Bryant & Anor v The Law Society [2007] EWHC 3043 (Admin)

[2007] EWHC 3043 (Admin)Case No CO/786/2007
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
DIVISIONAL COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 21/12/2007
Before
LORD JUSTICE RICHARDSMR JUSTICE AIKENS
Between
Hugh David BryantAppellantsReginald BenchAppellantThe Law SocietyRespondent
(Transcript of the Handed Down Judgment ofWordWave International LimitedA Merrill Communications Company190 Fleet Street, London EC4A 2AGTel No: 020 7404 1400, Fax No: 020 7831 8838Official Shorthand Writers to the Court)
Mr Gregory Treverton-Jones QC (instructed by Radcliffes Le Brasseur) for AppellantsMr Geoffrey Williams QC and Mr Jonathan Goodwin (instructed by Messrs Lonsdales of Preston) for RespondentHearing Hearing dates: 11-12 October 2007
JudgmentLord Justice Richards :
[1]This is the judgment of the court, to which both members have contributed, in respect of appeals brought by Mr Hugh Bryant and Mr Reginald Bench against a decision of the Solicitors’ Disciplinary Tribunal. Mr Bryant, who is 56 years of age, had been a solicitor since 1984. Mr Bench, who is 67 years of age, was formerly a legal executive but was admitted as a solicitor in 2001. The disciplinary proceedings related to a period between September 2002 and December 2004when the appellants were practising in partnership together in London under the style of Bryant Hamilton & Co. They faced seven charges of professional misconduct, which the tribunal found largely substantiated. The tribunal also made a finding of dishonesty in respect of Mr Bryant and ordered him to be struck off the Roll of Solicitors. It found Mr Bench’s involvement in the relevant transactions to have been much more limited and not to have been dishonest. The tribunal ordered him to be suspended from practice as a solicitor for three years. Appeals are now brought against the findings of dishonesty and misconduct and also against the sentences imposed.[2]The case is one of considerable factual complexity, as well as raising an important issue concerning the legal test for a finding of dishonesty in disciplinary proceedings.

Outline: charges, findings and scope of appeal

[3]The allegations against the appellants were that they had been guilty of conduct unbefitting a solicitor in each or any of the following circumstances, namely that:
“1. [They] acted for and continued to act for clients who were involved in dubious or fraudulent transactions that bore the hallmarks of fraudulent investment schemes, notwithstanding:- 1.1 their familiarity with The Law Society’s Yellow Card Warning on bank instrument fraud; 1.2 their familiarity with The Law Society’s Blue Cards on money laundering; 1.3 their knowledge that some of the transaction documents were forgeries; 1.4 they had been notified that Harry Alonso, who referred many of the transactions to them, had been convicted in the United States of America for his role in a money laundering and investment scam that defrauded victims; 1.5 their experience; 1.6 the fact that each transaction was unusual and not one in which a solicitor should properly involve himself. and, therefore, by virtue of 1.1 to 1.6 above their involvement in such transactions was both as knowing participants and dishonest. 2. [They] failed to take adequate and reasonable steps to protect funds held on behalf of third parties and in doing so acted dishonestly. 3. [They] deducted money from funds provided by third parties without authority, namely, funds provided on behalf of Rose Excalibur, Mermaid, Execo SA, United Trucking and Both Feet Films; and provided them on their client’s instruction to other third parties for example, Oxford Financial Group, FFC Capital Investment Agency, The Peoples Trade Indemnity and DBKN. 4. [Mr Bryant] breached an undertaking by failing to hold third party funds to their order after he agreed to do so and after promising the third parties’ solicitor he ‘would give him prior warning if we were asked to pay the money to anyone other than their clients’, which he also failed to do. 5. [They] separately or together misled or attempted to mislead third parties including a Law Society Investigation Officer by: - 5.1 sending an e-mail on 17th August 2003 in the Rose Excalibur Transaction to a third party Mr VL stating ‘… we have heard nothing from MM themselves …’ when that was not the case; 5.2 sending an e-mail on 13th November 2003 to a third party’s solicitor implying that the third party’s solicitor’s client’s money remained in client account when it did not; 5.3 failing to deliver up complete files of papers when required to do so pursuant to Section 44B of the Solicitors Act 1974 (as amended). 6. Contrary to Rule 32(2)(b) of the Solicitors Accounts Rules 1998, [they] failed to record funds received from third parties onto individual accounts in the client ledger. 7. Contrary to Rule 22 Solicitors Accounts Rules 1998, [they] withdrew monies out of client accounts for their costs otherwise than as permitted.”
[4]The tribunal found allegation 1 substantiated, subject to the issue of dishonesty which it dealt with separately. It considered allegations 2 and 3 together and found them substantiated, again subject to separate consideration of dishonesty. It found allegation 4 substantiated. It found allegations5.1 and5.2 substantiated against Mr Bryant but not against Mr Bench. It did not find allegation5.3 substantiated against either appellant. It found allegations 6 and 7 substantiated against both appellants.[5]The tribunal then turned to the issue of dishonesty and, as we have said, found Mr Bryant but not Mr Bench to have been dishonest.[6]Having reached its decision in relation to the allegations, the tribunal considered the character references put forward in support of the appellants, and also the submissions in mitigation, before making the orders striking off Mr Bryant and suspending Mr Bench.[7]Mr Bryant appeals against all the tribunal’s findings against him with the exception of the finding in relation to allegation 5.1. Mr Benchappeals against all the findings against him. Each of them appeals against sentence.

The facts: introduction

[8]Regrettably, it is impossible to understand some of the issues in this case without a detailed examination of the relevant facts, the documents and the history of the matter leading up to the hearing before the tribunal. We propose to set out here the central facts which formed the basis of the allegations and which led the tribunal to its conclusions. Later in this judgment, when we consider both appellants’ cases against the findings of the tribunal, we will have to consider in further detail particular facts and documents,

The appellants

[9]Between 1984 and 1990 Mr Bryant worked for two insurance companies, London & Liverpool P&I Management Limited and Shoreline Management (Bermuda) Limited. In the first company, whose business is the protection and indemnity insurance of shipowners and others, Mr Bryant was Chief Underwriter. In the second he also worked in the field of marine insurance. He was an executive director of both companies. In 1990 Mr Bryant left London & Liverpool P&I Management Limited and joined Holman, Fenwick & Willan, the well known firm of City Solicitors which specialises in maritime and insurance law. He was an assistant solicitor there. Subsequently he became a partner of five firms: Waltons & Morse, Penningtons, Williamson & Horrocks, his own firm, Bryant Hamilton & Co, and then Shadbolt & Co, before reforming Bryant Hamilton & Co in September 2002. In all of these firms Mr Bryant practised as a shipping, aviation and insurance lawyer. He was therefore no stranger to international commerce and insurance and he would have been well aware of the need to be careful about possible fraudsters and their schemes.[10]Mr Bench had formerly been a legal executive. He met Mr Bryant when they both worked at Holman, Fenwick & Willan. Mr Bench has worked continuously with Mr Bryant since 1990 in a number of different firms. Mr Bench was admitted as a solicitor in 2001.

The appellants’ experience with “credit guarantee insurance” or “financial guarantee insurance”

[11]Mr Bryant’s work whilst a partner at Penningtons included a project to find a solution to the problem that ship owners were required to provide financial guarantees, or “certificates of financial responsibility”, under the United States’ Oil Pollution Act of 1990. Mr Bryant’s solution was in the form of insurance, through the vehicle of a company called Shoreline Mutual. Mr Bench assisted in this work. Between 1993 and 1999, Mr Bryant and Mr Bench worked on various project finance transactions for two airlines. Security for the finance was provided by “financial guarantee insurance” through an insurance company. When they were partners in Bryant Hamilton & Co, Mr Bryant and Mr Bench worked on project finance for Caspian Energy. The proposal there was to use financial guarantees given by an insurance company to facilitate the provision of mezzanine finance for an oilfield development project. Mr Bryant’s evidence to the tribunal was that this type of insurance is known as “Alternative Risk Transfer” insurance, or “ART” insurance. It appears to be a variation on credit guarantee insurance, which is also known as “guarantee insurance” or “financial guarantee insurance”.

The contact with Mr Alonso and Northgate International Corporation

[12]Mr Harry Alonso was, at the relevant times, the Chief Executive of Northgate International Corporation (“NIC”). That is a British Virgin Islands company. Mr Bryant had acted for NIC and Mr Alonso since 1996 or 1997. They had remained clients of Mr Bryant when he moved firms. NIC and Mr Alonso continued to be clients from 1st September 2002, when Mr Bryant and Mr Bench practised in partnership as Bryant Hamilton & Co from offices in Ibex House in the City. During 1998 Mr Alonso was arrested by the National Crime Squad of the UK in connection with possible “advanced fee” fraud. He was then the subject of extensive investigations. Mr Alonso was eventually released without any charges being brought in May 2000. As we understand it, Mr Bryant and Mr Bench were aware, before forming Bryant Hamilton, that Mr Alonso had been the subject of these police enquiries. They believed that the allegations against him were based on transactions essentially similar to the transactions which subsequently gave rise to the disciplinary allegations against them; ie. the payment of an arrangement fee in return for the production of a letter of commitment from either an insurance company or a “broker”. We shall have to consider the subsequent history of Mr Alonso in more detail later in this judgment.

The contracts between NIC and its clients

[13]The evidence of Mr Bryant to the tribunal was that NIC acted as intermediaries who procured “ART insurance” on behalf of clients. Such “insurances” or guarantees were intended to act as a security to enable clients to obtain finance for large projects, e.g. construction projects, the purchase of aircraft or the development of oilfields. Typically the bank or other company providing the finance for such projects would require security from the project promoter as a condition of lending money. The project promoter might find difficulty in providing security in the form of ready assets. Therefore, guarantee insurance, or “ART insurance” as Mr Bryant called it, could be the means whereby additional security could be given by the project promoter.[14]In principle there is nothing dubious about that type of insurance or guarantee. Historically it is the creditor who obtains it: see McGillivray on Insurance Law (10th Ed, 2003) at para 31–16, footnote 55.Logically, a project promoter would have an insurable interest in the risk that it could not repay money lent for a project, so that, in principle, either the project promoter or the lender could be the assured on a policy of “credit insurance” or “credit guarantee insurance” or the object of a “financial guarantee”.[15]According to the evidence of Mr Bryant, NIC’s role was to obtain a Commitment Letter from either an insurance company or a “broker” or agent acting on behalf of an insurance company. The Commitment Letter was in favour of the client of NIC. By this Commitment Letter, either the insurance company undertook to provide an ART insurance policy or a financial guarantee, or the “broker” undertook to procure an insurance company to provide an ART insurance policy, or financial guarantee insurance, upon the completion of various pre-conditions by the client of NIC.[16]Mr Bryant’s evidence to the tribunal, which was not rejected on this point, was that in 1997 or 1998, he and Mr Bench had drafted a “standard” form of agreement for use between NIC and its client. It is clear that the standard form of agreement was not used in each of the cases that were investigated by the Law Society’s investigation officer, who carried out an inspection of Mr Bryant and Mr Bench’s books of account and other documents from June 2004. However, the standard contract terms are relevant to our consideration of the allegations against both appellants, particularly those in allegations 1, 2 and 3.[17]The “standard contract” terms provided as follows:
“1. Arrangement for the provision of a broker’s Commitment Letter Now in consideration of the payment of US$ nnn 000 (“the Arrangement Fee”) receipt of which is hereby acknowledged, NIC and Client agree that NIC shall arrange for the delivery of a Commitment Letter (“the Letter”), in the form annexed hereto as Annex 1, to Client by a major international insurance brokerage firm (“the brokers”) according to which the Brokers shall undertake, upon compliance by client with the conditions set out in the Letter, to secure a financial guarantee (“the Guarantee”) in the form annexed hereto as Annex 2 to be issued by insurance company, authorised in the country in which the Guarantee is issued to transact financial guarantee business and rated not less than “AA” by Standard Poor’s “the Guarantor” in the amount of $ nn00000.00 US$ to guarantee Client’s performance in relation to a project (“the Project”) to a lender nominated by Client (“the Lender”). 2. Guarantee Fee The cost of the Guarantee (“the Guarantee Fee”) which shall be payable to NIC acting on behalf of the Guarantor not later than the day on which the loan for the project is drawn down, shall be not less than Ten(10) per cent for the first year of its validity ……...” 3. Arrangement Fee 3.1 The Arrangement Fee shall be fully earned upon delivery of the Letter, and is charged to compensate NIC for the application, processing and negotiations for the Letter to be issued. NIC undertakes hereby that the Arrangement Fee will be credited against the Guarantee Fee when the loan is drawn down. ……. 4. NIC’s Performance NIC shall deliver the Letter by fax within a period of Twenty (20) working days, and by post as soon as possible thereafter, after receipt of the Arrangement Fee in good, cleared funds into NIC’s account and signature by Client of this Agreement. If for any reason whatsoever, the Letter is not delivered within Twenty (20) working days after receipt of the Arrangement Fee, then the total Arrangement Fee will be immediately refunded. ……… 7. Warranty of Capacity of the Brokers Client acknowledges that NIC has made no warranty in this Agreement or otherwise, concerning the capacity of the Brokers and in particular the Broker’s authority to issue the Letter, which, provided that it is issued in the form set out in Annex 1 and is issued by a recognised international insurance broking company, shall be deemed to be valid and in compliance of the requirements of this Agreement. 8. `Confidentiality and Non-circumvention 8.1 Client agrees with NIC that in consideration of NIC introducing Client to the Brokers for the purpose of obtaining the Letter, Client shall not divulge or communicate to any person (other than those whose province it is to know the same or with proper authority) to use or exploit for any purpose whatever any of the trade secrets or confidential knowledge or information or any financial or trading information relating to the Brokers or the Guarantor which Client may receive or obtain as a result of entering into discussions with NIC and Clients shall use reasonable endeavours to prevent its employees, associates and agents from so acting. This restriction shall continue to apply after the expiration or sooner termination of negotiations and discussions between Client and NIC, but shall cease to apply to information or knowledge which may properly come into the public domain through no fault of the Client. 8.2 Client undertakes hereby not to communicate with the Brokers, Guarantor or Lender except through NIC provided only that direct communication between the Client and Brokers, Guarantor and Lender may be permitted in writing by NIC once NIC is satisfied that all Client’s obligations under this Agreement have been met and the Guarantor has been nominated by the Brokers.”
[18]Clause 9 of the standard form of Contract provided for English law as the proper law of the Agreement and also provided that the High Court of Justice in England would have non-exclusive jurisdiction over any dispute or difference which might arise in connection with the Agreement.[19]Annex 1 of the standard from of Agreement contained pro forma wording for the Broker’s Commitment Letter. The pro forma provided: “We have received from [ ] and reviewed your request for the above mentioned Financial Guarantee. We are prepared to source and procure the issue of a Financial Guarantee (in a wording similar to that attached as Annex 2) from an international insurance company rated “AA” or higher by Standard & Poor’s (referred to hereafter as “Guarantor”) amounting to US$ [amount] for [name of Client]. This Commitment is subject to the following conditions, which must be satisfied within [number] working days of the date of this letter, after which this Letter shall be null and void, unless its validity is extended by mutual agreement in return for reasonable additional consideration: ……….”.[20]The remainder of the pro forma Commitment Letter sets out the “conditions”. These include one or more of the following: an appraisal of the assets of the Client which would be used as security to be pledged either to the intended Lender or to the intended Guarantor; confirmation that the Guarantor or Lender could take a First Charge over the specific security identified; an acceptable counter Guarantee issued in favour of the Guarantor or Lender; a signed copy of the offer of funds or loan agreement by a bona fide lender; and a Letter of Credit or other evidence of available funds to pay the Guarantee Fee.[21]Annex 2 to the “standard contract” is headed “Draft Guarantee”. This wording is in the form of a contract between the lender of finance for a project and the provider of the “guarantee”, so that the “insured” would not be the client of NIC but its financier for the contemplated project.[22]In our view, the effect of these three pro forma contracts is as follows: first, the agreement between NIC and its client is a contract whereby NIC agrees to procure a contractual undertaking from a third party to the client of NIC. The nature of that contractual undertaking depends on who the third party is. If it is an insurance company, then its undertaking is to provide an “insurance” or “guarantee” to a lender, guaranteeing the payment of liabilities of the client of NIC in respect of sums borrowed from the lender for the purposes of an identified project. If the third party is a “broker” or agent of an insurance company, then its undertaking by the broker or agent is to procure that an insurance company will enter into such an insurance or guarantee for the benefit of the lender to the client of NIC.[23]As already stated, this standard form of contract between NIC and its clients was not, in fact, always used. However, Mr Treverton-Jones QC submitted to us that both the aim and wording of the standard form of contract made commercial and legal sense and were not, by themselves, indicative of fraudulent schemes. He pointed out that the ICC had published a “Model Occasional Intermediary Contract”, which could contain a form of “non– circumvention and non–disclosure” clause in similar terms to that used in clause 8 of the standard form of contract developed by Bryant Hamilton & Co. We accept that the role of NIC, in obtaining Commitment Letters from either an insurance company or another party who was in the position of agent of the insurance company, would be that of “middle–man”. There is nothing inherently “dubious” about such a role. There is nothing inherently “dubious” about a lump sum payment for such a role. It is one of the methods of payment for an “occasional intermediary” envisaged by the ICC. Nor, in our view, is there anything inherently “dubious” about the provision of a “non– circumvention and non–disclosure” provision in the contract between the intermediary and the proposed project promoter. They are referred to in the ICC Occasional Intermediary Contract wording and commentary. Such clauses ensure that trade secrets and confidential knowledge are not improperly divulged. They also ensure that there is no attempt by the counterparty to the contract with the intermediary to “cut out the middleman”.[24]We accept, of course, that we have to ask whether this type of contract or a modified form of wording is “dubious” or indicative of fraud in the circumstances which arise in this case. We shall have to analyse further the effect of the wording of the form of agreements actually concluded between NIC and Clients against the factual background of the six sample transactions which formed the basis of the Law Society’s investigation officer and the case against the appellants before the tribunal.

The Blue and Yellow Cards

[25]At the time of events with which we are concerned, the Law Society had issued two “Cards” to firms of Solicitors, which warned them about the dangers of money laundering and fraudulent investment schemes. The aim was to ensure that firms did not become unwittingly involved in laundering the proceeds of crime or in assisting in fraudulent investment schemes.[26]The Blue Card set out advice in relation to money laundering. It pointed out that all solicitors should be aware of the money laundering provisions in the Criminal Justice Act 1993, which was subsequently superseded by the Proceeds of Crime Act 2002. The Blue Card also reminded those solicitors who engaged in investment business within the meaning of the Financial Services Act 1986 that they were subject to the Money Laundering Regulations 1993 and that such firms must take the steps required by those Regulations to ensure that they could not be used by money launderers.[27]The Blue Card set out various signs which might indicate that a money laundering transaction was taking place in which the solicitors’ firm was being involved. Five particular signs are identified. These are: first, unusual settlement requests. The Card says “settlement by cash of any large transaction involving the purchase of property or other investment should give rise to caution. Payment by way of third party cheque or money transfer where there is a variation between the account holder, the signatory and a prospective investor should give rise to additional enquiries”. The second warning sign identified is unusual instructions. That warning says “care should always be taken when dealing with a client who has no discernible reason for using the firm’s services, e.g. clients with distant addresses who could find the same service nearer their home base; or clients whose requirements do not fit into the normal pattern of the firm’s business and could be more easily serviced elsewhere. The third warning sign is large sums of cash. The advice states “always be cautious when requested to hold large sums of cash in your client account, either pending further instructions from the client or for no other purpose other than onward transmission to a third party”. The fourth sign is the secretive client. The fifth sign is “suspect territory”. That advises that “caution should be exercised whenever a client is introduced by an overseas bank, other investor or third party based in countries where the production of drugs or drug trafficking may be prevalent”.[28]Under the heading “Investment business – what the law says you must do”, the Card identifies three particular obligations that a Firm engaging in investment business (within the meaning of the Financial Services Act 1986) must do to comply with the provisions of the Money Laundering Regulations 1993. The third requirement states: “Ensure that [all staff who handle investment business] have in place a recognised procedure for obtaining satisfactory evidence of the identity of those with whom they do business, and that records of that evidence of identity are established and kept in respect of each transaction for 5 years …….”.[29]The Yellow Card warns solicitors firms against banking instrument fraud. The Card points out that a fraudster who peddles these schemes will wish to be associated with the legitimacy and respectability that a solicitor can provide. The Card identifies the following things (amongst others) that a fraudster might ask a solicitor to do: first, providing a communication to someone that the fraudster will nominate. Secondly, asking the solicitor to provide a letter which is either addressed to the fraudster’s company or a third party. Thirdly, asking the solicitor to open an account to await the receipt of funds.[30]The Yellow Card identifies common characteristics of banking instrument fraud. One of these is where proposals are to be received by fax. Another tell– tale sign is that documents will invariably be signed by “the President” or “the Chairman of the Board” or “the Chief Executive officer”. The Card urges solicitors to look for typical phrases in contracts or other documents, some of which, it says, are meaningless. The phrases identified include “Ready Willing and Able”; “Unconditional S.W.I.F.T. Wire Transfer”; “Freely Negotiable, Irrevocable, Clear S.W.I.F.T. Wire Transfers”; “Non-Circumvention and Non-Disclosure Agreements”; and “Good Cleared Funds of Non-criminal Origin”.[31]Both Mr Bryant and Mr Bench were aware of the advice contained on both the Blue and Yellow Cards. That is clear from the second witness statement of Mr Bryant, which was before the tribunal. Both appellants also confirmed to Mr Middleton-Cassini, the investigation officer, that they were aware of the Blue Card and the broad outline of the Proceeds of Crime Act 2002 (see paragraph 12 of the tribunal’s Findings). The appellants were also aware that if they had suspicions of money laundering they should report suspicions by making an official disclosure to the National Criminal Intelligence Service (“NCIS”) (ibid.).

