Notice the Notice

From time to time there is a decision from a court or tribunal that shows you

• how complicated housing/L&T law has become; and
• the dangers of letting the court/tribunal getting bored.

What happens is that the judge or chairman stops listening to the advocate rambling on about his case and flicks through the paperwork in the bundle, and comes upon a legal quirk that they hadn’t noticed before. They take it away over lunch and look things up in the books to hand, not because it really matters in the case in question, but because asking awkward questions was why they got to the bench in the first place, and there is nothing that they like more than putting a boring advocate on the spot.

The result is usually amusing, because the questioner has only looked at a small piece of a big problem,  the advocate hasn’t thought about this point at all previously, having thought that it was a non-issue, and gives an answer on the hoof that they wouldn’t if they had prepared for things properly, and strange things happen.

This is what happened in Breitov Properties v Elliston Martin [2012] UKUT 133 (LC)  recently. The LVT were listening to an argument about the reasonableness of some service charges, which was more boring than usual because the tenant hadn’t attended, and so the chairman flicked through the bundle, found the demand for payment, noticed that it gave the landlord’s name but the managing agent’s address and asked the landlord’s solicitor if this was allowed.

The problem is s47 Landlord & Tenant Act 1987 which applies to all residential tenancies that aren’t business tenancies under Part II LTA 1954. This requires all written demands for rent or other payments to contain the landlord’s name and address, plus an address for service in England and Wales if the address given is elsewhere. The bite is in s47(2):

“Where

-a) a tenant of such premises is given such a demand, but

b)  it does not contain any information required…

then…any part of the amount demanded which consists of a service charge…shall be treated for all purposes as not being due from the tenant to the landlord at any time before that information is furnished by the landlord by notice given to the tenant.”

Note that  the info is needed for all demands, including rent, but if you don’t have it in a demand for service charges the charge isn’t due until the info is given, while it doesn’t affect the liability for rent (presumably because you don’t normally have to demand rent, but do have to demand service charges).

The LVT decided that the section meant what it said, and that the agent’s address wasn’t the landlord’s address and so the demand was invalid. The address given should have been the landlord’s trading address, or one of their trading addresses, or their registered office. So the service charge element wasn’t due. And the Upper Tribunal agreed, albeit with some comments to the Tribunal on springing this sort of thing on a party.

The obligation in s47 is quite separate to the obligation in s48 to provide a tenant of residential premises with a notice in writing of an address for service in England and Wales of any notices. This goes on to say that rent and service scharges are not due until this has been conmplied with. The UT commented that “an address for service” is different from ” the name and address ” and unless it was there would be no point in having both s47 and s48. In this case there was a valid s48 notice giving the agent’s address, but it didn’t do the landlord any good.

There are two lessons to learn from this:

1. Don’t let tribunals get bored; and
2. Make sure you give the landlord’s name and address on all demands for rent, service charges, or other payments. You can give the agent’s address as well, but you can’t give it instead.

And all managing agents, and landlords ought to be checking their procedure on this right away, as no doubt tenants’ advisers will be taking this point until the novelty runs out.

What is a House?

The Leasehold Reform Act 1967 allowed tenants with qualifying leases  (ie originally granted for at least 21 years) to enfranchise – usually by acquiring the freehold, on advantageous terms.  But they can only do this if the property is a “house”.

This is defined by s2(1) as including

any building designed or adapted for living in and reasonably so called, notwithstanding that the building is not structurally detached, or was or is not solely designed or adapted for living in, or is divided horizontally into flats or maisonettes…

Now originally there were extensive residence and other qualifications but most of these have been removed and most tenants who have owned the lease for at least 2 years will qualify, including companies. The main remaining exclusion is for tenants with business leases under Part II Landlord & Tenant Act 1954 who do not reside on the premises.

Tenants discovered that if you have a house that is  – say – converted into a shop with flats over it, and provided it has been leased as a whole, with sub-leases for the components, then the head lessee can enfranchise. Landlords like to keep their properties and have been fighting this tooth and nail, especially in central London where the property values make the cost of going all the way legally seem worthwhile. And if you couldn’t turf the claim out on some technicality about the form of the notice required then arguing that the place isn’t a house seemed the best way to do so.

