[View without highlighting]
[Printable RTF version]
||Neutral Citation Number:  EWHC 3645 (Admin)
||Case Nos: CO/10485/2010; CO/2515/2011; CO/2617/2011
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ON APPEAL FROM THE SOLICITORS
IN THE MATTER OF THE SOLICITORS ACT 1974
||The Law Courts
Cardiff CF10 3PG
B e f o r e :
MR JUSTICE WYN WILLIAMS
|| RICHARD JOHN TINKLER
- and -
||SOLICITORS REGULATION AUTHORITY
||- and –
LEE TERRANCE HAYWARD
- and –
SOLICITORS REGULATION AUTHORITY
- and –
- and –
SOLICITORS REGULATION AUTHORITY
Gregory Treverton-Jones QC (instructed by Murdochs Solicitors) for the Appellant Richard John Tinkler
Lee Terrance Hayward appeared in person
Janie Hayward appeared in person
Geoffrey Williams QC (instructed by Russell Jones & Walker) for the Solicitors Regulation Authority
Hearing date: 24 October 2012
Further written submissions received 2 November 2012 & 22 November 2012
HTML VERSION OF JUDGMENT
Crown Copyright ©
Mr Justice Wyn Williams:
- In this judgment Mr Tinkler is referred to as the First Appellant, Mr Hayward is referred to as the Second Appellant, Mrs Hayward is referred to as the Third Appellant, the Solicitors Regulation Authority is referred to as SRA and the Solicitors Disciplinary Tribunal is referred to as SDT.
- There are 3 appeals before me. They arise from decisions by SDT made on 15 September 2010 and 13 December 2010. The nature and extent of the appeals are described more fully below.
Background facts common to each appeal
- The First Appellant was born on 8 November 1956. He was admitted as a solicitor on 15 November 1989. Between that date and the summer of 2003 the First Appellant worked as a solicitor for a number of different firms and organisations.
- On 1 October 2003 the First Appellant began practice as a sole practitioner under the style Tinkler, Solicitors (hereinafter referred to as "Tinklers"). As of that date he engaged one employee, his former legal secretary. The First Appellant's practice flourished; in or about November 2004 he changed premises and employed more staff. He engaged in a variety of work including residential conveyancing.
- In the latter half of 2005 the First Appellant met Mr Rodney Kemp. Mr Kemp was then a partner in a firm of solicitors known as Wisemove and the other partner was Mr Kemp's brother. Wisemove had been established in 2002 by the Third Appellant and another solicitor Mr F. At some stage Mr F had resigned and Mr Kemp and his brother had become the partners.
- By July 2006 Mr Kemp had become a sole practitioner. The First Appellant and he decided to become partners. The First Appellant became a partner in Wisemove and Mr Kemp became the First Appellant's partner in Tinklers.
- At the time he entered into partnership with Mr Kemp the First Appellant understood that the business of Wisemove was conveyancing. He knew that Mr Kemp needed to be in partnership to ensure that Wisemove would remain as panel solicitors to established lending institutions. As I understand it, the First Appellant also considered that if Mr Kemp joined Tinklers as a partner that would permit Tinklers to compete for work from lending institutions.
- On 14 January 2008 SRA began an investigation of the books of account and other documents held by Wisemove. Both the First Appellant and Mr Kemp were asked to provide information about the reasons why they had gone into partnership and how the two partnerships were run. Both the First Appellant and Mr Kemp told SRA that they went into partnership due to their "mutual need" to obtain panel status with lending institutions. The First Appellant described the arrangement as akin to "a sleeping partnership." The First Appellant told SRA that he had not reviewed either the books of account or the trading accounts of Wisemove before entering the partnership with Mr Kemp and that he could not recall having taken any steps to satisfy himself that the firm was running correctly at the start of the partnership. Neither The First Appellant nor Mr Kemp received a salary or share of the profits from the respective firms. Neither the First Appellant nor Mr Kemp maintained an office in each other's firms and neither was actively involved in the day to day running of each other's firms. The firms had separate books of account and the First Appellant had not been a signatory on the bank mandate for Wisemove.
- In summary, the investigation revealed breaches of the Solicitors' Accounts Rules 1998, breaches in relation to the Solicitors' Practice Rules and breaches of the Solicitors' Code of Conduct. Investigation also revealed that the Second Appellant and the Third Appellant had been employed by Wisemove during the period July 2006 to the commencement of the investigation. During this same period of time the Third Appellant had been a director of a company known as Wisemove UK Ltd which was a sales and marketing company that had referred work to Wisemove, the solicitors' firm.