The inspection of Bryant Hamilton & Co, the Law Society’s intervention and subsequent proceedings

[32]The appellants and the practice of Bryant Hamilton & Co were the subject of an inspection by a Law Society Investigation Officer, Mr Middleton-Cassini, who was appointed by the respondent in June 2004 under the Solicitors’ Accounts Rules and Solicitors’ Practice Rules. The investigation took place between June and December 2004. A report, dated 13 December 2004, was prepared as a result of the investigations of Mr Middleton-Cassini. The Report was signed by Mr M J Calvert, the Head of Forensic Investigations at the Law Society. In August 2004 Mr Middleton-Cassini removed from the firm’s premises all available documents relating to NIC and Mr Alonso, pursuant to a Notice served under section 44B of the Solicitors’ Act 1974.[33]Having reviewed these documents, Mr Middleton-Cassini concentrated on six particular transactions in respect of which Bryant Hamilton & Co undertook some kind of work on behalf of NIC and Mr Alonso. Mr Middleton-Cassini’s findings in relation to these transactions are set out in paragraphs 25-151 of Mr Calvert’s report. These six transactions and the findings set out in Mr Calvert’s report formed the basis of the allegations against the appellants. They were therefore the subject of the evidence and submissions before the tribunal.[34]We should note here, as part of the history of these matters, that following Mr Calvert’s report, the Law Society passed a resolution to intervene in the practice of Bryant Hamilton & Co on 20 January 2005. The appellants’ practising certificates for 2004–5 were immediately suspended. The appellants applied to the Law Society to terminate the suspension. On 22 March 2005 an Adjudicator of the Law Society, acting under delegated powers, resolved to terminate the suspension, but subject to conditions which he imposed. The present appellants then appealed to Lord Phillips of Worth Matravers, as Master of the Rolls, to set aside those conditions. In a ruling dated 25 July 2005, he dismissed their application. In the course of his judgment, the Master of the Rolls made a number of remarks about the facts which the appellants now rely upon. We will refer to these below.

The hearing before the tribunal

[35]The application to the Law Society that Mr Bryant and Mr Bench be required to answer the allegations that we have set out above was made on 29 April 2005. The application was heard before by a tribunal, consisting of two solicitors and a lay member, between 9 and 17 October 2006. The appellants were represented at that hearing by Mr Treverton-Jones QC. The orders, to which we have referred above, were made at the conclusion of the hearing, although the Findings of the tribunal were only published later, on 12 January 2007.[36]The documentary evidence before the tribunal consisted of the report signed by Mr Calvert together with various other documents listed in the tribunal’s findings at paragraph 7. The tribunal heard oral evidence from Mr Middleton-Cassini, who confirmed that the contents of the report issued under Mr Calvert’s name were true to the best of his knowledge and belief. Mr Middleton-Cassini gave evidence and was cross-examined about the six sample transactions. Mr Bryant and Mr Bench gave oral evidence as well as putting in their statements.[37]The tribunal also heard “expert” evidence from Mr John Merrett who was at the time an assistant director of the International Chamber of Commerce. His evidence was, in summary, that the documentation in the six sample transactions contained many hallmarks of financial instrument fraud, of the “advance fee” fraud type. Mr Roger McCormick, who was a former partner of Freshfields and who acted as consultant to Bryant Hamilton & Co, gave “expert” evidence on behalf of Mr Bryant and Mr Bench to the contrary effect to that of Mr Merrett. Mr McCormick is a personal friend of Mr Bryant.

The six transactions: (1) Rose Excalibur Ventures Incorporated

[38]By the time of this transaction, Bryant Hamilton & Co had already acted for NIC and Mr Alonso in respect of a number of transactions in which NIC agreed, in return for a fee payable in advance, to procure a letter of undertaking from either an insurance company or a “broker”, ie. to obtain a Commitment Letter. As already noted, that letter would stipulate that an insurance company would provide a financial guarantee or “credit insurance” for the client of NIC, provided that certain identified conditions were met by the client company.[39]Sometime in November 2002, Mr Alonso alerted Mr Bryant that there was a new client, Rose Excalibur Ventures Incorporated, “REVI”, for whom NIC was to undertake to procure a Commitment Letter. A meeting was held at the offices of Bryant Hamilton & Co in London on 28 November 2002. This meeting was attended by Mr Bench, Ms Rebecca Sweeney of REVI, Mr Eric Knudsen, the managing director of NIC and Mr Van Lent, the managing director of BaRe Investments BV. That company was apparently intending to provide finance to REVI. Mr Bryant was not present. Mr Bench’s evidence was that when Ms Sweeney and Mr Van Lent arrived, he checked their identity by looking at their passports.[40]Mr Bench’s evidence to the tribunal was that he believed he was told that REVI wished to undertake a large construction project in the southern USA. However, he was not told the details. His evidence was that he told Ms Sweeney and Mr Van Lent that funds paid to NIC in consideration of its agreement to procure the Commitment Letter would become those of NIC and would not be held in an Escrow Account.[41]The contract that was subsequently signed by NIC and REVI was not on the “standard terms” that we have set out above. It was signed on behalf of REVI and NIC on 26 and 27 December 2002. There was a dispute before the tribunal as to when Hamilton Bryant & Co saw the contract. At paragraph 31 of Mr Calvert’s report it is stated that a copy of the contract was sent to the firm by fax on 26 December 2002. That statement is not repeated in the tribunal’s Findings. It was the appellants’ case that they had not seen the contract terms at any stage until it was drawn to their attention after the Law Society’s intervention in January 2005. For the purposes of this appeal we are prepared to accept that Mr Bryant is correct (see paragraph 92 of his second witness statement dated 14 September 2006), that the contract was faxed on 26 December 2002, but was filed away unseen by either Mr Bryant or Mr Bench and was not seen by them until it was drawn to their attention by Mr Middleton–Cassini.[42]The contract terms are as follows:
“….. 1. Arrangement for the Provision of a Guarantor’s Commitment Letter The Facilitator hereby agrees to arrange for insurance commitment to total USD$500,000,000.000 (Five Hundred Million United States Dollars) from AA rated companies in tranches based upon mutual agreement subject to the receipt of the agreed consideration. Now in consideration of the initial payment of $85,000.00 Thousand, (the “Arrangement Fee”), USD$25,000,000.00 (Twenty Five Million United States Dollars) to include all costs and fees insurance commitment fee shall be guarantee shall be facilitated. The deposit of which shall be made to FACILITATOR’S bankers through the nominated Law Form at: BARCLAYS BANK PLC 54 LOMBARD ROAD LONDON, ENGLAND EC3P 3AH SORT CODE; 207767 SWIFR CODE; BARCGB22 NAME OF ACCOUNT; BRYANT HAMILTON & CO/CLIENT ACCOUNT ACCOUNT # 63660522 This amount shall be held in a solicitor’s client account. The Law Firm shall be bonded to handle the amount of money involved in this transaction. Further the funds shall be held in this account until the letter is delivered specifically as outline in this agreement. After it has been verified and confirmed, by the Solicitors, the funds shall become available for the facilitator “NORTHGATE INTERNATIONAL CORP.”
AND Client AGREE that “NORTHGATE INTERNATIONAL CORP.” shall arrange for the delivery of a Commitment Letter (“the Letter”), in the form annexed hereto as Annex 1, to Client by a major, international insurance company (Guarantor) according to which the Guarantor shall undertake, upon compliance by Client with the conditions set out in the Letter, to issue a financial guarantee (“the Guarantee”) in the form annexed hereto as Annex 2, to be issued by the insurance company, authorized in the country in which the Guarantee is issued to transact financial guarantee business, and rated not less than “AA” by Standard & Poors, in the amount of TWENTY FIVE MILLION UNITED STATES DOLLARS ($25,000,000.00 USD) United States Dollars, to guarantee Client’s performance in relation to a project (“the Project”), to a lender nominated by Client (“the Lender”). The insurance company to issue the commitment shall be among the following companies CHUBB, TOKYO MARINE, MITSUI MARINE CGU OR AXA. Any other company to be used shall be pre-approved by the project owner. The commitment for the insurance guarantee must be irrevocable for the period of 90 days. The text of the insurance guarantee letter must be specifically as agreed upon with no changes unless the new text is agreed upon in writing. All the terms, conditions and requirements shall be defined specifically as a part of this agreement to avoid any problems in complying with the request of the insurance company. The guarantee amount shall cover up to Thirty-Five Million ($35,000,000.00) U.S. Dollars to include all costs and fees. 2. Guarantee Fee The cost of the Guarantee (“the Guarantee Fee”), which shall be payable to “FACILITATOR” acting on behalf of the Guarantor not later than the day on which the loan for the Project is drawn down, shall be not more than six (6%) Percent, nor more than Seven (7%) percent for the first year of its validity. A roll-over fee shall be charged in case the Guarantee is required for a period longer than one year based on the declining balance of the loan, valued at the commencement of each year, and will be payable in advance to cover the duration of the loan as set out in the relevant loan agreement. 3. Arrangement Fee 3.1 The Arrangement Fee will be fully earned upon delivery and validation of the agreed Letter by the Solicitors for the Facilitators, and is charged to compensate “NORTHGATE INTERNATIONAL CORP.” for the application, processing and negotiations for the Letter to be issued. “NORTHGATE INTERNATIONAL CORP.” undertakes hereby that the Arrangement Fee will Be credited against the Guarantee Fee when the loan is drawn down. …….. 6. Warranty of Capacity of “FACILITATOR” “NORTHGATE INTERNATIONAL CORP.” warrants that it is duly authorized to arrange for the delivery of the Letter and to collect the Guarantee Fee on behalf of the Guarantor, however Client acknowledges that this Agreement des not represent an agreement to secure a loan, that “NORTHGATE INTERNATIONAL CORP.” is not acting as a loan broker and is not providing loan services of any kind or promising any loans. …….. 8. Confidentiality and Non – Circumvention 8.1 Client agrees with “NORTHGATE INTERNATIONAL CORP.” that, in consideration of “NORTHGATE INTERNATIONAL CORP.” introducing Client to the GUARANTOR for the purpose of obtaining the Letter, Client shall not divulge or communicate to an y person (other than those whose province it is to know the same or with proper authority) or use or exploit for any purpose whatsoever any of the trade secrets or confidential knowledge or information or any financial or trading information relating to the GUARANTOR which Client may receive or obtain as a result of entering into discussions with “NORTHGATE INTERNATIONAL CORP.” and Client shall use its reasonable endeavours to prevent its employees, associates and agents from so acting. This restriction shall continue to apply for the expiration or sooner termination of negotiations and discussions between Client and “FACILITATOR” but shall cease to apply to information or knowledge, which may properly come into the public domain through no fault of Client. 8.2 Client undertakes hereby not to communicate with the GUARANTOR except through “FACILITATOR”, provided only that direct communication between the Client and GUARANTOR or Lender may be permitted in writing by “NORTHGATE INTERNATIONAL CORP.” once the FACILITATOR is satisfied that all Client’s obligations under this Agreement have been made. ……… 9.0 Proper Law and Jurisdiction English Law shall apply to this Agreement; the High Court of Justice in England shall have non – exclusive jurisdiction over any dispute or difference, which may arise in connection with it. The Parties hereby undertake to nominate solicitors in England to accept service or proceedings if called upon to do so. ……..” BARCLAYS BANK PLC LONDON, ENGLAND EC3P 3AH SORT CODE; 207767 SWIFR CODE; BARCGB22 NAME OF ACCOUNT; BRYANT HAMILTON & CO/CLIENT ACCOUNT

ACCOUNT # 63660522

[43]The principal differences from the “standard” contract terms which are particularly relevant are: first, (in clause 1) that the “arrangement fee” of $85,000 payable to NIC was to be made to the “Facilitator’s” bankers through “the nominated law firm” and which names Bryant Hamilton’s client account. Secondly, (also in clause 1) this contract provides that the “law firm” , which is identified in that clause and also clause 8, the “Confidentiality and Non– Circumvention” clause, “shall be bonded to handle the money involved in this transaction”. That makes very little sense, but probably means that the law firm is to hold the money on behalf of the client. Thirdly, (also in clause 1) that the law firm is to hold funds in the client account until the Commitment Letter is delivered as provided for in the agreement. Fourthly, (again in clause 1), the contract provides that the solicitors are to verify and confirm the Commitment Letter, after which “the funds shall become available for the facilitator”, viz. NIC. Fifthly, clause 3, which deals with the “Arrangement Fee”, provides that the “Arrangement Fee” will be fully earned only on delivery of the fee and also upon authentication and validation of the Commitment Letter by the solicitors.[44]Mr Bryant accepted, in paragraph 92 of his second witness statement, that if he and Mr Bench had seen the contract terms, they would have been wrong to transfer any sums paid by BaRe until there had been validation of the Commitment Letter by Bryant Hamilton. In fact what happened was that Mr Alonso sent a fax instruction on 2 December 2002 to Mr Bryant informing him that US$75,000 was to be received in the firm’s client account in relation to the Rose Excalibur contract. Mr Alonso instructed Mr Bryant to transfer US$70,000 to an account at HSBC, in Florida, in the name of Oxford Financial Goup, Inc, another British Virgin Islands company controlled by Mr Alonso. Those instructions were reversed by Mr Alonso the following day. It appears, looking at the Bryant Hamilton general ledger of NIC transactions, that BaRe deposited $70,00 in the firm’s client account on 29 November 2002 and a further $10,000 on 27 December 2002. Bryant Hamilton paid out a total of $70,000, apparently to Oxford Financial Group Inc, during the period 13 to 27 December 2002.[45]Although Mr Bryant and Mr Bench did not see the contract terms, Mr Bryant accepts that he was told by Mr Alonso that NIC had agreed with REVI that a Commitment Letter would be produced by Mitsui Marine of Jakarta, Indonesia and that this was to be “verified” by Bryant Hamilton, who would be acting for NIC in doing so. Although Mr Bryant suggested other arrangements to Mr Alonso, they were not adopted. We infer from what Mr Bryant accepts he was told by Mr Alonso that Mr Bryant must have appreciated that his firm was supposed to “verify” the Commitment Letter and he should have appreciated that meanwhile it should not release any money received from either REVI or BaRe as the “Arrangement Fee”.[46]On 14 January 2003, Mr Bryant received a fax letter from Mr Knudsen of NIC, with the “text sample” of wording for an irrevocable undertaking to pay an amount of US$2,365,000, to be provided by either an unnamed bank or securities firm, identified as:
“ie. Merrill Lynch (or other major security firm) acting on the instructions of our customer”
. The wording said that the Undertaking for payment was: “irrevocable and payment occurs (sic) 2 or 3 days after receipt and verification of an insurance guarantee bond, in the amount of US$35,000,000 … issued by PT Asuransi Mitsui Marine Indonesia Insurance Company and after successful Authentication and Verification of the said Insurance Guarantee Bond”.[47]On 15 January 2003, an email was sent to Bryant Hamilton from NIC, quoting an email of the previous day that had been sent by Ms Sweeney to NIC, which had attached to it an “insurance guarantee document” and the questions “that are requested for the attorney to ask”. These are said to include: “… such things as did you issue this? Are you and the office authorized to issue the commitment and the guarantee? How many days after you receive the commitment for the premium will the insurance bond be issued? Clarification on the documents needed? Assurance that in the event of default that the pay out will take place in United States Dollars”.[48]The draft letter “from the attorney firm” is addressed to Ms Sweeney and it deals with the matters set out in the body of the email. The draft also says “This is to confirm that we are bonded solicitors operating under the laws of the United Kingdom”. The five questions are more specific. There is a manuscript note, in Mr Bryant’s hand, on the email, saying “check with Mitsui Marine London”. Against each of the five questions there is a manuscript note, again in Mr Bryant’s hand, answering “yes” to each of them.[49]What seems to have happened then is as follows: on 16 January 2003, Bryant Hamilton received a fax from Mr Erwan Suryadi, who is described in the fax as the Manager of PT. Asuransi Mitsui Marine Indonesia. It enclosed a draft guarantee “for your perusal”. On 17 January 2003, Mr Bryant wrote and faxed a letter to Ms Sweeney reporting on what he said that he had done. The letter stated that Mr Bryant had telephoned a number (in Indonesia) and asked to speak to Mr Suryadi and spoke to someone who identified himself as such. The letter then sets out the answers that Mr Bryant’s interlocutor gave. The letter ends: “This is to confirm that we are solicitors of the Supreme Court of England and Wales. Under the laws applicable to the practice of solicitors we are obliged to have professional indemnity insurance. We are regulated by the Law Society of England and Wales. However, although we reasonably believe that we have taken steps to verify the information given above, we can accept no liability for its accuracy, in addition we cannot accept any responsibility for the acts or omissions of any of the parties mentioned in this letter”.[50]Paragraph 32 of the Findings states that Mr Middleton–Cassini had not been able to find any formal attendance note concerning the conversation between Mr Bryant and Mr Suryadi. Nor was there any explanation as to why Bryant Hamilton had paid out the sums (which had apparently been credited to the Bryant Hamilton client account by BaRe) before Mr Bryant wrote to Ms Sweeney on 17 January 2003.[51]In his second witness statement (paragraph 103) Mr Bryant states that he had verified the identity and standing of Mr Suryadi in Mitsui Marine with Aon. It is noticeable that this statement is very different from the version set out at paragraph 73 of Mr Bryant’s statement dated 11 April 2005. That states that he had spoken to Helen Tang, a senior vice–president in the marine department of Aon Risk Services in Hong Kong, whom he had known since he was a P&I club underwriter in the 1980s. It states that she checked with her colleague in Singapore and had been able to confirm Mr Suryadi’s position and status; he could not understand why there was no note on the file of this.[52]If paragraph 73 of the first statement or paragraph 103 of the second statement is intended to give the impression that an enquiry was made of Ms Tang immediately before Mr Bryant wrote his letter of 17 January 2003, it would be misleading. Also in the papers before us there is a statement of Mr Andrew William Bellers, General Counsel, Asia, Aon Asia Limited, a solicitor of the Supreme Court, dated 22 July 2005. This states that on about 29 April 2002 (sic), Mr Bryant contacted Ms Tang, who was then Director of Business Development and Marketing, Marine and Logistics at Aon Hong Kong Limited. He did so in order to ascertain whether Mr Suryadi, “who was expected by Mr Bryant to be a signatory to a letter offering terms for the provision of a guarantee policy”, was employed by Mitsui Marine at the time of issue and was authorised to issue such a letter. At that time, Mr Bellers stated, Ms Tang was able to confirm that Mr Suryadi was employed by Mitsui Marine.[53]Mr Bellers goes on to state that Mr Bryant checked again in January 2003 when he had received a letter signed by Mr Suryadi. Paragraph 2 of Mr Bellers’ statement continues: “Aon did not, however, seek to ascertain whether Mr Suryadi had in fact signed the relevant letter or whether he was authorized to do so. Neither Aon Hong Kong nor Aon Singapore had acted as insurance broker in relation to the transaction for which this letter had been used, namely an offer of a guarantee police to Rose Excalibur Ventures Inc”.[54]Mr Bellers also states that Aon Singapore were approached on several occasions between 2000 and 2003, by Dr Richard Nah, on behalf of NIC, to obtain financial guarantee insurance. Mr Bellers confirms that Aon Singapore did issue letters to Dr Richard Nah and NIC recording Aon’s ability to obtain insurance if certain pre–specified conditions were met. He concludes: “Where such letters were issued Aon would have had the support of an insurance company willing to offer the insurance coverage”.[55]Page 3 of the Findings does not state that this statement was before the tribunal. However we understand that, in fact, it was.[56]In February and March 2003 sums were transferred from the US dollar client account to the office bank account of Bryant Hamilton in respect of costs.[57]On 6 July 2003 Mr Bryant received an email from Mr Van Lent, in which he said that he had been informed that the letter issued by Mitsui Marine Indonesia “verified by your law firm on January 17 of this year has turned out to be fraudulent”. The email continues:
“Dear Mr Bryant Ref: HDB/842/34 Northgate/Rebecca Sweeney I have been informed that the letter issued by Mitsui Marine Indonesia and verified by your law firm on January 17 of this year has turned out to be fraudulent I have also been informed that the parties involved in this transaction are currently being investigated by Kroll on behalf of Mitsui Marine in Japan. Your firm has given a reference to me in early December last year for the reliability and integrity of Northgate International Corporation and has been involved I the legal documentation surrounding this transaction. Based on this reference, I have transferred US$ 85,000 to the accounts of Northgate held with your firm. I have made this transfer after meeting with one of your associates who provided this reference to complete a transaction between Northgate and Rebecca Sweeney from Rose Excalibur Ventures. I have informed by Kroll that this transaction is fraudulent and probably part of a wider scam involving several parties. I have instructed my lawyers at Ashurst Morris & Crisp to inform the relevant authorities in the UK, Netherlands and US and like to understand from you what the role is of your firm in all of this. I also request you to urgently transfer the US$ 85,000 back to my account with ABN AMRO in Amsterdam before I take any further legal action. Details are as follows ………..”

