Solicitors Regulation Authority v Dennison [2011] EWHC 291 (Admin)

[2011] EWHC 291 (Admin)

Case No CO/6321/2010

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

ADMINISTRATIVE COURT

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date 22/02/2011

Before

THE RT. HON. LORD JUSTICE TOULSON

THE HON. MR. JUSTICE LLOYD JONES

Between

Solicitors Regulation AuthorityAppellant

Anthony Lawrence Clarke DennisonRespondent

Mr. Michael McLaren QC and Mr. Richard Coleman

(instructed by Jonathan Goodwin) for Appellant

Mr. Simon Monty QC (instructed by Pinsent Masons) for Respondent

Hearing Hearing date: 9 th February 2011

Judgment

The Hon. Mr. Justice Lloyd Jones:

[1]This is an appeal by the Solicitors Regulation Authority (“SRA”) pursuant to Section 49, Solicitors Act 1974 (as amended by Section 92 (6) of the Courts and Legal Services Act 1990), against the sentence imposed on the respondent, Mr. Anthony Lawrence Clarke Dennison, by the Solicitors Disciplinary Tribunal (“the Tribunal”) on 20th November 2009. The proceedings below.

[2]The six respondents before the Tribunal had all been equity partners in the firm of Rowe Cohen, practising at Quay House, Quay Street, Manchester.

[3]Prior to joining Rowe Cohen, Mr. Dennison had acted for Motor Law which operated a claims management scheme for personal injuries claimants. On joining Rowe Cohen in about March 1998 Mr. Dennison introduced Motor Law to Rowe Cohen who were appointed panel solicitors under Motor Law’s claims management scheme. In September 2000 The Accident Group (“TAG”) had acquired Motor Law’s business and the claims management business of Accident Advice Bureau Limited. TAG operated the claims management scheme involving the sourcing, funding and representation of claimants in personal injury cases (“the TAG scheme”). In 2003 TAG had gone into insolvent liquidation. Rowe Cohen had been involved in the TAG scheme in three respects:(a) As vetters of claims for TAG under the scheme, in which respect TAG had been Rowe Cohen’s client;

(b) As advisors to TAG in connection with the TAG scheme;

[4]The allegations against the respondents before the Tribunal fall into three groups(1) The TAG scheme allegations It was alleged against five of the respondents below (including Mr. Dennison) that they had facilitated, permitted or acquiesced in Rowe Cohen’s participation in a sham arrangement intended to circumvent the prohibition against the payment of referral fees, in Rowe Cohen’s concealing from panel solicitors the fact that part of the fee that panel solicitors paid to Rowe Cohen would be paid to TAG or its subsidiary, in the charging by Rowe Cohen of a disproportionately high amount for the vetting of claims under the TAG scheme, (against Mr. Dennison only) in Rowe Cohen misrepresenting to panel solicitors the criteria applied in vetting claims and that they had failed to ensure that vetting staff had been properly trained and supervised. In addition it was alleged against Mr. Dennison and four others respondents that they had facilitated, permitted or acquiesced in Rowe Cohen’s acting both for TAG and for clients under the TAG scheme, in the payment by Rowe Cohen of referral fees to a subsidiary of TAG and in the charge of such referral fee to the client, that they had failed to ensure that Rowe Cohen reimbursed the interest on the referral fees paid to the subsidiary of TAG and (against Mr. Dennison and one other respondent only) failed to ensure that Rowe Cohen had provided appropriate client care and costs information to TAG referred clients.

(2) The LRS allegations These allegations were made against Mr. Dennison alone and concerned his undisclosed interest in a company named Legal Report Services Limited (“LRS”). These are the only allegations with which we are concerned on this appeal.

(3) The Countrywide Allegations It was alleged against five of the respondents including Mr. Dennison that they had facilitated, permitted or acquiesced in the payment by Rowe Cohen of referral fees to Countrywide Property Lawyers Limited (“CPL”) and that they had facilitated, permitted or acquiesced in Rowe Cohen’s failure to inform the clients referred to it by CPL that the firm had been paying a referral fee to CPL.

[5]Although certain of the TAG scheme allegations and certain of the Countrywide allegations were upheld, no finding of dishonesty was made under either of these heads. In particular the allegations alleging dishonesty in relation to sham arrangements in respect of TAG were rejected by the Tribunal. The only allegation of dishonesty found proved was that against Mr. Dennison in respect of LRS. The other allegations which were upheld were all dealt with by the imposition of fines. Those allegations are entirely distinct and no complaint is made on this appeal about the relatively modest financial penalties imposed.

The LRS allegations

[6]The allegation against Mr. Dennison in respect of LRS was set out at paragraph 5 of the Rule 5 statement as follows:

“Mr. Dennison facilitated, permitted or acquiesced in the provision by Legal Report Services (“LRS”), a company in which he had a one third interest, of medical reports for clients for whom Rowe Cohen acted under the TAG scheme, and thereby created a conflict between: a. his financial interest in LRS; and b. his and Rowe Cohen’s duty to the client.”