But the landlords haven’t been doing very well. The courts over the years have held that all sorts of things that you wouldn’t expect are in fact houses, or at any rate, can “reasonably be called houses. “  In July 2012 the Supreme Court will be deciding if:

• 3 terraced houses converted into self-catering accommodation for visitors; and
• an 18th century Mayfair house, now used almost entirely for offices, as required by the terms of the lease

can be called houses as the CA held – Day v Hosebay , and Howard de Walden v Lexgeorge [2010]EWCA Civ 748.

The problem is a conflict between two earlier cases. In Boss Holdings v Grosvenor [2008]1WLR289 the HL held that once a building has been constructed as a house and retained its external appearance then the fact that you couldn’t live there didn’t prevent it being a house. But in Prospect Holdings v Grosvenor [2009] 1WLR1313 the CA decided that a house that had been let on terms allowing residential use only for 11% and with the rest being commercial you could not reasonably call the thing a house any more.

There is now another case that might join them – Magnohard v Cadogan Estates [2012]EWCA Civ 594. Here a building in Holbein Place, in central London , was built in 1888 as 6 flats with shops under them. It is now much the same, although there are now 8 flats. The County Court Judge said that the thing was a block of flats and couldn’t be called a house , and the CA agreed. But they suggested that the losing tenants might like to ask the SC for permission to be joined in the Hosebay appeal.

So we should have an authoritative decision soon. On the meaning of what Lewison LJ called “one of the 200 most frequently used words in the English language and one of the 20 most frequently used nouns” – the word “house”.

All Change for Deposits

Now readers are a pretty select bunch, and will know that there is an important change to the rules on protecting deposits for Assured Shorthold Tenancies coming into effect on 6th April 2012.  They will also know that in many ways the changes are about restoring things to the position that the legislators thought they were when they enacted the current rules in the Housing Act 2004. But it is an important change that will no doubt catch various people unawares, so it does no harm to set it out again.

The theory is unchanged: deposits paid by AST tenants have to be protected by putting them into a scheme that will

• pay up if the landlord does a runner, or goes bust, and
• provides an adjudication process to deal with arguments about deductions for damage etc.

The problem was that the method the government used to make sure that landlords actually did this, rather than using the deposit money as working capital (or the holiday in the Bahamas fund) as they did previously, was not only to stop a defaulting landlord serving a s21 notice, but also to allow tenants to claim draconian penalties of three times the deposit for even trivial failures, and this caused landlords and their lawyers to be inventive and persistent. The result was a series of cases that ruled that a landlord was not at risk of penalties if he protected the deposit by the day of the court hearing (Tiensia v Vision Enterprises) or if the tenancy had ended (Gladehurst v Hashemi). As it takes a remarkably stupid landlord not to notice the first of these, and most claims arise in practice after the tenant moves out and wants his deposit back, this rather ruined the scheme. Other commentators used much more colourful language.

So here’s the legislator’s second attempt. The key changes are:

• Landlords have 30 days to protect the deposits instead of 14 days as before,
• Courts have a discretion to pay between one and three times the deposit as a penalty,
• If the deposit is not protected in time late protection won’t stop the penalty, and won’t let the landlord serve a s21 notice until he repays the deposit, or concludes the tenant’s court action,
• Ex-tenants can make claims unless their deposits have been returned to them.

Note the rules apply to ALL ASTs that are in force on 6th April, so if a deposit (paid since 2007) has not been protected by then the landlord has until 6th May to sort things out.

I think that the thinking is that if you provide a more reasonable scheme then landlords won’t try so hard to get round it. Time will tell it this is right.

This is just a flag so you know you’re entering a minefield. If you or your clients merely want to operate things then get in touch with one of the Deposit Protection Schemes and they will provide all the notices etc that they need.

If you want lots of detailed advice then look on The Landlord Law Blog written by Tessa Shepperson www.landlordlawblog.co.uk  who is helpfully running lots of articles about this for the next week or so. Or go to Nearly Legal  http://nearlylegal.co.uk/blog/ who will analyse the law into fancy shapes in a thoroughly understandable way.

Interesting Times

Life as a litigator is getting tough, though some would say this is just catching up with problems our colleagues in family and crime have already gone through.

