Willetts: SDT is best placed to judge
Specialist regulatory lawyers have expressed concern that the High Court ruling in the Dentons case places too much reliance on the Solicitors Regulation Authority’s (SRA) view of the seriousness of rule breaches.
On Tuesday, Mrs Justice Lang said there was “no universal requirement” that breaches of SRA rules could only amount to professional misconduct if they were serious, culpable and reprehensible.
“Such requirements only arise where they are inherent in the rule in question,” she said. This was not the case when it came to anti-money laundering (AML) rules and so she quashed the decision of the Solicitors Disciplinary Tribunal (SDT) to clear Dentons.
The judge said SRA guidance that only serious breaches of the AML legislation would progress to disciplinary proceedings was “a safeguard against over-zealous enforcement”; it meant that “trivial breaches will not be prosecuted”.
Jayne Willetts – who runs her specialist eponymous firm in Birmingham – said the effect of the ruling was to remove from the SDT the ability to determine whether a breach was so minor that it did not represent professional misconduct.
“The tribunal is best placed to make these decisions with its experience and independence and to make these decisions to protect the public.
“Not all breaches represent a risk to the public. Not all breaches warrant a sanction. The notion as advanced by the judge that the SRA can be relied upon to make that distinction is not borne out by experience to date.”
Former SRA adviser Paul Wightman, a barrister and consultant at strategic and compliance consultancy DG Legal, described the decision as “overly legalistic”.
He explained: “A requirement to apply the stigma of an adverse disciplinary finding on any professional on the basis of strict liability without any wider consideration of proportionality and common sense can only lead to cases of injustice for the regulated community.
“Punishing firms with otherwise exemplary systems and controls for breaches that are acknowledged to be inadvertent and committed in good faith seems to me to be regulation for regulation’s sake.”
Mr Wightman said few people would be reassured by the SRA guidance, arguing that giving the SDT discretion to find minor breaches were not misconduct was “a much greater protection against over-zealous enforcement”.
Michelle Garlick, a partner at Weightmans and head of its Compli service, said: “Whilst it is an understandable decision legally, it will be interesting to see what happens next, whether it be a further appeal, another full SDT hearing or an agreed outcome.
“The SRA will be encouraged by the decision but I hope it reviews carefully it’s enforcement strategy and internal application of it to be clearer about what serious actually looks like in practice and only pursues disciplinary proceedings in circumstances which properly fit that criteria.”
Paul Bennett, a partner at Bennett Briegal, said he was not surprised by the decision but his concern was that it enhanced the SRA’s enforcement discretion beyond AML.
He said: “Troublingly, the court appears to have been very deferential to the SRA’s internal material and how it decides to pursue regulatory breaches.
“The problem with this regulatory empowerment is that it is it is difficult to apply it proportionately because the SRA, SDT and judges all struggle to place themselves in the shoes of solicitor practitioners, not least because a busy practitioner is in the context of AML – or any other professional misconduct – operating outside of their underlying legal speciality.
“Hindsight is a frequent factor in SRA enforcement and this judgment applies hindsight to solicitors. By contrast barristers, doctors and other professionals seem to be judged without this degree of hindsight.
“What is so special about law firms and solicitors that the court feels it is necessary to treat us more harshly?”
He suggested that a factor was handling client money and the money laundering regulations, in which case the wider professional misconduct threshold should not be affected, “but it seems to be and a well-resourced law firm may test the limitation of interpretation of this judgment in due course”.
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