In the Rule 5 statement the allegation was elaborated as follows:

“60. By no later than March or April 1998, Mr. Dennison acquired a one-third share in Legal Report Services Limited, a company that Motor Law used to supply medical reports for claimants under the Motor Law scheme. 61. By an agreement dated 16 April 1998 between Rowe Cohen and LRS, LRS agreed to receive instructions from Rowe Cohen for the arrangement of medical examinations by general practitioners anywhere in England and Wales.... The terms on which LRS provided medical reports were amended by a further agreement dated 3 November 1999.... 62. By an agreement dated 1 November 2000 between Rowe Cohen and LRS, Rowe Cohen agreed to instruct LRS to provide medical reports for all claims in which Rowe Cohen acted under the TAG scheme, and LRS agreed to provide such reports... 63. LRS supplied medical reports for clients referred to Rowe Cohen under the Motor Law scheme and subsequently the TAG scheme in accordance with these agreements. 64. Mr. Dennison was responsible for entering into these agreements on behalf of Rowe Cohen. He failed to disclose his interest in LRS to his partners or to TAG. Mr. Dennison eventually disclosed his interest in LRS to his former partners at a meeting on 9 July 2007. By a letter dated 20 July 2007, Mr. Dennison informed the Law Society that he had accepted that there was a conflict between his interest in LRS and his duty to TAG and to Rowe Cohen. 65. In the circumstances, Mr Dennison has committed professional misconduct in the respect alleged in paragraph 5 above. The Law Society will refer to Practice Rule 1 and Principles 15.04, … of the Guide. 66. In relation to the LRS allegations, Mr. Dennison consciously or recklessly fell short of the standards of professional conduct expected of solicitors and consciously or recklessly breached the rules and principles referred to above. In the all circumstances, his conduct was dishonest, alternatively reckless.”

Further, it was alleged that a trust arrangement had been set up to conceal Mr. Dennison’s interest from his partners, clients and the SRA. The SRA maintained that Mr. Dennison’s conduct in relation to LRS was dishonest. (Finding, paragraph 92). a. his financial interest in LRS; and b. his and Rowe Cohen’s duty to the client.”

[7]Practice Rule 1, Solicitors Practice Rules 1990 provided in relevant part:

“A solicitor shall not do anything in the course of practising as a solicitor, or permit another person to do anything on his or her behalf, which compromises or impairs or is likely to compromise or impair any of the following …(d) the good repute of the solicitor or of the solicitors’ profession; …”

The Solicitors Practice Rules 1990 have now been superseded by the Solicitors Code of Conduct 2007, Rule 1.06 of which is to similar effect. …(d) the good repute of the solicitor or of the solicitors’ profession; …” Principle 15.04 of the Guide to the Professional Conduct of Solicitors provided in relevant part:

“A solicitor must not act where his or her own interests conflict with the interests of a client or a potential client. … 4. A solicitor must at all times disclose with complete frankness whenever the solicitor has or might obtain any personal interest or benefit in a transaction in which he or she is acting for the client. In such circumstances, it is incumbent upon a solicitor to insist that the client receives independent advice. Failure to do so may lead to civil action by the client for account. … 6. The interests of the solicitor referred to in principle 15.04 may be direct (for example, where a solicitor seeks to sell or buy property from the client or lends to, or borrows from, the client) or indirect (for example, where the solicitor’s business interests lead the solicitor to recommend the client to invest in a concern in which the solicitor is interested). … 10. Practice Rule 10 (receipt of commission from third parties …) follows the position at law from which it is clear that a solicitor must not make a secret profit and must disclose to the client fully the receipt of any such profit. It may only be retained provided the client agrees. … The rule applies to the receipt by solicitors of, for example, commissions on insurances and from the Stock Exchange. …”

The Guide to the Professional Conduct of Solicitors is no longer in force. However, Rule 3.01 of the 2007 Code now contains a rule in terms similar to Principle 15.04.

[8]Mr. Dennison admitted the allegation but denied that he had acted dishonestly. By letter dated 23 July 2007 to the SRA he acknowledged that his interest in LRS and his duty to TAG as a client and Rowe Cohen’s clients for whom LRS provided medical reports were in conflict, in breach of Principle 15.04 of the Guide to Professional Conduct of Solicitors. The only issues for the Tribunal in relation to LRS, therefore, were whether or not on the admitted allegation Mr. Dennison acted dishonestly or recklessly and the appropriate sanction.

[9]The Tribunal made the following findings of fact(1) By no later than March or April 1998, Mr. Dennison held a one third share in LRS.

(2) By agreement dated 16 April 1998 between Rowe Cohen and the company, the company agreed to receive instructions from Rowe Cohen’s clients for the arrangement of medical examinations by general practitioners in England and Wales. Mr. Dennison was responsible for entering into the agreement on behalf of Rowe Cohen. He did not disclose his interest in the company to his partners.

(3) There was a further agreement dated 3 November 1999, when the TAG scheme was set up. Again, Mr. Dennison concluded the agreement on behalf of his firm. He failed to disclose his interest to his partners or to TAG, whom Rowe Cohen advised in connection with the claims management scheme and who were Rowe Cohen’s client as regards the vetting of claims under the scheme.

(4) Mr. Dennison’s interest in the company was held on trust. By agreement dated 15 February 2000, the shareholders agreed to keep that interest confidential.

(5) By an agreement dated 1 November 2000 between Rowe Cohen and LRS, Rowe Cohen (again acting by Mr. Dennison) agreed to instruct the company to provide medical reports for all claims in which Rowe Cohen acted under the TAG scheme and the company agreed to provide such reports. Mr. Dennison did not disclose his interest to his partners or to TAG.

(6) LRS supplied medical reports for clients referred to Rowe Cohen under the Motor Law Scheme and subsequently the TAG scheme in accordance with those agreements.

(7) Mr. Dennison did not disclose his financial interest in the company to the clients whose personal injuries claims Rowe Cohen conducted under the scheme, and whom he referred to the company and under the agreement mentioned above.

(8) Mr. Dennison drew dividends of some £680,000 from LRS in the period 1999 to 2003, without accounting for this profit to clients for whom Rowe Cohen was acting as panel solicitors, to TAG or to his partners. (The evidence of Mr. Dennison was that no more than £50,000 gross (£30,000 net) of his LRS receipts related to Rowe Cohen TAG clients who had been referred to LRS.)

