice and ordered to pay the costs of
Mr Miller did not dispute the disciplinary findings, but when the Law
Society sought to enforce the costs order he raised a counterclaim for
damages. He alleged that the investigating accountant had been negligent
in conducting his investigation and preparing his report, which led the
Society to intervene in Mr Miller's practice and prevent him from carrying
on his business. The main issue for the judge was whether the
investigating accountant could owe Mr Miller any duty to take care in
conducting his investigation and preparing his report.
The judge noted that two consequences might follow from an adverse
report by an investigating accountant: the Law Society could intervene in
the solicitor's practice, in which case the solicitor could challenge the
decision in the High Court; and the Society could bring proceedings in the
Solicitors Disciplinary Tribunal, which the solicitor could defend. Thus
the accountant's investigation was part of ìa unitary and indivisible
statutory processî which provided the solicitor with adequate remedies.
The judge therefore held that a private law action could not be used to
challenge either the Law Society's decision to intervene or the process
leading to that decision. The scheme of investigations and interventions
under the Solicitors Act gave rise to issues in public law only, and
private law claims in negligence should not be allowed to ìintrude into
this exclusively public law fieldî.
Although the outcome in this case appears correct, the judge was not
referred to a number of important cases in which the...
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