No strike-off for dishonesty: A case law review of exceptional circumstances

17 February 2021

In three recent judgments handed down by the Solicitors Disciplinary Tribunal (the ‘Tribunal’) – Solicitors Regulation Authority v Orton, Solicitors Regulation Authority v Panesar-Jagdev, and Solicitors Regulation Authority v McCullagh – the Tribunal found allegations of dishonesty proved but decided the circumstances fell within the small residual category of ‘exceptional circumstances’, thus warranting a more lenient sanction. In this blog, we consider recent case law in this area and, in particular, look at when the general rule of strike off for dishonesty has and has not been judged an appropriate sanction.

A finding of dishonesty will almost invariably lead to striking off, save in ‘exceptional circumstances’ (see Bolton v Law Society [1994] 1 WLR 512 and Law Society v Salsbury [2008] EWCA Civ 1285). These ‘exceptional circumstances’ comprise a small residual category of cases where striking off will be disproportionate in all the circumstances, and require the Tribunal, in each case, to make an assessment based on the facts before it.

As Coulson J succinctly summarised in Solicitors Regulation Authority v Sharma [2010] EWHC 2022 (Admin):

It seems to me, therefore, that looking at the authorities in the round, that the following impartial points of principle can be identified: (a) Save in exceptional circumstances, a finding of dishonesty will lead to the solicitor being struck off the roll … That is the normal and necessary penalty in cases of dishonesty ... (b) There will be a small residual category where striking off will be a disproportionate sentence in all the circumstances ... (c) In deciding whether or not a particular case falls into that category, relevant factors will include the nature, scope and extent of the dishonesty itself; whether it was momentary … or over a lengthy period of time … ; whether it was a benefit to the solicitor … and whether it had an adverse effect on others.” [13]

Dove J further explained in Solicitors Regulation Authority v Imran [2015] EWHC 2572 (Admin):

“…at the heart of any assessment of whether there are exceptional circumstances, and the factor which is bound to carry the most significant weight in that assessment is an understanding of the degree of culpability and the extent of the dishonesty which occurred.” [24]

Whether or not dishonest conduct justifies a sanction of striking off therefore depends on the nature, scope and extent of the dishonesty itself. What does and does not amount to exceptional circumstances is a fact-specific exercise which the Tribunal must conduct in each individual case. Importantly, the Tribunal will only consider whether exceptional circumstances are present when deciding the sanction to be imposed, after a finding of dishonesty is made.

The matter of exceptional circumstances in dishonesty cases has been shrouded in controversy in recent years, following a series of determinations made by the Tribunal concerning the conduct of junior lawyers. Many of the contested aspects in these cases have related to the level of experience of the lawyers concerned and their state of mental ill-health arising directly from their poor working environments. These issues have raised considerable alarm with respect to the harm that can arise from poor workplace culture, particularly relating to junior lawyers. While we are hopeful that this will lead to the SRA considering how it approaches workplace culture and mental health more generally in the profession, this is sadly beyond the scope of this blog, although it is a topic we will be turning to in the coming months.

Returning to allegations of dishonesty, it is important to note that where the Tribunal has decided a person has acted dishonestly, it is required to apply the prevailing law when assessing the appropriate sanction to impose. It is our focus then to evaluate the current legal position as adopted by the Courts and Tribunal. Specifically, we review and contrast cases in which exceptional circumstances were not found on the facts with cases in which they were, to answer the question: is it possible to identify what will and will not amount to exceptional circumstances when a finding of dishonesty has been made?

Cases where exceptional circumstances were not found

In Solicitors Regulation Authority v James, MacGregor, and Naylor [2018] EWHC 3058 (Admin) (‘James’), the SRA appealed to the High Court against three decisions in which the Tribunal imposed a lesser sanction of suspension, as opposed to strike off, on the basis of its assessment that there were exceptional circumstances in play. Each of these cases followed a similar pattern. They each involved alleged dishonest conduct in the course of work, with each respondent stating they had suffered poor mental health as a result of workplace conditions (described as “toxic”), which had led to their dishonest conduct. In considering the Tribunal’s decisions in each case, the High Court concluded that the Tribunal had erred in its approach to the question of exceptional circumstances, and replaced each order for suspension with an order of strike off.