Ref: HDB/842/34 Northgate/Rebecca Sweeney

[58]Mr Bryant forwarded this email to NIC on 8 July 2003 with the message:
“FYI received best regards Hugh”
. Then on 8 August 2003, Lubis, Santosa & Maulana, law offices of Jakarta, wrote to Mr Bryant, announcing that they were attorneys for PT Asuransi Mitsui Sumitomo Indonesia (“AMSI”), formerly known as PT Asuransi Mitsui Marine Indonesia. The letter stated that the guarantee from PT Asuransi Mitsui Marine Indonesia was unauthorised and invalid. The letter enclosed a further “Legal Notice”, dated 8 August 2003, from AMSI, which was addressed specifically to Bryant Hamilton. The Notice stated that it did not issue or accept insurance or cover any risks associated with property, losses or interests outside the Republic of Indonesia, except for cargo business. It continued: “[AMSI] has no knowledge of nor has issued to any party any kind of financial guarantees for the purpose of securing of any and all transactions and/or interests, either within or outside the Republic of Indonesia”.[59]On 16 August 2003 Mr Bryant emailed Mr Alonso, expressing concern at the letter from Lubis, Santosa and Maulana. He suggested that if the letters signed by Mr Suryadi were not genuine then they must check the true position and, if necessary, “issue a corrective” to third parties. Mr Bryant suggested that they discuss the matter.[60]The following day, Mr Bryant emailed Mr Van Lent, in which he accused Mr Van Lent of alleging fraud against Bryant Hamilton and Mr Bryant asked him to withdraw those allegations. The email goes on to say, with regard to the verification of the AMSI “Commitment Letter” that, at the time, Bryant Hamilton had asked the Hong Kong office of Aon (the brokers) to confirm the intended signatory was a senior executive of Mitsui Marine with authority to sign documents of that type. Aon gave that confirmation. That step was not mentioned in Bryant Hamilton’s letter to Ms Sweeney of 17 January 2003.[61]The email to Mr Van Lent then states, incorrectly, that Bryant Hamilton has not heard from Mitsui Marine themselves, although Mr Bryant had received the “Legal Notice” from AMSI which was addressed specifically to Bryant Hamilton. That inaccurate statement was never corrected. It is the basis of allegation 5.1, which the tribunal found proved against Mr Bryant, but not Mr Bench. Mr Bryant does not appeal that finding.[62]On 19 August 2003, Mr Bryant wrote to Lubis, Santosa and Maulana. The letter encloses the letter of 17 January 2003 that Mr Bryant had written to Ms Sweeney of REVI. The letter also states that it had asked the Hong Kong office of Aon to confirm that Mr Suryadi was employed by Mitsui Marine in a senior capacity and that Aon “give us this confirmation”. If it is intended to suggest that this confirmation was given in January 2003, then, as is clear from Mr Bellers’ statement, that is not so.[63]Lastly, in relation to the money paid to Bryant Hamilton by Mr Van Lent, the email refers to “the terms of the contract issued by our clients, according to the terms of which all money received for them in our client account is dealt with”.[64]This is puzzling phraseology. The “standard” form of contract does not mention money being paid into a Bryant Hamilton client account. If, by the time he sent this email, Mr Bryant had seen the actual Rose Excalibur contract terms, he would have been bound to notice that it provided for the arrangement fee to be held in the Bryant Hamilton client account until the Commitment Letter had been delivered, verified and confirmed by Bryant Hamilton.[65]Although Mr Van Lent had demanded the return of the money he had paid, there is nothing in Bryant Hamilton’s client files to indicate whether it was. Mr Bryant does not deal with this in his witness statement.

The six transactions: (2) Victoria Fintrade Ltd/X.Bio Pte Ltd

[66]On 27 January 2003, Mr Domenico G Tacchi, described as “President/CEO” of Victoria Fintrade Ltd of Nottingham, sent a fax to Mr Bryant. In his second witness statement (paragraph 75) Mr Bryant explains that he and Mr Bench had known Dr Tacchi since 1997–1998 and had met him several times. They were aware that Victoria Fintrade had used the services of NIC. In paragraph 103 of his second statement, Mr Bryant stated that Bryant Hamilton understood that Victoria Fintrade had introduced X.Bio Pte Ltd Company to NIC as X.Bio wanted to obtain a financial guarantee which would be procured by NIC from an insurance company. X.Bio would therefore be obliged to pay to NIC the “premium” for the bank guarantee, which it apparently intended to do by honouring a number of promissory notes. The idea was that X. Bio would obtain a bank guarantee of its obligation to NIC.[67]In the fax of 27 January, Mr Tacchi stated that Mr Bryant would be contacted by the “X.Bio Pte Ltd Company”, which had (he said) signed a loan agreement with Victoria Fintrade. The fax continued: “[X.Bio Pte Ltd Company] are ready to issue a bank guarantee from BNP Paribas of Hong Kong for the amount of USD 1,200,000 to cover promissory notes in the amount of 12,000,000.00 (sic). I have received also the text that I attach, but it is not very clear, despite that it has been sent by email. It seems to me that it is in order, anyway I have given your contacts to the Client for avoiding unnecessary waste of time”.[68]The attached text, which is in the form of a letter addressed to Bryant Hamilton, is, in the version we have, practically illegible. But it is possible to see that it is headed “Bank Guarantee and Funds for the Value of US$ 1,200,000”. It is also just possible to make out the words “we, BNP, Paribas, Hong Kong” in the body of the text. However, the text is on unheaded notepaper.[69]On the following day, Bryant Hamilton received a further fax from Mr Max G Bottreau of Stork Organisations (M) Sdn Bhd of Kuala Lumpur, Malaysia. It attached a copy of a bank guarantee issued by BNP Paribas, HK. The fax was addressed to Bryant Hamilton and signed by Mr Bottreau. It stated:
“Please find attached copy of a Bank Guarantee issued by BNP- Paribas in your favour from our client BM040 – X Bio Ltd (Singapore) to cover Promissory Notes given to Victoria Fintrade of Nottingham to be used as a guarantee of funds against the issuance of an insurance wrapping of the PN to open a loan credit line. For the purpose of verifying the BG on a Bank – To – bank basis, if need be, the client has informed me to let you know that you should inform me of tentative days and time, your bank will want to verify the GB so that an “open window” timing period can be organised between banks….I can be contacted 24hours/y days on my hand phone 6012 2066 944. The original BG hard copy is under the custody of our company’s lawyer…For further information please contact Mr Dominco G Tachchi, Victoria Fintrade Ltd….”
[70]The bank guarantee wording is on notepaper with a BNP logo on the left hand side of the page at the top. It is addressed to Bryant Hamilton. It is signed by “Ivan Tsui 10086, Financial Institution Group, Head of Bank Hong Kong” and is countersigned by “Anna Wong 10266, Head of Hong Kong Teams”.[71]The text refers to X Bio Pte Ltd as the “customer” and “borrower”. The letter states that this customer/borrower has informed BNP that: “…he entered into a contract with you [sic] through auspices of Victoria Fintrade Ltd (“the lender”), according to which you have to provide for him an insurance guarantee covering Corporate International Promissory Cover being established and agreed in US$1,200,000 to be paid by the Borrower within but not later than 90 days form (sic) the issue of the Insurance Policy. In consideration of the aforesaid, we BNP, Paribas Hong Kong hereby irrevocably undertake to pay to you, waiving any objection any amount up to the maximum of US$ 1,200,000.00 upon receipt of your first demand in writing, stating that the Borrower has failed to pay on due terms and conditions to the extent of the amount you are claiming from us, subject to the verification by us of your statement of default of payment by the Borrower and receipt from us of the confirmation of this default. This guarantee will be reduced by all amounts, which may be paid to you through us, or by you directly, or by your assignee of representative, under reference to the above contract. Our liability under this guarantee will expire on 12 May 2003 (90 banking days) at the latest, by which date the claim under it must be retrieved by us. This guarantee is to be returned to us as soon as it is no longer required, or its validity has expired, whichever is earlier. This guarantee is governed by the laws of Britain and place of jurisdiction will be at Hong Kong Court”.[72]The wording of this “bank guarantee” is very obscure. The use of “you” in the first and second paragraphs, suggests Bryant Hamilton, but they cannot be the beneficiaries of the guarantee. The third paragraph makes very little sense. The phrase “by which date the claim under [the bank guarantee] must be retrieved by us” in the fourth paragraph is nonsense. The wording of the fifth paragraph shows an ignorance of English law (not uncommon in parts of the commercial world), but is also a poor use of English language.[73]This must have prompted Bryant Hamilton to talk to someone, because it led to a letter, dated 15 February 2003 and stated to be signed by Mr Simon Gage as head of the legal department of BNP Paribas Hong Kong, being sent to Bryant Hamilton. (The writing of the signature looks very like that on the BNP guarantee). This letter acknowledged that Bryant Hamilton “are acting as agents and solicitors, not as principals, for [NIC] in relation to their contract with our customer X, Bio Pte Ltd” so that all references to “you” in the guarantee should be read as “you, as agent for [NIC]”. The second paragraph of the letter corrected the misapprehension about “British” law and referred to the “non–exclusive jurisdiction of the High Court of Justice in England” instead.[74]On 20 February Mr Bench sent the originals of the BNP guarantee and side letter to Mr Pascal Boris, Head of Territory at BNP Paribas, London, asking him to confirm they were genuine and issued with proper authority. On 26 February 2003, Mr Bench received a telephone call from Mr Michael Toubkin of BNP Paribas, London to say that “the documents” were forgeries and that the Fraud Squad was being informed. Mr Bench informed Mr Alonso.[75]It is clear from a note by Mr Bryant on 20 February 2003 that he spoke to Mr Alonso that day about the Victoria Fintrade matter and the “BNP guarantee” in particular.[76]Paragraph 49 of the Findings states that on 12 February 2003, Mr Bryant sent a draft letter to Mr Alonso, to be used by NIC to assign any rights arising from its relationship with X.Bio Ptd Ltd to BNP Paribas, in consideration of an advance from BNP. The finding says that the draft letter provided Bryant Hamilton’s banking co-ordinates to which “an advanced fee in an undisclosed amount in consideration of the assignment of the Guarantee for US$1.2 million was to be sent”. We have not seen that letter.[77]On 5 March 2003 Mr Bench spoke to DC Harknett of the Fraud ID Unit about the forged BNP Paribas guarantee. On the same date Mr Bench wrote to Mr Tacchi and Mr Alonso to confirm that BNP Paribas, London had stated that the guarantee and side letter documents were forgeries.[78]On 13 March 2003, Mr Max Bottreau of Stork Organisations (M) Sdn Bhd wrote to Mr Tacchi, copy to Mr Bryant, protesting that the guarantees were not forgeries, asking for them to be returned and offering that they be re-issued. Joseph Fernandez & Co, advocates and solicitors of Selangor, Malaysia, wrote a letter dated 26 March 2003 to Bryant Hamilton, urging it to take further action to validate the guarantee. Mr Bryant discussed this with Mr Alonso on 27 March and was instructed not to reply to the letter.[79]No money was received by Bryant Hamilton by way of “arrangement fee” for NIC in relation to the Victoria Fintrade/X.Bio matter.[80]Various fees were raised by Bryant Hamilton in relation to the Victoria Fintrade transaction and sums were transferred from the client account to the office account. Paragraph 61 of the Findings states that the Investigation Officer found no evidence to indicate that Bryant Hamilton had received any funds (in relation to the Victoria Fintrade matter) against which to take costs totalling US$7,252,29. At paragraph 104 of Mr Bryant’s second statement, however, he says that the schedule of the NIC transactions drawn from the client ledgers by the practice book–keeper, Mr Allan Smith, indicates that in respect of the X.Bio transaction, at all times the firm had a credit balance for NIC. There is no comment on this in the Findings.