- Following the conclusion of the investigation SRA formulated a number of allegations against the Appellants and Mr Kemp. The First Appellant faced a total of 11 allegations, Mr Kemp faced 10, the Second Appellant faced 2 allegations and the Third Appellant faced one. The 11 allegations made against the First Appellant were as follows:-
"1. Fail to comply with Solicitors' Account Rules ("SAR") contrary to Rule 1 SAR and Rules 5.01 Solicitors' Code of Conduct 2007 ("SCC");
2. Failed to keep accounts records properly written up, contrary to Rule 32(1) SAR;
3. Maintained a client account shortfall;
4. Permitted withdrawals from client account otherwise than in accordance with Rule 22(1) and 23(1) SAR;
5. Failed to remedy breaches of SAR promptly, upon discovery, contrary to Rule – SAR;
6. Made improper inter-ledger transfers between unrelated clients, contrary to Rule 30(1);
7. Misled clients as to the nature of their partnership, contrary to Rule 1(a) Solicitors' Practice Rules 1990 ("SPR") and Rules 1.01 and 1.06 SCC;
8. Permitted unadmitted persons to influence and/or control the practice; contrary to Rules 1(a), 1(c), 1(d), 1(e) and Rules 1.03, 1.04, 1.05 and 1.06 SCC;
9. Failed to adequately supervise client matters, contrary to Rule 13 SPR and Rule 5 SCC;
10. Failed to act in clients' best interests;
11. Misled clients upon the transfer of their matters from Wisemove solicitors to Tinkler solicitors, contrary to Rules 1.02 and 1.06 SCC."
- Allegations 1 to 10 were also brought against Mr Kemp. He did not face allegation 11.
- It was alleged against the Second Appellant and the Third Appellant that they had exerted influence and/or control over the practice of a solicitor. Additionally, it was alleged against the Second Appellant that he had carried out a conveyancing transaction which had borne the hallmarks of mortgage fraud.
- On 14 and 15 September 2010 SDT considered these allegations. At the commencement of the hearing the First Appellant and Mr Kemp admitted allegations 1, 2, 4, 6, 8, 9 and 10 and the First Appellant admitted allegation 11. Allegations 3 and 5 were withdrawn against both men. Allegation 7 was contested but SDT found it proved.
- The Second and Third Appellants contested the allegations which had been made against them. SDT found proved the allegation that they had exerted influence and/or control over a solicitor's practice but it dismissed the allegation that the Second Appellant had carried out a conveyancing transaction which had borne the hallmarks of mortgage fraud.
- As a consequence of its findings SDT imposed sanctions upon the Appellants and Mr Kemp. Mr Kemp was suspended from practice for a period of 2 years. The First Appellant was fined £40,000. The Second and Third Appellants were made subject to orders under section 43 of the Solicitors' Act 1974.
- At a separate hearing on 13 December 2010 SDT made costs orders. It ordered the First Appellant to pay costs in the sum of £4,000 but directed that the order should not be enforced without its further leave. Mr Kemp was ordered to pay costs in the sum of £10,000. SDT directed that this order, too, should not be enforced without its further leave. The order made as against the Second and Third Appellants was that they should pay costs in the sum of £28,000 and it was further directed that their liability should be joint and several.
- Mr Kemp has accepted the decisions of SDT. He has not appealed against its finding in respect of allegation 7, he has not appealed against the sanction imposed upon him and has not appealed against the order for costs to which he was made subject. The First Appellant appeals against the finding that allegation 7 was proved. He also appeals against the amount of the fine which was imposed upon him. The Second and Third Appellants appeal against the decision to make an order under section 43 of the Solicitors' Act 1974 and they also appeal against the orders for costs made against them.
- I propose to deal with the appeal of each of the Appellants in turn.
The appeal of the First Appellant
- The First Appellant alleges that SDT was wrong to conclude that allegation 7 was proved against him. I deal with this aspect of his appeal first.
- At the commencement of the hearing before SDT Mr Marriott, the solicitor advocate acting for SRA, sought to withdraw allegation 7. He did so because, as I have recorded above, the First Appellant and Mr Kemp were prepared to admit most of the allegations made against them and Mr Marriott apparently took the pragmatic view that no useful purpose would be served by pursuing allegation 7 since a finding of guilt in relation to that allegation was unlikely to affect the nature or extent of any penalty. Mr Marriott expressed the view, too, that allegation 7 was inextricably linked to other allegations which the First Appellant and Mr Kemp proposed to admit.