There have been a lot of changes in the courts in 2011/12, and there are more to come. Many local courts have closed, and from 19^th March 2012 all money claims will have to be sent directly to Salford and will be issued there as part of Northampton County Court.  They will only get transferred locally if they are defended. Urgent applications, injunctions etc can continue to be issued locally, but from 2^nd April 2012 it will no longer be possible to deal with ANY non-urgent work over the counter at local courts. “Urgent” means needing issue or seeing by a Judge within 24 hours. Everything else can be dropped off in a box and will be dealt with later. And the public counters will only be open from 10.00 to 12.00 (local times – nationally there are some variations). Court hearings will continue to take place locally, with support from court staff when judges are sitting. Cynics wonder for how long.

Quite how this will work is difficult to establish. Given the difficulties that can arise when the counters are providing a full service, and the way in which papers regularly fail to reach files for hearings at present, the omens are not good. Possession cases, and the larger applications are likely to be particularly difficult to manage. Given the significant increase in litigants in person it is likely to get worse, as they will be largely excluded from any procedural advice from court staff, who will have less contact with court procedure themselves.

Contrary to recent practice the Court Service did not consult before the recent changes were put into effect.  They have now asked for any comments on the changes at the counters, but the changes are going ahead nationally anyway, so it’s not clear what the point of the comments will be. A recent meeting in Birmingham showed the level of opposition from the judiciary and specialist bar to many of the changes, but at best they may be tweaked slightly.

There are more changes ahead in the future such as increasing Small Claims to £15,000 (?), and together with the changes on funding, the likely abolition of recovery of success fees and insurance premiums, and the loss of referral fees this is likely to result in a significant reduction in civil litigation, of all sorts. Or a radical change in how it is organised and paid for in any event. And this is leaving aside the impact of ABS bodies on the legal landscape as a whole.

We see fewer and fewer of our local colleagues as there are more telephone hearings, or matters dealt with by agency agents, and chances to do interesting and exciting things, like injunctions or complicated applications, fade away. Clients complain, quite fairly, about reducing standards, extra delay, unsatisfactory results. We lose the pleasure of getting things done. Sometimes we wonder why we are doing this at all. And still there are more and more students trying to become lawyers, at enormous expense and wasted effort. Judicial appointments are fewer than they were, and harder to get, as everybody is trying to look for a soft landing. Even pensions don’t seem to be doing too well.

Still, there’s always blogging. And scotch.

You have to Laugh

In the middle of a distressingly dry judgment today in the Court of Appeal  in the case of Sillitoe v Jacuzzi (all about when interest runs on costs)  Lord Neuberger said:

‘Judgment’ is only used once in CPR 40.8(1), whereas it is used three times in article 2(1) of the 1991 Order, but that does not help the defendant (as the Bellman’s instruction that ‘what I tell you three times is true’ rarely assists on issues of interpretation).

You don’t get The Hunting of the Snark by Lewis Carroll cited as an aid to interpreting legislation often enough these days, more’s the pity. Well done, My Lord!

We’re All Really Interpreters

Somebody asked me this week to justify using Latin as a lawyer:

“Who has acted for a Roman legionnaire lately?”

I wittered on about it being shorthand like Mareva injunctions, and the fact that English is full on foreign words like élan, kitsch and the like, but it raises a much bigger picture once you think about things properly.

Because, in fact,  all professionals are, at heart, interpreters.

Think about it. What does an interpreter do? They translate something said in one language – say English – into another language – say German. And this requires more than just a literal translation, it needs an understanding of references, of history, of culture and more besides. And you don’t just have to translate the obvious figures of speech – tip of the tongue, knocked down with a feather – that clearly need more than a literal translation.  If the comment is polite or rude, or if it is literary or common, or pompous, or self-effacing, this all needs to be reflected too or it isn’t a good translation and lots of the subtleties of the language are being lost.

Well the same things happen if you are a lawyer and you are talking to a client. You are being asked to translate clientese into legalese and back again all the time. The client says that he wants the other side to carry out the contract on time, because this is important; you say you will make time of the essence.  The other side send you a statutory demand; you explain that if the debt isn’t paid off in 3 weeks then they can ask the court to make the client bankrupt, and the consequences that this will have.

It isn’t limited to lawyers – accountants spend a lot of their time explaining what the figures really mean, doctors tell the patient why the x-ray is bad news, and IT people write lines of program so that you can just press the buttons and get intelligible results.