In particular, the Court found the Tribunal to have erred in finding that poor mental health in itself amounted to exceptional circumstances such that the sanction should be reduced. While mental health was considered a relevant factor to determining whether the conduct was dishonest, particularly in terms of whether the respondent was in the right state of mind to be able to recognise right from wrong at the time of their actions, it was not, the Court said, a significant factor in determining whether exceptional circumstances on the question of sanction existed. What was more significant was the nature of the dishonest misconduct itself, as Flaux LJ explained at [103]:

…where the SDT has concluded that, notwithstanding any mental health issues or work or workplace related pressures, the respondent's misconduct was dishonest, the weight to be attached to those mental health and working environment issues in assessing the appropriate sanction will inevitably be less than is to be attached to other aspects of the dishonesty found, such as the length of time for which it was perpetrated, whether it was repeated and the harm which it caused, all of which must be of more significance.

When considering these factors, the Court concluded that the Tribunal had erred, in that it had failed to focus on the nature and extent of the dishonesty involved in each case. The Court stated that had the Tribunal done so, it would have concluded that any lesser sanction than striking off, was insufficient.

“In James the dishonest conduct extended over 17 months and in Naylor over some 3 months. True it is that in MacGregor, the dishonesty was only for a period of 2-3 days, but that has to be seen in the context of the other misconduct found, the failure of Mrs MacGregor as COLP of the firm to report the fraud and misconduct for another 8 months. Furthermore, in each case the dishonesty was not isolated but was repeated on a number of occasions. In each case, the dishonesty caused harm, in two of the cases to the client (who in one case was vulnerable) and in the other to the LAA. [104]

The authority in James was followed in Solicitors Regulation Authority v De Vita, Platt, and Scott [2018] SDT 11696-2017, where the Tribunal found all three respondents to have acted dishonestly, with no exceptional circumstances justifying any sanction other than strike off. While the Tribunal sympathised with the third respondent, Scott, owing to her junior position at the time, her exposure to a “horrendous” work environment, and the fact that her dishonest conduct would very likely not have occurred but for the actions of the second respondent, it concluded there were no exceptional circumstances having regard to the extent and duration of the dishonesty (which continued over a period of four  months, with a failure to report extending to nearly two years) and the significant risk of harm it caused to clients during that time.

This focus on the nature and extent of the dishonesty, and the degree of culpability was further applied in Solicitors Regulation Authority v Matthews [2020] SDT 12005-2019, which concerned a junior solicitor who accidentally left a briefcase of documents, which included client information, on the train. The Tribunal found the solicitor had acted dishonestly in making untrue statements to her employer relating to the incident. Applying James, the Tribunal considered the solicitor’s mental state when deciding if the subjective element of the test for dishonesty had been met (as set out in Ivey v Genting Casinos (UK) Ltd [2017] UKSC 67). In the absence of any formal medical evidence, it concluded that there was no indication that Matthews’ mental state had been of a degree that caused her to be unaware of what she was doing, or unable to distinguish between right and wrong. The Tribunal further concluded that the objective element of the Ivey test was also met and found dishonesty to have been proved. When considering the sanction to be imposed, the Tribunal applied Sharma, and found that no exceptional circumstances were in play. Particularly, the Tribunal placed weight on the duration of the dishonesty, and concluded that it:

“…had not been a fleeting or momentary lapse of judgement but had in reality represented a course of conduct, involving dishonesty, which had persisted for a week. Even, if the Respondent was correct in her assertion that the delay had been one of only 3 working days then this was still too long” [59].