The six transactions: (3) Mermaid A/S

[81]Mr Bryant’s evidence to the tribunal was that this transaction concerned a fish–farm project in Norway, in which Israeli persons wished to invest. The project manager was to be Mermaid A/S. Mr Bryant says in his second witness statement (paragraph 106) that Bryant Hamilton had been working on a draft agreement between NIC and Mermaid A/S in November 2002, based on the “standard” contract wording.[82]On 31 January 2003, Mr Alonso of NIC sent a fax to Bryant Hamilton, stating that it was understood that the firm had received $100,000 from “the referenced client” – ie. Mermaid A/S - “into our client account”. The fax instructed Bryant Hamilton to transfer $95,000 to the account of Oxford Financial Group Inc at HSBC’s branch in Pompano Beach, Florida and to retain the remaining $5000 in the client account. The fax in our bundle has a manuscript note at the top, in Mr Bryant’s hand, which states “New Northgate File, please; client Northgate Int’l Group; Matter Financial Guarantee – Mermaid”.[83]In fact, on 30 January 2003, a total of US$ 99,938.06 had been received in the firm’s US dollar client account. Two separate amounts, half of the total, had come from, respectively, Amir Chen of Tel Aviv and Amir Hen, Lawyer Co of Tel Aviv. In his evidence to the tribunal, Mr Bryant said that these were one and the same person, Mr Chen. He accepted that no further checks were made on Mr Chen, as it was considered sufficient to note that the payment came from a “well–known law firm”: second statement paragraph 109.[84]On 4 February 2003, Bryant Hamilton paid out $95,000 to the Oxford Financial Group account as instructed. It did so before seeing any contract between NIC and Mermaid.[85]Then on 26 February 2003 Bryant Hamilton received a fax (from an unidentified source) which was a copy of a signed agreement between NIC and Mermaid A/S. The relevant provisions of this agreement are:
“….. 1. Arrangement for the Provision of a Insurer’s Commitment Letter Now in consideration of the payment of US$ 117,500.00 (“the Agreement Fee”), receipt of which is hereby acknowledged, NIC and Client AGREE that NIC shall arrange for the delivery of a commitment letter (“the Letter”), in the form annexed hereto as Annex 1, to Client by a major, international insurance Insurance firm (“the Insurers”) according to which the Insurers shall undertake, upon compliance by Client with the conditions set out in the Letter, to secure a financial guarantee (“the Guarantee”) in the form annexed hereto as Annex 2, to be issued by an insurance company, authorised in the country in which the Guarantee is issued to transact financial guarantee business, and rated not less than “AA” by Standard & Poor’s (“the Guarantor”), in the amount of $8,500,000 U.S. Dollars, to guarantee Client’s performance in relation to a project (“the Project”), to a lender nominated by Client (“the Lender”). 2. Guarantee Fee The cost of the Guarantee (“the Guarantee Fee”), which shall be payable to NIC acting on behalf of the Guarantor not later than the day on which the loan for the Project is drawn down, shall be not more than ten (10%) per cent for the first year of its validity. A roll-over fee shall be charged in case the Guarantee is required for a period longer than one year, amounting to not more than five (5%) per cent per annum based on the declining balance of the loan, valued at the commencement of each year, and will be payable in advance to cover the duration of the loan as set out in the relevant loan agreement. 3. Arrangement Fee 3.1 The Arrangement Fee will be fully earned upon delivery of the Letter, and is charged to compensate NIC for the application, processing and negotiations for the Letter to be issued. NIC undertakes hereby that the Arrangement Fee will e credited against the Guarantee Fee when the loan is drawn down. ………… 4. NIC’S Performance NIC shall deliver the letter by fax with in a period of twenty (20) working days and by post as soon as possible thereafter, after receipt of the Arrangement Fee in good, cleared funds into NIC’s Client Account with our Solicitors in London, Bryant Hamilton & Co, and signature by Client of this Agreement. If for any reason whatsoever, the Letter is not delivered within twenty (20) working days after receipt of the Arrangement Fee, then the total Arrangement Fee will be immediately refunded. …….. ”
It also contained a “Confidentiality and Non–Circumvention” clause and a Proper Law and Jurisdiction Clause, both of which were in similar terms to the equivalent clauses in the “standard” contract. There was an “Addendum” to the contract, which was a draft letter dated 25 November 2002, from NIC to Mr Avi Kopolovich of Mermaid A/S. This letter, which does not form part of the “standard” contract, records NIC’s willingness to arrange a “genuine bona fide lender (Bank or financial institution) for Mermaid A/S, provided that the commitment mentioned in the Agreement with Mermaid A/S is obtained and that the terms and conditions have been satisfied”.[86]Mr Calvert states in his report (paragraph 88) and this is re-stated in the Findings (paragraph 69) that on 13 March 2003 Bryant Hamilton received a further fax from NIC advising that a further $17,500 would be credited to their client account with the firm, “via Mermaid”. The fax instructed Bryant Hamilton to transfer $15,000 to the Oxford Financial Group account with HSBC in Florida.[87]On 28 March 2003 Bryant Hamilton received a fax from PT Asuransi Mitsui Marine Indonesia. The fax is in the same format, with the same address and headings as had been received by Mr Bryant on 16 January 2003 in connection with the Rose Excalibur transaction. As then, the fax cover sheet was signed by Mr Erwan Suryadi. The fax cover sheet stated:
“As requested, we herewith attached (sic) our Letter of Commitment dated March 28, 2001 duly executed”
. Behind the cover sheet is a letter from PT Asuransi Mitsui Marine Indonesia addressed to Mermaid A/S dated 28 March 2003, headed “Insurer’s Commitment Letter”. The letter stated that the company was prepared to issue a financial guarantee (in wording similar to that attached) amounting to US$8.5 million, in favour of Mermaid A/S. Various conditions were set out. The letter is signed by Mr Suryadi. The guarantee form of wording attached is the same as the pro forma Annex 2 to the “standard” form of contract that had been drafted some years before by Bryant Hamilton.[88]On the cover sheet of this fax is a manuscript note of a conversation that Mr Bryant apparently had with two people on 1 April 2003, when he rang the telephone number identified as Mr Suryadi’s direct line. At first a female answered. Mr Bryant records that he asked for Mr Suryadi. Mr Bryant then spoke to a man, who confirmed that he was Mr Suryadi, that he was the signatory to the Commitment Letter and that he was authorised to sign it. Mr Bryant records that the person did not really understand a question on whether this was a normal procedure for Mitsui “but he eventually said “yes””.[89]On 16 October 2003, Mr Bryant emailed Mr Alonso about the new procedures that had to be adopted following the introduction of the Money Laundering Regulations 2003, made pursuant to the Proceeds of Crime Act 2002. Mr Bryant noted that solicitors were under duties to satisfy themselves that money coming into their hands comes from sources which they can identify, in order to prevent the proceeds of crime being “laundered”. Mr Bryant indicated the additional measures that would be needed in the future if Bryant Hamilton was to accept money from third parties on behalf of NIC. He suggested that NIC consider setting up its own client account. The email continued: “If the transaction pending would be difficult to deal with in this way at short notice, then I regret to say that we will need to see notarised copies of the principal shareholders’ and directors’ passports and two utility bills for each one, together with a copy of their company’s last audited accounts, plus a copy of the contract with Northgate, before we can accept money in the client account”.[90]Mr Calvert reported that there was no record of the address of the paying party or the underlying contract or transaction in the client papers of the firm. In his second witness statement, Mr Bryant said that was not the case: see paragraph 109.[91]There seems to have been no further movement on this transaction until 5 January 2004, when Mr Ron Rosenwasser of Friedman, Rosenwasser & Goldbaum PA, attorneys at law of Boca Raton, Florida, USA, sent an email to Mr Bench. It followed a telephone conversation between the two men. Mr Rosenwasser stated that he acted for Mr Joseph Yariv, who paid a total of US$133,000 “on behalf of Avi Kopolovich and his company Mermaid” into the firm’s account “for payment to your clients [NIC] and Harry Alonso”. The email explained that the purpose of the payments was that NIC would obtain a guarantee from an insurance company to secure a loan to purchase a business. But, he had been told by his client that the guarantee was never issued and “the entire transaction with Northgate appears to be a complete fraud”.[92]The email enclosed a press release from the US Customs Service, dated 25 May 2001. That sated that on the previous day (24 May 2001) US District Court Judge Maurice Paul had sentenced Mr Harry Alonso and another person for money laundering conspiracy. It also stated that Harry Alonso had received “60 months incarceration, 3 years supervised release, a $25,000 fine and a $100 monetary assessment” and that he must “report to the Bureau of Prisons by June 22”. Mr Rosenwasser commented in his email that he had reason to believe that the Mr Alonso referred to in the press release was the same person as Bryant Hamilton’s client. The email ended by demanding the return of the funds paid to Bryant Hamilton.[93]Mr Bryant replied by email to Mr Rosenwasser on 12 January 2004. The email stated that Mr Bryant had discussed the matter with Mr Alonso; that he was not in jail; that NIC had provided a Commitment Letter as they were contractually obliged to do and that thereafter “the contract lapsed by reason of non–performance by Mermaid”. This does appear to be borne out by an email of 2 July 2003 from NIC to Mr Kopolovich. However, Mr Bryant had not made any other investigations beyond asking Mr Alonso about the matter. At no stage was money returned to either Mr Kopolovich, Mr Yariv or Mr Chen.[94]On 2 February 2004, Mr Bryant wrote, on Bryant Hamilton notepaper, to the National Criminal Intelligence Service. The letter is headed “Disclosure Report – Proceeds of Crime Act and Money Laundering Regulations”. The letter was sent because of difficulties in filling out a computerised version of the disclosure report. The letter identified NIC and Mr Alonso as the objects of the report. It stated that the firm had acted for NIC and Mr Alonso since 1997. It outlined the nature of NIC’s business as a “sort of insurance and project finance intermediary, albeit outside the UK …”. It stated that Mr Alonso had been investigated by the fraud squad in 1998 and released without charge.[95]The relevant parts of the remainder of the letter are:
“…….. 3. Northgate has, until recently, always adopted a procedure according to which they require their client to pay the fee, which is due under the contract to Northgate, to them care of our client account, from which the fee is passed on to Northgate, or, if the transaction does not proceed, returned to the client. We always stress to Northgate’s clients that they money is not held in escrow. 4. With the advent of the Act and MLR, we have of course been reviewing our procedures and we have realised that the previous procedure whereby Northgate’s clients made payments to our client account needed to e overhauled, and we provided a copy of the Act and the regulations to Northgate, telling them that in future we would not be able to accept money from the third parties without full identifying details. We attach a copy of our message dated 16th October 2003 in which we did this. …………. Mr. Rosenwasser’s message is self-explanatory. We checked on the US Customs Service website and obtained the same message which he quoted to us. We raised the message with Mr Harry Alonso, and he denied that the report had anything to do with him. Indeed, it does not look very likely to be the same Harry Alonso as is our client, as, if he had been sentenced to five years in prison in 2001, he would not have been in a position to deal with us and give us regular instructions from that date to the present day, as he has been doing. So far as we know, Mr. Alonso has not been incarcerated and he has been a free agent at all times. ………..”
[96]Mr Bryant enclosed with the letter a copy of the NIC-Mermaid A/S contract; the email he had sent to Mr Alonso on 16 October 2003; and the exchange of emails with Mr Rosenwasser. However, he did not disclose anything about the fraudulent BNP Paribas guarantee in relation to the Victoria Fintrade transaction. Nor did he mention the correspondence with Lubis, Santos & Maulana, the Indonesian lawyers, or their clients AMSI concerning the Mitsui Marine “Commitment Letter” in relation to the Rose Excalibur transaction.[97]The NCIS replied to Mr Bryant on 12 February 2004, acknowledging his letter and enclosures. NCIS did not respond further. Mr Bryant concluded that, in accordance with section 335 of the Proceeds of Crime Act 2002, he had consent to continue to do work for Mr Alonso. On 29 April 2004, Mr Bryant had a letter from NCIS stating that the matter had been passed onto the Metropolitan police, but he did not hear from them further. Mr Bryant telephoned the NCIS on 17 June and wrote to the NCIS again on 21 June 2004 after the Law Society began its investigation into the firm. The NCIS’ view was that he need only report new matters of suspicion. Mr Bryant did not make any further reports.

The six transactions: (4) Execo SA

[98]The background to the agreement between NIC and Execo SA are not clear from either Mr Calvert’s report or the Findings or the second witness statement of Mr Bryant. In his oral evidence to the tribunal, Mr Bryant said that he did not know anything about Execo. He was not sure he had seen the contract between Execo and NIC.[99]On 2 May 2003 Bryant Hamilton received US$50,000 in its US$ client account from Signor Bigoni Eugenio (whom Mr Bryant had not met). On the same day the firm paid out $47,500 to the Florida account of Oxford Financial Group. In the evening of the same day, but after the payments had been made, a fax was sent to Bryant Hamilton, which set out an agreement between NIC (referred to as “the Facilitator”) and Execo SA Inc of Florida (the “client”). It is headed “Arrangement for the Provision of a Guarantor’s Commitment Letter”. It provides that NIC agrees to arrange for “insurance commitment” to a total of US$12 million from “AA rated companies based upon mutual agreement subject to the receipt of the agreed consideration”, which is stated to be US$50,000. The contract provides for that to be paid “to Facilitator’s bankers through the nominated Law Firm”. It then identifies Bryant Hamilton’s client account.[100]Clause 3 of the contract deals with the Arrangement Fee. It stipulates that this will be “fully earned upon delivery and the authentication and validation of the agreed Letter by the Solicitors for the Facilitators”. Clause 4 seems to contemplate a different arrangement. It obliges NIC to deliver the letter within 20 banking days after receipt of the Arrangement Fee in “good, cleared funds into [NIC’s] bank account and signature by the client of this Agreement…”. Clause 8 is a Confidentiality and Non–Circumvention clause. Clause8.1 is in similar terms to the “standard contract”; clause8.2 is in somewhat different terms and there is an additional clause 8.3.[101]Annex 1 of the contract is a pro–forma Commitment Letter, which does not identify the entity due to commit. The letter is addressed to Execo SA. The first sentence provides that an “international insurance company” that is to provide the financial guarantee “confirms with full corporate and legal responsibility that [it] is ready, willing and able to issue” one. The Commitment Letter says that the letter can be verified by the proposed lender of funds and the verification is to be co-ordinated through Bryant Hamilton. Annex 2 is a draft form of guarantee.[102]On 12 May 2003, Mr Bryant was sent a fax from Mr Erwan Suryadi. The fax cover sheet stated at the top that it was from PT Asuransi Mitsui Sumitomo Indonesia. The name of the company is slightly different, but the address is the same as that for PT Asuransi Mitsui Marine Indonesia (from which Mr Suryadi had sent faxes in relation to both Rose Excalibur and Mermaid A/S). Some of the telephone numbers are the same.[103]The fax contained a “Leeter (sic) of Commitment” dated 9 May 2003. This letter appears to be the same as the one which is Annex 1 to the Agreement between NIC and Execo SA, including mistakes such as a reference to an initial payment of “one hundred and fifty thousand United States is required …”.[104]The tribunal found (paragraph 83) that on 12 May 2003, Mr Bryant sent an email to Mr Alonso advising that he would contact Mr Suryadi the next day. The tribunal also found that Mr Bryant sent a further email to Mr Alonso the following day confirming that he had telephoned Mr Suryadi on a mobile phone number that had been provided to him by Mr Alonso and that the voice “had sounded like the same person to whom he had spoken on previous occasions”. The email asked Mr Alonso if Mitsui could provide independent confirmation that the number Mr Bryant had telephoned was that of Mr Suryadi.[105]The tribunal also found that the Investigation Officer could not find any evidence on the client file that Bryant Hamilton had done any further checks as recommended on the Yellow and Blue Cards in respect of the Execo SA transaction. In particular there was no evidence of checks on the identity of Signor Bigoni Eugenio or the origins of the funds paid on 2 May 2003.

The six transactions: (5) United Trucking Corporation

[106]The tribunal found (paragraph 86) that on 6 June 2003 NIC sent a fax to Mr Bryant advising him that he would be contacted by “Larry Sellars and/or Walter Daly” regarding United Trucking “to discuss NIC’s bona fides”. On 4 July 2003 Mr Bryant sent to Mr Alonso by email a draft contract “for the Provision of Financial Guarantee Covering Promissory Notes”, between NIC and United Trucking. Clause 4 of the draft, which is headed “Recitals”, referred to another contract, between Capital Investment Agency and United Trucking, by which Capital Investment Agency had agreed to provide promissory notes in an agreed form, which United Trucking required to be “freely negotiable for value”; hence the need for Avalisation. Clause 3(i) defines the “Arrangement Fee” as “US$220,000, payable by UT to Bryant Hamilton & Co to be held by them for NIC…”. Clause 5(i), headed “Agreement”, provides that in consideration of the payment of the arrangement fee, NIC undertakes to arrange, within a time to be agreed, the Avalisation of the Promissory Notes by an AA rated insurance company.[107]On 3 and 18 July Bryant Hamilton’s US dollar client account was credited with sums of $49,989.93 and $99,990,32 respectively. On 24 July, $37,500 was sent from that account to Capital Investment Agency. The Investigation Officer stated, in paragraph 109 of his report, that “it would appear that Capital Investment Agency acted as agent for NIC in this matter”. On 29 July and 7 August 2003 further sums totalling $110,980.44 were received from United Trucking, making a grand total of $260,960.90.[108]The tribunal’s Findings state (paragraph 90) that the Investigation Officer could not find any evidence in Bryant Hamilton’s client file papers that any money laundering checks had been carried out on the identity of either United Trucking or Capital Investment Agency, nor on the source of the sums received.[109]On 2 September 2003, Judy Tolen of NIC sent a fax to Mr Bryant, enclosing a copy of a “Contract for the Provision of Financial Guarantee Covering Promissory Notes” between NIC and United Trucking. This was signed on behalf of those two companies, but post–dated 16 September 2003. Clause 1, headed “Arrangement Fee”, provided that US$200,000 “paid into the client account at Northgate’s London solicitors, Bryant Hamilton … will belong to [NIC] as soon as it is received; in the event that Avalisation has not been provided by December 16, 2003, the Arrangement Fee shall be returned to UT forthwith on demand”. Clauses 4 and 5 set out the nature of the contract. Capital Investment Agency had agreed with United Trucking to provide promissory notes, which United Trucking wished to be freely negotiable for value. However, buyers of the notes would not be interested unless they were secured. So NIC agreed, for the arrangement fee, to provide “Avalisation” of the promissory notes within 90 days, by an insurance company rated “AA” by either Standard and Poor’s or Moody’s. By clause 6(v), NIC undertook to obtain written confirmation from “its solicitors Bryant Hamilton & Co that they have used their best endeavours (without responsibility) to verify and authenticate the financial guarantee written by the insurer”.[110]On 2 September 2003 NIC instructed Bryant Hamilton to transfer $25,000 to the HSBC Florida account of Oxford Financial Group. That was done the following day.[111]In his second witness statement (paragraph 114), Mr Bryant states that a guarantee was provided by Standard Chartered Bank, Jakarta and that this was subsequently verified. This is not dealt with in the record of Mr Bryant’s evidence before the tribunal.

The six transactions: (6) Both Feet Films

[112]This transaction concerned “film finance”. It is well known that film finance has sometimes been secured by insurance, which in some cases has given rise to litigation in the English courts: see eg. HIH Casualty & General Insurance Ltd v Chase Manhattan Bank [2003] 2 Lloyd’s Rep 61 (HL). The history of this transaction began, so the tribunal found, with a telephone call to Mr Bench from Mr Robert Siegal, a US lawyer, in March 2003. Mr Siegal was enquiring about a finance guarantee for “Both Feet Films” for film finance. Mr Siegal said that funds relating to a possible guarantee were to be placed in an escrow account. Mr Bench told Mr Siegal that funds received by Bryant Hamilton would be held to the order of NIC, not in an escrow account. Mr Bench informed Mr Bryant of the call in an email on 25 March 2003.[113]Mr Bryant’s evidence was (second witness statement paragraph 116) that in April 2003 NIC told Bryant Hamilton that a South African film finance company, De Bruin Krueger Niemeyer International Pty (SA) Ltd (“DBKN”) of Cape Town had approached NIC asking that it procure financial guarantees to be used in connection with the production of films by clients of DBKN. At that stage Bryant Hamilton did not know the terms of any contract between NIC and its clients.[114]In April and May 2003 funds totalling US$ 94,980.78 were received by Bryant Hamilton in its US$ client account from two men, one from Both Feet Films and one from Mock Orange Productions. On 2 June 2003, Bryant Hamilton remitted US$14,967.10 to the Oxford Financial Group account with HSBC in Florida. On 15 July 2003 a further $47,490.14 was credited to the firm’s US$ client account and recorded on the NIC client ledger. On 5 August 2003 a further $37,490.25 was credited to the firm’s client account and credited to the NIC client ledger, from Arthur F Montroy, in connection with film finance. Small amounts were transferred by Bryant Hamilton from this account to the office bank account between May–July 2003.[115]On 24 July 2003, Mr Martin Lewis, a partner of the solicitors Buckles, of Peterborough, wrote to Mr Bryant. The letter enclosed a Morgan Stanley document showing movements in an account of Both Feet Films at Morgan Stanley, including a transfer of US$47,500 to Bryant Hamilton.[116]Other documents which were enclosed with Mr Lewis’ letter show that DBKN was attempting to organise finance for a project of four films. DBKN’s description of the project stated that deposits from those taking part in the project were to be made with Bryant Hamilton. The description stated: “Once the deposits for the four projects are made to Bryant Hamilton & Co, solicitors, London, the group will receive a funding offer by a bona fide source. If the group rejects the funding offer the deposits will be immediately returned to the various parties by the solicitor. Once the funding offer is accepted by the group, promissory notes will be issued by the funding source and avalised through an AA rated insurance company. Against these collaterals, a stand–by letter of credit will be issued in favour of the group who will then draw down funds against the stand by letter of credit. So there is no risk or any part of the deal where the money is without control”.[117]With Mr Lewis’ letter there was also a “Film Finance Term Sheet”, which set out the terms on which a loan would be made by DBKN to one or more borrowers and/or a special purpose company to be set up for the project. Clause 10 of the terms, headed “Costs and Expenses/Insurance Deposit”, provided that by accepting these terms, the borrowers agreed to transfer $47,500 to Bryant Hamilton’s client account, reference NIC. The clause also stated:
“The amount is due and payable by July 4th, 2003, and the entire sum will be credited towards payment for the insurance bond. Bryant Hamilton & Company, solicitors, will hold this deposit in escrow until the insurance bond is issued…..The amount requested is FULLY REFUNDABLE by NIC in the unlikely event that NIC is unable to perform as described in this agreement….[or] in 30 days if…the insurance bond has not been issued by that time. Deposits made to a Client’s Account at Bryant Hamilton & Company, solicitors, are insured by the Law Society in the United Kingdom and governed under the provisions of the Financial Services Act in the United Kingdom. The deposit will be held by the Solicitors on behalf of you as the Borrower/Producer and will only be released upon verification of the authenticity of the Commitment Letter and instructions to release the deposit. No further escrow agreements will be necessary, as under United Kingdom law, the solicitors are responsible for the money they receive from a Borrower/Producer and are bound by instructions given to them by you as the borrower/producer.”
[118]In his letter of 24 July 2003 to Mr Bryant, Mr Lewis noted the reference to Bryant Hamilton in the documentation sent with the letters. It continued: “Bearing in mind what you and I will appreciate is being proposed, I thought that you will not know about it and that I should bring it to your attention”.[119]Mr Bryant’s evidence (second witness statement paragraph 116) is that once he was aware of what DBKN had advised its clients, the potential borrowers, he advised them that they must seek separate legal advice and he suggested Mr Anthony Dowling. He was known to Mr Bryant and was then a partner of Jackson Parton, which is a firm of solicitors specialising in insurance law. Mr Dowling was then instructed to act for four film companies.[120]On 18 August 2003, Mr Bryant emailed Mr Alonso concerning conversations that Mr Bryant had had with Mr Dowling. In this email Mr Bryant refers to a contract between DBKN and “Both Feet Films” in which there is a reference to money being held in an escrow account. Mr Bryant states that he has not seen such a contract or any NIC/DBKN contract and asks them to be sent to him. This may be so, although it must be the case that Mr Bryant had seen and read the material enclosed with the letter from Mr Lewis, which had many references to deposits being sent to Bryant Hamilton and held by that firm on behalf of the “Borrowers/Producers” to their order.[121]On 21 August 2003, Sarah Kinsella, an assistant in Bryant Hamilton, wrote to Ms Judy Tolen at NIC, at the request of Mr Bryant, on the subject of NIC’s accounting and the Proceeds of Crime Act 2002. The letter was sent by fax. Ms Kinsella asked for copies of all the contracts that Bryant Hamilton had worked on for NIC and set these out in a schedule. The letter also stated:
“…going forward, we will need a copy of every signed contract for new matters before we take instructions from [NIC]. For the sake of good order, can I also mention the procedure we will adopt for paying money out of client account. As agreed, we will hold all client monies in one fund. When we are requested to pay out an amount, as long as there is enough money in the [NIC] client account we will be able to pay the amount out”
[122]On 22 August 2003, Mr Dowling sent to Mr Bryant a fax copy of an extract of an agreement between Both Feet Films, Moonchester Ltd, Mock Orange Productions and DBKN. There were discussions between Mr Bryant and Mr Dowling that day about the basis on which funds from the “Borrowers/ Producers” had been deposited with Bryant Hamilton. Mr Bryant insisted that the funds were held by the firm to the order of NIC. Mr Dowling insisted that they were held to the order of his clients. A manuscript note of that date states that Mr Bryant promised Mr Dowling that Bryant Hamilton would give Mr Dowling prior warning if the firm was asked to pay “the money” (ie. that from “Borrowers/Producers”) to “anyone other than their clients”. The note states Mr Dowling was satisfied. This conversation took place after Mr Bryant had sought instructions from Mr Alonso that he could agree with Mr Dowling that the latter’s clients’ money that had been deposited with Bryant Hamilton was held to Mr Dowling’s order. (The other alternative discussed was that all the money was sent on to Mr Dowling).[123]Mr Bryant sent an email to Mr Dowling on 26 August 2003, confirming the discussion on 22 August and that the three payments of $47,500 received on 7 April, 6 May and 5 August 2003, ie. a total of $142,500 would be held to his order. It is accepted by Mr Treverton-Jones that this constituted a “professional undertaking” for the purposes of allegation 4.[124]On 2 September 2003, Ms Tolen sent a fax to Bryant Hamilton, asking Mr Bryant to transfer $15,000 in relation to the Both Feet Films matter. Mr Bryant replied (heading the letter “Northgate Accounting – Proceeds of Crime Act 2002 Both Feet Films”), reminding her of the fax of 19 August. He said that money could not be transferred until Bryant Hamilton had seen a copy of the signed contract with Both Feet Films and asked her to forward it urgently. That letter was emailed to NIC on 3 September 2003.[125]However, on 5 September Bryant Hamilton transferred from its US$ client account two sums. The first, a sum of $15,000, was transferred to Mr Niemeyer of DBKN and the second, a sum of $100,000, was transferred to Peoples Trade Indemnity. Before those transfers, Bryant Hamilton had US$425,132.27 on the US$ client account attributable to NIC. On 2 September, at the request of Mr Dowling, US$47,500 (less charges) was remitted from the Bryant Hamilton US$ client account to Mr Montroy. The credit balance after those transfers and charges was $262,444.12.[126]On 11 September 2003 Bryant Hamilton opened a new client bank account and paid into it US$142,132.27 from the US$ client account. This sum was intended to represent the sums received from Mr Dowling’s clients (Messrs Sapp, Ramsey and MacLaughlin). At the time of that transfer there was approximately $215,000 standing to the credit of NIC in the firm’s US$ client account.[127]On 10 October 2003, Bryant Hamilton received a fax copy of the agreement between NIC and Bumbershoot Films. On 13 November 2003 Mr Bryant emailed Mr Dowling to advise him that Mr Alonso would be contacting him soon to provide instructions to release the funds held by Bryant Hamilton in the firm’s client account and held to the order of Mr Dowling. Mr Dowling emailed Mr Bryant on 13 November 2003 authorising the release of the sum of US$142,471.27 to NIC. That sum was sent from the separate account to Oxford Financial Group on 17 November 2003.