- SDT took a different view. It concluded that allegation 7 was a discrete allegation and that it should be considered since it had a potential impact on the reputation of the profession and it was an allegation in which the protection of the public was an important consideration.
- It has not been suggested in this appeal that SDT was wrong when it concluded that it should not permit SRA to withdraw the allegation.
- The evidence upon which SRA relied in support of allegation 7 was admissions made by the First Appellant and Mr Kemp. I have summarised them at paragraph 8 above. SRA did not allege that the First Appellant or Mr Kemp were dishonest. The nub of the allegation was that although the First Appellant and Mr Kemp were partners in both Tinklers and Wisemove the First Appellant took no active role in the affairs of Wisemove and Mr Kemp took no active role in relation to the affairs of Tinklers. That was alleged to be misleading. In opening the case for SRA, Mr Marriott expressed himself thus:-
"I am not alleging dishonesty; I am simply saying they misled lenders, misled clients. The Tribunal can legitimately take notice of the fact that lenders are more reluctant to deal with sole practitioners who can take proper notice of this because you are aware from your practice, and therefore there is, between some solicitors, a tendency to hobble together, if I may say, a partnership, which gives an impression to the world and potential clients that the business is run by two partners with cross disciplines which occur. Whereas, in fact, this partnership the way it was structured, obviously did nothing of the sort.
I therefore submit that you can find that allegation proved that by relation to the fact that they did what they did in the partnership agreement that they had with Wisemove and indeed with Tinklers, there was a benefit for both parties, both partnerships and by the structure of that partnership agreement, it was inevitable what they were representing to the world was in fact not the case because there was no sharing of confidence, but more importantly, you may think, that anyone looking at this as a client or a prospective client, would believe that they were operating together. Whereas you may come to the conclusion or should, in my submission, come to the conclusion that this partnership in effect was and the way it operated demonstrated this that Mr Tinkler played no part in Wisemove at all, hardly ever turned up; there would be some evidence that he did turn up once in a while, he wasn't on the client's mandate, they had no offices in each other's office premises and, indeed, conversely although Mr Kemp, had, it appears, a client mandate with Tinklers what does appear is that he wasn't able to properly run the practice of Wisemove, never mind become a partner or appear, to work as a partner with Tinkler's.
I can put it no higher than that, sir. I have no evidence at all that any lenders, or clients, were misled. All I can say is that on the structure of it, you can probably come to the conclusion that the purpose of it was to mislead clients and if you take into account the knowledge that you have, which is to the effect that many lenders are very reluctant and indeed will not instruct, as indeed Mr Tinkler has said in his interview with Mrs Guile, [the officer of SRA] to instruct a firm of solicitors where there was just the sole practitioner."
- Both the First Appellant and Mr Kemp gave evidence. Neither of them said anything which undermined how allegation 7 had been explained by Mr Marriott on behalf of SRA.
- Before SDT the First Appellant was represented by experienced counsel, Ms Marion Smith. In her closing submissions Ms Smith took one point, essentially, in support of the submission that allegation 7 had not been proved. Ms Smith argued that no evidence had been adduced before SDT which demonstrated that any actual or potential client had been misled as to the nature of the partnership between the First Appellant and Mr Kemp. As Ms Smith pointed out, it would have been open to SRA to adduce evidence from actual or potential clients that they had been misled about the nature of the partnerships in question.
- Before me Mr Treverton-Jones QC has, in effect, adopted the stance which was taken by Ms Smith before SDT. Further he submits that SDT has provided no or no adequate reasons to support its view that allegation 7 was proved.
- It was incumbent upon SRA to prove allegation 7 to the criminal standard, i.e. SDT had to be sure that the allegation was proved. It is common ground that no evidence was led by SRA to prove that any client was misled by the nature of the partnership between the First Appellant and Mr Kemp. Does that failure mean, inevitably, that allegation 7 was not proved? In my judgment it does not. I have reached the clear conclusion that it was open to SDT to infer that clients must have been misled as to the nature of the partnerships between the First Appellant and Mr Kemp. The two men held themselves out as partners in Tinklers and Wisemove; yet they did nothing to dispel the obvious inference to be drawn from that holding out that each played a part in the control and operation of each partnership. In the absence of any disclosure of the true state of the nature of the partnerships, clients would, inevitably, believe that each partner was playing a role in the control and operation of the partnerships.