Now, the problem is that all professions or specialities have a large number of terms that they use among themselves in order to express the detail that they need with precision. They know that ordinary language is just too vague and woolly to do the job. A doctor will say that the broken wrist has a Colles fracture because this is much more informative to those in the know. It will tell them what is wrong and they can immediately think of the standard treatment, the prognosis and so on. This is efficient, useful , and to be encouraged. Indeed as time goes on most professions develop ever more precise graduations of description – a differentiation between type I or type II  diabetes is useful because it shows whether insulin will be needed or whether the condition can be treated by diet alone.

The problem arises when the expressions are not used between the professionals, but between them and outsiders. If a doctor tells me that my daughter has a Le Fort II fracture and doesn’t explain more then, as a  housing lawyer, I’m really none the wiser. If I dealt in personal injuries I’d know that it was a particular sort of fracture to the bones of the face, as the knowledge spreads across into the related fields, but as a mere father I haven’t a clue, and he may as well spoken to me in German. Or Serbo-Croat.

Lawyers have the same problem. But it looks worse because a lot of legal terms have historically been expressed in Latin, the dead tongue last spoken hundreds of years ago. So they get a lot of stick from some quarters for saying that something is res judicata, or de jure, or ex parte. It isn’t the Latin that they should be concentrating on, it’s the use of technical language in an inappropriate setting. Because there is more to res judicata than just “the matter that has been decided”, and a client needs a proper explanation of this. Just saying it in English doesn’t do the job. But then “time is of the essence” or “entire contract” use English expressions that don’t in fact mean anything significant to the man in the street, and which will wash over him unless you tell him just how important they are.

No, we need to translate legal language from the contract or the advice, the lease or the will, into appropriate understandable English, of a suitable nature so that this particular client can understand it to the degree that they need to do so. Sometimes this will require a lot of explanation, and at other times you can tell them that this is a rough interpretation that they can come back to you about if the need arises. You need to judge the client’s degree of education, their knowledge of the field involved, the importance of the explanation and a host of other matters, and you need to give a seamless performance. It isn’t easy, but neither is training the lions, and it’s what this particular job requires.

And for some clients, Latin is the best way. The company secretary knows all about ultra vires, and if you don’t use it he will be puzzled. But this is unusual, and telling your personal injury client that the accident is a case of res ipsa liquitur  is rightly a cause for derision.

No, keep the Latin, and the other technicalities, to the discussions inside the profession when the exact subtleties are understood and matter – to the letters to the other side, to the submissions to the judge – and use appropriate everyday language to the clients. Because we are all interpreters. And they aren’t legionnaires.

Mind What You Say

I feel sorry for Bevan Ashford (as was) the West Country solicitors.  One afternoon in 2003 their small Tiverton office was visited by a distraught wife asking for advice and she was seen by a newly qualified solicitor who I won’t name here for reasons that will become apparant.

It seems that the wife had been told by her husband, a financial consultant, that he was in serious trouble, had been accused of taking some £200,000 from a client, and that the only way to avoid being prosecuted was to charge their jointly owned house, and their shares,  in favour of the client. Otherwise she and the children would see him going to prison.

In order for the charge to be valid the wife would have to get independent legal advice, and this is what she wanted. She had been given a letter from the husband’s solicitors explaining the situation very briefly and saying that she needed to get advice right away. Hence the visit to Bevan Ashford.

The meeting was a very short one – possibly less than 15 minutes as the wife had to collect the children from school. The solicitor gave excellent advice: don’t sign or agree to anything, don’t go ahead, the husband isn’t worth it. However, the wife was deperate to go ahead and left saying she would do so. No charge was made for the interview.

So far so good. However, things then started going seriously wrong:

• It would appear there was no attendance note. For a 15 minute meeting that was understandable but not very clever, and probably reflected the solicitor’s inexperience.
• Bevan Ashford sent a fax to the husband’s solicitors saying the wife would be going ahead, “having taken advice from them as to the consequences”. In fact the consequences had hardly been discussed.
• A few days later the wife had a meeting in Bevan Ashford’s larger Exeter office with an associate who witnessed her signature to the charge and other legal documents, and certified that she had “had the consequences of the deed explained to her by a solicitor… and understood its meaning and effect.”  The associate had (it appears) not explained this himself – he relied on the advice given in Tiverton. And he hadn’t seen a note of this because there wasn’t one. He didn’t notice that the amount covered had gone up from £200,000 to £860,000. And he didn’t raise a bill either.