(9) Mr. Dennison’s evidence was that he was given the shares in the company. The Tribunal noted that he sold them “for a substantial sum of money”. Mr. Dennison’s evidence was that he received £1.546m in cash (£50,000 of which was deferred) and £100,000 in loan notes on the sale of his interest in the company in February 2004.

(10) Mr. Dennison disclosed his interest in the company to what were now his former partners at a meeting on 9th July 2007.

(11) By letter dated 20th July 2007 Mr. Dennison informed the Law Society that he accepted that there had been a conflict between his interest in LRS and his duty to TAG and to Rowe Cohen. He reported himself after his partners had become aware of the situation.

[10]The Tribunal found that Mr. Dennison had acted dishonestly. It set out its reasons in the following passage:

“555. The allegation, against Mr. Dennison alone, was that he had facilitated, permitted or acquiesced in the provision by LRS, a company in which he had a one third interest, of medical reports for clients for whom Rowe Cohen had acted under the TAG scheme, and had thereby created a conflict between his financial interest in LRS and his, and Rowe Cohen’s, duty to the client. 556. The Tribunal noted that the history of Mr. Dennison’s interest in LRS was set out in his statement and in the written submissions. After considering all of the evidence in relation to the allegation, the Tribunal concluded that Mr. Dennison had deliberately kept his interest in LRS secret and that he had completely failed to notify clients that he, and through him Rowe Cohen, had had an interest in the company which provided their medical reports, and that he had deliberately deceived his Partners and kept hidden his interest as he had not wanted them to share in the money that he had been making from LRS. The Tribunal found that to have been a gross breach of trust between partners and a complete failure to notify clients as was required. 557. Mr. Dennison had drawn a very considerable amount of money in dividends and salary from LRS and had eventually sold his interest for a substantial amount of money. 558. When his Partners had found out about LRS, they had been understandably angry and proceedings had been taken against Mr. Dennison in settlement of which he had had to pay his former partners a considerable sum of money. 559. It was said, on Mr. Dennison’s behalf, that he had misunderstood Rule 10 of the Solicitors’ Practice Rules and that he had even consulted his brother-in-law, a solicitor, about it. His brother-in-law had arranged for a member of his firm to write to the Ethics Department of the Law Society about the matter. Subsequently, Mr. Dennison had self reported, after his partners had become aware of the situation. 560. It was the view of the Tribunal that it would have been obvious to any solicitor that Rule 10 had not applied to the situation. Moreover, it noted that Mr. Dennison’s view had been inconsistent with what the Law Society had stated. Mr. Dennison had known, and had admitted, that he had a fiduciary duty to his clients. He also, in the view of the Tribunal, must have known that he had breached his duty of trust to his Partners. 561. Because of the seriousness of the allegation, Mr. Dennison’s failure to disclose his interest to clients and indeed to his Partners, his considerable attempts to keep his interest in LRS secret and to keep all the profit and share value for himself, the Tribunal concluded that Mr. Dennison had been dishonest. The Tribunal found that he had acted dishonestly by the ordinary standards of reasonable and honest people and he had been aware that, by those standards, he had been acting dishonestly. The Tribunal found allegation 5 proved accordingly.”

The penalty

[11]The Tribunal expressed its conclusions in relation to penalty arising from the LRS allegation as follows:

“573. The Tribunal noted that the circumstances of the LRS matter had been very unusual, not to say unique, and not related solely to a regulatory matter. However, the probity of Mr. Dennison and therefore the reputation of the Profession had been involved and the Tribunal considered that the matter was very serious. 574. However, having regard to the length of time that had passed since the matter complained of, taking into account the payment that Mr. Dennison had already made to his former partners and the fact that it was the clear view of the Tribunal that no member of the public would be at risk if Mr. Dennison remained in practice, the Tribunal determined that the appropriate penalty, in the particular circumstances, would be a substantial fine. The Tribunal did not consider it to be appropriate or necessary for Mr. Dennison to be struck off the Roll or suspended for any period.”

At paragraph 593 the Tribunal imposed a fine of £20,000 on Mr. Dennison in relation to the LRS allegation. The Tribunal imposed on Mr. Dennison fines totalling £3,500 in respect of four other allegations which were found proved against him. None of those involved a finding of dishonesty. The total fine payable by Mr. Dennison was £23,500. Grounds of appeal.

[12]The SRA advances two related grounds of appeal. First, it submits that the Tribunal approached sentencing on the wrong basis and as a result erred in law. Secondly it submits that the sentence was clearly inappropriate.

[13]Ground 1 is expressed in the following terms:

“The SDT erred in law in not ordering Mr. Dennison to be struck off the Roll of Solicitors. Specifically: a. The SDT failed to pay any or any sufficient regard to the principle that the sentence of striking off the Roll of Solicitors is almost invariably the consequence of a finding that a solicitor has acted dishonestly. b. The SDT failed to consider adequately or at all whether the factors advanced by Mr. Dennison in mitigation amounted to wholly exceptional circumstances sufficient to displace the presumption, alternatively the normal rule, that a finding of dishonesty almost invariably leads to the solicitor being struck off the Roll of Solicitors. c. The SDT failed to give any or any sufficient consideration to the vital issues of (i) Maintaining the reputation of the solicitors’ profession; and/or (ii) Upholding public confidence in the profession; and/or (iii) The protection of the public and/or the public interest.” a. The SDT failed to pay any or any sufficient regard to the principle that the sentence of striking off the Roll of Solicitors is almost invariably the consequence of a finding that a solicitor has acted dishonestly. b. The SDT failed to consider adequately or at all whether the factors advanced by Mr. Dennison in mitigation amounted to wholly exceptional circumstances sufficient to displace the presumption, alternatively the normal rule, that a finding of dishonesty almost invariably leads to the solicitor being struck off the Roll of Solicitors. c. The SDT failed to give any or any sufficient consideration to the vital issues of (i) Maintaining the reputation of the solicitors’ profession; and/or (ii) Upholding public confidence in the profession; and/or (iii) The protection of the public and/or the public interest.”