The arguments on the appeal

[128]On behalf of the appellants, Mr Treverton-Jones challenged first, the tribunal’s conclusion that Mr Bryant had acted dishonestly. He submitted that the tribunal had not applied the correct legal test in reaching its conclusion that Mr Bryant was dishonest: Findings paragraph 491. He also submitted that when considering the issue of dishonesty on the facts of the case, the tribunal had erred in refusing to consider the character references before making any decision in relation to the allegations, including that of dishonesty. Mr Treverton-Jones challenged the conclusions of the tribunal that all the allegations had been proved against both appellants, save the conclusion in respect of allegation 5.1. Mr Geoffrey Williams QC, for the respondent Law Society, sought to uphold all the conclusions of the tribunal.[129]We propose dealing first with the question of whether the tribunal applied the correct legal test in relation to the issue of dishonesty. We will consider next whether it was right to refuse to consider the character references before reaching a conclusion in relation to the allegations. Thirdly, we will consider the tribunal’s findings in relation to all the allegations it found proved, in the light of our conclusions on the first two points.

Dishonesty: did the tribunal apply the correct legal test?

[130]This is the first issue raised by the grounds of appeal. We can concentrate on Mr Bryant since the tribunal made an adverse finding in relation to him alone.[131]The tribunal stated at para 487 that it was familiar with the test laid down in Twinsectra Ltd v Yardley and others [2002] UKHL 12, [2002] 2 AC 164. It fully appreciated “the fact that [Mr Bryant] has a strong belief in his honesty and he rules out even as a possibility that he might have been mistaken or duped”. In para 488 it referred to the Twinsectra test as being “in part objective” and said that the evidence led it to the conclusion beyond any doubt that the transactions in which Mr Bryant was involved were so questionable as to arouse a strong suspicion of impropriety or fraud. It went on to list some of the factors taken into account. In para 489 it said that in the light of those factors it had “sadly come to the conclusion that [Mr Bryant’s] mindset is such that it can admit of no doubt that he failed to act professionally”. This led to the conclusion expressed at the beginning of para 490 that:
“… this is a case where [Mr Bryant] set himself a standard of honesty which was all his own. He was convinced of his own moral rectitude and in his own mind he was incapable of dishonesty.”
[132]The tribunal then observed that this was not the test which it was enjoined to apply. It set out passages from three authorities. The first, from Walker v Stones [2000] 4 All ER 412, was to the effect that a person may in some cases act dishonestly even though he genuinely believes that his action is morally justified. The second was a passage from the judgment of Lord Hutton in Twinsectra, to which we will return in a moment, referring to a number of possible standards for determining whether a person has acted dishonestly. The third was a passage from the judgment of the Privy Council in Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378, to which we will also return, to the effect that individuals are not free to set their own standards of honesty and that “the standard of what constitutes honest conduct is not subjective”.[133]Having set out those passages, the tribunal reached the end of its reasoning process in this way (para 491):
“… the Tribunal does come to the conclusion that no honest and competent solicitor would have ignored the many warning signs that the exemplified transactions were highly suspect. Continuing to assist in securing their implementation carried with it a great risk of participating in or facilitation of fraudulent or illegal activities which would cause serious damage to the reputation of the solicitors’ profession as well as damage to the public interest. In the light of this conclusion the Tribunal considers that [Mr Bryant’s] conduct was so far beyond the standards to be expected of an honest and competent solicitor as to justify condemnation and it must not shrink from the conclusion that by the standards laid down for the profession it amounted to dishonesty.”
[134]A striking feature of the tribunal’s reasoning is the extent to which an objective test was applied. The tribunal concluded that Mr Bryant had acted dishonestly because his conduct “was so far beyond the standards to be expected of an honest and competent solicitor as to justify condemnation” and that it amounted to dishonesty “by the standards laid down for the profession”. Yet it did not doubt Mr Bryant’s own strong belief in his honesty; and in particular it did not suggest that Mr Bryant believed that his conduct was dishonest by the ordinary standards of the profession. It did not reject Mr Bryant’s clear evidence that he believed that the relevant transactions were entirely legitimate.[135]The case advanced by Mr Treverton-Jones is that the tribunal thereby fell into error. It applied a purely objective test and found him guilty of dishonesty notwithstanding that, on the evidence accepted by the tribunal, his state of mind was not dishonest.[136]In order to determine whether the tribunal did fall into error as Mr Treverton-Jones submits, it is necessary to decide first what test it ought to have applied.[137]It is well established that when dishonesty has to be proved as an ingredient of a criminal offence, the test generally to be applied is that laid down in R v Ghosh [1982] 1 QB 1053. That test has a subjective as well as an objective element, as appears from the following passage in the judgment of Lord Lane CJ (at p.1064):
“In determining whether the prosecution has proved that the defendant was acting dishonestly, a jury must first of all decide whether according to the ordinary standards of reasonable and honest people what was done was dishonest. If it was not dishonest by those standards, that is the end of the matter and the prosecution fails. If it was dishonest by those standards, then the jury must consider whether the defendant himself must have realised that what he was doing was by those standards dishonest. In most cases, where the actions are obviously dishonest by ordinary standards, there will be no doubt about it. It will be obvious that the defendant himself knew that he was acting dishonestly. It is dishonest for a defendant to act in a way which he knows ordinary people consider to be dishonest, even if he asserts or genuinely believes that he is morally justified in acting as he did.”
[138]In the Royal Brunei case the Privy Council laid down a different test for determining, in the context of a civil claim, whether a third party dishonestly assisted a trustee to commit a breach of trust or procured him to do so, so as to be liable to the beneficiary for the loss occasioned by the breach of trust. In giving their Lordships’ judgment, Lord Nicholls of Birkenhead said this (at p.389):
“Before considering this issue further it will be helpful to define the terms being used by looking more closely at what dishonesty means in this context. Whatever may be the position in some criminal or other contexts (see, for instance, Reg. v Ghosh …), in the context of the accessory liability principle acting dishonestly, or with a lack of probity, which is synonymous, means simply not acting as an honest person would in the circumstances. This is an objective standard. At first sight this may seem surprising. Honesty has a connotation of subjectivity, as distinct from the objectivity of negligence. Honesty, indeed, does have a strong subjective element in that it is a description of a type of conduct assessed in the light of what a person actually knew at the time, as distinct from what a reasonable person would have known or appreciated. Further, honesty and its counterpart dishonesty are mostly concerned with advertent conduct, not inadvertent conduct. Carelessness is not dishonesty. Thus for the most part dishonesty is to be equated with conscious impropriety. However, these subjective characteristics of honesty do not mean that individuals are free to set their own standards of honesty in particular circumstances. The standard of what constitutes honest conduct is not subjective ….”
That is one of the passages to which the tribunal referred in the present case in the context of “the test which the Tribunal is enjoined to apply”.[139]Twinsectra was a subsequent decision of the House of Lords concerning the accessory liability principle. Lord Hutton, with whom the majority of their Lordships agreed, referred at para 27 to three possible standards which can be applied to determine whether a person has acted dishonestly: a purely subjective standard, a purely objective standard, and “a standard which combines an objective test and a subjective test, and which requires that before there can be a finding of dishonesty it must be established that the defendant’s conduct was dishonest by the ordinary standards of reasonable and honest people and that he himself realised that by those standards his conduct was dishonest”. The tribunal in the present case cited a part of that passage, referring to the objective standard and to the combined standard.[140]Lord Hutton went on to analyse and explain what Lord Nicholls had said in Royal Brunei, concluding that Lord Nicholls was not laying down a purely objective standard or “stating that in this sphere of equity a man can be dishonest even if he does not know that what he is doing would be regarded as dishonest by honest people” (para 32). A little later in his speech, Lord Hutton said this:
“35. There is, in my opinion, a further consideration which supports the view that for liability as an accessory to arise the defendant must himself appreciate that what he was doing was dishonest by the standards of honest and reasonable men. A finding by a judge that a defendant has been dishonest is a grave finding, and it is particularly grave against a professional man, such as a solicitor. Notwithstanding that the issue arises in equity law and not in a criminal context, I think that it would be less than just for the law to permit a finding that a defendant had been ‘dishonest’ in assisting in a breach of trust where he knew of the facts which created the trust and its breach but had not been aware that what he was doing would be regarded by honest men as being dishonest. 36. … I consider that … your Lordships should state that dishonesty requires knowledge by the defendant that what he was doing would be regarded as dishonest by honest people, although he should not escape a finding of dishonesty because he sets his own standards of honesty and does not regard as dishonest what he knows would offend the normally accepted standards of honest conduct.”
[141]On the face of it, the test there laid down corresponds closely to the test laid down in the criminal context by R v Ghosh in requiring, as a subjective element, that the person concerned was aware that what he was doing would be regarded as dishonest by ordinary standards. That is supported by the reasoning in para 35 of Lord Hutton’s speech, which refers to the gravity of a finding of dishonesty and suggests a deliberate intention to align the test with the criminal test notwithstanding that the issue arose in the context of equity. It is also supported by the dissenting speech of Lord Millett, who formulated the question for the House as “whether a plaintiff should be required to establish that an accessory to a breach of trust had a dishonest state of mind (so that he was subjectively dishonest in the R v Ghosh sense); or whether it should be sufficient to establish that he acted with the requisite knowledge (so that his conduct was objectively dishonest)”, and who resolved that question by favouring the objective approach (paras 126 et seq.).[142]The position is complicated, however, by the way in which Twinsectra has since been interpreted by the Privy Council in Barlow Clowes International Ltd v Eurotrust International Limited [2005] UKPC 37, [2006] 1 WLR 1476, another case on accessory liability for breach of trust. Lord Hoffmann, giving the judgment of their Lordships, first said this (at para 10):
“The judge stated the law in terms largely derived from the advice of the Board given by Lord Nicholls of Birkenhead in Royal Brunei Airlines Sdn Bhd v Tan …. In summary, she said that liability for dishonest assistance requires a dishonest state of mind on the part of the person who assists in a breach of trust. Such a state of mind may consist in knowledge that the transaction is one in which he cannot honestly participate (for example, a misappropriation of other people’s money), or it may consist in suspicion combined with a conscious decision not to make inquiries which might result in knowledge …. Although a dishonest state of mind is a subjective mental state, the standard by which the law determines whether it is dishonest is objective. If by ordinary standards a defendant’s mental state would be characterised as dishonest, it is irrelevant that the defendant judges by different standards. The Court of Appeal held this to be a correct state of the law and their Lordships agree.”
[143]The judge had found that the defendant had strong suspicions about the true nature of the funds passing through his hands, and if those suspicions were correct no honest person could have assisted in the disposal of the funds as he had done; but he had consciously decided not to make inquiries because he preferred in his own interest not to run the risk of discovering the truth. Their Lordships considered that by ordinary standards such a state of mind was dishonest.[144]It was, however, contended on the defendant’s behalf that such a state of mind was not dishonest unless he was aware that it would by ordinary standards be regarded as dishonest. Reliance was placed upon paras 35-36 of Twinsectra, quoted above. In relation to that passage, Lord Hoffmann stated:
“15. Their Lordships accept that there is an element of ambiguity in these remarks which may have encouraged a belief, expressed in some academic writing, that Twinsectra had departed from the law as previously understood and invited inquiry not merely into the defendant’s mental state about the nature of the transaction in which he was participating but also into his views about generally acceptable standards of honesty. But they do not consider that this is what Lord Hutton meant. The reference to ‘what he knows would offend normally accepted standards of honest conduct’ meant only that his knowledge of the transaction had to be such as to render his participation contrary to normally acceptable standards of honest conduct. It did not require that he should have had reflections about what those normally acceptable standards were. 16. Similarly in the speech of Lord Hoffmann, the statement (in para 20) that a dishonest state of mind meant ‘consciousness that one is transgressing ordinary standards of honest behaviour’ was in their Lordships’ view intended to require consciousness of those elements of the transaction which make participation transgress ordinary standards of honest behaviour. It did not also require him to have thought about what those standards were.”
[145]Their Lordships therefore rejected, at para 18, the submission that the judge had failed to apply the principles laid down in Twinsectra, and expressed the opinion that those principles were no different from those stated in the Royal Brunei case which were correctly summarised by the judge.[146]In Abou-Rahmah v Abacha [2006] EWCA Civ 1492, a further case on civil liability as an accessory to a breach of trust, the Court of Appeal considered the relationship between the decision of the House of Lords in Twinsectra and the decision of the Privy Council in Barlow Clowes and, in particular, the question whether it should follow the latter even though, under the doctrine of precedent, it was bound by the former. Neither Rix LJ (at paras 14-23) nor Pill LJ (at para 90) found it necessary to answer that question for the purposes of the case. Arden LJ, on the other hand, considered that Barlow Clowes should be followed. She summarised the background in this way:
“64. This is the first opportunity since the decision in the Barlow Clowes case that this court has had to consider the element of dishonesty required for liability as an accessory in a breach of trust … The decision of the Privy Council in Royal Brunei … had been taken to establish for the purposes of English law that dishonesty was required before liability for assisting in a breach of trust could be imposed …. Lord Nicholls … held that ‘the standard of what constitutes honest conduct is not subjective’ … and gave other indications that consciousness of wrongdoing was not required for accessory liability for breach of trust. 65. The subsequent decision of the House of Lords in Twinsectra … was widely interpreted as requiring both an objective and subjective test to be applied to the question of standard. In the case of the subjective test, that would mean that the defendant would not be guilty of dishonesty unless he was conscious that the transaction fell below normally acceptable standards of conduct. The Privy Council in the Barlow Clowes case has now clarified that this is a wrong interpretation of the Twinsectra decision. It is not a requirement of the standard of dishonesty that the defendant should be conscious of his wrongdoing … 66. On the basis of this interpretation, the test of dishonesty is predominantly objective: did the conduct of the defendant fall below the normally acceptable standard? But there are also subjective aspects of dishonesty. As Lord Nicholls said in the Royal Brunei case, honesty has a ‘strong subjective element in that it is a description of a type of conduct assessed in the light of what a person actually knew at the time, as distinct from what a reasonable person would have known or appreciated’ ….”
[147]At para 68 Arden LJ gave detailed reasons for considering that the circumstances justified following Barlow Clowes. They included the fact that Barlow Clowes did not involve a departure from, or refusal to follow, Twinsectra but gave guidance as to the proper interpretation to be placed on it as a matter of English law; the fact that the members of the Privy Council in Barlow Clowes were all members of the Appellate Committee of the House of Lords and that two of them had been members of the constitution that decided Twinsectra; and that “[t]here is no overriding reason why in respect of dishonesty in the context of civil liability (as opposed to criminal responsibility) the law should take account of the defendant’s views as to the morality of his actions”.[148]There are several reasons why it has been necessary to survey those cases on accessory liability for breach of trust. First, the tribunal in the present case referred to Royal Brunei and to Twinsectra in its discussion of dishonesty. Secondly, our understanding is that since the decision in Twinsectra it has been the practice of the tribunal to apply “the Twinsectra test” in disciplinary proceedings for the purpose of determining whether a solicitor has acted dishonestly. Thirdly, Mr Williams has submitted to this court that the correct test is that laid down in Twinsectra as interpreted by Barlow Clowes.[149]Barlow Clowes shows that “the Twinsectra test” is an inherently ambiguous expression. It seems likely, however, that the practice of the tribunal has been to act by reference to that test as it was widely understood prior to Barlow Clowes, that is to say as including not only an essentially objective element (“that the defendant’s conduct was dishonest by the ordinary standards of reasonable and honest people”, albeit that the conduct is to be assessed in the light of the facts known to the defendant at the time) but also a separate subjective element (“knowledge by the defendant that what he was doing would be regarded as dishonest by honest people”). The tribunal decisions that we have been shown include examples to that effect.[150]In any event that is how the matter has been approached when it has come before the courts on appeal from the tribunal. First, it appears to have been accepted by the Divisional Court in D v The Law Society [2003] EWHC 408 (Admin), per Rose LJ at paras 33 and 39, that the test for dishonesty involves a subjective element in accordance with the speech of Lord Hutton in Twinsectra.[151]Then in Bultitude v The Law Society [2004] EWCA Civ 1853, when giving the reasons of the Court of Appeal for a decision previously announced, Kennedy LJ said this (at para 32):
“[Counsel for Mr Bultitude] submitted, and I would accept, that the test to be applied when deciding dishonesty is as formulated by the House of Lords in Twinsectra …, namely, in the context of this case: first, did Mr Bultitude act dishonestly by the ordinary standards of reasonable and honest people, and if so: secondly, was he aware that by those standards he was acting dishonestly?”
Kennedy LJ went on to state that Mr Bultitude’s conduct “satisfies both legs of theTwinsectra test”, with the result that the tribunal’s finding of dishonesty was upheld. It is clear that the test approved and applied by the Court of Appeal in Bultitude included the separate subjective element.[152]The same approach was followed recently in Donkinv The Law Society [2007] EWHC 414 (Admin), another case involving a finding of dishonesty against a solicitor. In Donkin it was common ground before the Divisional Court that the test to be applied included both the objective and the subjective elements expressed by Lord Hutton in Twinsectra (see per Maurice Kay LJ at para 11).[153]In our judgment, the decision of the Court of Appeal in Bultitude stands as binding authority that the test to be applied in the context of solicitors’ disciplinary proceedings is the Twinsectra test as it was widely understood before Barlow Clowes, that is a test that includes the separate subjective element. The fact that the Privy Council in Barlow Clowes has subsequently placed a different interpretation on Twinsectra for the purposes of the accessory liability principle does not alter the substance of the test accepted in Bultitude and does not call for any departure from that test.[154]In any event there are strong reasons for adopting such a test in the disciplinary context and for declining to follow in that context the approach in Barlow Clowes. As we have observed earlier, the test corresponds closely to that laid down in the criminal context by R v Ghosh; and in our view it is more appropriate that the test for dishonesty in the context of solicitors’ disciplinary proceedings should be aligned with the criminal test than with the test for determining civil liability for assisting in a breach of a trust. It is true, as Mr Williams submitted, that disciplinary proceedings are not themselves criminal in character and that they may involve issues of dishonesty that could not give rise to any criminal liability (e.g. lying to a client as to whether a step had been taken on his behalf). But the tribunal’s finding of dishonesty against a solicitor is likely to have extremely serious consequences for him both professionally (it will normally lead to an order striking him off) and personally. It is just as appropriate to require a finding that the defendant had a subjectively dishonest state of mind in this context as the court in R v Ghosh considered it to be in the criminal context. Indeed, the majority of their Lordships in Twinsectra appeared at that time to consider that the gravity of a finding of dishonesty should lead to the same approach even in the context of civil liability as an accessory to a breach of trust. The fact that their Lordships in Barlow Clowes have now taken a different view of the matter in that context does not provide a good reason for moving to the Barlow Clowes approach in the disciplinary context.[155]Accordingly, the tribunal in the present case should, in our judgment, have asked itself two questions when deciding the issue of dishonesty: first, whether Mr Bryant acted dishonestly by the ordinary standards of reasonable and honest people; and, secondly, whether he was aware that by those standards he was acting dishonestly.[156]There is nothing to show that the tribunal asked itself the second of those questions. At no point did it articulate with any clarity the test that it was applying, and the test applied cannot be derived from the authorities cited, since the passages selected for quotation do not lay down any single test. Most pertinently, although the tribunal found that Mr Bryant acted dishonesty by the standards of an honest and competent solicitor, it did not make any finding or even any suggestion that Mr Bryant was aware that by those standards he was acting dishonestly.[157]It follows that in our judgment the tribunal’s finding of dishonesty is vitiated by a serious legal error.

