Solicitors Regulation Authority v Anderson Solicitors & Ors [2013] EWHC 4021 (Admin)

Case No CO/4547/2013Case No CO/10914/2013[2013] EWHC 4021 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
DIVISIONAL COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 17/12/2013
Before
LORD JUSTICE TREACYMR JUSTICE KING
Between
Solicitors Regulation AuthorityAnderson Solicitors (1)Robert Alan Ainsworth (2)Christopher James Anderson (3)Peter Howard Coe (4)Margaret Ann Hunter (5)Paul Wade Richardson (6)
Mr Dutton QC (instructed by Penningtons Manches) for AppellantMr Treverton-Jones QC (instructed by Anderson Solicitors) for RespondentsHearing Hearing date: 21st November 2013
Judgment

Introduction

[1]This appeal is concerned with an order of the Solicitors Disciplinary Tribunal dated 18th March 2013. The Solicitors Regulation Authority (SRA) appeals against(a) the acquittal of the Respondents in relation to Rule 10 of the Solicitors Code of Conduct 2007 (SCC), and(b) the penalty of £1,000.00 which was imposed on the Second to Sixth Respondents inclusive, jointly and severally. No penalty was imposed on the First Respondent. The First to Sixth Respondents have cross-appealed the order made by the Tribunal, whereby it ordered them to pay £80,000.00 towards the costs of the SRA. For convenience, I will refer to them as Respondents throughout.[2]The Tribunal hearing took place over five days between 28th January and 1st February 2013. The Respondents faced eight allegations. They are as follows:(1) In the period up to 5th October 2011 the Respondents’ method of providing costs information to clients in conveyancing matters failed to provide clients with adequate costs information and/or provided clients with misleading costs information which took unfair advantage of them in breach of Rules 1.02, 1.04, 1.05, 1.06, 2.03, 7.01, 7.02 and/or 10 of the SCC.(2) From 6th October 2011 [when a new SRA code of conduct came into being] and continuing, the Respondents’ method of providing costs information to clients in conveyancing matters failed and continued to fail to provide clients with adequate costs information and/or provided and continued to provide clients with misleading costs information. This was alleged to be in breach of all or any of Principles 2, 4, 5 and/or 6 of the SRA Principles 2011. Further, or alternatively, the Respondents failed and continued to fail to achieve any of the Outcomes O(1.1), O(1.13), O(8.1), and/or O(8.2) of the SRA Code of Conduct 2011.(3) In the period up to 5th October 2011 the Respondents acted in breach of Rules 1.02, 1.04, 1.05, 1.06 and/or 10 of the SCC in that they overcharged conveyancing clients and/or took unfair advantage of their conveyancing clients in: (a) making additional charges for matters such as advising on joint ownership, reporting on mortgage conditions and considering additional titles in circumstances where the amount of such charges was wholly disproportionate; and (b) making charges in excess of the charges set out in their costs documentation.(4) From 6th October 2011 and continuing the Respondents had continued and did continue to overcharge conveyancing clients and/or take unfair advantage of their conveyancing clients in making additional charges for matters such as advising on joint ownership and reporting on mortgage conditions where the amount of such charges was wholly disproportionate. This was alleged to be in breach of all or any of Principles 2, 4, 5 and/or 6 of the SRA Principles 2011. Further, or alternatively, the Respondents thereby failed and continued to fail to achieve outcome O(1.1) of the SRA Code of Conduct 2011.[3]The conduct complained of and covered by the charges started in 2009 and was continuing at the date of the hearing. During the course of the hearing we commented on the highly complicated structure of the charges, involving multiple allegations of breaches of rules, either cumulatively or in the alternative. Mr Dutton QC, for the SRA, acknowledged the force of this criticism. We would hope that in the future consideration would be given to a significantly clearer method of framing charges.[4]Each of the allegations (1) to (4) was denied, but was found to be proved by the Tribunal. However, in relation to allegations (1) and (3), the Tribunal did not find that there had been a breach of Rule 1.02 (lack of integrity) or of Rule 10 (taking unfair advantage) of the SCC 2007.[5]Rule 10.01 is headed “not taking unfair advantage” and provides:
“You must not use your position to take unfair advantage of anyone either for your own benefit or for another person’s benefit.”
[6]The remaining allegations, (5) to (8) were as follows: (5) The Respondents failed to obtain their clients informed consent before retaining commissions, in breach of Rules 1.04, 1.06, and 2.06 of the SCC. (6) In the period up to 5th October 2011 the Respondents’ publicity contained inaccurate references to the Law Society (as the Regulator) and to the Solicitors Complaints Bureau, and failed to show the words “regulated by the Solicitors Regulation Authority” and the firms registered SRA number in breach of Rules 7.01 and/or 7.07 of the SCC. (7) From 6th October 2011 and continuing the Respondents’ publicity contained and/or continued to contain inaccurate references to the Law Society (as the Regulator) in breach of all or any of Principles 4, 5 and/or 7 of the SRA Principles 2011. Further, or alternatively, the Respondents thereby failed and continued to fail to achieve all or any of the Outcomes O(1.7), O(8.1), and/or O(8.4) of the SRA Code of Conduct 2011. (8) The Respondents allowed residual balances to remain on client account ledgers in breach of Rule 15(3) of the Solicitors Accounts Rules 1998, and failed to remedy this upon discovery in breach of Rule 7 of the Solicitors Accounts Rules 1998.[7]Allegation (5) was denied, but was found proved. The issue in allegation (5) related to a construction of the relevant rules. Allegations (6) to (8) were admitted. It was accepted before us by the SRA that breaches of (5) to (8) inclusive were not serious, although they tended to demonstrate a lax attitude towards proper regulatory standards.[8]In the circumstances, therefore, the issues before us have focused around allegations (1) to (4).