[14]Ground 2 is expressed as follows:

“The sanction of merely a fine was excessively lenient and therefore clearly inappropriate given the established dishonest conduct of Mr. Dennison. In particular: a. There were no wholly exceptional circumstances capable of placing this case within the very small residual category of cases where it is appropriate to permit dishonest Solicitors to remain on the Roll of Solicitors. b. The SDT failed to take into account sufficiently or at all the following matters: (i) That Mr. Dennison had been guilty of dishonesty on repeated occasions and over a substantial period of time; (ii) Mr. Dennison had made, and/or the extent to which he had made, substantial secret profits from his concealed interest in LRS, which monies Mr. Dennison had not accounted for in full or in sufficient or substantial measure either to his ex-partners or to the clients of Rowe Cohen; (iii) That since the clients of Rowe Cohen had not been reimbursed the secret profits which Mr. Dennison had made as a result of his concealed interest in LRS, the public had suffered loss. c. The SDT erred in taking into account the following matters: (i) “The length of time that had passed since the matter complained of” to the extent that the SDT failed to treat the misconduct as having occurred on repeated occasions and over a substantial period of time ending only in July 2007; (ii) “The payment which [Mr. Dennison] had already made to his former partners”, to the extent that the SDT failed to put such a payment into the context of the far larger sums by which Mr. Dennison had profited from his misconduct; (iii) “No member of the public would be at risk if [Mr. Dennison] remained in practice”, to the extent that the SDT failed to give consideration to the loss which clients of Rowe Cohen had suffered by reason of the failure to account to them for all or any of the secret profits made by Mr. Dennison. d. The imposition of the sanction of the fine was insufficient to meet the needs of: (i) Maintaining the reputation of the solicitors’ profession; and/or (ii) Upholding public confidence in the profession; and/or (iii) Protection of the public and/or the public interest; Which depend on the honest and honourable conduct of its members at all times.” a. There were no wholly exceptional circumstances capable of placing this case within the very small residual category of cases where it is appropriate to permit dishonest Solicitors to remain on the Roll of Solicitors. b. The SDT failed to take into account sufficiently or at all the following matters: (i) That Mr. Dennison had been guilty of dishonesty on repeated occasions and over a substantial period of time; (ii) Mr. Dennison had made, and/or the extent to which he had made, substantial secret profits from his concealed interest in LRS, which monies Mr. Dennison had not accounted for in full or in sufficient or substantial measure either to his ex-partners or to the clients of Rowe Cohen; (iii) That since the clients of Rowe Cohen had not been reimbursed the secret profits which Mr. Dennison had made as a result of his concealed interest in LRS, the public had suffered loss. c. The SDT erred in taking into account the following matters: (i) “The length of time that had passed since the matter complained of” to the extent that the SDT failed to treat the misconduct as having occurred on repeated occasions and over a substantial period of time ending only in July 2007; (ii) “The payment which [Mr. Dennison] had already made to his former partners”, to the extent that the SDT failed to put such a payment into the context of the far larger sums by which Mr. Dennison had profited from his misconduct; (iii) “No member of the public would be at risk if [Mr. Dennison] remained in practice”, to the extent that the SDT failed to give consideration to the loss which clients of Rowe Cohen had suffered by reason of the failure to account to them for all or any of the secret profits made by Mr. Dennison. d. The imposition of the sanction of the fine was insufficient to meet the needs of: (i) Maintaining the reputation of the solicitors’ profession; and/or (ii) Upholding public confidence in the profession; and/or (iii) Protection of the public and/or the public interest; Which depend on the honest and honourable conduct of its members at all times.”

[15]In the course of his submissions, Mr. Michael McLaren QC, who appeared for the Appellant, accepted that the grounds are closely related and he concentrated on the second. The correct approach in law.

[16]The classic statement of the approach of this court to an appeal against a penalty imposed by the solicitors’ professional disciplinary body is contained in the judgment of Sir Thomas Bingham MR in Bolton v Law Society

[1994] 1 WLR 512

at pp. 518A – 519E. That approach was modified to a limited extent by the Court of Appeal in Salsbury v Law Society

[2008] EWCA Civ 1285

;

[2009] 1 WLR 1286

at paragraphs 30 and 37. For the purposes of this appeal, the following matters to be derived from these authorities are particularly significant.(1) The purposes of the imposition of sanctions on defaulting solicitors are three-fold: (a) In some cases there may be a punitive element in order to punish the solicitor, if he has not been dealt with by the courts, and to deter others. However, such orders are not primarily punitive and often the order is not punitive in intention. (b) The order may be intended to ensure that the solicitor does not have the opportunity to repeat the offence. An order of suspension or striking off may achieve that in varying degrees. (c) Most fundamentally, the order is intended to maintain public confidence in the solicitors’ profession and its reputation.

(2) Because such orders are not primarily punitive, personal mitigation is likely to be of less effect.

(3) Nevertheless, the Tribunal must also take into account the rights of the solicitor under Articles 6 and 8 ECHR.

(4) Cases of proven dishonesty are the most serious breaches of professional standards. In Bolton, Sir Thomas Bingham observed that in such cases the Tribunal has “almost invariably” ordered that the solicitor be struck off. In Salsbury the Court of Appeal accepted that there exists a “very small residual category where striking off is not appropriate”.

(5) In cases where there has been proved a breach of the required standards of integrity, probity and trustworthiness, but falling short of dishonesty, the lapse remains very serious indeed. While a striking off order will not necessarily follow in such cases, it may well. Only in a very unusual and venial case would the Tribunal be likely to regard as appropriate any order less severe than one of suspension.

