BEIS White Paper on Audit Reform: Will Kwarteng's reforms really unchain entrepreneurs?
Judgment date: 19 December 2012
High Court dismiss an appeal in relation to the SDT’s findings on a particular allegation but allowed an appeal in relation to the sanction imposed
Mr Tinkler (T) began practice in 2003 as a sole practitioner of Tinkler Solicitors (Tinklers). In 2005 T met Mr Kemp (K), who was a partner in a firm of Solicitors known as Wisemove. In 2006 K had become a sole practitioner. T and K decided that T would become a partner in Wisemove and K a partner in Tinklers.
In January 2008 the SRA began an investigation of the books of accounts and other documents of Wisemove. T and K told the SRA that each of them had become a partner in the other’s firm in order to obtain panel status with lending institutions. T told the SRA that he had not reviewed Wisemove’s books or trading accounts before entering the partnership. Neither T nor K received a salary or share of the profits from the respective firm, nor did they maintain an office in or take an active role in the running of each other’s firms.
The SRA’s investigation revealed various breaches of the Solicitors’ Accounts Rules 1998, the Solicitors’ Practice Rules and the Solicitors’ Code of Conduct. Several of the allegations made against T were admitted and found proved by the Solicitors Disciplinary Tribunal (SDT). An allegation that T and K misled clients as to the nature of their partnership contrary to Rule 1(a) of the Solicitors’ Practice Rules 1990 and Rules 1.01 and 1.06 of the Solicitors Code of Conduct (Allegation 7) was disputed.
In opening the case before the SDT, Counsel for the SRA made it clear that Allegation 7 was not based on any dishonesty on the part of T and K, nor was there any evidence that lenders or clients had in fact been misled. Instead, the SRA’s case was based on the premise that the purpose of the structure of the partnership was to mislead clients. The SDT found Allegation 7 proved. T was fined £40,000.
T appealed against the finding that Allegation 7 was proved and against the fine that was imposed upon him.
On appeal, Mr Justice Wyn Williams held that it was not necessary to find that any client was misled by the nature of the partnership in order for Allegation 7 to be proved. He found that:
“The two men held themselves out as partners in Tinklers and Wisemove; yet they did nothing to dispel the obvious inference to be drawn from that holding out that each played a part in the control and operation of each partnership. In the absence of any disclosure of the true state of the nature of the partnerships, clients would, inevitably, believe that each partner was playing a role in the control and operation of the partnerships.”
It was held that it could properly be inferred that clients had been misled about the true nature of the partnerships.
In relation to the fine, Mr Justice Wyn Williams found that the SDT erred in law in assessing the financial penalty, because it failed to have any regard to T’s ability to pay a fine and there was “no doubt that this was a material factor”. On the basis of T’s means, it was held that the fine of £40,000 was excessive and disproportionate. A fine of £20,000 was substituted.
An allegation that clients have been misled as to the nature of a partnership may be found proved on the basis of an inference that clients would have been misled in the absence of any evidence of clients who actually were misled.
The Appellant’s means are a material factor in the decision as to the appropriate fine for the SDT to impose.
Skip to content Home About Us Insights Services Contact Accessibility