The Tribunal Proceedings

[9]The case advanced in relation to allegations (1) to (4) was in essence that the Respondents had operated a complex system of charging in a way which meant that clients initially received a quotation for conveyancing services at a relatively low price which had the purpose and/or effect of luring clients in. However, many additional charges were included in the Respondents’ Terms and Conditions booklet, provided later, with charges for mortgagee costs and joint purchaser advice only appearing from the client’s viewpoint when a final account was sent to them at the conclusion of the transaction. In consequence, clients were faced with conveyancing charges often very significantly higher than the initial price quoted, and in circumstances where an accurate estimate of costs could have been provided at the outset.[10]The essence of the Respondents’ defence to allegations(1) and(2) was that the Respondents had provided a sufficient level of costs information to their domestic conveyancing clients, and that even if they had not, any failure was of insufficient gravity to justify a finding of professional misconduct.[11]In relation to allegations (3) and (4) there was a denial of overcharging or taking unfair advantage of clients. If in any case there had been overcharging, that was due to human error and did not amount to professional misconduct.[12]Part of the defence put forward by the Respondents referred to previous proceedings which had taken place in 2005 involving allegations with a degree of similarity. In those proceedings the Second and Fourth Respondents had been acquitted. In the light of those proceedings and subsequent adjudications undertaken internally by the SRA in two other cases where the adjudicators had held that the firm’s contractual documentation was clear and that there was no cause for complaint, there were good grounds for the Respondents to believe that its conveyancing pricing information was satisfactory.[13]It was, however, conceded that, in the interim, terms had changed and charges had increased. The Respondents’ submissions also included an attack on what it characterised as a heavy-handed and unnecessary approach taken by the SRA.

The Tribunal’s Findings

[14]In relation to the 2005 proceedings, the Tribunal was satisfied that there were significant differences between the scheme which led to the 2005 proceedings and those leading to the current proceedings. For example, the earlier scheme involved two documents setting out costs information sent together by post. The current scheme involved initial costs information by email, giving the headline quote in two documents, followed by Terms and Conditions and a Client Care Code sent by post. Thus there were four documents to be considered, not all provided simultaneously, and without clarity for the client that they all formed part of the charging structure.[15]The firm’s additional charges had been significantly fewer and lower in 2001-2002 than in 2009. The current proceedings involved ten additional charges as against those potentially chargeable in 2001-2002. In the earlier proceedings the majority of clients paid the headline fee with very few additional charges, whereas that was not now the case, and additional charges had significantly increased the costs ultimately payable.[16]The Terms and Conditions contained several statements that could have led the client to believe that all the charges applicable to them were contained in the initial documentation provided by email.[17]In these circumstances the Tribunal was satisfied that what had been done by the firm was inadequate and misleading as major charges were being left out of the initial quotation to clients, which the Tribunal was satisfied that the firm would have known had to be paid, (e.g. a fee for acting for the mortgage lender and advice regarding co-ownership), and that the client would have wanted to know at the outset.[18]As to the two adjudications, they were distinguishable on their particular facts.[19]In relation to allegation (1), this was found proved, but the Tribunal did not find a breach of Rule 1.02; the Respondents had not lacked integrity by virtue of their having relied upon the 2005 Tribunal findings and the adjudications, albeit that such reliance was misconceived. The Tribunal also did not find a breach of Rule 10; the Respondents had not taken unfair advantage of third parties. It held that in providing costs information as they did, the Respondents intended to give prospective clients a low headline quote which would encourage them to use their services. Only a small minority would have been charged no more than the headline quote, most would have been subject to significant additional charges.[20]Although the Respondents had made provision for those charges in the various documents containing costs information, the method had become so complicated, relying as it did on four different documents delivered at different times, that it was rendered inadequate and misleading. A similar finding was made to the parallel allegation (2). That included a finding of a failure to achieve Outcome O(1.1), namely treating clients fairly. The SRA accepted that this was outcome-based and different from the allegation under Rule 10 of taking unfair advantage.[21]As to allegation (3), relating to overcharging and taking unfair advantage of clients, the Tribunal did not find that the Respondents had taken unfair advantage of their conveyancing clients, thus acquitting on the Rule 10 element of the allegation.[22]However, in relation to allegation (3), it found that there had been overcharging in relation to charges for advice on co-ownership, reporting on mortgage conditions, considering additional titles, and cash back charges. It found those charges to be “wholly disproportionate”. Insofar as there was charging in excess of that set out in the documentation, this was the result of mistake or human error.[23]As to allegation (4), a similar conclusion was reached in relation to overcharging. This finding included a failure to achieve Outcome O(1.1) as explained at paragraph 20 above, but there was also a specific finding that the Respondents had not taken unfair advantage of their clients.[24]In relation to allegations (1) to (4), the Tribunal also had regard to the fact that in some cases the completion statement was only received by clients the day before completion; that the phrasing of some of the documents provided was ambiguous, contradictory or uncertain; that in relation to value to the client, the advice on co-ownership, which attracted a charge of £225.00, was not given to or required by clients in some cases, and the work involved simply did not justify the charge in any event since it involved the mere printing off of a form.[25]The Tribunal noted that the Second and Fourth Respondents had previously appeared before the Tribunal in July 2005 when they had been reprimanded for breach of the Solicitors Accounts Rules. This did not appear to carry weight in the hearing below, and Mr Dutton, rightly in our view, has not relied on it.[26]In mitigation it was urged that the Respondents’ business would be devastated as a result of the judgment. There having been publicity, the firm had already been removed from a number of conveyancing panels, and the future of the firm was in doubt as a result. Reference was made to ill health on the part of the Second Respondent, age and ill health on the part of the Third Respondent (age 69), and age and ill health on the part of the Fourth Respondent (age 63). The offences had not been committed out of greed, and the Respondents were earning significantly less than £100,000.00 per annum.[27]As a consequence of these proceedings the firm had not applied for membership of the Conveyancing Quality Scheme, nor had it converted to a Limited Liability Partnership.

