16 March 2011
High Court overturns SDT fines and questions absence of sanctions guidance
High Court: SDT failed to explain itself
The High Court has expressed surprise that the Solicitors Disciplinary Tribunal (SDT) does not publish guidance on the sanctions it might impose, in a judgment overturning fines levied against four partners at a firm where a member of staff stole over £100,000
The case should give “encouragement to those who have been poorly treated by the tribunal”, it has been claimed.
Brian Hazelhurst, Christopher Murphy, Stephen David Garrett and Martyn Robert Brown practised at Fanshaw Porter & Hazelhurst, and were charged by the Solicitors Regulation Authority (SRA) with breaches of the Solicitors Accounts Rules 1998 and with a failure to supervise the employee.
They were innocent parties to the employee’s thefts, which continued undetected by anyone – including the firm’s auditors and the Law Society, which inspected some of the employee’s files in connection with a complaint made about her – for three years. She was exposed by chance.
The firm dismissed her and reported the thefts to the SRA; the partners put the firm’s accounts in order and ensured clients were compensated in full. The partners’ uninsured losses amounted to £80-90,000.
The partners pleaded guilty to all charges, on the basis that they accepted, with hindsight, that they had been at fault to place the degree of trust that they did in their employee.
They contended before the SDT that the appropriate sanction was a reprimand, because they had taken steps which would ensure there could be no repetition of the breach of the rules and had demonstrated that they could be “trusted to the ends of the earth” by self-reporting the matter to the SRA, co-operating fully and ensuring that no client lost any money. The SDT fined each one £4,000 instead.
In Hazelhurst & Ors v Solicitors Regulation Authority  EWHC 462 (Admin), the High Court overturned the SDT’s sanction because it failed to consider mitigating evidence put forward as to why the thefts went undetected, and made a finding of fact – that there was an inadequate system of file review – without any proper basis for doing so.
The SDT had also failed to explain why it decided a monetary penalty was appropriate, gave no reason for the sum and did not explain how it was apportioned as between the breaches “so as to permit the respondents or indeed members of the public to understand what degree of seriousness should be attached to any given breach of the professional rules”.
Mrs Justice Nichola Davies said: “It is of note that the SDT has not published indicative sanctions guidance. Such guidance identifies the purpose, parameters and range of sanctions. It permits those who appear before it to better understand the proceedings and the thinking of the SDT. It assists the transparency of the proceedings. Such guidance has been used by other regulatory bodies for some years and is a valuable reference point both for the tribunal and for those who appear in front of it, as practitioners or advocates.”
The parties agreed that, if she struck down the SDT’s sanction, the judge should impose her own. She decided that a sanction was required but that the solicitors’ conduct was evidence of their trustworthiness.
“I am satisfied that the sanction of a reprimand is appropriate to reflect the nature and circumstances of the breaches and the conduct of the appellants. The maintenance of public confidence in the profession does not require a greater penalty. Further, as each appellant has personally contributed monies to ensure that no client of the firm has suffered loss, in the particular circumstances of this case the imposition of a financial penalty is not appropriate.”
A briefing released by Hailsham Chambers, whose barrister Paul Mitchell acted for the partners, said the ruling “should assist in those instances where the SRA seeks to obtain a sanction against solicitors in connection with allegedly inadequate systems of work but declines to plead evidence of what an adequate system would have been in the circumstances”.
The briefing added: “It is noteworthy that the SRA has not sought leave to appeal against the judgment. The case should give encouragement to those who have been poorly treated in the SDT to appeal notwithstanding the Administrative Court’s historic reluctance to interfere with the ‘expert determination’ of that tribunal.”
By Legal Futures
Tags: Solicitors Accounts Rules, Solicitors Disciplinary Tribunal, Solicitors Regulation Authority
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