Critically, what is clear from the Tribunal’s findings is the greater weight it placed on the nature and extent of the dishonesty itself, rather than on other mitigating factors which it considered:

“Having given very careful consideration to all the matters raised by the Respondent including her state of health; her character references and that she had no previous disciplinary findings, the Tribunal concluded that only limited weight could be given to these factors when evaluated against the inherent seriousness of findings of dishonesty within the circumstances of this case. The Tribunal therefore could find no exceptional circumstances within the meaning of Sharma and James in the Respondent’s case” [64].

 

Cases where exceptional circumstances were found

We turn now to cases where the Tribunal has found exceptional circumstances to be in play, thus warranting a lesser sanction than strike-off. The three recent Tribunal judgments of Solicitors Regulation Authority v Orton [2020] 11965-2019, Solicitors Regulation Authority v Panesar-Jagdev [2020] 12074-2020, and Solicitors Regulation Authority v McCullagh [2020] 11683-2017 are particularly relevant. We now consider the contrasting aspects of these cases against the case law set out above.

In Orton, the Tribunal found the junior solicitor to have acted dishonestly by providing misleading information to her supervisor concerning receipt of a hearing notification on one of her client matters, and making untrue statements to the Employment Tribunal, suggesting she had not received the hearing notification. An allegation of dishonesty was also put forward relating to her immediate concealment of the firm’s receipt of the hearing notification by removing the document from the file and placing it in the confidential waste bin.

Relevant to this particular allegation was the fact that the solicitor concerned was subsequently diagnosed with Asperger’s syndrome and medical evidence placed before the Tribunal indicated that this condition would have caused her to be “overwhelmed with anxiety” and initial panic, to the degree that she may not have known what she was doing when she removed the hearing notification from the file and placed it in the confidential waste bin. The Tribunal therefore considered Orton’s mental state when deciding whether this particular act was dishonest, finding that it was not, based upon the medical evidence.

However, the Tribunal stated that the medical evidence did not indicate that Orton’s mental state had prevented her from knowing or believing that subsequently providing misleading information to her supervisor and making untrue statements to the Employment Tribunal “after the moment of panic had gone” was wrong. Accordingly, in respect of these two actions, the Tribunal found her to have acted dishonestly.

Having found dishonesty proved in respect of some of the allegations, the Tribunal then commenced its assessment of whether exceptional circumstances were in play. Again, the Tribunal referred to Sharma and James, and considered the nature, scope and extent of the dishonesty, and the degree of culpability, stating these factors to carry more weight than the respondent’s personal mitigation and mental state, further reiterating the position in James. Contrasting the facts of the case with those in James, the Tribunal noted that in the present case, the two incidents of dishonesty took place within 40 minutes of each other, a much shorter duration than had occurred in James. Further, it said, “whilst inevitably a serious matter, the dishonest account was not sustained and could not be described as calculated” [41]. As such, the Tribunal decided the case fell within the small residual category of cases where there were exceptional circumstances which meant that an order for strike off was not a proportionate sanction. Instead, the Tribunal ordered a suspension from practice for six months.

A similar sanction was imposed in another case heard shortly after Orton; that was the case of Panesar-Jagdev. This case bore some similarities to Orton insofar as it involved a junior solicitor who had made a mistake at work which was determined to have been dishonest, but which the Tribunal concluded warranted a lesser sanction than strike off, again owing to exceptional circumstances. The solicitor in this case was found to have dishonestly falsified two emails by amending the names of the addresses and then, on each occasion, forwarding the email to her client purporting it to be a true copy of the original document. No mitigating factors relating to her mental state were put forward at the time of the incidents. Of note, the Tribunal was asked by the SRA and the respondent to deal with the allegations by way of an Agreed Outcome, but the Tribunal decided that as the case involved admitted dishonesty, and a proposed sanction of a six-month suspension, it merited the attendance of both parties. Of further note, the SRA put forward the argument that the sanction be lessened owing to exceptional circumstances, referring to the then unpublished case of Orton. In assessing whether this was a comparable case, the Tribunal referred again to the approach laid down in Sharma and James, focusing on the nature and extent of the dishonesty and degree of culpability of the respondent. Of particular relevance:

“The Tribunal accepted that this had been a fleeting or momentary lapse of judgement which had lasted a very brief period of time before discovery and also noted that the Respondent had promptly self-reported the incident. On that basis, this case was distinct from other cases of dishonesty in which hours, days and weeks had gone by before the dishonesty had come to light. [49]

Further, the Respondent had not benefitted from her actions and there had been no adverse effect on the client (who was not deceived by her actions), or on the client’s conveyancing transaction.” [50]

The Tribunal thus agreed with the parties’ submissions that exceptional circumstances did apply in this case and that the proposed period of a six month suspension was the proportionate sanction.