- In relation to this issue SDT expressed itself as follows:-
"In relation to allegation 7, misleading clients as to the nature of their partnership, the Tribunal did not accept the submission made on behalf of Mr Tinkler and Mr Kemp, that evidence from lenders, who had in fact been misled, was necessary to prove the allegation. The Tribunal was satisfied, so that it was sure, from the evidence of both Mr Tinkler and Mr Kemp that they had entered into partnership in each other's firm in order to ensure that their firms would be or would continue to be on the panels of sub-prime mortgage lenders. In reality, following the establishment of their new partnerships, both of their businesses had carried on as before, but each with a "sleeping partner"."
- I acknowledge that this does not record, in terms, that SDT had inferred that clients were misled as to the nature of the partnership but, in reality, that can be the only conclusion to be drawn from SDT's finding especially given that the finding was made against the background of Mr Marriott's opening – see paragraph 23 above. What Mr Marriott was saying and what SDT must have accepted was that it could be inferred, quite properly, that clients had been misled about the true nature of the partnerships. I am not persuaded that SDT made any error when it determined that allegation 7 was proved. Further, although it can be said that SDT failed to articulate its reasoning as fully as was desirable the reason for its decision is plain and obvious to any informed observer.
- I turn to the issue of sanction. Mr Treverton-Jones QC submits that a fine of £40,000 – the sanction imposed upon the First Appellant – was disproportionate and/or excessive given the nature of the allegations admitted by the First Appellant and given the nature of the allegation found proved against him (allegation 7). In support of this submission he points to the fact that in the year ended 30 April 2010 the highest fine levied upon a solicitor by SDT was £25,000 and in the year ended 30 April 2011 the highest fine was £20,000. He suggests that a fine of £40,000 can properly be categorised as "enormous" and SDT has made no attempt to justify such a level of fine as compared with the usual upper limit.
- An alternative argument deployed by Mr Treverton-Jones QC is that SDT paid no attention to the First Appellant's ability to pay the fine imposed upon him. Before SDT announced its decision on sanction Ms Smith had made submissions about the First Appellant's financial position. In summary as of September 2011 the First Appellant had a net income of £2000 per month, approximately, and his monthly outgoings were £1700. He was divorced and supporting his former wife and the child of the marriage.
- Mr Treverton-Jones QC submits that upon the assumption that there is no remarkable improvement in the First Appellant's financial circumstances (an assumption which is reasonable to make) it would take him more than a decade, realistically, to pay anything like £40,000. If his financial circumstances were to deteriorate, of course, such a sum might never be paid or paid only after a very long period of time.
- In his submissions on behalf of SRA, Mr Williams QC points out that there is no upper limit upon the level of fine which SDT is empowered to impose. In this case, submits Mr Williams QC, SDT was fully entitled to take a serious view of the allegations which were admitted and the allegation which was proved (for the reasons given by SDT and amplified in his skeleton argument) and it cannot be said that the fine imposed was disproportionate or unreasonable.
- In his skeleton Mr Williams QC did not address the issue of the First Appellant's ability to pay the fine imposed upon him. In his oral submissions, however, he expressly acknowledged that SDT should have taken account of the First Appellant's ability to pay the fine; he further acknowledged that there is nothing to suggest that SDT did so.
- I deal, first, with whether or not SDT should have taken account of the First Appellant's ability to pay a fine. In my judgment there is no doubt that this was a material factor. In August 2012 SDT issued a document entitled "Guidance Note on Sanctions". Under the heading "Level of Fine" the following appears:-
"The Tribunal will consider the following in determining the appropriate level of Fine or combination of Fine to be imposed:
- There is no limit to the level of Fine the Tribunal may impose. In deciding the level of Fine, the Tribunal will consider all the circumstances of the case, including aggravating and mitigating factors. The Tribunal will fix the Fine at a level which reflects the seriousness of and is proportionate to the misconduct.
In my judgment the extract from the guidance demonstrates clearly that means or ability to pay is a material factor in assessing the level of fine. As I understand it, there was no such guidance in being at the time SDT made its decision in the case of the First Appellant. Nonetheless, in my judgment, the guidance should be treated as declaratory of a principle which is and has been very well established for a considerable period of time.