Dishonesty: the exclusion of character evidence

[158]It is contended in the second ground of appeal that there was a further error in the tribunal’s approach to the issue of dishonesty.[159]The tribunal was asked to consider, prior to its decision on liability, a number of written character references adduced on Mr Bryant’s behalf. They were rightly described by Mr Treverton-Jones as “unusually impressive”. They came from a retired High Court Judge, a former Deputy Chairman of the Board of Inland Revenue, a former President of the CBI, a former chairman of the Competition Commission, a senior solicitor, and the rector of Mr Bryant’s parish. They testified to Mr Bryant’s honesty and integrity. It was submitted to the tribunal that the evidence was relevant to the question of propensity to be dishonest and also to Mr Bryant’s credibility when giving evidence.[160]The tribunal rejected the application, relying on R (Campbell) v General Medical Council [2005] EWCA Civ 250. Accordingly, it left the character evidence out of account when reaching its finding of dishonesty. That is the subject of the second ground of the appeal.[161]Mr Treverton-Jones submitted, and we accept, that the tribunal fell into legal error in adopting the course it did. Unfortunately it did not have the benefit of the decision of the Divisional Court earlier this year in Donkin (cited above), in which materially the same issue arose. As already mentioned, Donkin was another case in which a finding of dishonesty was made. The tribunal had received a large number of character references in support of the solicitor, but made no reference to that evidence when setting out its findings on dishonesty. On the appeal, Maurice Kay LJ (with whom Goldring J agreed) dealt with the issue as follows: “22. In this court, Mr Williams’s first submission in his skeleton argument was that the material was not relevant to the issue of dishonesty but only to sanction. He resiled from this position in his oral submissions. He was undoubtedly right to do so. Whilst it is true that, in some professional disciplinary cases, evidence of character is only relevant at the second stage, there are other cases where it has potential relevance at the earlier stage. An example of irrelevance at the first stage would be a case where the alleged misconduct does not require proof of a guilty state of mind. Once the conduct has been proved or admitted, it cannot avail the person charged to say that his previous exemplary character prevents the conduct from being misconduct. These issues were authoritatively canvassed in The Queen (Campbell) v General Medical Council [2005] EWCA Civ 250. Giving the judgment of the Court of Appeal Judge LJ referred to issues of culpability and mitigation as being distinct, with a need for them to be addressed sequentially (paragraph 43). However, the Court did not suggest that material relevant to the discrete issues is always mutually exclusive. The same passage continues: ‘The fact that in some cases there will be an overlap, or that the same material may be relevant to both issues, if they arise, does not justify treating evidence which is exclusively relevant to personal mitigation as relevant to the prior question, whether serious professional misconduct has been established.’23. In other words, it is the context which determines whether material which would be relevant to personal mitigation is also relevant to ‘the prior question’. The mischief which was the concern of the Court in Campbell was the situation where personal mitigation might be misused to downgrade what would otherwise amount to serious professional misconduct to some lesser form of misconduct (see paragraph 46(iii)).24. On behalf of the appellant, [counsel] submits that where the issue is dishonesty, evidence of good character, particularly evidence as reliable and extensive as was produced in this case, is relevant to credibility and to propensity just as it would be in a criminal trial. She further suggests that it is also relevant to an examination of the circumstances in which the misconduct took place although, ultimately, this may add little to propensity in the sense that that word surely denotes propensity to commit the offence in the circumstances which are established.25. In my judgment the evidence of good character in this case was relevant to the issue of dishonesty. As in a criminal trial, it cannot afford a defence in itself. Moreover, the weight to be attached to it is in the last resort a matter for the Tribunal. In the present case the reasons stated by the Tribunal do not disclose that it gave any consideration at all to this evidence in this context. I am not satisfied from the text of the stated Reasons that it played any part in its consideration of dishonesty. I find that to be a significant legal error ….” ‘The fact that in some cases there will be an overlap, or that the same material may be relevant to both issues, if they arise, does not justify treating evidence which is exclusively relevant to personal mitigation as relevant to the prior question, whether serious professional misconduct has been established.’[162]We are in full agreement with that reasoning, which applies with equal force in the circumstances of the present case. The character references in support of Mr Bryant were cogent evidence of positive good character and were of direct relevance to the issue of dishonesty. The tribunal’s refusal to take that evidence into account when deciding the question of dishonesty was a significant legal error.[163]The tribunal’s refusal may perhaps cast some light on the legal test that it thought it was applying: if the test was a predominantly objective one, then one can see how the tribunal would have considered the character evidence to be irrelevant (though we do not say that such a view would necessarily have been correct). But if, as we have held, the test to be applied included a subjective element, then the character evidence was clearly relevant to it and capable of having real weight.

Dishonesty: conclusion

[164]For those reasons we are satisfied that the tribunal’s finding of dishonesty against Mr Bryant cannot stand. Moreover we take the view that it would be wrong to remit the matter to the tribunal for a re-determination of the issue of honesty on the basis of the correct legal test and with the benefit of the character evidence that was previously excluded. There is nothing in Mr Bryant’s evidence, as summarised in the tribunal’s decision, to suggest that he thought that his conduct was dishonest by the ordinary standards of the profession. His evidence was that he thought that the transactions were legitimate. The tribunal did not reject that evidence. There does not seem to us to be any basis upon which, if the matter were remitted, the tribunal could properly find the subjective element of dishonesty to be proved. The character evidence makes it all the more difficult to see how such a finding could be reached.[165]We therefore propose to quash the finding of dishonesty against Mr Bryant; and in the remainder of this judgment we will consider the charges against Mr Bryant shorn of any issue of dishonesty.

The tribunal’s findings on allegation 1

[166]The findings of the tribunal in relation to this allegation are set out at paragraphs 446 to 457. At no point in its findings does the tribunal analyse the nature of what has to be proved before the two appellants can be convicted of the first allegation. The overall allegation against both appellants is that each was guilty of “conduct unbefitting a solicitor in each or any of the following circumstances”. After that the seven particular allegations are set out. The “circumstances” which comprise allegation one are that the two appellants “acted for and continued to act for clients who were involved in dubious or fraudulent transactions that bore the hallmarks of fraudulent investment schemes”. The reference to “transactions” must be a reference to the six particular transactions which had been the subject of the investigation by Mr Middleton–Cassini and Mr Calvert’s report. The allegation is that the appellants acted for and continued to act for these clients in relation to “dubious or fraudulent transactions that bore the hallmarks of fraudulent investment schemes”, despite their knowledge or experience which is identified in the six particular matters set out at items 1.1 to 1.6 of allegation one.[167]The wording at the end of the allegation further characterises the nature of the charge made against the appellants. In our view, the statement that “…therefore, by virtue of 1.1 to 1.6 above their involvement in such transactions was both as knowing participants and dishonest” means that allegation one against the two appellants can be split up into the following elements:(i) one or more of the six transactions, in which NIC/Mr Alonso were involved and for whom the appellants acted, were “fraudulent” transactions that bore the hallmarks of fraudulent investment schemes; alternatively(ii) one or more of those six transactions were “dubious” and bore such hallmarks;(iii) because of the knowledge and experience of each of the appellants identified in items 1.1 to 1.6 (although 1.6 simply repeats one of the elements of the allegation), each of the appellants knew when he participated in one or more of the six transactions that he participated in either (a) a fraudulent transaction or (b) a dubious transaction;(iv) further, each of the appellants was dishonest when he participated in each transaction.[168]It is unfortunate that this “rolled up” allegation was not split so that the various possible conclusions could have been more easily addressed by both the tribunal and also this court when examining the tribunal’s finding that this allegation was substantiated.[169]Our conclusion on the issue of dishonesty in relation to Mr Bryant, coupled with the tribunal’s own finding that Mr Bench was not dishonest, means that element (iv) that we have identified above is to be left out of account in our further consideration of allegation 1.[170]The tribunal did not find that any of the six transactions was, in fact, fraudulent generally, or a fraudulent investment scheme in particular, or indeed that any of the transactions bore the hallmarks of a fraudulent investment scheme. It did express the view, in paragraph 448, that “in all probability the documents were indeed fraudulent”. But the tribunal did not indicate which documents should be so characterised and it also said that it had sought to consider the appellants’ conduct at the relevant time “without too great a reliance” on that view. We have concluded that, given the seriousness of the allegation against the appellants, this inconclusive view of the tribunal so expressed does not amount to a sufficiently clear or reasoned finding that can be relied on against the appellants. In the circumstances we are satisfied that we must proceed on the basis that elements (i) and (iii)(b) above were not proved. We are also satisfied that we should proceed on the basis that it was not proved that the transactions bore “the hallmarks of fraudulent investment schemes” for the purposes of element (ii).[171]That leaves the balance of elements (ii) and (iii) above. The essence of those two elements is that(a) one or more of the six transactions was “dubious” and that(b) the appellants participated in them “knowing” that they were dubious.[172]It seems to us that this part of the case against the appellants was put in practice on the basis that one or more of the transactions was “dubious” in the sense that they bore the indicia of fraud or possible fraud, although not necessarily of fraudulent investment schemes. Therefore, it was professional misconduct for the appellants to act or to continue to act in relation to them without at least carrying out sufficient enquiries to satisfy themselves that the transactions were not, in fact, fraudulent. That, broadly, is how Mr Williams expressed it when summarising the Law Society’s position on allegation one before us. Much the same philosophy can be seen in the submission of Mr Treverton-Jones, in response to a question from the court, that a “dubious” transaction means, in the context of an allegation of professional misconduct against a solicitor, one in which no reasonable solicitor would act.[173]It is, however, also necessary to consider whether the appellants participated in one or more of the transactions “knowing” that they were “dubious” in the sense just set out. Mr Treverton–Jones submitted that it is only proved that an appellant was a “knowing participant” if it is established that the relevant appellant actually knew that the transaction was “dubious” or he was “reckless” as to whether it was such a transaction. We have concluded that the analysis is slightly different. We start from the premise that this is a serious allegation of professional misconduct; the solicitor is being accused of something which is just short of dishonest. In our view, the tribunal has to be satisfied, to the proper standard of proof, that the relevant appellant knew that one or more of the transactions was “dubious” in the sense set out above. That entails a finding that the particular appellant actually knew the transaction was dubious, not simply that he ought to have done so. But the tribunal would be entitled to reach this conclusion of knowledge on evidence that the appellant had deliberately shut his eyes to the obvious or refrained from enquiry because he suspected the truth but did not wish to have his suspicions confirmed. (Compare: Westminster City Council v Croyalgrange Ltd(1986) 83 Cr App R 155 at 164 per Lord Bridge). In that connection, the tribunal had to consider the further matters alleged in paragraphs 1.1 to 1.6 within allegation one.[174]It is tolerably clear to us, looking at all the tribunal’s findings, that it concluded that all of the six transactions were “dubious” in the sense described above. The tribunal considered the warning signs to be such that no reasonable solicitor would have acted or continued to act for a client in relation to them. Given the challenge mounted by Mr Treverton–Jones, we will have to consider, in relation to each transaction, whether that finding was justified.[175]However, it is not clear that the tribunal made a finding that the appellants were “knowing participants” in the sense we have just described. The tribunal did not expressly consider what needed to be proved in order to find that the appellants had been “knowing participants” in “dubious” transactions. However, the tribunal did make various findings of fact which impinged on this issue. First, it found that the history of Mr Alonso, summarised in paragraphs 449 to 451 of the Findings, “constituted warning signs which to any competent solicitor would have indicated a need for extreme caution”: see paragraph452. Secondly, the tribunal concluded that, in relation to each of the transactions, “no honest and competent solicitor would have anything other than extreme scepticism about the propriety of the transactions and those promoting it [sic]”:paragraph453. Thirdly, it concluded that the documents “gave the solicitors the strongest possible warning of the need to proceed with extreme caution”: paragraph454. Fourthly, the tribunal concluded that the appellants gave no consideration to whether the arrangements made for the transactions were “manifestly vulnerable to fraud”, because of their “unshakeable faith in [Mr Alonso] and their own certainty that the transactions in which they were involved were lawful and proper”: paragraph 456. That paragraph concluded: “This was in the face of almost overwhelming evidence to the contrary that should have caused even the most naïve to wonder if NIC and [Mr Alonso] were to be trusted and in spite of the fact that [Mr Bryant] in particular claimed to be an expert in the field”.[176]The tribunal then concluded, in paragraph 457, that the case against the appellants on allegation one was substantiated.[177]We have concluded that although it would have been possible for the tribunal to find, on the facts, that one or both of the appellants knew that one or more of the transactions was “dubious” and yet they continued to participate in them, the tribunal did not do so in terms. Given that the tribunal did not expressly analyse what is involved in being a “knowing participant” and that it did not make express conclusions on knowing participation, we are not prepared to infer that the tribunal made a finding that the appellants acted in a way that was just short of dishonest. Instead, we conclude that the tribunal found that both the appellants were incompetent, to a high degree, in failing to recognise what were, objectively speaking, “dubious” transactions and in deciding, in the circumstances existing, to act for NIC and Mr Alonso or in deciding to continue to do so. The tribunal effectively found, we conclude, that if the appellants had been competent, then they would have ceased to act for NIC and Mr Alonso at some time before January 2005, although there is no express finding as to precisely when they should have ceased to act.[178]In the light of this analysis and the submissions made to us by Mr Treverton– Jones, it seems to us that we now have to ask two questions in relation to allegation 1. First, was the tribunal’s finding, that each of the six transactions was “dubious”, one that was justified on the material available to it? Secondly, if the answer to that is “yes”, then was the tribunal justified in finding the appellants incompetent, because they did not conclude that any of those transactions were “dubious”, so that they ought not to have acted or continued to act for NIC or Mr Alonso?

Was the tribunal justified in finding the six transactions “dubious”?