(6) The Solicitors Disciplinary Tribunal is a specialist tribunal which is particularly well equipped to determine what sanctions are necessary in any given case in order to deal with defaulting solicitors, to protect the public and to protect the reputation of the profession. As a result a high degree of respect should normally be paid to its decisions.

(7) However, the power of the High Court to interfere with a decision of the Tribunal on sanctions is not limited to cases where “a very strong case is shown”. The court will intervene where there has been an error of law or where the sentencing decision was clearly inappropriate. The LRS charge.

[17]Before turning to consider how these principles apply in relation to the facts of this case, it is necessary to say something more about the scope of the LRS charge. First, Mr. Simon Monty QC, who appeared on behalf of Mr. Dennison both below and on this appeal, points out that the charge is one of a conflict of interest, that it does not allege any misappropriation of client funds and does not allege any impropriety in the relations between Mr. Dennison and his partners. Secondly, Mr. Monty correctly draws attention to the fact that the matter alleged to give rise to the conflict of interest was the provision by LRS of medical reports “for clients for whom Rowe Cohen acted under the TAG scheme”. The result, it is alleged, was a conflict between Mr. Dennison’s financial interest in LRS and his and Rowe Cohen’s duty to the client. The significance of the words quoted above is that the conflict of interest to which the charge relates is limited to services provided to persons for whom Rowe Cohen was acting under the TAG scheme and does not extend to the provision of services by LRS to other persons referred by other solicitors to LRS under the TAG scheme. However, the resulting breach of duty is alleged to be a breach of duty owed to Rowe Cohen’s clients which would include TAG.

[18]So far as Mr. Monty’s first submission is concerned, it is correct that we are concerned with a finding of a conflict of interest. However, the conduct in question was also found to be dishonest and deliberate and it is necessary for this court, as it was for the Tribunal, to consider that matter in its factual context and to have regard to all of the consequences of that conduct. That necessarily includes the making of a secret profit for which Mr. Dennison failed to account and the concealment of the arrangements set in place by Mr. Dennison from his partners and his clients.

[19]I readily accept the submission of Mr. Monty that the Tribunal and this court are bound to approach the question of penalty by reference to the specific breach of duty alleged and proved against Mr. Dennison. It is also important to have regard to the fact that the charge was limited to the provision of reports to clients of Rowe Cohen when considering the figures presented to the Tribunal in relation to the benefits received by Mr. Dennison. The dividends received by Mr. Dennison from LRS in the period 1999 to 2003 totalled some £680,000. However, not all of that sum would have been derived from the profits of providing reports for clients of Rowe Cohen. Mr. Dennison’s evidence was that the amount relating to work referred by Rowe Cohen to LRS was “small” or “very small”. In his third witness statement (para. 28) he estimated that no more than £50,000 gross (£30,000 net) of his LRS receipts related to clients of Rowe Cohen. (I understand the net figure to refer to the sum after payment of income tax by Mr. Dennison.) In his submissions to us Mr. Monty suggested that Mr. Dennison’s profit arising from the non-disclosed conflict as charged was around £37,000. This clearly has a bearing on the scale of the conflict of interest to which the charge related. Nevertheless, we were told that some 7,000 clients of Rowe Cohen were referred to LRS for the preparation of reports during the relevant period and the estimate of Mr. Dennison’s receipts from services provided to these clients is far from small.

[20]It is convenient to refer at this point to the commercial settlement arrived at between Mr. Dennison and his former partners following their discovery of his interest in LRS. The evidence before the Tribunal was that the total sum paid by Mr. Dennison to his former partners was £400,000 and that of this sum £100,000 was treated as due to be paid to clients on account of secret profits. Mr. Monty surmised – although he was not sure – that the sum of £100,000 was arrived at by taking the figure of £50,000 and doubling it to take account of the fact that there was a breach of duty to both individual clients of Rowe Cohen and also to TAG. The evidence below does not establish whether this was full accounting or whether any payments were made to individual clients or to the liquidators of TAG.

The reasons given by the Tribunal for its decision on penalty

[21]At paragraphs 572 of the Findings, the Tribunal records that Mr. Monty had referred the Tribunal in detail to the judgment of Sir Thomas Bingham in Bolton. It then set out at paragraphs 573-4 its reasons for its conclusion that it was neither appropriate nor necessary for Mr. Dennison to be struck off or suspended and that a substantial fine was the appropriate penalty. It does so in the most summary way and there is little in the way of reasoning to support its conclusions. In particular, it does not expressly explain why it felt able to depart from the normal order in a case where dishonesty had been proved.

[22]Mr. Monty rightly places considerable emphasis on the Tribunal’s conclusion that “it was the clear view of the Tribunal that no member of the public would be at risk if Mr. Dennison remained in practice”. It is not entirely clear what the Tribunal meant by this as the statement is not elaborated at all. However, I take it to mean that it concluded that Mr. Dennison could be trusted not to do something similar in future. Mr. McLaren in his submissions on behalf of the SRA made clear that he does not seek to challenge that finding. The Tribunal’s conclusion on this point is clearly an important consideration when addressing the objective of protecting the public. However, this does not greatly assist Mr. Dennison in relation to the further purpose of the imposition of sanctions: the protection of the reputation of the profession. This was the point addressed by Sir Thomas Bingham in the following passage of his judgment in Bolton (at p. 519):

“Often he will say, convincingly, that he has learned his lesson and will not offend again. On applying for restoration after striking off, all these points may be made and the former solicitor may also be able to point to real efforts made to re-establish himself and redeem his reputation. All these matters are relevant and should be considered. But none of them touches the essential issue, which is the need to maintain among members of the public a well-founded confidence that any solicitor whom they instruct will be a person of unquestionable integrity, probity and trustworthiness.”

