High Court rejects SRA appeal against £75,000 costs order

Eyre: Repeated delays on part of SRA

The High Court has rejected the Solicitors Regulation Authority’s (SRA) appeal against a £75,000 costs order made after its failed prosecution of a solicitor.

Mr Justice Eyre rejected the SRA’s contention that the circumstances in which the Solicitors Disciplinary Tribunal (SDT) can make a costs order against it were limited to those where the proceedings have been improperly brought.

Last year, the SDT cleared Amie Tsang of the allegation that she failed to advise hundreds of clients about the high risks inherent in investing in three property development schemes, after finding that the SRA made an “essential mistake of law”.

Costs do not automatically follow the event at the SDT as the SRA is seen as acting in the public interest, even where prosecutions fail.

However, the SDT found that the combination of an inordinate delay in prosecuting the case and the allegation not having a proper legal basis justified a costs award.

The SRA appealed but, after a review of the authorities, Eyre J rejected its contention that the SDT could only make a costs order against it where proceedings have been improperly brought.

“My understanding of the state of the law is that there is a substantial restriction on the award of costs against the SRA but the tribunal’s power was not as narrowly constrained as the SRA now contends it was,” he said.

“The principle that costs follow the event is displaced in cases of this kind and, instead, when an allegation is dismissed the starting point is that there should be no order as to costs.

“For costs to be awarded against the SRA, there must be a good reason justifying the departure from that starting point.

“In considering whether there is such a good reason the fact that the proceedings were brought in exercise of the SRA’s regulatory function is to be seen as a crucial factor and regard is to be had to the risk that the making of adverse costs orders will have a chilling effect on the exercise of the regulatory jurisdiction. However, those factors are not conclusive.”

While good reasons were not confined to those cases where the proceedings have been improperly brought or so badly conducted as to have amounted to “a shambles from start to finish” – a quote from one of the authorities – these indicated that good reason must be “of a comparable gravity”, the judge said.

The SDT identified the correct test, Eyre J said. The delay and absence of a proper legal basis for the prosecution were both capable of being good reasons for a costs order and, in the circumstances, were good reasons.

Procedural failings on the part of the SRA, including delay, were capable of being a good reason “regardless of whether or not they increased the amount of costs incurred by the other party”, the judge said.

But the delay had to go “substantially beyond the delay inherent in the proper investigation and determination of allegations of misconduct”.

There were “repeated delays and repeated occasions when the SRA took longer than it should have done to move the case forward”, not least in taking two years from deciding to investigate Ms Tsang to actually starting it.

Eyre J noted that the SRA had not appealed the decision on liability and that the SDT was “entitled to take account of the fundamental legal deficiency in the allegation when considering the making of a costs order”.

The decision to make one was “well within the bounds of those which the tribunal could properly and reasonably reach”.

The judge went on to dismiss the SRA’s appeal against the quantum of the costs, although there remains an outstanding issue over £15,500 of costs which the SRA contends the tribunal was misled into including in the award.

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