[1]High Court: SDT decision not sustainable
The High Court has overturned fines imposed on two solicitors for their involvement in stamp duty land tax (SDLT) avoidance schemes, saying that their conduct deserved more severe punishment.
Remitting the case to the Solicitors Disciplinary Tribunal (SDT) for re-sentencing, Lord Justice Davis said the original tribunal had “seriously underestimated the gravity of its own findings”.
Richard Chan and Rajob Ali of Harrogate firm Abode Solicitors – which the Solicitors Regulation Authority (SRA) shut down [2] in October 2013 over accounts rules failures – were fined £15,000 each [3].
It found that they had not acted in the best interests of their clients, not provided a proper standard of service, failed to act in a way that maintained the trust the public has in solicitors and the provision of legal services, failed to run their business effectively, and failed to protect client money and assets.
The tribunal heard on how the pair operated various SDLT avoidance schemes for house buyers. They advised clients on the avoidance scheme through their own separate Seychelles-based business, called Omega, which took a commission.
However, it found unproven allegations that the pair acted without integrity and that they allowed their independence to be compromised.
The Solicitors Regulation Authority appealed these latter findings and the sanctions.
Davis LJ – with whom Mr Justice Ouseley agreed [4] – said that “the inevitable inference to be drawn from the tribunal’s findings, in my judgement, is that the interests of the clients were subordinated to the financial interests of the respondents.
“Not only (as found) did they not implement the schemes in accordance with the advised requirements: the clear indications are that they regarded the form of the schemes being used as no more than that: a form… This perhaps, however, to some extent explains the respondents’ complete indifference to informing the clients properly of the true position and of the potential risks involved.”
The allegations of want of integrity and acting with lack of independence “really follow from the primary facts as found by the tribunal; and, with all respect, its conclusion to the contrary is not sustainable”, he said.
Davis LJ added: “It is, in this regard, not sustainable to dismiss the allegations of want of integrity by reference to ‘incompetence’ or ‘a lack of proper understanding of the schemes’. The respondents knew full well what they were doing – this extending even to incorporating Omega (in the Seychelles) with a view to their own personal profit.
“And if it is to be said, as the tribunal said… that they had ‘no proper understanding of their duties to their clients’, one wonders how such persons are then to be considered fit to be solicitors at all.”
However, the judge said he had hesitated over acceding to the SRA’s request that the solicitors be struck off.
“In my view, this was serious misconduct, showing overall a heedless indifference to the interests of the clients, both lenders and purchasers, by reason of a desire to maximise, without proper disclosure to the clients, the personal profits of the respondents.
“But I have to remember that dishonesty is not alleged. I cannot at this stage be entirely satisfied that some lesser sanction than striking off possibly may be adjudged by the tribunal to be appropriate.”
As a result, he remitted the matter to the SDT “for re-determination of the appropriate sanction”.