Legal Services Act 2007 (Appeals from Licensing Authority Decisions) Order 2011

Lord Thomas of Gresford Excerpts

Monday 27th June 2011 Grand Committee

The order makes provision for the First-tier Tribunal alone to hear the council's licensing appeals. Noble Lords may wonder why the society, which has also applied to become a licensing authority, is not included. The society has opted in the immediate term to use a different appellate body, the Solicitors Disciplinary Tribunal, and the consultation on its proposals has recently closed. When a formal recommendation from the Legal Services Board is received, a further order will be brought before Parliament for approval. This order is one of the essential requirements that the council needs to have in place for it to become a licensing authority. If approved, it will provide individuals and businesses affected by the council's licensing decisions with an opportunity to challenge them in an independent and impartial tribunal. I commend both orders to the Committee.

[Lord Thomas of Gresford]

My Lords, I confess to being slightly confused. The Minister has addressed the orders in a different order from that in which they appear on today’s Order Paper—and they do have different aspects. As I understand it, the Law Society and the Council for Licensed Conveyancers are content with the modification of functions order, but the SRA is not content with the other order, which covers appeals against licensing authority decisions. Therefore, we are dealing with both bodies in relation to one order and one body in relation to the other.

I see no reason to object in any way to the proposal that there should be changes, to the powers of, first, the Law Society to enable it to make compensation arrangements, and to those of the council. Both seek to provide a fund for people who are damaged either by Law Society-regulated bodies or Council for Licensed Conveyancers bodies. They will have a common fund, as I understand it, from which compensation can be paid.

I will raise a single point that was put forward by the Law Society in its parliamentary brief, namely its concern about arrangements to ensure that the prospective owners of alternative business structure firms are fit and proper persons.

It is important that the Government should make a commitment that the Rehabilitation of Offenders Act 1974 should not be allowed to stand in the way of the approval of those who wish to involve themselves in alternative business structures. I have had the experience in Hong Kong of appearing, instructed by firms which were essentially Triad-funded, with a front of a solicitor who did very little except ultimately go to jail. The warning was there: one cannot be too blasé in these alternative business structures. The noble Lord, Lord Bach, will know how I feel about alternative business structures, but those arguments seem to be a long way away from where we are today. Can the Minister address the question of whether an exception can be made so that the licensing authorities can stop individuals with criminal convictions from becoming involved in ABS firms, specifically after the 10-year period has passed when their convictions might be concealed for other purposes? That is my only point on this order.

On the order about appeals from licensing authority decisions, it seems appropriate that the First-tier Tribunal should act as the appellate body for appeals in relation to licensing authority decisions. We certainly supported the setting up of the new tribunal system, with the First-tier Tribunal and Upper Tribunal. They contain people of considerable and wide experience, not necessarily totally involved in this area but nevertheless well capable of dealing with the issues that would arise in appeals from licensing authority decisions. I am surprised that the Law Society has decided to opt out and follow its own method of appeal. From the Explanatory Memorandum, it seems that the issue that very properly concerned the Law Society was that of costs. The tribunal has only a limited power to award costs, and the Law Society seemed to take the view that there should be a wide discretion, as for tribunals in other areas, to award all the costs when an appeal is dismissed having been improperly brought. Is that the issue? To set up a separate body to take these appeals seems quite unnecessary. Can the Minister help us with where he is on that basis?

[Baroness Hayter of Kentish Town]

My Lords, I declare an interest as chair of the Legal Services Consumer Panel. I welcome these two orders, which appear a little technical—as, indeed, they are. But they are also important milestones on the road to seeing a new form of company opening for business which will help clients get access to good legal advice and enable “one-stop shops” to serve the needs of consumers. The Legal Services Act 2007 is a key piece of legislation introduced by the previous Government. It set up the Legal Services Board and the consumer panel which I have the honour to chair. That Act established independent oversight of the regulation lawyers. The Act clearly requires that such regulations should be in the interests of access to justice and the rule of law, and also be consumer focused.

The Act, as we know, set up the new legal ombudsman, which came intro operation in October last year. What is pertinent to today’s discussion is that it allows a new form of business, as the Minister has set out, combining law with other services in ways that we hope will better serve the needs of some clients in accessing particular types of service. As has been stated, the orders are part of the preparation for the introduction of the new business structures and are intended to ensure that the licensing authorities, which are the specialist parts of the approved regulators, will be ready to accept applications from October this year.

