Kingsley Napley Spotlight Series

Where have we reached on costs in proceedings before the Solicitors Disciplinary Tribunal post Beckwith?

19 January 2021

Regulatory investigations across all sectors are increasing in complexity, with a corresponding increase in the size of the cost applications made by regulators upon successful prosecution. For solicitors facing investigation by the Solicitors Regulation Authority (‘SRA’), the costs associated with prosecutions before the Solicitors Disciplinary Tribunal (‘SDT’) have made the headlines recently for their size. In Beckwith, for example, the Divisional Court referred to the SRA’s costs of c.£340,000 as “alarming.

Whilst cost applications by regulators against respondents are commonplace, the recovery of costs against the regulator has always been a far harder task. Recent cases have gone someway to levelling the playing field and in bringing regulatory prosecutions further towards (yet still some way away from) the position in civil proceedings, namely that the costs follow the event.

Costs in the SDT

Costs are dealt with in rule 43 of the Solicitors (Disciplinary Proceedings) Rules 2019. Pursuant to rule 43, the SDT may at any stage in the proceedings make such an order as to costs as it thinks fit, which may include an order for wasted costs. The amount of the costs to be paid may be determined by the SDT following summary assessment or directed by the SDT to be subject to detailed assessment by a taxing Master of the Senior Courts (summary assessment is typical). Rule 43 requires the SDT to consider all relevant matters when deciding whether to make an order for costs, against which party, and for what amount including:

  1. The conduct of the parties and whether any or all of the allegations were pursued or defended reasonably;
  2. Whether the Tribunal’s directions and time limits imposed were complied with;
  3. Whether the amount of time spent on the matter was proportionate and reasonable;
  4. Whether an hourly rate and the amount of disbursements claimed is proportionate and reasonable;
  5. The paying party’s means.

 

Costs against the Respondent

When the SRA pursues a case before the SDT, the Tribunal may order the respondent in the case to pay the SRA’s costs, or a proportion of those costs,[1] if the SRA is successful in its prosecution.[2] Whether any allegations were withdrawn and the division of costs in multi-respondent cases can be relevant considerations. The SRA can also recover its costs in cases that result in the SRA issuing or agreeing a finding or sanction.

Generally speaking, where a regulator’s case against a respondent fails in part, the regulator’s costs are usually discounted either by a percentage or even to zero (see Broomhead v SRA [2014] EWHC 2772[3] and SRA v Libby [2017] EWHC 973 (Admin)).[4]

Where a regulator’s case against a respondent fails entirely, however, ordinarily the regulator must bear its own costs. That presumption can be departed from, for example if the regulated person’s conduct, although acquitted, demands it, most usually in circumstances where it is argued that they “brought the prosecution on themselves”, for example by not responding to the regulator’s enquiries or not cooperating with the investigation (see for example Broomhead v SRA [2014] EWHC 2772[5] and SRA v Libby [2017] EWHC 973 (Admin)).[6]

The means of the respondent should be taken into account (see Merrick v SRA [2007] EWHC 2997 (Amin) and D’Souza v Law Society [2009] EWHC 2193 (Admin)). If a respondent wishes to submit that they have insufficient financial means to meet an order for costs, it is incumbent on him/her to give notice of his/her position on costs and serve the evidence in support of that position in advance of the hearing where costs are to be considered. The SRA must be afforded a reasonable opportunity to test the evidence relied upon, in an appropriate case to call evidence on the question of the solicitor’s means, and make submissions to the Tribunal.[7]

In R (Lonsdale) v Bar Standards Board [2014] EWHC 4353 (Admin) the unsuccessful defendant was ordered to pay the costs of the Tribunal, including the fees of the tribunal clerk, shorthand writer and lay members.

 

The decision in Ryan Beckwith v SRA [2020] EWHC 3231 (Admin)

The High Court’s recent judgment in Beckwith has potentially improved the prospects for respondents seeking to defeat/challenge cost applications from the SRA in proceedings before the SDT (and indeed the prospects for respondents facing such claims in other fora).

