Acting to stop harm: the FCA and Appointed Representatives
Basis for appeal
The Solicitors Regulation Authority (SRA) appealed against sentences imposed by the Solicitors Disciplinary Tribunal (SDT) in relation to three Solicitors (O, E and S). The SDT had fined all three solicitors and made S subject to a six month period of suspension. The SRA contended that the sentences did not reflect the gravity of the conduct and that O, E and S should be either suspended or struck off. O and E argued that neither was guilty of dishonesty and that suspension or striking off should be reserved for far more serious cases.
O had entered into a sham partnership arrangement with E under the partnership Ross Kingsley and Co, to enable E to practise as a sole principal when he was not qualified to do so. During a forensic inspection, O falsely attempted to claim that he had played a full role in the firm. He provided false information in relation to the working arrangements in the practice, the banking arrangements and the existence and identity of employees of the firm.
The SDT considered that O and E were equally culpable and noted that the conduct, which showed a lack of integrity, would have had an impact on both clients and lenders.
O was also the partner in a firm named Elliot Stephens & Co. S also worked for this firm. O and S were found to have committed various breaches of the Solicitors Account Rules. O had also failed to comply with the Solicitors Introduction and Referral Code, including by paying referral fees directly from client accounts. Further allegations related to the firm's engagement in mortgage transactions which bore several of the hallmarks of mortgage fraud.
O was fined £28,000.
S was accused of the same matters as those involving O whilst working at Elliot Stephens & Co. However, his responsibility was found by the SDT to have been greater than that of O. Client accounts appeared to have been in deficit on a number of different occasions in very significant amounts.
S was also alleged to have failed to honour an undertaking and provided inaccurate information to the SRA. S was further alleged to have practised as a solicitor in breach of conditions on his Practising Certificate
S was fined £8,000 and given a six month suspension.
E was involved in the sham partnership with O and it was suggested that he might have been the instigator of this. He had also been involved in a firm which had improperly retained £342,000 to fund a transaction for three months after it had become clear that this transaction would not proceed. There were significant and wide scale failures in the operation of the accounting system of this firm and, on two occasions, the firm had failed to honour undertakings.
In total, 15 allegations were found proved against E in relation to the firm of Ross Kingsley & Co. The most serious of these included breaches of undertakings, the use of £6,000 of clients’ funds for his own benefit and a failure to act in the best interests of lender clients.
E was fined £35,000.
Mr Justice Burnett allowed the SRA’s appeal. He determined that:
(1) The court had to bear in mind that the tribunal was an expert and informed tribunal, best able to assess what was needed to uphold the standards of integrity, probity and trustworthiness in the solicitor's profession. However, the court should interfere where the sanction was “clearly inappropriate”
Mr Justice Burnett was of the view that the process of looking at similar cases, some of which showed that fines were imposed in cases of at least as great a gravity and others of which showed that suspension was ordered where the failures were no more severe, was not of assistance. While the SDT must strive for uniformity, the essential principle was that identified by Thomas Bingham MR in Bolton v Law Society  1 W.L.R. 512;
“The profession of solicitor requires complete integrity, probity and trustworthiness. Lapses less serious than dishonesty may nonetheless require striking off, if the reputation of the solicitors’ profession “to be trusted to the ends of the earth” is to be maintained”.
This means that, in cases where there has been a lapse in standards of integrity, probity or trustworthiness, a solicitor should expect to be struck off, even if dishonesty has not been proved.
(2) All three solicitors had to be struck off the Roll; striking off was the only appropriate sanction for maintaining the standards of the profession.
O was guilty of persistent flouting of the rules in relation to two firms in a way which posed a serious risk to his clients. The reputation of the profession was seriously undermined by the imposition of fines for such cases.
E’s actions in practising as a de facto sole principal with O’s assistance when he was not qualified to do so would alone have justified both being struck off.
The SDT had failed to appreciate the damage that would be done to the profession if O was allowed to continue to practise having shown so serious a disregard for the rules. E showed no appreciation for the demands of the profession and no understanding of the standards of integrity and trustworthiness.
It was not possible in S's case to impose a fine as he had breached professional undertakings, given misleading information as to the existence of partners, failed to rectify debit balances on client accounts and been involved in transactions which bore the hallmarks of fraud.
This case established that where there has been a lapse in standards of integrity, probity or trustworthiness, a solicitor should expect to be struck off, even if dishonesty has not been proved.
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