- The Respondent shall be entitled to adduce evidence that the ability to pay a Fine is limited by his means."
SDT does not enforce any fine it imposes. A fine is payable to the Treasury and enforceable at its instigation. I was told that the Treasury is normally prepared to enter into an agreement with a person liable to pay a fine whereby that person can pay the fine in instalments. In my judgment that is not a reason to say that SDT need not take account of ability to pay when assessing the amount of an appropriate fine. SDT can properly take account of the fact that an agreement may be reached between the Treasury and the solicitor for payment by instalments over a significant period of time but, to repeat, the means of the solicitor to pay the fine is a material factor to be taken into account when assessing the amount to be paid.
I have no doubt that when the First Appellant's means are taken into account a fine of £40,000 was excessive and disproportionate. It was not reasonable or proportionate for SDT to fix a fine at such a level that it was obvious that the First Appellant would, realistically, need many years to make payment.
It may be that SDT considered it possible that the First Appellant's financial situation might improve in the future. I stress that SDT did not make such a view explicit in its findings but, to repeat, that is a possibility. If SDT did adopt such an approach it was wrong so to do on the facts of this case. It had no information before it to suggest that there was a realistic possibility that the First Appellant's financial circumstances would improve either substantially or at all within the foreseeable future and given his age and his involvement in these disciplinary proceedings it is difficult to imagine that his income as a solicitor would increase to any substantial extent in the remainder of his working life. Additionally, there was nothing before SDT to suggest that the First Appellant had funds independent of his income as a solicitor or was likely to obtain such funds within any reasonable timescale.
On an appeal under section 49 of the Solicitors Act 1974 (the 1974 Act) this court has power to make such order as it thinks fit – see section 49(4). However, the approach which this court should adopt when exercising the power under section 49(4) is encapsulated in paragraph 30 in the judgment of Jackson LJ in Salisbury v Law Society  2AER 487. Jackson LJ expressed himself thus:-
"From this review of authority I conclude that the statements of principle set out by the Master of the Rolls in Bolton's case 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 Arts 6 and 8 of the Convention. It is now an overstatement to say that 'a very strong case' is required before the court would 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 holding such respect, is satisfied that the sentencing decision was clearly inappropriate, then the court will interfere. It should also be noted that an appeal from the Solicitors Disciplinary Tribunal to the High Court normally proceeds by way of review; see CPR 52.11(1)."
In my judgment SDT did err in law when assessing the appropriate financial penalty to be imposed upon the First Appellant since it failed to have any regard whatsoever to his means to pay the financial penalty which was imposed. Alternatively, I am satisfied that the sanction imposed was clearly inappropriate given the means available to the First Appellant to meet the fine.
In the light of this conclusion it is not necessary for me to consider, in the abstract, whether or not a fine of £40,000 would have been justifiable had the First Appellant had the means to pay such a sum. That said, it is worth making the following observations. First, there is no upper limit upon the financial penalty which SDT can impose. Mr Williams QC is correct when he so submits. Second, I do not consider that SDT has set itself an upper limit of £20,000 or £25,000 when imposing a fine. True it is that no fine exceeded those amounts in the years ending April 2010 and April 2011 but I have not been made aware of the circumstances of the case or cases in those years in which a fine or fines at that level were imposed and, just as importantly, whether or not the means of the solicitor ordered to pay a fine at that level was taken into account. Third, I am completely satisfied that SDT was correct in its conclusion that the conduct of the First Appellant as admitted and proved called for a substantial financial penalty. It is clear that SDT considered that his conduct was on the cusp of being serious enough to justify suspension but concluded instead that a substantial fine was a sufficient sanction to mark the damage to the reputation of the profession caused by the conduct of the First Appellant. I have read or heard nothing which begins to persuade me that SDT was wrong in that assessment. I have no doubt that the First Appellant's willingness to cooperate with SRA, his admissions before SDT and the powerful character evidence adduced on his behalf were very persuasive factors in tipping the balance against suspension in favour of the more lenient sanction of a fine.
In the light of the conclusions set out above it falls to me to assess an appropriate financial penalty. It must be a significant sum to mark the damage to the reputation to the solicitor's profession caused by the First Appellant's conduct yet it must also take account of the First Appellant's means. In my judgment such a sum is £20,000. I am satisfied that there is a reasonable prospect that such a sum can be paid by instalments and within a reasonable time. I acknowledge that paying by instalments will probably involve payments over a number of years but there is a reasonable prospect that the period in question will not be unduly onerous. Accordingly, I propose to quash the sanction imposed by SDT and substitute a fine in the sum of £20,000.