As a result the argument before us was largely focused on the need to protect the reputation of the profession.

[23]The Tribunal observed that the circumstances of the LRS matter had been very unusual, not to say unique. The factual context in which this conflict of interests arose – the provision of reports by LRS for clients of Rowe Cohen referred by TAG – may have been unusual, but there was to my mind nothing unusual about the conflict of interests which arose or the conduct of Mr. Dennison in that regard. Solicitors are frequently confronted with problems of conflict of interests. Any competent solicitor would appreciate that he was not entitled to make a secret profit from services he has arranged, on the client’s behalf, to be provided to his client. The novelty of the factual context does not affect the gravity of the conduct, nor does it bear on the appropriate penalty.

[24]The Tribunal considered that the circumstances of the LRS matter had not related solely to a regulatory matter. I have some difficulty in understanding this point. It is correct, as explained above, that the charge was limited in its scope and did not relate to the entirety of the activities of LRS in relation to participants in the TAG scheme. It was limited to the conflict arising in respect of clients referred by TAG to Rowe Cohen. There were wider aspects of the commercial relationships which extended beyond the charge. However, what was before the Tribunal was entirely a regulatory matter. It concerned a solicitor’s conduct in relation to his clients. Mr. Dennison may have acted in a commercial context but he was acting at all times as a solicitor and was properly subject to professional regulation. Furthermore, it was necessary for the Tribunal to consider the implications of that conduct in the wider context of the TAG scheme and the partnership at Rowe Cohen. The seriousness of the conduct is not diminished when viewed in this wider context.

[25]The Tribunal gave as a reason for its decision on the appropriate penalty “the length of time that had passed since the matter complained of”. Earlier in its Findings (at para. 507) the Tribunal was very critical of the “inordinate delay” which had occurred in bringing the proceedings before it. The original investigation had begun in 2003. The Tribunal stated that no credible explanation had been provided by the SRA as to why the case had not been pursued expeditiously and deprecated that failure where serious allegations of dishonesty had been hanging over the heads of the respondents for some five years. However, that criticism does not appear to apply to the LRS matter as Mr. Dennison did not disclose his interest in the company until July 2007. The fact that wrongdoing over the period 1999 to 2003 did not result in a disciplinary decision until November 2009 is explained by the fact that Mr. Dennison had concealed his wrongdoing. Elsewhere in the Findings (at para. 561) the Tribunal is critical of Mr. Dennison’s “attempts to keep his interest in LRS secret” and this forms a part of the basis for the finding of dishonesty. However, this is not referred to in the section of the Findings concerned with the appropriate penalty. In my judgement the passage of time does not provide any justification for a reduction in penalty.

[26]The Tribunal also stated that it was influenced in coming to its conclusion on penalty by “the payment that Mr. Dennison had already made to his former partners”. I have explained earlier in this judgment that the total payment of £400,000 to his former partners included a sum of £100,000 in respect of sums due to be paid to clients of Rowe Cohen in respect of secret profits. There was no evidence below as to whether the clients ever received this payment. Furthermore, this was not a voluntary payment by Mr. Dennison but a commercial settlement of proceedings brought by his former partners which he initially defended. Whether or not the effect of the payment to his partners was to deprive Mr. Dennison of all of his gains from the activities which were the subject of the charge, it does not detract from the gravity of the wrongdoing. Furthermore, the fact of the settlement with his partners could carry very little weight in the determination of what the maintenance of the reputation of the profession required.

[27]For the reasons set out above, I have come to the conclusion that the matters identified by the Tribunal at paragraphs 573-4 of their Finding do not make out any case for departing from the normal penalty in cases where dishonesty has been proved against a solicitor. Further submissions.

[28]In the course of his submissions Mr. Monty argued that the imposition of a lesser penalty than striking off could be justified on the ground that Mr. Dennison’s conduct was not criminal. He sought to distinguish the cases establishing the principle that dishonesty will almost invariably result in striking off on the basis that they were concerned with criminal conduct. By contrast, he submitted, the present case concerns a failure to disclose a conflict of interests which was not a breach of the criminal law and which therefore fell within the residual category where that sanction need not be imposed. I would accept that it is relevant to bear in mind that Mr. Dennison has not been charged with any criminal offence in relation to the LRS matter and that it may well be that at the time it was performed his conduct was not criminal. However, the precise extent of the criminal law and the borderline between criminal and non-criminal activities cannot, in my judgement, be determinative of whether a given case may be regarded as falling within the residual category. Whether a case falls into that category is likely to depend on a consideration of a variety of factors including the nature and extent of the dishonesty itself, its duration, the benefit received by the solicitor and its effect on others. (See Solicitors Regulation Authority v. Sharma

[2010] EWHC 2022

(Admin.) per Coulson J. at paras. 14, 15.) In the present case, Mr. Dennison’s conduct was undoubtedly a fraud in equity and might well have constituted an offence of fraud by failing to disclose information or fraud by abuse of position contrary to sections 3 and 4, respectively, of the Fraud Act 2006 had it taken place after the commencement of that statute.

[29]In support of his submission that the present case could properly be regarded as falling within the residual category, Mr. Monty sought to persuade us that the individual clients of Rowe Cohen had not suffered any loss. He explained that each client referred by TAG to Rowe Cohen would have received an expert medical report commissioned through LRS for which the client would never pay, because if the personal injury claim were successful the defendant would pay and if it were not the cost of the report would be covered by insurance. However, even if this were correct, it overlooks the fact that Mr. Dennison, acting on behalf of his clients, commissioned reports from LRS and in return received a secret profit for which he was liable to account to his clients. Moreover, while the amount of secret profit in each case would be small, the cumulative effect was undoubtedly substantial.

