Robertson: Privileged material often crucial in defences
This week’s Carter-Ruck ruling could be bad news for some solicitors under investigation by the Solicitors Regulation Authority (SRA), experts have warned.
Mr Justice Butcher decided on Monday that section 44B of the Solicitors Act 1974 does not give the SRA the right to require the production of documents subject to legal professional privilege (LPP) without a waiver from the client
Much of the reaction has focused on the impact on the SRA but privileged material can often by valuable in clearing solicitors being probed by the regulator.
A briefing from City firm CMS – co-authored by partners Zoe Burge and Dan Tench, who acted for Osborne Clarke partner Ashley Hurst in his successful appeal against a finding of misconduct in a SLAPPs case – said: “There are likely to be many scenarios in which solicitors will want to seek their client’s consent to the production of privileged client documents to the SRA upon receipt of a section 44B notice, including where such documents would exonerate/assist in resolving conduct concerns raised by the SRA.
“Difficulties will now arise where a client refuses to waive its LPP.”
Patricia Robertson KC, a legal regulation expert at Fountain Court Chambers, said the ability to defend by reference to privileged material was “often critical in persuading the SRA that what looked at first to warrant investigation is in fact on the right side of ‘walking the line’”.
Writing on LinkedIn, she continued: “If this stands, solicitors would need to be given the benefit of the doubt on points that might be illuminated by privileged material, as happens in the wasted costs jurisdiction.
“That will however require a major reset on the part of a regulator who has hitherto been very willing to allege lack of integrity or even dishonesty on, many of us might say, very slim grounds.”
More broadly, she acknowledged that the law on this “was indeed in a mess and the judgment nails that”.
But on the “core debate” of the necessity of implying a right of view privileged material into section 44B, she said “Butcher J seems to test that need against a limited range of type of case and rather assumes what’s in issue, namely that there will not be a need for the regulator to resort to privileged material”.
CMS said that, if a court had to proceed in the same way as in wasted costs proceedings, “the SRA may have to do the same… which is likely to mean these investigations cannot practicably continue”.
The ruling also raises questions about ongoing cases where LPP material has already been obtained by the SRA, as well concluded cases where prosecutions have been successful on the basis of LPP material.
CMS said: “Plainly, the SRA cannot continue to access any LPP material it holds unless the client has given consent. But will all this material be returned or destroyed or held in escrow pending the appeal? If the latter, what safeguards will there be?
“In terms of concluded cases, the courts may be reluctant to overturn a series of SDT [Solicitors Disciplinary Tribunal] decisions on this basis.
“However, if they are predicated on evidence which was unlawfully obtained by the SRA, challenges cannot be ruled out. That starting point is the material in question should not have been with the SRA or the SDT or in any judgment.”
CMS added that the decision also put into focus “the lack of any real regime to protect the provision of LPP material to the regulator”.
It explained: “For example, as noted in the judgment, presumably the power does not extend to the SRA obtaining such material when the solicitor is acting for a client against the SRA itself, but what are the parameters of this? And what safeguards should there be when this very sensitive information is disclosed?”
Benjamin Tankel, a barrister at 39 Essex Chambers who has frequently acted for the SRA in the tribunal, laid out the types of cases where the client may be unwilling to waive their LPP.
These ranged from money laundering matters, spurious immigration claims and allegations of conflict of interest or misuse of confidential information, to investigation triggered by a media sting and “involvement by firms in problematic schemes”.
Writing on LinkedIn, he said: “Examples [of the latter] from the recent past include graphite investment schemes, land-banking, and fractional property investment schemes. The SRA must see the advice provided to the clients about such schemes, to see whether the firm adequately advised the clients of the risks.
“The trigger for an investigation is usually the collapse of such schemes, rather than a complaint by any individual client. In any event, there can be hundreds of affected clients whose files need checking, and whose consent must therefore be obtained.”
Leading legal ethicist Professor Richard Moorhead of Exeter University said the decision was good news for “the sort of person who likes to threaten people with apparently-meritless litigation (I am not saying Mr Amersi or Carter-Ruck did that, we will now quite likely never know), or cover up the dirt with dubious investigations and over-menacing NDAs, or dance around your disclosure obligations, or seek lawyers who are willing to tell you something illegal is unlawful but reasonable and so provide you with legal cover.”
Writing on his blog, he continued: “They can all sleep safe and the lawyers sleep safely as long as they do not fall out with those clients. Take a moment to ponder those incentives.
“For such people, it is a great day for the rule of law. A fundamental right has prevailed. Unless the higher courts reverse out (possible but not especially likely, I would say) or Parliament legislates to make what should be clear, clear.
“The regulators need these rights. They must exercise them responsibly, of course. That requires a proper stautory framework. They should sort out the powers of all legal regulators at the same time.
“It is not something best left to courts to deal with on a case-by-case basis. The rule of law depends on holding lawyers appropriately to account, particularly when they are in league with clients reckless or deliberate in the harm they inflict on others. If the law does not do that, the rule of law for the many becomes the rule of lawlessness for a few.”
In a statement, the Legal Services Board said it has been in regular contact with the SRA over the Carter-Ruck case.
“We are now considering the implications of the High Court ruling on the SRA’s ability to effectively investigate and where warranted, take enforcement action in the public interest.
“The LSB’s interest is in ensuring a well-functioning legal services regulatory framework that works in the interests of consumers. We will continue to monitor this situation and consider next steps with that objective in mind.”
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