Case gives encouragement to those who have been poorly treated in the SDT to appeal

Hazelhurst & Ors v Solicitors Regulation Authority [2011] EWHC 462 (Admin)

On Friday (11 Mar 2011) the Administrative Court (Nichola Davies J.) handed down judgment in Hazelhurst & Ors v Solicitors Regulation Authority [2011] EWHC 462 (Admin).  The appellants were solicitors who had been harshly sanctioned by the Solicitors Disciplinary Tribunal and who were represented by Paul Mitchell of Hailsham Chambers on their successful appeal against the sanction imposed.  The judgment contains many important observations of general application to those who appear before the SDT.

The relevant facts were as follows.  The solicitors were partners in a firm one of whose long-standing employees began, after many years of loyal and honest service, to steal from client account and from the firm itself.  The employee's thefts continued undetected by anyone - including the firm's auditors and the Law Society, which inspected some of the employee's files in connection with a complaint made about her - for three years.  She was exposed purely by chance.  The firm dismissed her and reported the thefts to the SRA; the partners of the firm ensured that the firm's books of account were put into order and clients compensated in full.  The partners' uninsured losses amounted to between £80-90,000. 

The SRA charged the partners with breaches of the Solicitors' Accounts Rules 1998 and with a failure to supervise the employee.  The partners pleaded guilty to all charges, on the basis that they accepted, with hindsight, that they had been at fault to place the degree of trust that they did in their employee.  They contended before the SDT that the appropriate sanction in all the circumstances was a reprimand, because (a) they had taken steps which would ensure that there could be no repetition of the breach of the rules (i.e., sacking the employee and making certain changes to the cheque requisitioning process); and (b) they had demonstrated that they could be "trusted to the ends of the earth" by self-reporting the matter to the SRA, co-operating fully with the SRA's investigation and ensuring that no client of the firm lost any money. 

The SDT did not address any of the submissions made on behalf of the solicitors, but instead fined them a global sum of £4,000 each.  The SDT's written determination contained no reasoning to explain the harsh sanction or the apparent irrelevance of the mitigating factors.  Furthermore, it contained what appeared to be findings of fact which were not based on any evidence that had been before the SDT.

Nicola Davies J held that the SDT's determination was wholly inadequate.  She accepted submissions on behalf of the appellant that the SDT's judgment should have contained a review of the facts; consideration of what had been said by way of mitigation with a view to determining whether any of what had been said should influence the choice of sanction having regard to the purpose of sanction (as set out in Bolton v The Law Society [1994] 1 WLR 514 and The Law Society v Salsbury [2008] EWCA Civ 1285); a review of the range of sanctions; and finally an explanation of why the sanction chosen was appropriate.

The judge held that the SDT's determination that the solicitors had operated an inadequate system of file review was unsustainable in the absence of proper and cogent evidence that there had been an inadequate system of file review.  This finding should assist in those instances where the SRA seeks to obtain a sanction against solicitors in connection with allegedly inadequate systems of work but declines to lead evidence of what an adequate system would have been in the circumstances.

In a passage which will be warmly welcomed by practitioners, the judge noted with surprise the absence of any Indicative Sanctions Guidelines available to explain the SDT's approach to sanction.  It is to be hoped that the SDT will now finally address the task of preparing ISG, "to assist the transparency of the proceedings", as the judge put it. 

The judge undertook her own analysis of the appropriate sanction in this particular case.  She appears to have accepted that breaches of the "strict liability" Solicitors' Accounts Rules could, depending on the facts, take place but involve no misconduct on the part of the solicitor who is in breach; furthermore, she expressly accepted that the appellants' obvious willingness to comply with the rules of the profession after the thefts had been discovered was of central importance in determining what sanction should be applied having regard to the purpose of sanctions.

It is noteworthy that the SRA has not sought leave to appeal against the judgment.  The case should give encouragement to those who have been poorly treated in the SDT to appeal notwithstanding the Administrative Court's historic reluctance to interfere with the "expert determination" of that tribunal.