[30]Mr. Monty also drew our attention to the fact that the LRS allegations were only a small part of a very long investigation and hearing and that throughout that period Mr. Dennison had much graver allegations of dishonesty hanging over his head. In the event, all of the other allegations of dishonesty were dismissed. Mr. Monty submitted that this was an exceptional factor justifying the imposition of a pecuniary penalty in respect of the LRS allegations, notwithstanding the fact that it was not a reason given by the Tribunal. However, I consider that this would not have been an appropriate reason for reducing the penalty. The Tribunal was required to act to protect the reputation of the profession. Inappropriate penalty.

[31]I have come to the view that the imposition of a fine in this case was clearly an inappropriate penalty and that the conduct of Mr. Dennison could not reasonably be regarded as falling within the residual category of cases where the Tribunal would be justified in departing from the normal course of striking off in a case where dishonesty has been proved. I have come to this conclusion for the following reasons. (1) The conduct was entirely deliberate and calculated.

[32]Before the Tribunal Mr. Dennison had maintained that he believed that he did not have to disclose his interest in LRS to his clients. In rejecting that submission the Tribunal stated (at para. 560) that “Mr. Dennison’s view had been inconsistent with what the Law Society had stated”. This is a reference to correspondence in June 1999 between Halliwell Landau, Solicitors, and the Ethics Department of the Law Society. Mr. Dennison’s brother-in-law had been a partner at Halliwell Landau. It had originally been Mr. Dennison’s case that he had instructed Halliwell Landau to write to seek the advice of the Ethics Department of the Law Society. Moreover, in his response to the Rule 5 statement and in his first witness statement Mr. Dennison based his explanation of his failure to inform clients of his interest in LRS on his alleged interpretation in 1999 of the Law Society’s response. However, during the course of the hearing Mr. Dennison changed his position on this. In his third witness statement he stated that, on reflection, he believed that he did not instruct Halliwell Landau to write to the Law Society on his behalf. He had previously assumed that he must have instructed Halliwell Landau to write the letter but he now believed that that was not the case. Mr. Dennison said in cross examination that his brother-in-law had asked a trainee to write to the Law Society without any instructions from Mr. Dennison.

[33]The letter date 8th June 1999 from Halliwell Landau to the Law Society was in the following terms:

“Very Urgent. We have been asked to act for a Solicitor who proposes to acquire a one third shareholding in a company which procures expert evidence for the legal profession. In his role as a Solicitor, our client refers work to that company. Is our client entitled to his own third share in the profits of this company, subject to the restriction relating to £20.00 commissions (Rule 14)? Further, could the solicitor accept the profits of the company, provided that his profit share does not include any of the profits derived from work referred by him?”

The reply from the Law Society stated that the interest must be disclosed: “You have not indicated exactly what services the separate business will be providing, but if you are satisfied that it will not be providing any of the core services then your solicitor client will not be prevented from participating in the business, provided that he complies with the safeguard set out in Section 4. In particular, you will see from Section 4(2)(d) that any clients referred by the solicitor during the course of his practice to the separate business, must be informed in writing of the solicitor’s interest in the business and the fact that as customers of the separate business, they will not enjoy the statutory protections attaching to clients of the solicitor…Any sums paid by way of commission will be subject to Practice Rule 10. However, this is a separate issue from the profits of the company to which the solicitor may be entitled”.

[34]The Findings do not deal with the Law Society letter, save in the brief reference at paragraph 560 quoted above. Mr. McClaren submits and Mr. Monty accepts that the reference at paragraph 560 is an implicit finding that Mr. Dennison had, in fact seen the Law Society letter in 1999.

[35]The Law Society letter is an entirely clear statement that in the circumstances of this case clients must be informed in writing of the solicitor’s interest in the business. Furthermore, the Law Society letter makes clear that Practice Rule 10, which Mr. Dennison maintained before the Tribunal he had believed at the time absolved him of any duty of disclosure, is concerned with payments of commission and that that is a distinct issue from any profits of the company to which the solicitor might be entitled. The letter demonstrates that the conduct of Mr. Dennison thereafter in breach of his duty was entirely calculated. (2) The conflict of interests was deliberately concealed.

[36]Mr. Dennison had acquired his interest in LRS in 1998 before he joined Rowe Cohen. At that time he decided not to reveal that interest. However, notwithstanding the clear advice received from the Law Society in 1999, Mr. Dennison thereafter failed to disclose his interest in LRS and took steps to conceal his conflict of interests. The shareholders’ agreement relating to LRS dated 15th February 2000 provided that Mr. Dennison’s interest in LRS should be held in trust and that it should be kept confidential. (3) The duration and scale of the dishonest conduct.

[37]The dishonest conduct involved repeated wrongdoing over a long period of time. Clients were referred to LRS for the commissioning of medical reports from 1999 until 2003 when TAG collapsed. Rowe Cohen acted for some 7,000 clients under the scheme, none of whom were told about Mr. Dennison’s secret interest. Nor was TAG informed of his secret interest. (4) Mr. Dennison was motivated by financial gain.

[38]There can be no doubt that Mr. Dennison’s involvement in LRS was motivated by financial gain. It proved very profitable. However, it is right to record that his gross receipts derived from referring TAG clients of Rowe Cohen to LRS – the matter to which the charge relates - were on his account limited to approximately £50,000, or possibly £37,000. (5) Subsequent failure to disclose the wrongdoing.

[39]Mr. Dennison kept his wrongdoing secret until 2007 when he was forced to make disclosure. The matter first came to light when one of his partners saw a reference to Mr. Dennison in connection with LRS. Thereafter Mr. Dennison reported himself to the SRA only when required to do so by his professional indemnity insurers. (6) Failure to be frank with the Tribunal.

[40]Before the Tribunal, Mr. Dennison denied that he had acted dishonestly or that his conduct was deliberate. He sought to justify his conduct on a number of grounds.