Sanction

[28]The Tribunal considered its Guidance Note on Sanctions. It approached the matter on the basis that the Respondents had not created a scheme deliberately to cheat their clients with a view to increasing their conveyancing returns. Whilst the Tribunal accepted that the Respondents believed that their provision of costs information was comprehensive and transparent, they had failed to consider it from a client’s perspective. From that perspective the information was largely impenetrable and thus misleading and inadequate.[29]It elaborated by saying that the procedure by which the Respondents gave costs information was flawed, and that the four documents used, their content and the procedure adopted were confusing and misleading to clients.[30]The Tribunal also observed that both parties had taken entrenched positions as to their actions which the Tribunal considered had prevented the case being sensibly resolved. It should not have been necessary for the case to have come before the Tribunal.[31]The Tribunal had a responsibility to balance the interests of the public and of the reputation of the profession with imposing a reasonable and proportionate sanction in all the circumstances of the particular case. The Tribunal then ordered that each Respondent (with the exception of the First Respondent) should pay a fine of £1,000.00 on a joint and several basis.

Costs

[32]At the hearing on 1st February 2013 when the Tribunal gave its decision with brief accompanying reasons, Mr Dutton QC, for the SRA, stated that the SRA’s costs were £142,277.00. He sought a reasonable contribution towards that sum from the Respondents. The Schedule of Costs was only provided after the ruling on the allegations had been given. The Tribunal was reminded of evidence that there had been 7,000 conveyancing transactions in which the current information model had been used. That model had been found to be confusing and misleading. It was submitted that it was only through the matter being brought before the Tribunal that changes could be achieved, it being the Respondents’ case that their costs information to their clients was appropriate and transparent. They had failed to engage with reasonable attempts to achieve a resolution with them.[33]In response, Mr Treverton-Jones QC, submitted that the proceedings had been over-prosecuted and that his clients had been prepared to enter into a dialogue with the SRA. It should have been possible to deal with the case in some other way, particularly in the light of the new approach to outcomes-focused regulation. The sum claimed was out of all proportion to a case which did not merit more than a moderate fine.[34]The Tribunal found that the proceedings had been properly brought and that allegations (1) to (5) had been proved, with (6) to (8) being admitted. It considered that neither side had sought to resolve the issues, although it had been in the Respondents’ hands to try to resolve matters with the Regulator, the SRA. A report on an inspection of the firm in December 2009 had been sent to the firm requiring action and changes to documentation. It required compliance. However, the firm had made no effective response.[35]Whilst the Tribunal would discount an element of the costs to reflect concerns that neither side had resolved the matter without these proceedings, it was satisfied that the greater blame lay with the Respondents, who had had the opportunity to work with the Applicant but had not taken it. It had taken these proceedings for the Respondents to offer to change their documents and methods of charging.[36]Having additionally noted that it took into consideration the late service of witness statements by the SRA (albeit that had not caused prejudice to the Respondents), the Tribunal summarily assessed the costs in the sum of £80,000.00 on a joint and several basis.[37]We note that no application had been made by the Respondents for time to consider the SRA’s Schedule of Costs so as to make any detailed submissions; no application was made that the matter be sent for a detailed assessment; and no financial information relating to the position of any of the Respondents had been placed before the Tribunal other than a very general statement of incomes and a pessimistic prognostication for the continued existence of the First Respondent.