The rest of the sorry tale is rather inevitable. The husband had not stolen £860,000 as he had said but more than £2,000,000 and was inevitably prosecuted and sent down for 6 years. The parties divorced. The victim enforced the mortgage and the house was sold. So the wife sued the solicitors.

Now when the case came on for trial in Bristol there was the first bit of good news for Bevan Ashford – the Judge stopped the trial on the first day after hearing the wife’s evidence and dismissed the claim, saying there was no case to answer.  The initial advice was all you would expect in a 15 minute free interview and if the wife had wanted more she should have come back later for a proper appointment.  And no advice was given at the Exeter meeting. So the case failed.

However the Court of Appeal had a different idea and in December 2011 they allowed the appeal and ordered a retrial before a different judge.  So they all go back and the matter continues. Because the defendants  did not get as far as giving evidence the conclusion had to be tentative on the facts, and there wasn’t enough to make a final decision. The cost of two trials and a visit to the CA won’t be cheap to whoever loses in the end.

The CA made some pretty obvious comments:

• Once a solicitor accepts instructions they have to do a proper job, whether there’s a fee or not.
• If a solicitor certifies that somebody understands a transaction then they either have to explain it themselves or be satisfied that somebody else has done so, and the Exeter associate seems to have done neither.
• There is little point in just telling a client not to enter into a transaction. You have to explain why not, and what will happen if they do. And in this case it should only take a moment for a solicitor (although perhaps not a newly-qualified one) to see that if somebody has stolen as much as £200,000, let alone £860,000 (or £2m) then they are going to be prosecuted even if they give it back.  So it was a scheme that was doomed to failure , however much the wife loved her husband at the time, and if she had been told this she would probably not have gone ahead.
• And if a solicitor can’t give a client adequate advice they mustn’t certify they have, or they take the consequences.

So the case goes back for a retrial, or negotiation. And what can we learn, in addition to the CA’s points?

• That  newly qualified solicitors know a lot of law and little of life, and are dangerous (even if “very gentle, and young” as the wife described her here.)
• And that independent advice of this sort is serious work that needs doing properly, and at a fee that reflects the risks.

But most of all, that it doesn’t matter what happened, what matters is what you can prove happened. If you make and keep a good note then it is still there 8 years later when the oral witnesses have forgotten everything. And although one must always tell the truth, do remember that Winston Churchill said that he would come out of the history of the war very favourably because he would write the history of the war, and there must be some of that in all of us.

The case is Padden v Bevan Ashford [2011] EWCA Civ 1616.

 

A Time to Look Back

This is traditionally the time to look back, and wondering around the net you see no end of reviews of the year, forecasts for 2012, lists of the top 10 cases, or bloggers, or lawyers and so on.  I have resisted doing a review myself on the grounds that

• I have only been writing Coventry View since June and that this isn’t long enough to count
• everybody has done it and I’ll just be repeating things
• if you do it properly it’s a lot of work.

However, there doesn’t seem to be much happening in the housing area which I’m trying to cover here, and so a review it has to be.

But I won’t just cover a year.

I came to Coventry as a solicitor in 1983, some 29 years ago. In those days County Courts could generally only handle claims for up to £5,000, and anything else went to the High Court. Small claims were less than £1,000. Most possession claims were dealt with by a Circuit Judge in open court, although if you had a big house you may have to go to a High Court Judge in Birmingham, because there was a rateable value limit (I forget how much) which meant using a barrister.

Trials were exciting because you didn’t know who the other side’s witnesses were, let alone what they might say. And although there was a lot less paperwork cases could take years to come to trial.

Against that you knew all your local lawyers.Virtually no litigation could be dealt with by post, and you often had to go off to some obscure court to do a 5 minute application.   Solicitors handled their own cases either personally, or via the barrister that they used for everything. The District Judges (then called Registrars) were a powerful and idiosyncratic bunch, who you fell out with at your peril. The County Court Judges were people you regularly came across in trials, applications and so on. They knew the local advocates, and marked their cards if they were less than professional. And there was Legal Aid that would give you a decent living if you were reasonably efficient.