I, too, will start with the second order: like the noble Lord, Lord Thomas, I had them originally in the other order. The second order deals with appeals that are turned down by the new licensing authorities. It gives the First-tier Tribunal the remit to hear appeals from the Council for Licensed Conveyancers. This is a sensible, proportionate and appropriate regime. The noble Lord, Lord Thomas, said that he was surprised that the solicitors were not similarly covered. I very much regret that absence, and the fact that the Solicitors Regulation Authority did not accept exactly the same system for appeals against its decisions as a licensing authority on the same issue: namely, rejections of applications to be allowed to operate the new business framework. As other noble Lords have been said, the SRA prefers its own Solicitors Disciplinary Tribunal, for which, as we have heard, a separate order will come here in due course. I regret this because it will risk causing a delay to the desired 6 October start date. It will also mean, perhaps more seriously in the longer term, that there will be two tribunals dealing with essentially identical cases. It is in the interest of consumers, and more widely in everyone’s interests, that a single, consistent body of case law should develop about legal services regulatory matters. Despite the absence of the SRA, I nevertheless welcome the order, which allows for an efficient and cost-effective solution to regulation completely independent of the CLC.

On the first order, I simply note and welcome the proposed change in membership of the Council for Licensed Conveyancers, which, as the noble Lord, Lord McNally, explained, will provide for a lay majority. This is in line with the Act’s requirement for the Legal Services Board and also with the LSB’s internal governance rules for all front-line, approved regulators.

--- Later in debate ---

[Lord McNally]

Yes, in Mandarin and with a suitable chart. We hope that the orders go some way along the line of trying to get some order into these things.

On the matter of the missing orders, they are being drafted. We are undertaking further consultation. At this stage, the draft standing order relating to the society is not finalised. Until it is, it cannot be approved to be laid before Parliament. As the order is subject to the affirmative resolution procedure, it will require parliamentary debate and approval before the order can be made. We will be back, folks.

Quickly, on the Rehabilitation of Offenders Act, that again is under review. The point that was made is being taken on board. The Law Society Council will have arrangements in place to consider fitness of owners. They are set out in its licensing rules. The Law Society Council has asked for the Rehabilitation of Offenders Act to be extended. An order has been laid before the House adding the head of legal practices and head of financial administration to be covered by the law. Again, I note what has been said here. These are serious matters and areas that need to be tidied up as we go through the process of bringing the ABSs on board and getting the right lines of appeal.

I am just seeing if there is anything else that I have either not understood or not covered. A draft order will be debated in the House next week. We are aware of the additional requirements sought for owners and managers. The matter is being discussed at the moment so, again, watch this space. I thank the contributors to the debate. I hope that this has been enough clarification. If I have missed things I will write to noble Lords.

My noble friend Lord Thomas raised the point about what the solicitors did not like. The Law Society did not sign up because of a principal concern that changes were needed to the First-tier Tribunal general regulatory chamber rules to allow a general power to award costs. The LSB has asked the tribunal procedures committee to consider changes to its costs rules but, on 1 March 2011, the committee came to the preliminary view that the rules in their current form were adequate to determine whether one party or another should pay costs. The Law Society has not consented to this order. As was said, it has made provision in its proposed licensing rules for the Solicitors Disciplinary Tribunal to be the appellate body for its licensing appeals.

[Lord Thomas of Gresford]

Before the Minister leaves that point, will he give us an assurance that he will take on board the point made by the noble Baroness, Lady Hayter, that it is quite wrong that there will be one way of appealing for ABS firms and another for Law Society-regulated firms? As she said, it is very important that there should be a common body that creates precedents on which people in future can advise and act.

[Lord McNally]

As a lay man, I was impressed that it was a consumer champion who made that point. Certainly I will take it on board. I know that in trying to get agreement one has to make sure that the profession is protected and that there are proper guarantees that these matters will not be repeatedly revisited. It is also important that, in getting through the negotiations, consideration is given to the consumer and to securing the clearest and most understandable forms of regulation. As I said when I read my brief, my heart sank a little when I saw that agreement had not been reached and that the bodies were going off in different directions. That was not the initial aim of the Act or the direction of travel that we want. Therefore, I hope that those responsible in the professions will note what has been said in this debate. I will report back to noble Lords and see whether we can help push these things in the right direction.