Submissions on the appeal

[38]Mr Dutton QC, for the SRA, challenged the level of the fines imposed on the Second to Sixth Respondents, and the absence of any fine on the First Respondent. He pursued two grounds; ground one asserted that the Tribunal should have found that where an allegation included a reference to Rule 10, there had been a breach of that rule, consistent with the Tribunal’s findings. He argued that a breach would be proved by(a) use of a solicitor’s position,(b) to take unfair advantage of another,(c) for the solicitor’s or another’s benefit.[39]Since the Tribunal had found that the Respondents had given a headline quote to clients which would encourage them to use their services, and which would not be accurate as to the likely costs to be incurred, and which was then followed by an inadequate and misleading system of documents which led to clients being charged far more than the quoted figure, the Respondents could not have been acting fairly.[40]It was submitted that for there to be a breach of Rule 10 there was no requirement that a solicitor should act with an intention to cheat or act dishonestly or with a lack of integrity, and that the Tribunal must have been misled by its conclusions that the Respondents had not acted in those ways.[41]The second ground is that to impose a fine of £1,000.00 on the Second to Sixth Respondents and no penalty on the First Respondent was clearly inappropriate. The Tribunal must keep in mind the twin principal objectives in relation to sanction, namely the need to deter and the need to protect the reputation of the profession in the eyes of the public. An assessment of the conduct in question with its aggravating features should have led to a much more significant financial penalty for all Respondents.[42]The breach here was said to be serious in the use of misleading and confusing documentation provided for the purpose of obtaining domestic conveyancing work. The misconduct was aggravated by its occurrence over a four year period of time, and which was continuing at the date of the hearing. On the Respondents’ own account they had undertaken several thousand conveyancing transactions in this period. Many transactions involved overcharging, albeit not intentional.[43]The position was aggravated by a failure to respond when given the opportunity to change the system in December 2009. The Tribunal should have had regard to the harm done to clients and the benefits obtained by the Respondents as a result of the misconduct. It was highly likely that the Respondents would not have obtained anything like as many clients had their documentation been adequate and clear.[44]In the circumstances a significant financial penalty was clearly required in order to achieve the purposes of deterrence and protection of the profession’s public reputation. Had the Tribunal properly applied its mind, it would have imposed a much more serious sanction. Whilst the breaches of allegations (5) to (8) were not serious, they contributed to an overall picture of laxity of standards.[45]In addition, in the absence of an undertaking given to the Tribunal that the Respondents would change their conveyancing practices, it was originally submitted that it would be appropriate for this court to impose conditions on the Second to Sixth Respondents’ practicing certificates to the effect that they must not practice in conveyancing matters using the four document system in respect of which they had been found guilty of misconduct. See Camacho v The Law Society [2004] EWHC 1675. In the end, since by the time of the hearing, it was clear that the First Respondent was taking on no new business and was shortly to cease trading, there was general acceptance that this aspect of the matter had become academic. Accordingly, I need say no more.[46]There was an additional ground of appeal (ground three) which complained about the Tribunal’s refusal to hear a closing submission on behalf of the SRA. I return to this later.[47]In response Mr Treverton-Jones QC emphasised that this court should be very reluctant to interfere with sanctions imposed by a disciplinary Tribunal which was best placed to judge the gravity of professional misconduct and determine the appropriate sanctions.[48]The Tribunal had found that misleading documentation had been used and that clients had been overcharged. However, the concept of taking unfair advantage of another involved a deliberate course of conduct. The Tribunal had rightly dismissed this part of the allegation since it had found that the Respondents had not embarked on a scheme deliberately to cheat their clients, and because they were not acting with a lack of integrity.[49]As to ground two, it was submitted that in considering the fines this court should consider the overall financial burden imposed consistent with the approach in Matthews v SRA [2013] EWHC 1525 (Admin). The court should recognise that a financial penalty is only part of the financial and reputational cost of proceedings for a solicitor. By the time of the hearing there was already evidence of loss of business consequent on the proceedings, and the gloomy prognosis for the future of the firm mentioned at the hearing had been borne out by the fact that the firm was taking on no new business and would close at the end of this year. The court has been informed that the immediate cause of the closure is the firm’s inability to obtain professional indemnity insurance on commercially acceptable terms.[50]Insofar as it was asserted that this court should approach the matter on the basis of depriving a wrongdoer of the fruits of his misconduct, that would represent a highly controversial departure from existing practice. The Tribunal’s guidance note on sanctions shows that whilst there is no limit to the level of fine the Tribunal may impose, it will consider all the circumstances of the case, including aggravating and mitigating factors. The fine is to be fixed at a level which reflects the seriousness of and is proportionate to the misconduct. Those are the principles which should guide an assessment of any fine. In the circumstances the court should respect the decision of the Tribunal.[51]It was conceded by the SRA that a fine was the appropriate penalty, and the SRA was unable to overcome the very high threshold which needed to be satisfied before this court could interfere with sentence.[52]In addition, the Tribunal was not wrong in failing to impose any sanction upon the First Respondent. The firm was a traditional partnership, not an LLP. The Third Respondent is the sole equity partner, the others being salaried partners, so that any fine imposed on the firm would be a fine imposed upon him, and thus amount to a double penalty.[53]In mitigation reliance was placed upon the history of the previous charges which resulted in acquittals. In the light of the demise of the firm and details of the financial means of the Respondents, this court was invited to assess the financial position of the individuals in looking at the overall picture of fines and costs.[54]We were informed that the Third Respondent is indemnifying the other Respondents against their liabilities for fines and costs. He is contractually obliged to do so.

