Legal Village

When late payment is misconduct

Posted 13/02/2008 by Barbara Hewson

Is it the proper function of a regulator to police the performance of contracts between professionals and non-clients, such as their suppliers? You may think not. However, the Health Professions Council (HPC) thinks differently. This body regulates 13 different branches of the healthcare professions, ranging from podiatrists to radiographers.

According to the HPC, failure to honour a contract is a disciplinary offence. Thus, late payment of a debt to a supplier (even with interest) is seen as a breach of Standard 14 of the HPC’s Code of Conduct – the duty to behave with integrity and honesty and keep to high standards of personal and professional conduct at all times – and of Standard 16, damaging the profession’s reputation.

It is unclear whether disputing a debt (as opposed to admitting it) might also be a disciplinary offence.

This development creates an important new weapon in a creditor’s armoury. Why bother to sue when they can hold the threat of loss of livelihood over a professional person instead, and get someone else to get in their money, for free? 

One wonders if other professional bodies will follow the HPC’s example. It is not immediately obvious that the public is better protected, though, when regulators act as alternatives to small claims courts. Ensuring a professional does not abuse her/his relationship with clients – for example, by overcharging or doing shoddy work – has always been a legitimate regulatory concern. But is it really misconduct if you don’t pay your electricity bill on time?

By contrast, the Bar Council, whose Professional Conduct Committee I joined in the early 1990s, always refused to act as a debt-collecting agency. We would advise the occasional disgruntled creditor chasing a barrister for outstanding rent, loans and the like to use their legal remedies instead.

The Bar Standards Board now tells me that it would consider an allegation that a barrister had failed to honour a judgment. The rationale is not obvious. There may be a number of reasons why a litigant cannot comply with a judgment: being broke is one of them.

Curiously, becoming bankrupt is not stated as a ground for an allegation of impairment of fitness to practise in Article 22 of the Health Professions Order 2001, though having a criminal conviction is. This makes the HPC’s position on late payment somewhat incongruous.

By contrast, insolvency has long been recognised a basis for terminating membership of certain professions, outside the healthcare field, either on a mandatory or a discretionary basis. A solicitor’s practising certificate is automatically suspended on bankruptcy. Insolvency practitioners cannot practise whilst bankrupt. Some accountancy bodies will exclude members who become bankrupt, though again the Bar does not.

Until the latest version of the Solicitors’ Code of Conduct was issued in July 2007, solicitors were subject to an express obligation to pay counsel’s fees: Rule 20.06. Despite this rule, the Law Society refused for years to treat non-payment of counsel’s fees as a disciplinary issue – even though solicitors are officers of the court and might be expected to maintain high standards in such matters.

The latest version of the Solicitors’ Code has dropped the professional rule that solicitors should pay counsel. The justification, which the new Solicitors Regulatory Authority (SRA) gave for this omission, was interesting: it did not regard such a rule as “necessary”.

En passant, it seems remarkable that a Code could have been prepared without any recognition of the fact that some solicitors’ work will be referred to the Bar. But going forward, can barristers now complain to the SRA, following the HPC’s precedent, that late payment of counsel’s fees is misconduct under Rule 1, which requires solicitors to act with integrity? It certainly seems arguable.

It would be surprising if a chiropodist whose hourly rate may be as low as £25 should be subject to more stringent rules of financial propriety than, say, a lawyer who earns ten or twenty times as much – and is entrusted with client funds to boot.