Things have changed beyond all recognition. I won’t bore you with the details, as most of you will know the changes. Some of the changes have been for the better – the “cards on the table” attitude and the speeding up of cases are the most obvious. But not everything is an improvement. What brought things home to me was the closure of Warwick County Court, and its Crown Court, earlier in the year. The Magistrates Court closed some years ago. This means that for the first time since Saxon times, Warwick has no local court of any kind. Justice is becoming distant.

Warwick, in all fairness, isn’t that big  and it couldn’t really justify a court apart from the history. But it’s just a sign of the future.

In Coventry (which is 15 times bigger) all money claims for the local court are already sent off to a processing centre in Salford for issue. At the moment you post them to Coventry who send them on for you, but this is set to change in 2012. Possession claims are issued centrally (PCOL) though you can still send them to the courts for the time being.  I understand that the plan is that before long the local court offices will close entirely and all cases will be handled in 2 or 3 national processing centres, with local Hearing Centres, staffed with ushers and Judiciary only. Everything else will be dealt with in the processing centres. No local orders, no staff with any knowledge of cases, just a place to have hearings. And in Warwickshire there are now only 3 hearing centres, against the 7-8 when I came.

Now as a solicitor this is something that I can cope with. I can pester people at the end of an email or over the phone quite effectively, and if something is important enough I am sure I will find a way to get it sorted out. But how will the thousands of litigants in person cope? With the virtual abolition of civil Legal Aid and the loss of litigation practices from many regional towns far more people have resorted to DIY lawyering. In the family law field it has resulted in serious delay and problems, and this will clearly spread.  At least up to now they have been able to discuss things over a counter in their local court with staff who know procedure and even some of the law. This will be ending shortly. What will replace it?

Law is a practical service, allowing people to understand and enforce their rights. It isn’t just a pleasant way for lawyers to earn a living. People with problems need local advice and local determination when advice is not enough. First most of the advice has been taken away – the loss of Legal Aid and closure of advice centres. Secondly procedure has become so prescriptive, with pre-action protocols, early disclosure, early exchange of witness statements and so on that even quite ordinary claims become beyond the pocket of  anyone other than large businesses, and the seriously rich. And now the hearings are going to be miles away, with no local connection.

This isn’t progress. How is this making things better for the public? Hasn’t somebody, somewhere, lost the plot?

Clarkson v the Unions

Not really my area but I had to say something. I’m sure I don’t need to remind you of the details , and they are all over the web if you want them.

There was outrage among various union leaders and their supporters that Jeremy Clarkson, the well-known Larger-than-Life petrol-head, had made a very poor joke on TV the other day that public service workers who went on strike should be shot, and calls that he should accordingly be made to apologise, be sacked by the BBC, and be made to work as a care worker etc etc. Furthermore he should be prosecuted (although they rather wisely didn’t say for what).

This all misses a number of points:

• JC is a  petrol-head, who does this sort of thing for a living, and makes a very good living out of it too,  so some people, in fact quite a lot of people, must find it entertaining.
• It was a joke, and a poor one, which I think he accepts.
• It followed his praising the strikes (for clearing the roads for his use) and was expressed as being “in order to show BBC balance”.
• The joke was apparently cleared with his producer first.

These are minor points and I wouldn’t have bothered writing this for their sake only.

However, there are more important ones – why there should be a knee-jerk reaction that if somebody says something unpopular they should be prosecuted, and what has happened to freedom of speech, tolerance and moderation? And how can union leaders etc have such a poor sense of reality as to suggest all this nonsense? Do they realise how silly they are making themselves look, and how distracting this has been from the purpose of the strike, which was to oppose significant alterations in working conditions for millions of workers? Or don’t they want us to talk about that?

Either way, not a very glorious episode on either side. But a bit worrying if you are concerned about freedom under the law.

Too Many Rules – Not enough Guilt

Every few weeks, it seems, there are cries that individuals in one field or another are behaving badly and that the area needs to be regulated, with guidelines, a code of conduct, a complaints system, qualifications, a disciplinary structure and a Regulator. People in the field will be required to tick boxes vigorously, send out lots of (pretty incomprehensible) information to their clients/customers and a bit later some academic, or a committee will be asked to report on how things have changed. And often enough, they have changed, but aren’t really any better.