Submissions on the cross-appeal

[55]The Respondents apply for permission to appeal out of time. Our decision in this respect is to grant leave, the application being unopposed.[56]The Second to Sixth Respondents appeal against the order for costs made jointly and severally in the sum of £80,000.00. They contend that:(1) No order for costs should have been made in the light of the Tribunal’s finding that the case need not have come before it. The Tribunal should have concluded that the Appellant had sought to engage with the SRA, both before and after the commencement of proceedings.(2) The Tribunal erred in principle in carrying out a summary assessment of costs at the conclusion of a five day hearing and only minutes after service by the SRA of a schedule of costs exceeding £142,000.00. The result was that the figure of £80,000.00 was in effect plucked out of the air with no proper explanation as to how that sum was calculated. Although the Tribunal is master of its own procedure, there was no good reason to depart from the procedure adopted in civil litigation. (See CPR 44 PD.7 at paragraphs 13.1, 13.2 and 13.5(4)(b)).(3) The Tribunal failed to provide any or any adequate reasoning in support of its costs decision.(4) The Tribunal erred in attributing greater blame to the Respondents than to the SRA in assessing the Respondents’ liability for costs. In any event the sum of £80,000.00 is too high in all the circumstances and the Tribunal paid insufficient attention to the “high handed manner” in which the SRA had conducted the proceedings.(5) Material now available to this court shows that on a detailed assessment the SRA’s costs schedule would be likely to be substantially reduced.(6) Material now available to the court demonstrates that the Appellants are not in a financial position to pay the costs ordered.[57]In response, Mr Dutton QC, for the SRA, submits that costs fell within the Tribunal’s discretion and that this court should be slow to interfere unless the Tribunal had clearly fallen into error. If either of the SRA’s grounds of appeal succeeded, that impacted on the Respondents’ cross-appeal on costs. In any event the costs awarded amounted to a proper exercise of the Tribunal’s discretion in circumstances where the SRA had to bring this case before the Tribunal in order to obtain findings that the Respondents were in breach of the rules in relation to allegations (1) to (5) inclusive.[58]All those matters had been contested and it had been argued by the Respondents that the case was simply a repeat of that heard in 2005 and the two additional matters adjudicated upon. That argument had failed.[59]A decision not to order a detailed assessment was a proper exercise of discretion, and the Respondents had failed to disclose their own costs of defending the case, which should have been done had they wished to contend that the SRA’s costs were excessive.

The Law

[60]The appeal and cross-appeal are made under Section 49 of the Solicitors Act 1974. On an appeal this court should only interfere if there is an error of law, or a failure to take account of relevant evidence, or a failure to provide proper reasons.[61]In terms of an appeal against sanction, Mr Dutton drew attention to The Law Society v Salsbury [2008] EWCA Civ 1285 at paragraph 30 where Jackson LJ said:
“From this review of authority I conclude that the statements of principle set out by Sir Thomas Bingham MR in Bolton v Law Society [1994] 1 WLR 512 remain good law, subject to this qualification. In applying the Bolton principles the Solicitors Disciplinary Tribunal must also take into account the rights of the solicitor under Articles 6 and 8 of the Convention. It is now an overstatement to say that “a very strong case” is required before the court will interfere with the sentence imposed by the Solicitors Disciplinary Tribunal. The correct analysis is that the Solicitors Disciplinary Tribunal comprises an expert and informed Tribunal which is particularly well placed in any case to assess what measures are required to deal with defaulting solicitors and to protect the public interest. Absent any error of law, the High Court must pay considerable respect to the sentencing decisions of the Tribunal. Nevertheless if the High Court, despite paying such respect, is satisfied that the sentencing decision was clearly inappropriate, then the court will interfere.”
[62]In Bolton Sir Thomas Bingham MR cited with approval (at page 516) a passage from a earlier decision of the Judicial Committee of the Privy Council in these terms:
“Their Lordships are of the opinion that Lord Parker CJ may have gone too far in Re a Solicitor [1960] 2 QB 212 when he said that the appellate court would never differ from sentence in cases of professional misconduct, but their Lordships agree with Lord Goddard CJ in Re a Solicitor [1956] 1 WLR 1312 when he said that it would require a very strong case to interfere with sentence in such a case, because the Disciplinary Committee are the best possible people for weighing the seriousness of the professional misconduct.”
[63]Mr Treverton-Jones QC argued that the relaxation of the requirement on an appellant in a sentence case that he must make “a very strong case” related to the Convention Rights of a solicitor appellant and did not apply to an appeal by a regulator. He submitted that in relation to a regulator’s appeal against penalty the position remained as stated in Bolton. Conclusions The Legal Test

Conclusions

[64]I deal first of all with the point just raised. I note that either party may appeal to this court from a decision of the Tribunal. It seems to me that it would be invidious or anomalous for different standards to apply, depending on which party was appealing. In the circumstances I consider that the decision of Salsbury is of general application subject to the need to take account of the rights of a solicitor under the Convention. There is a need in the absence of legal error for this court to pay considerable respect to a sentencing decision of the Tribunal, and this court should only interfere if satisfied that the sentencing decision was clearly inappropriate.[65]We invited counsel to indicate to us how in practice in this appeal the approach and language used in Salsbury would or could lead to a different result from an application of the test in Bolton. Neither was able to articulate a difference of result.[66]We found this unsurprising, given the high hurdle maintained by Salsbury in relation to any sentencing appeal. The conclusions we have reached in this case are clear and do not depend upon an application of one test rather than the other.