[179]This question arises in the context of an allegation of professional misconduct against a solicitor which is made in disciplinary proceedings. A finding that a particular transaction was “dubious” must therefore involve value judgments. The tribunal had to consider not only the nature of each of the six transactions involved, but also the work that the client instructed the solicitor to carry out, the background of the client, the professional obligations of the solicitors concerned and their general duties under both the civil and criminal law of England and Wales. We are unlikely to disagree with the tribunal’s characterisation of a transaction as being “dubious” unless we are convinced that the tribunal failed to take relevant facts into account or fundamentally misunderstood some factual or legal aspect.[180]The question of whether the six individual transactions were, or became at any stage, “dubious” in the sense we have defined above, therefore has to be considered against the background of the five circumstances set out at paragraphs 1.1 to 1.5 in allegation one. The last circumstance, which states that “…each transaction was unusual and not one in which a solicitor should properly involve himself”, really begs the question that is asked, ie. were these transactions “dubious”, so that the appellant should not have acted for their clients in relation to them.[181]In relation to circumstances1.1 and1.2 (familiarity with the Law Society’s Yellow and Blue Cards), we note that in relation to all six transactions large sums of money were sent to Bryant Hamilton’s client account by entities (or on behalf of them) that were said to be clients of NIC, all of which were foreign companies or persons resident abroad. Only a minimum of checks were done on these companies or people. In no case did either Mr Bryant or Mr Bench question the payer about the reason for depositing the arrangement fee with Bryant Hamilton, despite the terms of the “standard” contract which envisaged the arrangement fee being paid direct to NIC. In all cases sums paid to Bryant Hamilton were then transferred to other entities on the instructions of NIC. The Blue Card specifically urges caution to solicitors who are requested to hold large sums in a client account, either pending instructions or for onward transmission to a third party. It is also noticeable that some of the typical phrases that solicitors are urged to look for in documents that might be associated with banking instrument fraud occurred in the documents connected with these transactions. Yet that does not seem to have sounded alarm bells for either Mr Bryant or Mr Bench.[182]It is said that they are solicitors who are used to dealing with foreign clients, foreign companies and payments from other jurisdictions and that therefore transactions involving them would not have been unusual or caused concern. In our view the fact that a solicitor has experience with international transactions and foreign clients and companies should make him all the more aware of the need for caution, particularly where non–clients are regularly paying money into a client account and then the client gives instructions that it be transferred to an account that the client controls.[183]As for circumstance 1.4, ie. the conviction of Mr Alonso in the USA for his role in a money laundering and investment scam, this is of limited use in deciding whether any of the transactions were “dubious”. It is not suggested that the appellants should have discovered this fact for themselves before they were sent the information in Mr Ron Rosenwasser’s e-mail to Mr Bench on 5 January 2004. The fact of the US convictions was disclosed to the NCIS by Bryant Hamilton on 2 February 2004. But by that time there was no continuing activity in connection with any of the six transactions with which we are concerned. We are prepared to accept that neither Mr Bryant nor Mr Bench should have been too exercised by the fact that Mr Alonso had been investigated by the police in the UK in 1997-8. Those investigations had come to nothing and they were entitled to assume he was not engaged in any criminal activity concerning money transfers.[184]The only other general point we would make is in relation to circumstance 1.3, ie. that the appellants knew that “some of the transaction documents were forgeries”. This is true, but it is important to note when Bryant Hamilton were told of this fact. The appellants learnt that the BNP Paribas, Hong Kong “guarantee” was a forgery (in connection with the Victoria Fintrade Ltd transaction) in February 2003. Another “guarantee”, purportedly given by PT Asuransi Mitsui Marine Indonesia in relation to the Rose Excalibur transaction was discovered to be a forgery only in August 2003. In the meantime, another “Insurer’s Commitment Letter” in relation to the Mermaid A/S transaction had purportedly been given by PT Asuransi Mitsui Marine Indonesia in March 2003. In May 2003, a “Leeter of Commitment” (sic) had been purportedly been given by the successor company, PT Asuransi Mitsui Sumitomo Indonesia in relation to the Execo SA transaction. It may be said, therefore, that by August 2003 at the latest, the appellants should have appreciated that forged “Commitment Letters” or “guarantees” had been produced which affected four different transactions in which NIC were involved and in relation to which NIC and Mr Alonso had instructed Bryant Hamilton to undertake tasks as solicitors.[185]We now consider each of the six transactions.[186]The Rose Excalibur transaction was, in our view, clearly “dubious”. The terms of the contract signed by NIC and Ms Sweeney do not make sense, particularly clause 1. The “project” referred to in clause 1 is not identified in the contract between NIC and Rose Excalibur, nor the draft Commitment Letter annexed to it, nor the draft “Guarantee” also annexed to the NIC/Rose Excalibur contract. This wording was in very different terms from the “standard” form of contract that Mr Bryant had been involved in drafting in 1996/7. In particular, the standard form of wording did not contemplate either funds being paid into Bryant Hamilton’s client account, or that Bryant Hamilton would “verify” the Commitment Letter. The wording of the “text sample of irrevocable conditional payment order (ICPRO)” which Mr Knudsden sent to Mr Bryant on 14 January 2003 is not the wording that a bank would provide if asked for an irrevocable undertaking to pay an amount upon the occurrence of certain events.[187]Despite the fact that the “standard contract” wording had no provision for verification by Bryant Hamilton, Mr Bryant was prepared to undertake that exercise in advance of seeing the contract between NIC and Rose Excalibur. We would be prepared to accept that the investigations that Mr Bryant was to undertake to verify the authenticity of the Commitment Letter to be provided by PT Asuransi Mitsui Marine of Indonesia may not, in themselves, have been “dubious”. It is, however, odd that a London solicitor should be asked to undertake that task rather than some firm in, say, Hong Kong or Singapore: compare the warning on the Law Society’s Blue Card to be wary of unusual instructions. Further, Bryant Hamilton received sums in its client account in early December 2002, when Mr Bryant had not seen the terms of the NIC/Rose Excalibur contract and he could not have been expecting any “arrangement fees” for NIC to be paid into that account. Furthermore, he was instructed to make payments out to Oxford Financial of sums that had been credited to the client account, yet this was to be done in advance of the verification exercise that he had been instructed to undertake and on which he had to report to Ms Sweeney of Rose Excalibur.[188]The subsequent history of this transaction, following the email from Mr Van Lent on 6 July 2003 and which is set out above, confirms its “dubious” nature. Yet both Mr Bryant and Mr Bench continued to defend the activities of NIC and Mr Alonso.[189]The Victoria Fintrade Ltd transaction is, in our view, also clearly “dubious”. The fax of 27 January 2003 from Mr Tacchi states that X.Bio Pte Ltd is “ready to issue a bank guarantee from BNP Paribas of Hong Kong” for an amount of US$1,200,000, which guarantee is “to cover promissiory notes in the amount of 12,000,000” (sic). There is no explanation of the underlying reason for this or what project might be involved that required promissory notes to a value of $12,000,000. Neither appellant seems to have made enquiries. The fax of 27 January 2003 is odd enough. The draft bank guarantee that accompanied it is addressed to Bryant Hamilton and is on unheaded notepaper. The fax from Mr Bottreau of Stork Organisations (M) Sdn Bhd of Kuala Lumpur which Mr Bryant received the next day also talks of a bank guarantee in favour of Bryant Hamilton for US$1,2000,000. As we have pointed out already, the wording of the draft bank guarantee, supposedly on BNP Paribas headed paper, is very obscure and makes very little sense. These oddities prompted Bryant Hamilton to talk to someone because it received a letter, said to be from Mr Gage, as head of the legal department of BNP Paribas, Hong Kong, on 15 February 2003. The letter corrected the most obvious absurdities in the draft bank guarantee. But on 20 February, Mr Bench received information that the BNP guarantee and side letter were forgeries. Yet the appellants still continued to act for Mr Alonso and NIC in relation to this transaction until instructed by Mr Alonso to do nothing more on 27 March 2003. No sums were received by Bryant Hamilton from either Victoria Fintrade or X.Bio Pte Ltd in relation to this transaction, but costs in respect of it were transferred from the client account to the office account: see the Findings paragraph 62.[190]The Mermaid A/S transaction was no less “dubious”. Mr Bryant had some information about the underlying project in this case. He had been working on a draft agreement between NIC and Mermaid A/S based on the “standard” form of NIC contract. That wording does not envisage any money being paid to Bryant Hamilton for the account of NIC. But on 31 January 2003, Mr Alonso faxed Bryant Hamilton to confirm that it should have received from Mermaid A/S the sum of US$100,000 to be paid into the client account for the benefit of NIC. The funds actually received had come from two Israeli sources, not Mermaid. Mr Bryant made no checks on these sources other than to confirm that the ultimate provider was Mr Amir Chen. Bryant Hamilton paid out $95,000 from the client account to Oxford Financial on 4 February 2003 on the instructions of NIC. At that stage the firm had seen no contract between NIC and Mermaid A/S. When Bryant Hamilton received a fax on 26 February 2003 which contained a copy of the signed contract between NIC and Mermaid A/S, the terms were different from the “standard” contact terms. In particular clause 4 required Mermaid A/S to pay the Arrangement Fee “in good, cleared funds”, (compare the warning on the Yellow Card), into the “NIC client account” with Bryant Hamilton.[191]Those contract terms did not require Bryant Hamilton to carry out checks on any Letter of Commitment that was issued. However, on 26 February 2003 Bryant Hamilton received a fax from PT Asuransi Mitsui Marine Indonesia (the same entity as had provided the Rose Excalibur “guarantee”), also signed by Mr Erwan Suryadi. It is clear that Mr Bryant did do some “checks” on Mr Suryadi on 1 April 2003, although they were, in our view, superficial and unsatisfactory. Mr Bryant then reported by telephone to Mr Alonso, who said that he did not require Mr Bryant to write to confirm what he had done.[192]The subsequent history of this transaction, following the e-mail from Mr Rossenwasser to Mr Bench on 5 January 2004, confirms how “dubious” this transaction was.[193]In relation to the Execo transaction, Mr Bryant did not know anything about Execo itself, nor had he seen a contract between Execo and NIC before receiving money in the firm’s client account. On 2 May 2003 Bryant Hamilton received US$50,000 in its US$ client account from Signor Bigoni Eugenio, whom Mr Bryant had not met. Neither appellant made any checks in relation to the money or Signor Eugenio. Mr Bryant was instructed to pay out $47,500 to the Florida account of Oxford Financial the next day and Bryant Hamilton did so before receiving by fax a copy of an agreement between NIC and Execo SA Inc of Florida. As we have already noted, the terms in clauses 1 and 4 of that contract, which deal with the “Arrangement Fee”, are in confused terms. Clause 1 required money to be paid into Bryant Hamilton’s client account; clause 4 requires payment “in good, cleared funds” (compare the Yellow Card) into “[NIC’s] bank account…”. Clause 3 refers to “authentication and validation of the agreed Letter by the Solicitors for the Facilitators”, ie. NIC. The pro-forma Commitment Letter states that the intended provider of the financial guarantee is “ready, willing and able to do so” (again, compare the warning on the Yellow Card). Even at that stage no checks were made about either Execo SA or Signor Euginio and their position remains obscure. That transaction was, in our view, a “dubious” one.[194]As for the United Trucking Corporation transaction, this starts with Mr Bryant sending to Mr Alonso a draft contract between NIC and United Trucking. The draft envisages the payment of an arrangement fee by NIC’s client to Bryant Hamilton, “…to be held by them for NIC”. That was different from the “standard contract” terms, which did not envisage Bryant Hamilton holding funds for NIC. In consideration of the arrangement fee NIC was to procure the Avalisation of Promissory Notes, which were in fact to be provided by Capital Investment Agency. At the same time, it seems that after money had paid into Bryant Hamilton’s client account by United Trucking (on 3 and 18 July 2003) a sum of $37,500 was paid out to Capital Investment Agency on 24 July 2003. But, according to the Investigation Officer, that sum was received by Capital Investment Agency “as agent for NIC”. If that is correct, then this is a suspicious arrangement; the agent of NIC was to provide the promissory notes, for which NIC was to procure avalisation by a third party. There is no evidence that either Mr Bryant or Mr Bench enquired into the underlying reasons why Capital Investment Agency should be providing promissory notes for United Trucking or why those promissory notes had to be “freely negotiable for value”.[195]The actual contract “for the Provision of Financial Guarantee Covering Promissory Notes” between NIC and United Trucking was signed before being sent by Judy Tolen of NIC to Mr Bryant on 2 September 2003, but it was post–dated 16 September 2003.[196]We have concluded that this transaction was “dubious” in the sense discussed above. The lack of any explanation for the arrangement between United Trucking and Capital Investment Agency or the underlying reason why United Trucking needed promissory notes; the nature of the contract between NIC and United Trucking, its terms and the circumstances surrounding its production and the payment of sums to Bryant Hamilton’s client account and out of it, all point to this conclusion.[197]The circumstances surrounding the payment of money into and out of Bryant Hamilton’s client account in relation to the Both Feet Film transactions were, in our view, “dubious”. First, Mr Bench received a telephone call from Mr Siegal about a finance guarantee for film finance. That, in itself, is not suspicious. In April 2003, the firm was told by NIC that it had been approached by DBKN to procure financial guarantees for film finance. Nor is that, in itself, suspicious. But before any contract terms between NIC and DBKN or others had been received by Bryant Hamilton, it received money in its US$ client account in April and May 2003. No checks were made by either appellant. These sums were received long before the warning letter from Mr Lewis of Buckles of 24 July 2003. Further sums were paid in and paid out of the Bryant Hamilton client account before Mr Lewis’ letter and its contents were received. On Mr Bryant’s own account (in his email of 18 August 2003 to Mr Alonso) he did not see any NIC/DBKN contract before Mr Dowling began to act for the four film companies involved, which was in mid August 2003. At no time did either of the appellants see a contract between NIC and the film companies or other interested parties until a fax copy was sent on 10 October 2003. Was the tribunal justified in finding the appellants incompetent because they did not conclude that the transactions were “dubious”, but, despite the existing circumstances, they acted for or continued to act for NIC and Mr Alonso?[198]In our view the tribunal were amply justified in reaching that conclusion. The appellants did not seem to register the signs that should have led them to conclude that the transactions were “dubious”. First, the appellants should have been on their guard from the outset, given the guidance and instructions on the Blue and Yellow cards and the anti–money laundering legislation that was in place, of which they were well aware. At the latest the appellants should have been very suspicious about this type of transaction once they learnt that the BNP Paribas Hong Kong “guarantee” was a forgery. Secondly, in relation to the Rose Excalibur, Victoria Fintrade, Mermaid A/S, Execo S/A and Both Feet Films transactions, Bryant Hamilton received funds in its client account, for the benefit of NIC, before it had details of contracts between NIC and its client. Yet at no time was this questioned by the appellants. Thirdly, the appellants did not question at any stage the need for arrangement fees for NIC to be deposited in a client account held by Bryant Hamilton, despite the fact that this was contrary to the terms of the “standard” contract. Fourthly, the appellants did not question the confused, contradictory or simply meaningless terms of the contracts or draft guarantees that were produced, save in the case of the Victoria Fintrade bank guarantee wording. Nor did the appellants advise (save in that one case) that contract wording must be revised so as to be suitable and professional. Fifthly, the “checks” that were made by the appellants were, at best, superficial. In some cases none were made. In all cases they were insufficient. It appears that the appellants never demanded original contracts or confirmation that the copies of contract documents were genuine. The checks made in relation to Mr Suryadi’s position in Mitsui Marine in 2003, were, in our view, clearly deficient. They made only the most rudimentary “money laundering” checks. Sixthly, the appellants did not take sufficiently seriously the complaints made on behalf of Mr Van Lent (in relation to Rose Excalibur) in July–August 2003, but instead took the part of NIC/Mr Alonso and did so in an unprofessional manner. Seventhly, Mr Bryant’s attempts, in October 2003, to put in place more stringent procedures for identification of the sources of money coming into a client account, were made far too late. It is clear from the contents of the Blue and Yellow Cards that they should have been in use before the advent of the Money Laundering Regulations 2003. Lastly, although Bryant Hamilton reported to NCIS in February 2004, on learning of the US conviction of Mr Alonso, it does not seem to have occurred to the firm to question the propriety of the transactions in which the firm had been acting for him over the previous 18 months. Nor did it change the appellants’ attitude towards acting for NIC/Mr Alonso in the future.[199]In our view the appellants should have concluded that these transactions involving NIC and Mr Alonso were “dubious” in the sense described above at the very latest by the end of August 2003. But they never did so. They appeared to be naïve, uncommercial and unwilling to question matters; whereas we would have expected solicitors who had considerable experience of international clients and transactions to have developed a healthy scepticism.[200]We shall have to consider below the consequences of this conclusion in relation to the sentence appeals.

Allegations 2 and 3

[201]Given our conclusion concerning the issue of dishonesty, we consider allegation 2 as if there was no charge of dishonesty in it. That enables us to deal with these two allegations together.[202]On the facts as we have set them out above, it is clear that in relation to the Rose Excalibur, Mermaid A/S, Execo SA, United Trucking and the Both Feet Films transactions, sums were received in the Bryant Hamilton client account and credited to the NIC ledger before any contract documents were in the firm’s hands. In the case of Victoria Fintrade no sums were received from third parties. In all the cases identified the sums came from persons or entities other than NIC, none of whom were clients of Bryant Hamilton. Both appellants knew that the funds received had not come from NIC but from third parties. We are prepared to accept that both appellants believed that those sums came from persons or entities that were “clients” of NIC.[203]In respect of the first four of those transactions some of the funds were paid out of the Bryant Hamilton client account upon the instructions of NIC or Mr Alonso before Bryant Hamilton had seen or considered contracts between NIC and third parties. Characteristically the money was paid to a Florida account of Oxford Financial, a company controlled by Mr Alonso. The case of the Both Feet Films transaction raises different issues and is the subject of the separate allegation four.[204]The nub of allegation 2 is that, as a matter of professional duty, the appellants were obliged to take adequate and reasonable steps to protect the sums that were received from the “clients” of NIC, because Bryant Hamilton received those sums on behalf of those third parties. The nub of allegation 3 is that in relation to four transactions, the appellants paid away sums out of the money deposited by third parties without the consent of those third parties, but upon the instructions of NIC.[205]Mr Treverton-Jones and Mr Williams agreed that the key question in relation to both allegations 2 and 3 is whether the sums received from the third parties were held by Bryant Hamilton on behalf of third parties, or whether, when the sums were received, they were held on behalf of NIC. If the sums were held on behalf of third parties, then, as we understand it, Mr Treverton-Jones would accept that no particular steps were taken by Bryant Hamilton to protect those funds. The answer to the question “on whose behalf were the sums held?” must depend on two factors. First, the contractual arrangements between NIC and its client, in relation to each transaction. Secondly, the circumstances in which Bryant Hamilton received the money and then paid it out to the order of NIC. It is necessary to examine each of the five transactions separately.[206]The background to the transactions was that the appellants had been involved in drafting the “standard” form of contract and knew its terms. We have no doubt that, upon the proper construction of clauses 1 and 3.1 of the standard form of contract, when an arrangement fee was paid into the account of NIC (not the client account of Bryant Hamilton), it became the property of NIC. It was not held on trust for the client. If for some reason the Commitment Letter was not produced as contemplated in clause 1 of the standard terms and so the client demanded the fee back, that would be because NIC had a contractual obligation to make the repayment. The client would not be demanding the money as the beneficiary of the sum held in trust for the client by NIC. We therefore respectfully agree with the remarks of Lord Phillips of Worth Matravers MR in paragraph 16 of his judgment, to which we have already referred. However, that judgment was dealing with the “standard wording”. As the Master of the Rolls also pointed out, the correct analysis in individual transactions must depend on the terms of the contract between NIC and its client and, as we say, the circumstances in which Bryant Hamilton received the money from NIC’s client.[207]It was the evidence of Mr Bench to the tribunal that he always explained to clients of NIC when he met them that if an arrangement fee was paid by a client of NIC and was received by Bryant Hamilton in its client account, then that was held on account of NIC, not its client. (See paragraph 89 of Mr Bryant’s second witness statement). This demonstrates that even before the series of transactions with which we are concerned, clients of NIC had paid arrangement fees into Bryant Hamilton’s client account. Bryant Hamilton were therefore aware that the “standard” form of contract, in particular the terms of clauses 1 and 3.1, were not being used in practice.[208]In the case of the Rose Excalibur transaction we proceed on the basis that neither appellant saw the actual contract terms between NIC and Rose Excalibur until much later in 2003. Despite that, it seems that the receipt of money from BaRe in the Bryant Hamilton client account came as no surprise to the appellants. As we have already stated at paragraph 45 above, Mr Bryant accepts he was told by Mr Alonso (after the meeting between Mr Bench, Ms Sweeney and Mr Knudsden on 28 November 2002) that Bryant Hamilton was to “verify” the Commitment Letter that was to be produced by Mitsui Marine of Indonesia. That was intended to be for the benefit of the client of NIC. We think that it necessarily follows that it was intended that any money received by Bryant Hamilton in its client account from either Rose Excalibur or BaRe had to be retained by Bryant Hamilton until the firm had done the necessary verification.[209]Neither Mr Bryant nor Mr Bench analysed the matter very carefully. They assumed that because of the “standard” contract terms or the mantra used by Mr Bench (that funds paid to Bryant Hamilton for NIC would be immediately available to NIC), therefore the firm had no duties towards clients of NIC in respect of funds received. Our conclusion is that this assumption was wrong. There would be no point in arranging for money to come from BaRe into Bryant Hamilton’s client account unless it was to be retained by the firm pending verification of the Commitment Letter. That money was held by Bryant Hamilton on behalf of the third party “client” of NIC until the successful verification had been carried out, when it would become the property of NIC. But in the meantime, Bryant Hamilton should have taken steps to safeguard the money as that of Rose Excalibur or BaRe.[210]Money was paid to Oxford Financial from the client account during the period 29 November to 27 December 2002 and before any attempts at verification of the Commitment Letter were made. Therefore, in relation to the Rose Excalibur transaction, we conclude that both appellants were guilty of allegations 2 and 3, in the manner we have indicated.[211]In relation to the Mermaid A/S transaction, Mr Alonso sent a fax to Bryant Hamilton on 31 January 2003, telling them to expect $100,000 in the client account from Mermaid A/S. Therefore, although Mr Bryant had been working on a draft agreement between Mermaid A/S and NIC based on the “standard” contract wording, he must have appreciated from that point that the standard wording of clauses 1 and 3.1 were not going to be relevant in that instance. That position is reflected in the actual terms of clause 4 of the signed agreement between NIC and Mermaid A/S which was received by Bryant Hamilton on 26 February 2003. But before then, the funds had been received by Bryant Hamilton on 30 January 2003 and were paid out to the order of NIC (to Oxford Financial) on 4 February 2003.[212]In this transaction there was no contractual provision for a verification of the commitment letter by Bryant Hamilton. Instead, clause 3 of the contract terms between NIC and Mermaid A/S provided that the arrangement fee was “fully earned” by NIC “upon delivery of the [commitment] Letter…”.[213]We have concluded that, in relation to this contract, the money received from or on behalf of Mermaid A/S was held by Bryant Hamilton for the account of NIC. We appreciate that clause 4 of the contract wording provides that if the Commitment Letter is not delivered to Mermaid A/S within 20 days after receipt of the Arrangement Fee, then the total fee will be refunded immediately. But that provision is not, in our view, sufficient to make Bryant Hamilton the trustees or guardians of sums received from Mermaid A/S or Mr Chen, or their agents, until the commitment letter has been delivered. The provision does not expressly set out to make Bryant Hamilton trustees or agents in respect of sums received. Nor is that to be implied. Where a person pays a sum (eg into a bank account) in advance of the fulfilment of a contractual obligation by the other party, normally the bank will not hold that money on trust for the first party pending the fulfilment of the contractual obligations of the second party. If the second party fails to fulfil its obligations then the contract may specifically provide for repayment. But that is a contractual obligation on him. The bank would not be obliged to pay the money to the first party because a trust is imposed when it received the money into the account of the second party.[214]Therefore, on a construction of the contract terms and on the facts, we conclude that the tribunal was wrong to find that allegations 2 and 3 were proved against the appellants in respect of the Mermaid A/S transaction.[215]In relation to the Execo SA transaction, the funds were received and paid out on 2 May 2003, but before Bryant Hamilton had seen the contract between NIC and Execo SA. However, the contract had, in fact, been signed on 1 May 2003 and therefore before funds were sent to Bryant Hamilton. Clause 3 of the contract provides that the arrangement fee will be “fully earned upon delivery [of the letter] and the authentication and validation of the agreed Letter by the Solicitors for [NIC]”. Clause 4 makes no reference to authentication and validation. But it does stipulate that if the letter is not delivered within 20 banking days of receipt of the arrangement fee, then the fee will be immediately refunded.[216]Given the contract terms and the sequence of events, we have concluded that Bryant Hamilton did not receive the funds sent by Mr Eugenio on 2 May 2003 on behalf of Execo SA. The analysis is the same as in the case of the Mermaid A/S transaction. If anything, it is more strongly in Bryant Hamilton’s favour, because the sums were sent after the contract was signed. Therefore Execo SA (and, we presume, Signor Eugenio) knew the basis on which the money was paid to Bryant Hamilton. Therefore, in relation to this transaction, we conclude that the tribunal was wrong to find allegations 2 and 3 proved against the appellants.[217]With regard to the United Trucking transaction, sums totalling US$260,960.90 were sent by United Trucking in July and August 2003 to the client account of Bryant Hamilton. Of that, NIC instructed Bryant Hamilton to pay $25,000 to the Oxford Financial account in Florida. That was done on 2 September 2003. On 2 September Mr Bryant received a fax fom Judy Tolen of NIC with a copy of the contract between NIC and United Trucking. Clause 1 provided that the $200,000 arrangement fee was to be paid into the client account of Bryant Hamilton and that it was to belong to NIC as soon as received. It also provided that if the Avalisation of the promissory notes was not achieved by 16 December 2003, then the arrangement fee was to be returned to United Trucking on demand.[218]In our view, given the facts and the contract terms, Bryant Hamilton did not receive these funds on behalf of United Trucking, but on behalf of NIC. It was entitled to pay them away to NIC’s order. Therefore we conclude that the tribunal was wrong to find allegations 2 and 3 proved against the appellants in respect of this transaction.[219]As we have stated, the position on the Both Feet Films transaction was different. That is the subject of allegation 4, which we consider next. Allegation 4: breach of undertaking by failing to hold third party funds to their order after agreeing to do so etc.[220]This allegation relates solely to the funds received in connection with the Both Feet Films transaction. The allegation is that Mr Bryant gave undertakings to Mr Dowling, the solicitor who agreed to act for Both Feet Films, Moonchaser Ltd, Mock Orange Productions and DBKN. It is accepted by Mr Treverton-Jones that undertakings were given by Mr Bryant orally on 22 August 2003 and confirmed in an email on 26 August 2003. They were to the effect that three payments of US$47,500 received on 7 April, 6 May and 5 August 2003, (ie. a total of $142,500) from Mr Dowling’s clients would be held to his order; further, that Mr Bryant would give Mr Dowling prior warning if Bryant Hamilton were asked to pay the money to anyone other than Mr Dowling’s clients. Mr Treverton-Jones also accepted that these constituted “professional undertakings”. The question was whether Mr Bryant was in breach of them in the light of what happened subsequently.[221]The tribunal found that once these undertakings had been given, it was the duty of Mr Bryant to place the sum of $142,500 in a separate account, which should have been identified as holding the sums that were the subject of the undertakings: see Findings paragraph 479. The tribunal found that this was not done and that on 5 September 2003, Bryant Hamilton transferred a total of US$115,000 from its US$ client account to DBKN and Peoples Trade Indemnity. A separate account was only set up by Bryant Hamilton on 11 September 2003. The sum of US$142,500 was paid into that account and that sum was paid out, on NIC’s instructions and with Mr Dowling’s approval, on 13 November 2003.[222]There is no dispute about the facts on this allegation. Nor is it in dispute that during the period between 22 August 2003, when the undertaking was given, and 11 September 2003, when the separate account was set up, Bryant Hamilton had funds of approximately $262,000 standing to the credit of NIC in its client account.[223]Our conclusions are that the proper, professional, course that Mr Bryant should have followed, having given the undertaking, was to place the US$142,500 in a separate account and identified that sum as being the subject of the undertakings. However, we also conclude that although Mr Bryant acted unprofessionally, his failure was more of form than substance. There was never any doubt that there would be sufficient funds to repay Mr Dowling’s clients during the nine day period 5–11 September 2003 from sums standing to the credit of NIC in Bryant Hamilton’s client account. On 11 September the new account was opened and $142,500 deposited in it. Allegation 5.2: sending an e-mail on 13 November 2003 to a third party’s solicitor implying that the third party’s solicitor’s client’s money remained in a client account when it did not.[224]This allegation arises out of the exchange of e-mails between Mr Bryant and Mr Dowling on 13 November 2003. At 15.46 on 13 November 2003, Mr Bryant sent an e-mail to Mr Dowling in the following terms: “Our clients advise that they have heard from yours that, agreement having been reached between them, you either have or will shortly receive instructions to release the funds which we are holding to your order, to [NIC]”.[225]The allegation is that this e-mail was misleading because the money that had been received from the “third parties”, ie. the clients of NIC interested in the Best Feet Films transactions, had been paid out on 5 September 2003. (In fact US$115,000, not $142,500 had been paid out to the order of NIC on that date). The tribunal’s conclusion (Findings paragraph 481) was that “…consistent with its finding of a breach of undertaking (allegation 4)…allegation 5.2 [is] substantiated against [Mr Bryant]”.[226]The position on 13 November 2003 was that Bryant Hamilton did hold US$142,500 in a separate bank account at Barclays, to the order of Mr Dowling and his clients. So, in our view, Mr Bryant’s e-mail of 15.46 was accurate in stating that Bryant Hamilton was holding funds to the order of Mr Dowling and his clients. It was misleading only in the sense that it did not reveal that US$115,000 had been paid out to the order of NIC on 5 September 2003. However, we regard that as immaterial. At all times if Mr Dowling had demanded that the US$142,500 be returned to him or his clients, Mr Bryant could not have refused. Furthermore, by setting up the separate account on 11 September 2003, Mr Bryant had regularised the position.[227]At 16.53 hours on 13 November 2003, Mr Dowling sent an e-mail to Mr Bryant. That authorised the release to NIC of the sum of US$142,500 “…which [was] paid to you by Both Feet Films LLC, Mock Orange Productions LLC and Davi Sapp of Arcadian Pictures”. That was agreed on the basis that a valid and authentic insurer’s letter of commitment had been provided and that there had been an extension of the deadline for compliance with the insurer’s guarantee requirements. It was common ground that Mr Bryant acted on those instructions.[228]On the basis of these facts, we have concluded that the tribunal was wrong to find allegation 5.2 proved. When the email was sent by Mr Bryant on 13 November 2003, the sum of $142,000 was held in a separate account to the order of Mr Dowling and his clients.