Exceptional circumstances were further considered in McCullagh. This case concerned an experienced solicitor who, the SRA alleged, (i) had submitted a misleading and inaccurate CV to a prospective employer suggesting he was presently employed, when in fact he had been dismissed for gross misconduct, and (ii) had provided misleading and inaccurate responses during two subsequent job interviews with the prospective employer, suggesting he had one month’s notice to give, when in fact this was not true. The Tribunal found dishonesty proven only in relation to allegation (ii). In considering sanction, the Tribunal applied the principles in Sharma and James and assessed the nature, scope, and extent of the dishonesty.

The nature of the dishonesty was the giving of misleading answers in the two interviews in order to help secure an offer of employment. The Tribunal found that while the dishonesty was deliberate, it was not planned or calculated. As to scope, the dishonest conduct spanned two occasions, being the two interviews, though the Tribunal noted it related to one and the same misleading answer in each interview. Further, it noted the dishonesty related to two linked incidents, which though separated by one week, each lasted “a matter of seconds”. The Tribunal thus distinguished James:

The Tribunal considered that the Respondent’s dishonest conduct was thus of a very different scope and extent to that which was the subject of the decision in James. Whilst not a ‘moment of madness’ in that there were two incidents, they each took place within seconds, albeit separated by a week. In James, the cases considered involved more extensive conduct taking place over a much longer period.” [25]

Medical evidence was also submitted suggesting McCullagh’s poor mental health comprising his previously diagnosed OCD, depression, anxiety, and the fact that he was mourning his father’s death at the time of the incidents. The Tribunal considered these were relevant personal mitigating factors. While it found these factors did not impair his ability to recognise what he was doing was wrong, they did contribute to creating a “perfect storm” surrounding the misconduct. While of significance in terms of reducing culpability, the Tribunal considered these personal factors to carry less significant weight compared to the nature, scope and extent of the dishonesty, applying the principles in Sharma and James:

Uppermost in its mind …was that the dishonest conduct consisted of two unplanned but misleading answers, each lasting a matter of seconds which took place within one week of one another. The Tribunal was mindful that whilst inevitably a serious matter, the dishonest answers were not planned and could not be described as calculated. The Respondent’s record was otherwise unblemished. …The Tribunal found that the Respondent’s case fell within the small residual category of cases where there were exceptional circumstances which meant that strike off from the Roll was not the appropriate sanction. Given the nature, scope and extent of the dishonest conduct the Tribunal did not consider that the protection of the public and reputation of the profession required this ultimate sanction.” [28]  

In view of the circumstances, the Tribunal decided to impose an indefinite suspension as a more appropriate sanction. While an indefinite suspension is a more lenient sanction than a strike off, there is a fine distinction between them in terms of their effect. A respondent may apply to the Tribunal to lift either sanction and, though the test for lifting an indefinite suspension might be lower, they would still need to wait a period of time before applying to the Tribunal and provide cogent evidence that things had changed. In contrast to Orton and Panesar-Jagdev, where the Tribunal imposed much shorter suspensions of six months, a distinguishing factor might be the nature of the dishonesty involved. McCullagh stood to gain personally and economically from his dishonesty, whereas no such gains were evidenced in Orton or Panesar-Jagdev. This may explain the Tribunal’s decision to impose on him a lengthier suspension term.