Rule 10

[67]It seems to me that the wording of Rule 10 prohibiting the use of a solicitor’s position to take advantage of another must involve an element of consciously taking unfair advantage. This gives a natural meaning to the words used. It is not in my judgment sufficient, as Mr Dutton QC contended, for the solicitor to have taken deliberate action which in fact had the consequence of taking unfair advantage of the client. To look at the end result is not, in my judgment, enough. The phrase “you must not use your position to take unfair advantage” clearly imports a degree of purpose underlying the use of position.[68]Accordingly, it does not seem to me that the Tribunal was in error in finding that there was no breach of Rule 10. Rule 10 is to be distinguished from Outcome O(1.1) of the SRA Code of Conduct 2011 which requires fair treatment of clients as an outcome of solicitors work, and is something which is objectively based. I am satisfied that Rule 10 properly construed requires a subjective element in the way I have indicated. In those circumstances the findings of the Tribunal support its conclusion in relation to Rule 10.[69]Although it had found that the Respondents intended to put themselves in a position to be able to give a low headline quotation, it did not find a lack of integrity, nor did it find that the scheme had been intended to cheat clients. Moreover, in brief remarks made at the end of the hearing, a finding was recorded that this was not a scheme deliberately to disadvantage clients, and the overall picture has to be viewed in the light of an acceptance that the Respondents themselves believed that their scheme was transparent so that they had not set out to cheat anyone.[70]In the light of those various findings of the Tribunal, I conclude that the SRA’s challenge on this basis must fail.

The Level of the Penalty

[71]I have come to the conclusion that the penalties imposed on the Second to Sixth Respondents were clearly inappropriate in that they were far too low in all the circumstances of the case. I have come to that conclusion highly conscious of the expert nature of the Tribunal. It is clear to me that the penalties fall far below any appropriate range available to the Tribunal.[72]The primary purpose of the sanction is to deter others and to uphold the reputation of the profession. The facts of the case show long-term and significant breaches of important rules which had the effect of causing loss to many clients, and which represented a course of conduct which could only compromise the reputation of the profession for fair dealing. The culpability of the Respondents lies in the creation and continuation of a scheme of documents which was designed to attract work by reason of the low headline quote, which was opaque and misleading by its nature, and which had the effect of operating unfairly on the clients.[73]The named Respondents were all experienced solicitors whose position was aggravated by their decision to continue with the scheme after it had been called into question by the SRA in December 2009. Although the Tribunal found that both sides had to some extent become entrenched, it clearly found that the greater responsibility for this lay with the Respondents, who had failed to take the opportunity to work with the SRA and were determined to maintain the system until the outcome of the Tribunal hearing.[74]Set against those matters the Respondents were entitled to point to the absence of any finding of dishonesty or a lack of integrity. It accepted that the Respondents believed that their costs information was comprehensive and transparent, although they had failed to consider the matter from the clients’ perspective.[75]Contrary to the impression given by his written submissions, Mr Dutton did not urge upon us that we should seek to strip out any benefit gained by the Respondents. I consider that he was right to adopt this course since the Tribunal’s guidance note on sanctions does not require this, nor was there any material available to enable such an exercise to be carried out. However, the question of benefit is a relevant factor in assessing the gravity of the harm done, and in this case where there must have been significant benefit derived by the Respondents from their misleading scheme and overcharging of their clients, this can only serve to raise the gravity of the offences.[76]It seems to me that notwithstanding the available mitigation, the scale of, timeframe and harm caused by these offences was serious and significant, and represented relatively large-scale poor practice in a way particularly calculated to undermine public confidence in the profession. When one looks to see the Tribunal’s reasoning for imposing the penalties which it did, the material was rightly criticised by Mr Dutton as being sparse. Although the guidance note on sanctions was referred to, there was no attempt to analyse by reference to culpability, harm, and aggravating and mitigating features, nor was there any assessment by reference to the need for deterrence and the upholding of the reputation of the profession beyond noting:
“A responsibility to balance the interests of the public and the reputation of the profession with imposing a reasonable and proportionate sanction in all the circumstances.”
[77]The sparsity of the reasoning in relation to the sanction imposed is in contrast to the very careful analysis of the evidence on the issue of liability. The absence of clear reasoning means that there is no firm platform for this court to consider in assessing whether the penalty was clearly inappropriate.[78]We were referred to Tinkler v SRA [2013] EWHC 3645 (Admin) as a recent example of a consideration of the appropriate level of fines before the Tribunal, together with a number of other recent decisions. All such cases, of course, turn upon their own facts. We were also shown a recent SRA consultation paper on proposals to increase the SRA’s fining powers, showing levels of fines imposed up to the end of July 2013. It is clear to us from such materials that although the Tribunal has since 2009 been able to impose an unlimited fine, the level of penalty actually imposed has rarely exceeded £20,000.00. Indeed the overwhelming majority of fines is imposed at £10,000.00 or less.[79]Although the most serious breaches of the rules will call for a striking off or suspension, a significant financial penalty will fall to be extracted (subject to the means of a party) in cases of serious breach of the rules. At the hearing below very little indeed was advanced to assist the Tribunal as to the means of these Respondents. I have already summarised what little information was provided below.[80]In SRA v Davis & McGlinchey [2011] EWHC 232 (Admin) Mitting J identified the need for a solicitor to provide evidence in advance to the Tribunal if he wished to contend that he lacked the means to meet a financial order. The court was primarily concerned with costs, but it seems to me that Mitting J’s observations were of equal validity in relation to a financial penalty. Indeed, the current Practice Direction Number 6 at paragraph 13 requires a Respondent who wishes his or her means to be taken into consideration in relation to sanctions and/or costs to provide a statement of means in good time.[81]This course had not been taken below, but we have now been provided with information about the financial position of the Second to Sixth Respondents, together with other personal information which could have a bearing upon their ability to pay, which was not available to the Tribunal. That information has been provided at a stage when it was too late for the SRA to make any meaningful investigation. Accordingly, it is not open to us in adjusting the financial penalty to an appropriate level, to deal with the matter today, taking account of the means of these Respondents.[82]As I have already stated, I am entirely satisfied that in all the circumstances the penalties imposed on the Second to Sixth Respondents were clearly inappropriate. They failed to take account of the scale, duration and gravity of this offending in the context of the two principal matters underlying the imposing of such a sanction. There must be a significant increase to mark the nature of this offending.[83]It seems to me that the Tribunal was also in obvious error in failing to take heed of the fact that the Third Respondent was the sole equity partner in the firm and the most experienced solicitor. He fairly acknowledges that his responsibility in this matter is the greatest. In the circumstances, although the Tribunal did not express this as part of its reasoning, if the Third Respondent is to suffer an enhanced penalty by reason of his status as sole equity partner, there would be no justification for in effect penalising him twice by imposing a penalty on the firm, the First Respondent, as long as the overall penalty as between the two is just and proportionate.[84]I have come to the conclusion, having assessed the gravity of the offending alongside such mitigation as is available, that the appropriate financial penalty for the Third Respondent is £15,000.00, making no separate order against the First Respondent. As far as the Second, Fourth, Fifth and Sixth Respondents are concerned, as already stated their position differs from that of the Third Respondent, but they were all experienced solicitors who countenanced the continuation of this misleading scheme, even after challenge by the SRA, for a significant period of time. A penalty for them of £1,000.00 was also wholly inadequate in the circumstances. The penalty in each case should have been £5,000.00.[85]I have assessed those figures as headline figures representing the appropriate level of fines in this case. That assessment is made without an ability to consider the means of these Respondents which, for reasons explained, could not be investigated before this court. With the support of the parties, having set those headline figures, I would remit the ultimate assessment of the financial penalty to the Tribunal once the means and assets and other relevant considerations pertaining to these Respondents have been fully and properly set out, with an opportunity to the SRA to consider.[86]Thus, once the means of the Respondents have been properly ascertained, either by agreement or by decision of the Tribunal, the Tribunal can then consider whether any adjustment should be made to the headline figures I have identified by reference to the parties’ means. Accordingly, I would allow the SRA’s appeal on this ground and dispose of this aspect of the matter in the way indicated.

