Dentons: Case remitted for fresh hearing
A solicitor’s breach of their regulatory obligations will only amount to misconduct if it is “sufficiently serious”, the Court of Appeal ruled yesterday.
In an important ruling for the profession, it rejected the strict liability approach supported by Mrs Justice Lang last year when she overturned a decision of the Solicitors Disciplinary Tribunal (SDT) to clear global law firm Dentons of anti-money laundering rule breaches.
However, it upheld her ultimate decision, remitting the decision on misconduct and possible sanction to a differently constituted tribunal.
In 2024, the SDT found that Dentons breached regulation 14 of the Money Laundering Regulations 2007, and particularly the requirement to take adequate measures to establish the source of wealth and funds in relation to a client who was a politically exposed person.
The Solicitors Regulation Authority (SRA) argued that the world’s largest law firm had therefore breached principle 7 of the 2011 SRA principles – “You must comply with your legal and regulatory obligations” – and outcome 7.5 of the then code of conduct, that “you comply with legislation applicable to your business, including anti-money laundering and data protection legislation”.
But the SDT decided the test was whether the breach was serious, reprehensible and culpable such that it amounted to professional misconduct, and said that it did not in this case.
Lang J held last year that this seriousness test only arose where it was inherent in the rule in question, which was not the situation here.
Lord Justice Bean, vice-president of the Court of Appeal’s civil division, Lord Justice Jeremy Baker and Lord Justice Zacaroli yesterday rejected what it dubbed Lang J’s “grammatical interpretation”.
She had agreed with the SRA that the “natural and ordinary meaning” of the words in principle 7 was that any failure to comply with legal and regulatory obligations was a breach.
The appeal court said this would mean the SDT had “no power to refuse to hear an allegation on the grounds that it is not sufficiently serious to occupy their time”, giving the hypothetical example of a law firm in breach of health and safety regulations because the premises it owned were not equipped with appropriate firefighting equipment.
“We reject the grammatical interpretation of principle 7, for two reasons: (a) the very substantial departure which it would represent from the common law definition or description of misconduct by a solicitor; (b) the inconsistency of such an interpretation with the SRA’s own procedural rules and with section 28(3) of the Legal Services Act 2007.”
At common law, the judges explained, “mere negligence was not enough; there had to be an element of seriousness calling for professional censure”. Section 28(3)(a) instructs regulators to have regard to “the principles under which regulatory activities should be transparent, accountable, proportionate, consistent and targeted only at cases in which action is needed”.
The court noted too that the SRA’s own rules imposed a threshold condition of seriousness before investigating an alleged breach, while guidance on the issue of SDT proceedings and the SRA’s enforcement strategy “both refer to seriousness as an important factor”.
“Accordingly, we conclude that there is an inherent requirement of seriousness in considering whether a solicitor’s conduct amounts to a breach of the SRA principles or the mandatory provisions of the SRA code.
“An allegation of a breach of principle 7 can only be upheld, therefore, if the conduct (the breach of the relevant legal or regulatory obligation) is sufficiently serious.”
The court framed this test as “whether the conduct in question would be considered sufficiently serious by competent and reputable solicitors that it be categorised as professional misconduct”.
The test used by the SDT went too far, which led it to wrongly characterise Dentons’ breach as being “entirely inadvertent” – a conclusion the judges had “difficulty in understanding”.
So it upheld the decision to quash the SDT ruling but said the findings of fact made by the tribunal should be preserved.
“The questions for the new SDT should be these: on the basis of those findings of fact, and applying the test set out above, was the firm in breach of principle 7 and outcome 7.5? If so, what sanction should be applied?”
A statement from Dentons said: “The court has rejected the SRA’s argument on the interpretation of principle 7.
“The court provided important clarification to the profession that a breach of regulatory obligations does not automatically constitute a breach of that principle and instead a threshold of sufficient seriousness must be met…
“Dentons has co-operated fully with the SRA throughout its investigation into events that took place between nine and 13 years ago.
“We remain committed to the highest standards of professional conduct and regulatory compliance. We continue to enhance our compliance systems and risk management procedures in line with evolving best practice.”
An SRA spokesman said: “We welcome the judgment and are reviewing the detail.”
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