In the underlying SDT proceedings, the SRA had claimed costs of £343,957 after the finding that Mr Beckwith had breached Principle 2 (lack of integrity) and Principle 6 (upholding public confidence in the legal profession) of the SRA Code of Conduct 2011. The SDT ordered Mr Beckwith to pay £200,000 towards those costs.

The SDT reduced the SRA costs claim: (1) to take account of the limited hearing time (the case was listed for 10 days, concluded in 9 days and there was only 1 day where the Tribunal heard evidence for a full day); and (2) to substantially reduce the fees claimed for junior counsel. The Tribunal found the issues in the case not to be significantly complicated such as to justify the SRA requiring junior counsel for the entirety of the case. The Tribunal considered this to be even more so the position when Leading Counsel was supported by two experienced lawyers.

Alongside his substantive appeal in the High Court, Mr Beckwith appealed the SDT decision to order him to pay the SRA’s costs. Since Mr Beckwith’s substantive appeal succeeded, the order for costs made by the SDT was in turn set aside.

Whilst the issue of costs appears not to have been the subject of extensive submissions, the High Court felt moved to deal in some detail with this aspect of the case. In the handful of paragraphs of the judgment in which the issue of costs is dealt ([56] – [60]), there is material that will found arguments by respondents in cases going forward.

First and foremost, the court made plain that a regulator pursuing a case against a respondent had a duty to do so in a way that was proportionate: “[s]ince the SRA will not in the ordinary course, be required to pay costs when regulatory proceedings are successfully defended (see the judgment of the Court of Appeal in Baxendale-Walker v Law Society [2008] 1 WLR 426), it must conduct its cases with proper regard to the need to permit persons who face regulatory complaints to defend themselves without excessive cost. This is part of any regulator's responsibilities in the public interest.”

Second, the SDT was criticised for providing reasons that were not coherent. Previous case law has confirmed the need for tribunals to give clear and proper reasons for cost decisions reached (see SRA v Anderson and others [2013] EWHC 4021 (Admin)).[8]

It is well established that the costs a person is ordered to pay must be proportionate.[9] The High Court’s judgment in Beckwith however places renewed pressure on regulators to ensure, more so than ever before, that they have, and continue to maintain, an eye to proportionality in the costs incurred during disciplinary investigations and any proceedings that follow.

 

Costs against the regulator

The recovery of a respondent’s costs in a successfully defended prosecution by the SRA has hitherto followed the rule established in Baxendale-Walker v the Law Society[10] and has, in practice, been a rare sight. Whilst costs against a regulator could in principle be ordered, such orders were only made in exceptional circumstances (where the complaint was improperly brought or, for example, proceeds as a “shambles from start to finish.”) The underlying rationale is that were the general rule in civil proceedings (costs follow the event) to apply in regulatory proceedings, this could cause a chilling effect on the part of regulators which is to be avoided given regulators exercise their powers in the public interest. Accordingly, where a regulator entirely fails to prove its case, costs will not be awarded against the regulator where the prosecution was properly brought and the regulator behaved reasonably.

In 2020 the Court of Appeal shifted the dial a little in favour of respondents and took the opportunity to helpfully summarise the law on costs orders being made against regulators, in the case of CMA v Flynn Pharma [2020] EWCA Civ 617.[11] The Court reviewed the relevant authorities, including Baxendale-Walker
and summarised the new position on costs awards being made against a regulator as follows:

  1. An important factor in the exercise of discretion, is the fact that one of the parties is a regulator exercising functions in the public interest;
  2. That leads to the conclusion that in such cases, the starting point or default position is that no order for costs should be made against a regulator who has brought or defended proceedings acting purely in its regulatory capacity;
  3. The default position may be departed from for good reason;
  4. The mere fact that the regulator has been unsuccessful is not, without more, a good reason. However, it is unnecessary to find “exceptional circumstances” as opposed to a good reason;
  5. A good reason will include unreasonable conduct on the part of the regulator, or substantial financial hardship likely to be suffered by the successful party if a costs order is not made;
  6. There may be additional factors, specific to a particular case, which might also permit a departure from the starting point.