The Cross-Appeal on Costs

[87]Under the Solicitors (Disciplinary Proceedings) Rules 2007 the Tribunal is given a wide discretion in relation to costs, as Rule 18(1) demonstrates:
“The Tribunal may make such order as to costs as the Tribunal shall think fit....”
[88]Rule 18(3) provides that the amount of costs to be paid may either be fixed by the Tribunal or be subject to detailed assessment by a costs judge.[89]I have to say that I consider that what occurred below in relation to costs was unsatisfactory in a number of respects. Firstly, the SRA only produced its very substantial schedule of costs at the end of a five day hearing on liability. This plainly gave very limited opportunity for the Respondents to give the document any meaningful consideration. The problems caused by that were compounded by the fact that Mr Treverton-Jones QC made only the most general submissions concerning costs, effectively inviting the Tribunal not to make any order in the light of its observations about the intransigence of the parties having resulted in the matter needing to come before the Tribunal.[90]He did not seek an adjournment to consider the schedule, nor did he submit that the matter be adjourned for detailed assessment, suggest that the Respondents did not have sufficient means to pay a substantial order for costs or present any financial materials to the Tribunal as might have been expected in line with the observations of Mitting J in SRA v Davis & McGlinchey.[91]In those circumstances I do not consider that the Tribunal received the sort of assistance that it could have expected. Given the result of the appeal brought by the SRA in relation to the level of fine, a challenge to the costs order on the basis that the case should not have come before the Tribunal cannot be sustained, as Mr Treverton-Jones QC himself conceded. This is because the stance of the SRA that the Respondents’ documents were unfair and misleading has been vindicated. In the light of the refusal of the Respondents to change their documentation up to the point of the Tribunal hearing, and given the view I have taken of the relative gravity of the offending, some order for costs is undoubtedly appropriate.[92]At the hearing below, Mr Dutton QC, recognising the Tribunal’s comments about the parties entrenched positions, did not apply for the whole of the sum in the schedule of costs, but instead sought a reasonable contribution. He no doubt also had in mind the Tribunal’s findings in relation to lack of integrity and taking unfair advantage of clients. In the event, the order of the Tribunal was made in the sum of £80,000.00.[93]In so ordering, the Tribunal made plain, as I see it, its view that the greater blame in relation to the matter coming before the Tribunal at all lay with the Respondents on account of the position they had adopted and maintained after the Regulator had drawn to their attention what the Tribunal had found were justified concerns about the documentation. I can see no basis for criticism of the Tribunal’s conclusion in that respect. I also have considerable sympathy with the fact that the Tribunal dealt with the matter in a summary way rather than adjourning for a detailed assessment in circumstances where no submission had been made to them that they should do so.[94]However, I consider that there is much force in the Respondents’ submissions that the decision as to costs was not supported by sufficiently clear reasoning. Apart from dealing with the previously mentioned issue of whether the proceedings had properly been brought, the Tribunal confined itself to saying this:
“372. While the Tribunal was minded to offset an element of the cost to evidence its concerns that neither the applicant nor the respondents had resolved the matter before these proceedings had been heard, it was satisfied that greater blame lay with the respondents who had had the opportunity to work with the applicant and had not taken that opportunity. The Tribunal noted that the respondents had now offered to alter their Terms and Conditions/Charging Methodology but it had taken these proceedings for that to happen. 373. The Tribunal had also taken into consideration the late service of witness statements by the applicant in its assessment of costs. 374. The Tribunal summarily assessed the costs and ordered the respondents to pay costs in the sum of £80,000.00, on a joint and several basis.”
[95]That is the sum total of what was said. It seems to me to be wholly inadequate. Paragraph 374 speaks of the costs being “summarily assessed”, but gives no clear indication as to how the sum of £80,000.00 was arrived at. There is no indication as to whether the headline figure of £140,000.00 had been considered or accepted as the appropriate starting point or whether the assessment started from some lower figure. There is no indication of the extent to which the question of late service of witness statements affected the position. Nothing is said as to whether any weight was given to the important factual findings that the SRA’s allegations of a want of integrity and an unfair taking of advantage of clients were aspects of the matter upon which the Respondents had been successful. There is no indication of how the conclusion that the Respondents bore a greater responsibility in relation to the issue of entrenched positions is in fact reflected in the order. It seems to me that an award of costs of this magnitude cannot be sustained given this sparsity of reasoning. The level of costs awarded is somewhat surprising given the relatively nominal penalties imposed by the Tribunal. The earlier part of this judgment indicates the error into which the Tribunal fell in that respect, but I do not consider that the success of the SRA can make good the failure to deal with the question of costs adequately.