Allegations 6: breach of Rule 32(2) of the Solicitors Accounts Rules 1998

[229]This allegation relates to the Rose Excalibur, Mermaid A/S, Execo SA, United Trucking and Both Feet Film transactions. It is alleged that the appellants failed to record funds received from third parties onto individual accounts in the client ledger in accordance with Rule 32(2)(b). Rule 32(2) provides: “All dealings with client money (whether for a client or other person) and with any controlled trust money, must be appropriately recorded;(a) in a client cash account or in a record of sums transferred from one client ledger account to another; and(b) on the client side of a separate client ledger account for each client (or other person, or controlled trust). No other entries may be made in these records.” (a) in a client cash account or in a record of sums transferred from one client ledger account to another; and (b) on the client side of a separate client ledger account for each client (or other person, or controlled trust).[230]In our view, the obligations of the appellants under Rule 32(2) will depend on whose behalf money was received in the case of each of the transactions identified. If the money was received on behalf of NIC, then it is accepted that the appellants cannot be in breach. If it was received on behalf of third parties, then the money should have been recorded in a separate account.[231]In the light of our conclusions on allegations 2, 3 and 4, the position must be that the appellants were in breach of Rule 32(2) in relation to the Rose Excalibur transaction and in relation to the Both Feet Film transaction as soon as Mr Bryant had given the undertakings to Mr Dowling on 22 August 2003. In respect of the latter transaction, the breach was remedied with the transfer of the sum to the separate account on 11 September 2003.

Allegation 7: breach of Rule 22 of the Solicitors’ Accounts Rules 1998

[232]The allegation is that the appellants wrongly drew monies out of clients’ accounts for the firm’s costs, otherwise than permitted. Rule 22 provides, so far as material: “(1) Client money may only be withdrawn from a client account when it is:(a) properly required for a payment to or on behalf of the client (or other person on whose behalf the money is being held);(b) properly required for payment of a disbursement on behalf of the client;(c) properly required in full or partial reimbursement of money spent by the solicitor on behalf of the client;(d) transferred to another client account;(e) withdrawn on the client's instructions, provided the instructions are for the client's convenience and are given in writing, or are given by other means and confirmed by the solicitor to the client in writing;(f) a refund to the solicitor of an advance no longer required to fund a payment on behalf of a client (see rule 15(2)(b));(g) money which has been paid into the account in breach of the rules (for example, money paid into the wrong separate designated client account) - see paragraph (4) below; or(h) money not covered by (a) to (g) above, withdrawn from the account on the written authorisation of the Society. The Society may impose a condition that the solicitor pay the money to a charity which gives an indemnity against any legitimate claim subsequently made for the sum received. (2) Controlled trust money may only be withdrawn from a client account when it is: … (3) Office money may only be withdrawn from a client account when it is: … (b) properly required for payment of the solicitors’ costs under rule 19(2) and (3)”. (a) properly required for a payment to or on behalf of the client (or other person on whose behalf the money is being held); (b) properly required for payment of a disbursement on behalf of the client; (c) properly required in full or partial reimbursement of money spent by the solicitor on behalf of the client; (d) transferred to another client account; (e) withdrawn on the client's instructions, provided the instructions are for the client's convenience and are given in writing, or are given by other means and confirmed by the solicitor to the client in writing; (f) a refund to the solicitor of an advance no longer required to fund a payment on behalf of a client (see rule 15(2)(b)); (g) money which has been paid into the account in breach of the rules (for example, money paid into the wrong separate designated client account) - see paragraph (4) below; or (h) money not covered by (a) to (g) above, withdrawn from the account on the written authorisation of the Society. The Society may impose a condition that the solicitor pay the money to a charity which gives an indemnity against any legitimate claim subsequently made for the sum received. (b) properly required for payment of the solicitors’ costs under rule 19(2) and (3)”.[233]It is accepted by Mr Treverton-Jones that none of the provisions of Rule 22(1) apply to any of the transactions. It is also accepted by him that if money received by Bryant Hamilton from clients of NIC was held on behalf of that client, then none of the situations in Rule 22(2) applied. Mr Treverton- Jones submitted that when Bryant Hamilton took money out of the client account (held to the credit of NIC) for the firm’s costs, it was permitted to do so because it fell within the terms of Rule 22(3)(b) and Rules 19(2) and (3). The latter provide: “(2) A solicitor who properly requires payment of his or her fees from money held for the client or controlled trust in a client account must first give or send a bill of costs, or other written notification of the costs incurred, to the client or the paying party. (3) Once the solicitor has complied with paragraph (2) above, the money earmarked for costs becomes office money and must be transferred out of the client account within 14 days”.[234]It is not suggested that Bryant Hamilton failed to send to NIC a bill of costs for work it had done on behalf of NIC. Nor is it suggested that there was a breach of Rule 19(3). The allegation is that, because money was received by Bryant Hamilton on behalf of the “clients” of NIC, then that money could not be used by the firm to pay costs incurred for work done for NIC.[235]This allegation must fail in total. The total costs bill of NIC charged to the NIC ledger between September 2002 and August 2004, according to Mr Calvert’s report (paragraphs 152-153), was US$44,455. Even if sums received in relation to the Rose Excalibur and Both Feet Films transactions are to be regarded as “controlled trust” money for the purposes of Rule 22, the firm must have been entitled to transfer sums for NIC costs from other sums held on behalf of NIC in the client account. There was always more than enough money standing to the credit of NIC in the client account to pay the costs of Bryant Hamilton for the work it had done for NIC.

Conclusions on allegations 1 to 7

[236]In summary, our conclusions on the allegations are as follows: i) In relation to allegation 1, as a matter of law the tribunal adopted the wrong test on “dishonesty”. Therefore, its finding that Mr Bryant was guilty of dishonesty cannot stand and must be set aside. ii) The tribunal did not hold that the six transactions were fraudulent in fact. Nor did it find that the transactions specifically bore the hallmarks of fraudulent investment schemes. We approach allegation one on the premise that the tribunal found that the transactions were “dubious” in that they “bore the hallmarks” or indicia of fraud, without finding that they were fraudulent. iii) The tribunal did not expressly address the issue of what comprised “knowing participation” by the appellants in these “dubious” transactions. “Knowing participation” in this context would involve a finding that the appellants took part in one or more of the transactions knowing that it or they had the indicia of fraud. We are not prepared to infer that this was the conclusion of the tribunal, given the lack of any express finding on this aspect. iv) We hold that the tribunal was correct to conclude that each of the six transactions was “dubious” in the sense that no reasonable solicitor who had properly investigated the matter would act for his client in respect of them. We also hold that the tribunal was correct to conclude that both appellants were incompetent in failing to appreciate that these transactions were “dubious” in that sense, but went on acting for NIC/Mr Alonso long after they should have stopped doing so. v) In relation to allegations 2 and 3, the arrangement fees were only received by Bryant Hamilton on behalf of the “clients” of NIC in respect of the Rose Excalibur transaction. The tribunal was wrong to find those allegations proved in respect of other transactions. vi) In respect of allegation 4, Mr Bryant was in breach of the undertakings given by him to Mr Dowling on 22 August 2003. But this was only of significance for the period between 5 September 2003 (when sums were paid out to the order of NIC) until 11 September 2003 when a separate account was set up for the US$142,500. vii) The tribunal was wrong to find allegation 5.2 proved against Mr Bryant. The e-mail of 13 November 2003 was not misleading because the sum of $142,500 was held in a separate account, to the order of Mr Dowling and his clients. viii) As for allegation 6, there was a breach of Rule 32(2)(b) of the Solicitors’ Accounts Rules 1998 only in relation to the sums received in respect of the Rose Excalibur transaction. The tribunal was wrong to find the allegation proved in any other respect. ix) As for allegation 7, there was no breach of Rule 22 of the Solicitors’ Accounts Rules 1998. Therefore the tribunal was wrong to find this allegation proved.[237]The consequence of these conclusions is that we agree with the tribunal that the appellants were both guilty of conduct unbefitting a solicitor, but to a much lesser extent than that found by the tribunal.

Sentence appeals

[238]In the light of our conclusions on the seven individual allegations, set out above, it is accepted by Mr Williams on behalf of the Law Society that this court must reconsider the penalties imposed on the appellants by the tribunal. However, Mr Williams submits that this court’s general approach to penalties must accord with that set out by the Court of Appeal in Bolton v Law Society [1994] 1 WLR 514 at 518–9, by Sir Thomas Bingham MR. The Master of the Rolls emphasised two particular factors that the court should bear in mind when it has to consider the penalty imposed by a professional disciplinary tribunal on one of its profession. First, the court must ask: what are the appropriate penalties for the purpose of punishment and deterrence. Secondly, it must ask: in the light of the misconduct that has been found, what penalties are required to maintain the reputation of the profession (in the particular case, the solicitors’ profession) in the eyes of the public. The Master of the Rolls emphasised the fundamental importance of solicitors’ reputation for probity, integrity and trustworthiness. We respectfully agree that this must be our approach.[239]Mr Williams submits that the most serious element of the overall charge against both appellants, that they had been guilty of conduct unbefitting a solicitor, is that contained in allegation one. We agree. In the case of Mr Bryant, the incompetence displayed was considerable and continued for approximately a year. In the case of Mr Bench, his culpability was far less, but, on our findings, remains significant. We accept the submission on behalf of the Law Society that such incompetence threatens the reputation of the profession for prudence as well as competence and that it puts the public at risk.[240]The remaining allegations in respect of which this court has overturned conclusions of the tribunal, viz. allegations 2, 3, 4, 6 and 7 are, on our findings less serious. However, we do accept Mr Williams’s argument that any allegation relating to funds held by a solicitor for the account of another cannot be treated as trivial.[241]The tribunal’s finding on allegation 5.1, against Mr Bryant alone, was not appealed. It concerns the email sent by Mr Bryant to Mr Van Lent on 17 August 2003, which was part of the exchange of correspondence between Mr Bryant and Mr Van Lent in July and August 2003 in relation to the Rose Excalibur transaction. We have set out the relevant facts at paragraphs 57 to 65 above.[242]Mr Bryant’s email was undoubtedly incorrect in stating that Bryant Hamilton had not heard from Mitsui Marine, because Mr Bryant had received a “Legal Notice” dated 8 August 2003 from AMSI, attached to the letter from Lubis, Santosa & Maulana, written on the same day. Mr Bryant’s misleading impression to Mr Van Lent was never corrected. The email was part of a course of conduct by Mr Bryant in relation to this transaction after he had received Mr Van Lent’s email of 6 July 2003 which shows Mr Bryant attempting to defend the position of Mr Alonso and NIC, almost at all costs, whatever the contrary evidence.[243]We do regard this misconduct as serious. But we recognise that there is no finding of dishonesty against Mr Bryant with regard to this allegation.[244]Mr Williams invited the court to consider the penalties imposed by Solicitors’ Disciplinary Tribunals in other cases. Whilst we note the general tenor of those decisions, we agree with Mr Treverton-Jones’s submission that all these cases are “fact-sensitive” and do not provide specific assistance to this court in its present task.[245]Given the principles on penalties to which we have referred above and our findings in relation to the particular allegations, we have concluded that, with regard to Mr Bryant, the penalty of being struck off the Roll must be quashed.[246]Mr Treverton-Jones submitted to us that there was considerable personal mitigation in the case of Mr Bryant and that, in all the circumstances, his misconduct should be marked by either no penalty or a financial penalty only. We accept that Mr Bryant has lost his own practice, which he will never regain, that he has suffered heavily financially and that his family life has been badly affected, all as a result of the inspection and intervention of the Law Society and the subsequent disciplinary proceedings, findings and penalty imposed. We have taken account of those matters. We have noted that Mr Bryant has never before been disciplined in any way by the Law Society and that the present proceedings did not arise from any complaint to the Law Society by a former client of Bryant Hamilton.[247]Despite these factors, we cannot accept Mr Treverton-Jones’s submission. On our findings, Mr Bryant was guilty of serious professional misconduct over a period of about a year. That can only be marked by a penalty of suspension. In our view the correct period of suspension is one of two years. This will be deemed to run from the date of the tribunal’s order, ie. 17 October 2006.[248]It has always been accepted that the misconduct of Mr Bench was far less serious than that of Mr Bryant. In his case we have decided that the correct penalty is one of suspension for nine months, to run from the date of the tribunal’s order, ie. 17 October 2006. Therefore Mr Bench’s term of suspension has been completed.

Costs

[249]Mr Treverton-Jones submits that the Law Society should pay the costs of the appeal and that this court should also order that the appellants should have to bear only 50% of the costs of the tribunal hearing. Mr Treverton-Jones argues that the case against the appellants at the tribunal hearing was made unnecessarily complicated by the manner in which the allegations were drawn by the Law Society and that many areas of the case advanced against the appellants have been found by this court to lack merit.[250]We accept that the allegations against the appellants could have been expressed in clearer and more precise language and that the tribunal hearing might have been shorter as a result. But the fact remains that these appellants, by their professional misconduct, brought these proceedings upon themselves. Accordingly, we conclude that the proper way to deal with costs is to leave the order for the costs of the tribunal hearing undisturbed.[251]As for the appeal, we see no reason why the normal approach under the CPR should not apply. We consider that the appellants are the substantial winners, even though they have not succeeded in displacing all the findings that were challenged. We therefore order that the Law Society shall pay the costs of both appellants on this appeal. We will also order that those costs be set off against the costs that the appellants were ordered to pay in respect of the tribunal hearing.

Cited in 18 later judgments

and 9 more of the most senior