SRA: Not unreasonable in its actions

The Solicitors Disciplinary Tribunal (SDT) has again reached a highly unusual majority decision in the Leigh Day case, this time on the costs of the case.

Two members of the tribunal decided that there should be no order for costs, but the third member argued that Leigh Day should be awarded 40% of its costs of the proceedings – although not the initial investigation.

With Leigh Day’s overall costs estimated at £5m, about £3m of which went on the hearing, this would have been worth around £1.2m to the firm and payable by the Solicitors Regulation Authority (SRA). Leigh Day had sought 60% of its total costs.

The dissenter this time was bench chairman Simon Tinkler, a senior corporate partner at City giant Clifford Chance.

In the substantive ruling, he and lay member Lucinda Barnett, a former chair of the Magistrates Association, cleared Leigh Day partners Martyn Day and Sapna Malik, solicitor Anna Crowther and the firm as a whole of all the 20 allegations laid variously against them.

Richard Hegarty issued dissenting findings in respect of 10 of the allegations. Mr Hegarty, who sat on the Law Society council for 16 years until 2005, is senior partner of Peterborough firm Hegarty Solicitors.

The Court of Appeal authority on costs in the SDT is that an order should not be made against the SRA unless the case was not properly brought or conducted, lest it have a chilling effect on the exercise of its regulatory obligations.

The SDT members unanimously found “little evidence” that the SRA’s extensive investigation into the allegations against the firm were unreasonable. This accounted for around £2m of Leigh Day’s costs.

However, they disagreed on the costs incurred once the case was referred to the tribunal.

Ms Barnett and Mr Hegarty said that “unreasonable, when considering making an award of costs against the [SRA], meant more than that valid criticisms could be made”.

Stressing the importance of not invoking hindsight, they continued: “It was clearly in the public interest that proceedings should have been brought, and whilst criticisms could be and had been made of the [SRA]… those criticisms were not such as to render the [SRA’s] decision to prosecute the allegations unreasonable.”

They noted that Leigh Day at no stage sought to challenge the bringing of any of the allegations, whether by judicial review or a submission of no case to answer.

The SRA had neither taken a disproportionate approach to the prosecution, nor pursued the allegations unreasonably, the majority said.

In order to determine the allegations, it was necessary to hear the witness evidence and consider the scope and extent of the duties the SRA had contended applied.

Mr Tinkler stressed the “privileged position” enjoyed by the SRA in costs. “It was important in upholding trust in the regulator that it acted reasonably, and was seen to be accountable where it did not do so.”

He said the criticisms made of the SRA had included the lack of evidence to support certain allegations, allegations being unclear or being different at the hearing from the pleadings, and some being made against people who were not involved in the matters alleged.

“Those allegations that had been the subject of meaningful criticism had been pursued unreasonably, both individually and collectively, resulting in over-prosecution and wasted costs.”

For example, he said that it “inevitably followed” that it was unreasonable for the SRA to have taken to tribunal three allegations which were held to have been disproportionately brought.

Having gone through each allegation, Mr Tinkler found that around 40% of the hearing had been taken up by those which he considered had been unreasonably brought.

A Leigh Day spokesman said: “We are disappointed, given the fact that over 250 charges against the firm and colleagues here were found unproved.

“We believed it was appropriate to seek some measure of the costs involved – paid both by ourselves and by our insurers – in defending ourselves. However, we respect the decision of the SDT in what was an unusual application.”

The SRA had no comment.

The parties have until Thursday to make submissions on the costs of the costs hearing.

The clock on an SRA filing an appeal against the substantive finding starts when the costs proceedings conclude.


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