Furthermore, if we contrast McCullagh with the case of Matthews, we find that both involved dishonesty over a similar duration, spanning one week. In this regard, what might have distinguished McCullagh’s case in the Tribunal’s mind may have been it's finding that his dishonesty was neither planned nor calculated.

An application for appeal has not been submitted in relation to Orton, and an appeal in Panesar-Jagdev is not expected owing to the decision being based on an agreed outcome. As the judgment in McCullagh was handed down very recently, we are yet to see whether either party will seek to appeal the decision. 

 

Concluding remarks

Current case law firmly establishes that what may amount to exceptional circumstances is in no sense prescribed and depends upon a balancing exercise of the various factors and circumstances of each individual case. As Flaux LJ explained in James:

“…it is clear from the decisions in Sharma, Imran and Shaw, that the most significant factor carrying most weight and which must therefore be the primary focus in the evaluation is the nature and extent of the dishonesty, in other words the exceptional circumstances must relate in some way to the dishonesty.[101]

The duration of the dishonest misconduct appears a significant factor along with the seriousness of dishonesty and the (risk of) harm (or potential harm) caused to clients and others. In the recent cases of Orton and Panesar-Jagdev, the Tribunal distinguished the momentary nature of the dishonest conduct in both cases from the more extensive period of time over which dishonesty took place in James, Scott, and Matthews. The Tribunal further concluded that the harm or risk of harm arising from the dishonesty in Orton and Panesar-Jagdev was minimal, with no adverse effects being found, particularly in Panesar-Jagdev. Taking into consideration the most recent decision in McCullagh, the Tribunal found exceptional circumstances to be present, but owing to the more serious nature of the dishonesty, imposed a greater period of suspension – one of indefinite duration. These cases are distinct from James, Scott, and Matthews, where the nature and extent of the dishonesty and the harm either caused or likely to be caused, was considered to tip the balance in favour of the most serious sanction being imposed; strike off.

So, is it ultimately possible to identify what will and will not amount to exceptional circumstances when a finding of dishonesty has been made? The short answer is ‘no’. While the judgments indicate that certain factors carry significant weight, namely the nature of the dishonesty, its duration, whether it was repeated, and the degree of harm it caused, the Courts have been reluctant to define any scope or parameters, emphasising that each case will turn on its own facts, thereby requiring a Tribunal to perform a balancing exercise of the factors relevant to the case in hand.

Following James, a Tribunal will consider mitigating circumstances surrounding mental ill-health at work at both the stage of deciding whether the conduct was dishonest, and subsequently at assessment of sanction. However, the case law is clear in that mental ill-health considerations will carry more weight in a Tribunal’s decision in respect of whether the individual could distinguish between right and wrong at the time of their actions, rather than at the subsequent sanction stage, where any sanction less than a strike off hinges on the Tribunal’s assessment of exceptional circumstances.

 

In summary, if dishonesty is found proven, notwithstanding the existence of mental ill-health, the sanction imposed will depend upon the seriousness, nature and extent of the dishonesty itself. These principles embedded in Sharma, and restated in Imran and James, remain the current law, and reinforce the Court’s view that the number of dishonesty cases with exceptional circumstances should remain as small as possible. With the current law as it is, preventing adverse situations arising in the first place, which would subsequently be considered by a Tribunal to amount to dishonest conduct, would help to minimise the risk at its source. This involves targeting policy and regulatory efforts at a primary level to combat poor workplace culture and create more psychologically safe working environments.

FURTHER INFORMATION

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

 

ABOUT THE AUTHORS

Jessica is a senior associate with extensive experience specialising in legal services regulation. Jessica’s work in this sector focuses on advising her clients in relation to complying with regulatory obligations, better understanding the importance of legal ethics within regulation, regulatory investigations and public law matters, including reviewing regulatory frameworks and decision making processes.  Jessica is Deputy Editor of Cordery on Legal Services.

Lucinda is a professional support lawyer in the Regulatory team, and is responsible for knowledge management and practice development. She has previously advised individuals and professional bodies in the legal and accountancy sectors, on authorisations, compliance, ethics, and regulatory policy.

 

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