Why does this happen? The intention was to root out a few bad apples, shine light into some dark corners, and improve transparency, yet it sometimes seems to have the opposite effect. Why?

The answer came to me the other day when I was watching the excellent and amusing programme When Bankers were Good by Ian Hislop on BBC2 .  He was explaining that in Victorian times, and indeed until quite recently, banking and stockbroking was largely unregulated by the law. There were some complete sharks and con-men, but most people behaved well, and those who didn’t were known, and heavily disapproved of by the others. Reputations mattered enormously, because that was all you had to go on.  People couldn’t rely on certification by some quango, and so had to make their own judgements, based on reputation, and the opinions of others in the field.  If you didn’t know somebody and they couldn’t put forward somebody who you did know to speak for them then you dealt with caution, if at all.

The system was underwritten by a strong sense of a shared morality, and an ethos of truthfulness, hard work and being bound by your word. You behaved like gentlemen, or else. The fact that the number of participants was comparatively small, and they often had been to the same schools or universities, meant that reputations were generally well-known, and that bad conduct would normally get back to those dealing with you pretty rapidly. If you lost your “name” then that was basically it, and you would probably have to go to the colonies, because you would get little further business here.

I began to think – is the problem that we now have too many rules, rather than not enough? Do extra layers of regulation actually do any good?

When I was in training there were no regulators for the professions, and indeed the idea would have been regarded as incomprehensible. The whole idea of being a profession was that you regulated yourself. The Law Society, the Institution of Chartered Accountants, the Bar Council, the various medical organisations, the surveyors and so on all had their own rules and enforced their own discipline among their own members. They decided who could be a member, and who couldn’t, and how members should behave, up to a point. Beyond that it remained the province of reputation.

If you were dealing with another professional you knew that a certain minimum standard of behaviour was a given. You would not be lied to, agreements were generally adhered to, and the client’s interests were predominant. A breach of any of this would result in serious displeasure from the senior members of the firm involved, because their reputations would be tarnished by the shortcomings of their staff. Threats to complain to the profession were generally unnecessary. Reputation and shared morality were too important to risk.

But you knew that you were on your own beyond there. You could expect a basic level of competence, but it was pretty basic. It was an important part of your skill to build up a list of suitable experts and contacts who you could rely on. And a list of those to avoid. You got to know the opponents you could trust and those who fought their corners only just on the right side of the rules. You learned the horses for the courses, and the wolves in sheep’s clothing. It was a matter of judgement, and as time went on it became one of the most valuable parts of you, what made you a professional.

Nowadays of course every profession or quasi-profession is regulated up to the eyebrows. An amazing number of things are prescribed, or prohibited. And you can’t be an expert unless you have been on the training course, passed the exam, got on the list and kept your CPD points up to date. You have to tick all the boxes. But has it actually made things any better?

Now I’m not saying that checklists are, in themselves, a bad thing. They are an excellent way of reminding the forgetful or harassed of the things they need in order to achieve the desired result. And they mean that people without the education or experience to work out the requirements for themselves can be allowed to handle something in a manner that will produce the intended result on the majority of occasions. But somebody has always got to be allowed to apply brain to the final answer. No check list is perfect. And it is the result that has to be correct, not just the procedure. Correct procedure makes the result more likely, but not certain. Look both ways before crossing the road, except in one-way streets. But what if somebody is coming the wrong way?

The danger, as I see it, is that people no longer feel responsible for what they do. I taught my children not to lie and steal, not to just avoid being caught. A professional ought to know what the right thing to do is, and expect to be held accountable if they don’t do it. If you over-regulate things then this feeling is lost. I expect, and deserve,  to be hauled over the coals if I mislead my client over their chances in a forthcoming case. But if I am disciplined for failing to ensure that the clients is sent an evaluation of risks every x months, contrary to rule abc I just feel irritated. I don’t feel guilty.

Now the old days were far from perfect. Unsophisticated lay clients could have a very hard time if they fell among thieves. And the enormous increase in the numbers in all professions, coupled with the loss of local and increase in national or internet businesses,  means that it is much harder for reputations to spread in the way they one did. So we can’t go back.

But we, and our regulators, always ought to bear this in mind.  If you have too many rules, and too much regulation, then we don’t feel guilty if we fail. And we should.