The jettisoning of the exceptional circumstances basis from Baxendale-Walker and its replacement with the lower threshold of good reason has provided fertile ground for cost applications against an unsuccessful regulator. In Beckwith, such an application was made; the Divisional Court did not find that the evidence placed before it was sufficient for it to conclude that this was a case where, exceptionally, the SRA should pay Mr Beckwith’s costs of the SDT proceedings, although the Court expressed its “considerable sympathy” to the points made by Mr Beckwith in support of his costs appeal.

In the recent SDT decision of SRA v Adrian Anthony Ring,[12] however, the ‘good reason’ test was successfully argued by the Respondent. The SDT found that many of the allegations had not been properly brought by the SRA as they were based on errors and misunderstandings on the part of the SRA Forensic Investigation Officer. The SDT ordered the Respondent to pay £5,000 of the SRA’s costs (costs were originally c. £63,000 and the SRA sought £15,000 from the Respondent) and the SRA ordered to pay £22,500 of the Respondent’s costs (£40,000 was claimed; deductions were made to take account of preparation, time in the hearing, and those allegations properly brought and, in one instance, proved).

 

As is clear, recent cases have seen a slight, but welcome, shift in favour of respondents when it comes to recovery of costs in regulatory proceedings. The extent to which this trend will continue is questionable, given the chilling effect such decisions may have.

You can  also download our recently published white paper summarising the key insights discussed during  the teams  Spotlight Series webinar , Insights into Legal Services Regulation in 2021: The Impact of Beckwith v SRA, using the form below. 

Download the whitepaper  "Beckwith v SRA - an analysis of the implications of the Court's landmark decision":

 

5f9fea43aec9a90ca1d3a104542a6e39deef6b40 

The white paper produced following on from this webinar forms part of a series that Kingsley Napley will be running through 2021, covering a range of some of the most important regulatory issues and/or developments facing the legal professions in 2021.

We are delighted that a number of thought leaders in the sector will be joining us during the series to share their insights. If you would like to be kept informed in relation to these events please click here.

FURTHER INFORMATION 

If you have any questions about the issues discussed in this article, please contact  Charlotte Judd  or a member of our regulatory team.

 

 

About the author

Julie is a partner in the Regulatory Team. She predominantly acts in the professional services sector, advising lawyers, accountants and built environment professionals on regulatory compliance, investigations, adjudication, enforcement and prosecutions. 

Charlotte Judd is an Associate in Regulatory  department and advises on matters including defending regulated individuals, organisations and corporates; advice for regulators and public bodies and legal services regulation.

 

Footnotes 


[1] See Matthews v Solicitors Regulation Authority [2013] EWHC 1525 (Admin)

[2] As outlined above, the SDT typically carries out a summary assessment; costs schedules are served in advance of the hearing in the Tribunal’s standard directions.

[3] At [40]-[43].

[4] At [64]-[65].

[5] At [41]-[43].

[6] At [64]-[65].

[7] See SRA v Davis and McGlinchey [2011] EWHC 232 (Admin), paras 21-25 for further detail. The SDT standard directions include provision of financial means.  

[8] The Law Society v Hedley Adcock [2006] EWHC 3212 at 41 deals with when the court should interfere with a costs order: “This court should only disturb an order for costs in rare circumstances and only if, in the exercise of its discretion, the tribunal has misdirected itself or reached a conclusion which this court would not have reached, and where the solution preferred by the tribunal has exceeded the general ambit within which a reasonable disagreement is possible.”

[9] See Alistair Brett v The Solicitors Regulation Authority [2014] EWHC 2974 (Admin) at para 114.

[10] [2006] 3 All ER 675 at [43] and [2008] 1 WLR 426 at [34] and [40].

[11] At 79.

[12] Judgment dated 18 December 2020

 

Share insightLinkedIn Twitter Facebook Email to a friend Print

Email this page to a friend

We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.

Leave a comment

You may also be interested in:

Skip to content Home About Us Insights Services Contact Accessibility