[41]Before the Tribunal it was Mr. Dennison’s case that he believed he did not need to disclose his interests to his clients as he thought that Rule 10 of the Solicitors Practice Rules meant that he had no duty to disclose any profit received on any client’s individual case of less than £20. Rule 10, which is no longer in force, provides:

“Solicitors shall account to their clients for any commissions received of more than £20 unless, having disclosed to the client in writing the amount or basis of calculation of the commission or (if the precise amount cannot be ascertained) an approximation therefor, they have the client’s agreement to retain it.”

Although Mr. Dennison came to accept that Rule 10 provided no justification for not disclosing his interests in LRS to Rowe Cohen’s clients, he maintained that at the relevant times he had believed that it did. At paragraph 560 the Tribunal rejected as untruthful Mr. Dennison’s evidence that he believed at the material time that the effect of Rule 10 of the Solicitors Practice Rules (which concerns commission received by a solicitor from a third party as opposed to profits earned by a solicitor by retaining on behalf of the client services from a company in which he has a financial interest) was that he could keep the profits and not disclose his interest to his clients.

[42]Another explanation put forward by Mr. Dennison before the Tribunal for his failure to disclose his interest was that he had believed at the relevant time that Clause 4.2 of the shareholders agreement prevented any conflict arising. Clause 4.2 provided:

“It is hereby agreed that [Mr. Dennison] shall not be entitled to any participation whatsoever (whether by way of distribution of profits, payment or any consultancy fee or otherwise) in any profits of [LRS] which are derived from any services carried out by [LRS] at the request or instigation of Rowe and Cohen, Solicitors, or such other firm at which [Mr. Dennison] has worked or works from time to time”

. Before the Tribunal Mr. Dennison accepted that Clause 4.2 did not relieve him of the obligation to disclose his interest to his clients. This concession was clearly correct because Mr. Dennison had a financial interest in the company to which he was referring his clients notwithstanding Clause 4.2. In any event, Clause 4.2 was not applied in practice. In his Response to the Rule 5 statement and in his first witness statement Mr. Dennison explained that this was because the amount relating to work referred by Rowe Cohen to LRS was “small” or “very small”. However, he subsequently stated in his third witness statement that his LRS receipts related to Rowe Cohen TAG referrals were no more than £50,000 gross (£30,000 net).

[43]The Tribunal does not deal with Clause 4.2 in its Findings. In arriving at its conclusion on dishonesty it must have rejected the argument based on Clause 4.2.

[44]Reference has been made above to the Tribunal’s finding, albeit implicit, that Mr. Dennison must have been aware in 1999 of the Law Society’s response to the letter from Halliwell Landau. Personal mitigation.

[45]Mr. Monty also addressed us on the personal circumstances of Mr. Dennison. I have read with care the many letters which speak very highly of his qualities and good works. I have no doubt that if he were struck off this would have the most serious consequences for Mr. Dennison personally and for his colleagues and staff at the new practice in which he has established himself. However, as Mr. Monty fairly accepted, the effect of such mitigation is necessarily limited for the reasons given by Sir Thomas Bingham in Bolton.

Further conduct by the SRA

[46]In his Respondent’s Notice, Mr. Dennison draws attention to certain other regulatory decisions taken by the SRA with regard to his fitness to practise.

[47]First, he states that in November 2009, on adjudication of the application by Mr. Dennison’s new firm, Dennison Greer, for LLP status, the SRA had not felt it appropriate to impose any conditions on the grant of that status or on Mr. Dennison practising as a member of the LLP, despite its knowledge of the allegations then pending against him. However, as Mr. McLaren pointed out, that adjudication was made four days before the decision of the Tribunal with which we are concerned and was expressed to be “without prejudice to any outstanding matters and/or issues.”

[48]Secondly he refers to the fact that in its letter of 6 May 2010 notifying him that it was recommending that a condition be imposed on his practising certificate, the SRA stated that “in light of the fact that the Tribunal found Mr. Dennison to have acted dishonestly in relation to one allegation against him, the Adjudicator is satisfied that the above condition is necessary in the interests of the public to ensure that in the future Mr. Dennison does not have sole responsibility for compliance with the rules and regulations which govern all solicitors”. Thus, he submits, in full knowledge of the decision of the Tribunal the SRA considered it to be a sufficient protection for the public that this condition be imposed. That statement was made in circumstances where the penalty imposed by the Tribunal had been limited to a fine. The SRA could not lawfully have circumvented that decision by refusing a practising certificate. The appropriate course was to challenge the decision on appeal. However, on the hearing of that appeal, the SRA is not precluded by reason of the position it took in the interim from arguing that a more stringent penalty than the imposition of a condition is necessary. Conclusions.

[49]For the reasons set out above, I consider that the Tribunal was correct in its conclusion (at para. 573) that this was a “very serious” matter. Furthermore, notwithstanding the respect which is normally due to this expert Tribunal, I consider that the conduct cannot reasonably be considered as falling within the residual category described in Salsbury where striking off is not required and that accordingly the penalty imposed was clearly inappropriate.

[50]I have given careful consideration to the alternative submission of Mr. Monty that this matter might properly be disposed of by the imposition of a term of suspension. Mr. Monty submits that the only purpose of striking Mr. Dennison off the Roll of Solicitors would be punitive and that to deprive him of his livelihood is too severe a penalty. I am unable to accept this submission. The purpose here is to protect the standing of the profession of solicitors. I regret that, in the circumstances of this case, that objective cannot properly be served by any course other than striking off.

[51]I would allow the appeal, quash the penalty imposed in respect of the LRS matter and substitute an order that the respondent be struck off the Roll of Solicitors. The Rt. Hon.

Lord Justice Toulson:

[52]I agree.