[96]It might have been possible for this court to make its own costs assessment, having regard to the circumstances, including our findings as to penalty. That, however, is not possible since a consideration of means is also necessary in the light of the information now provided concerning the individual Respondents’ financial position and the closure of the business of the First Respondent. As I have already indicated, further information and enquiries are necessary into the means position before the matter can be resolved.[97]Since the matter of penalty is to be remitted to the Tribunal for further consideration, it is logical for the question of costs to be remitted for further consideration at the same time. Thus, the Tribunal will be able on a single occasion to deal with both matters, which plainly have an inter-relationship when ability to pay a financial order is significantly in question.[98]I therefore would allow the cross-appeal and order further disposal of the matter on the lines indicated.[99]I note that by reason of Practice Direction Number 6 of the Solicitors Disciplinary Tribunal Standard Directions, which took effect on 25th October 2013, there are now detailed directions, not only into the provision of a statement of means if a Respondent wishes his or her means to be taken into consideration, but also a requirement for a party seeking a costs order to serve on the relevant party a schedule of costs no later than five working days prior to the hearing in respect of which the costs order is sought. This is a welcome development which may avoid the unsatisfactory situation which arose in this case.

Ground Three

[100]As recorded at paragraph 46 above, this ground complained about the Tribunal’s refusal to hear a closing submission on behalf of the SRA after the evidence had been heard over a period of about four days. This ground was never directed towards the Rule 10 ground (Ground One) or the ground relating to the inadequacy of the fine (Ground Two). I therefore cannot see that it could have had any impact on these proceedings. Insofar as the ground was included as some form of request for guidance, I cannot do more than observe that matters of procedure of this sort are for the Tribunal to judge in the light of the circumstances before it. Although this case was of some length and complexity, the SRA had set out its case very fully in written submissions prior to the hearing and in a lengthy oral opening by Mr Dutton QC. Moreover, he had cross-examined those Respondents who gave evidence at substantial length.[101]In the circumstances the Tribunal could have been left in no doubt about the way in which the SRA was putting its case. Had it felt in need of further assistance from Mr Dutton QC, I am sure it would have permitted him a closing address. I infer that it did not hear him, because in the circumstances it did not need to do so.

Costs

[102]We have received competing submissions from the parties as to costs. The SRA seeks its costs on the appeal and no order for costs on the cross appeal. The Respondents seek an order that there be no costs on the appeal, but seeks an order for its costs on the cross appeal.[103]In relation to both the appeal and the cross appeal, we are satisfied that we should look beyond the general rule that the unsuccessful party will be ordered to pay the costs of the successful party. It is necessary to look at all the circumstances.[104]In relation to the appeal, we note that the SRA was successful on the contested issue as to whether the penalties imposed were clearly inappropriate. The matter could not be finally resolved by us in the absence of relevant financial information, but the matter was argued and decided in principle. The success of the appeal is not based on anything done by the Respondents, but rather as a result of error by the Tribunal. In those circumstances we would be slow to make an order in favour of the SRA.[105]As to the cross appeal, we have already drawn attention to the unsatisfactory circumstances in which the costs award below came to be made. We consider that both parties contributed to that situation, which was compounded by the inadequate reasoning of the Tribunal. Whilst the Respondents have been successful in setting aside the order made, we consider that their failure to provide details of the financial position as required by Davis and McGlinchey, and their adoption of a broad brush argument as to the principle of costs below contributed significantly to the approach of the Tribunal.[106]In the exercise of our discretion we stand back and look at the matter overall. Having done so, we conclude that the appropriate order is to make no order as to costs.[107]I agree.

Cited in 6 later judgments