The appeal of the Second Appellant
The Second Appellant appeals against the finding of SDT that he exerted influence and/or control over a solicitor's practice. He also appeals against the order made against him under section 43 of the 1974 Act. Belatedly, the First Appellant also takes issue with the order for costs which was made against him at a hearing which he did not attend on 13 December 2011.
The order made under section 43 of the 1974 Act was in the following terms:-
"The Tribunal orders that as from 15 September 2010 except in accordance with Law Society's permission:-
i) No solicitor shall employ or remunerate, in connection with his practice as a solicitor [the Second Appellant]
ii) No employee of the solicitor shall employ or remunerate, in connection with the solicitor's practice [the Second Appellant]
iii) No recognised body shall employ or remunerate the [the Second Appellant]
iv) No manager or employee of a recognised body shall employ or remunerate [the Second Appellant] in connection with the business of that body
v) No recognised body or manager or employee of such a body shall permit [the Second Appellant] to be a manager of the body
vi) No recognised body or manager or employee of such a body shall permit [the Second Appellant] to have an interest in the body."
SDT was empowered to make such an order given its finding that the Second Appellant had exerted influence over and/or controlled a solicitor's practice.
I do not propose to rehearse the facts found by SDT in support of its conclusion that the Second Appellant had exerted influence and/or control over a solicitor's practice. That is because the Second Appellant's notice of appeal and witness statement in support is confined to allegations of procedural unfairness at the hearing before SDT on 14 and 15 September 2010.
Reduced to its essentials the Second Appellant complains that the witness statements of Mr Kemp and the First Appellant were provided to him only on the first morning of the hearing. He next complains that other documentation relevant to then ongoing civil litigation between Mr Kemp and the First Appellant on the one hand and the Second and Third Appellants on the other were disclosed on or about 16 September 2010.
I have scrutinised the transcript of the proceedings before SDT with care. It is correct that the witness statements of the First Appellant and Mr Kemp were produced on the first morning of the hearing but the Second Appellant made no real complaint about that at the time. He did not seek an adjournment. He did not seek any direction of any kind from SDT. Given that the Second Appellant was acting in person the chairman of SDT was astute to ensure, throughout the hearing, that the Second Appellant was not disadvantaged in any way.
The allegation relating to a failure to disclose documentation until after SDT had concluded its deliberations on 15 September 2010 relates to documents which came into existence in 2004. In 2004 the Law Society undertook a monitoring visit in relation to Wisemove and there came into existence a practice standards report, a letter dated 5 July 2004 in response to the report and other correspondence between The Law Society and Wisemove. This documentation was disclosed by solicitors acting for Mr Kemp and the First Appellant in the civil litigation to which I have referred under cover of a letter dated 16 September 2012.
It may be a moot point as to whether or not the documents generated in 2004 to which I have referred above should have been produced to SDT before or during the course of the hearing in September 2011. I am satisfied, however, having read the documents produced by the Second Appellant and his witness statement that there is no realistic prospect that the production of the documents to SDT would have deflected SDT from concluding that the Second Appellant had exerted influence and/or control over a solicitor's practice and/or from making an order under section 43(2) of the 1974 Act.
During the course of the hearing on 15 September 2010 it became clear that SRA was seeking an order for costs against Mr Kemp and the Appellants. A schedule of costs in the sum of £49, 370.36 was produced and SDT was invited to make orders for costs against Mr Kemp and the Appellants. SDT decided that it could not determine the issue of costs on 15 September and, consequently, it decided to convene a hearing on 13 December 2010 so as to determine all issues relating to costs. A direction was issued that Mr Kemp and each of the Appellants should file a statement of means supported by a statement of truth by 13 October 2010. SRA was given until 27 October to file any submissions in reply.
The Second Appellant did not file a statement of means. He did not attend the hearing on 13 December 2010.
At the hearing on 13 December 2010 SDT determined that the total amount of costs which should be reimbursed to SRA was £42,000. It directed that the Second Appellant should be jointly and severally liable (with the Third Appellant) for the sum of £28,000. That figure was derived in this way. The First Appellant, who had filed a statement of means, was ordered to pay £4,000; Mr. Kemp, who had also filed a statement of means was ordered to pay £10,000; the balance, which was £28,000, was ordered against the Second and Third Appellant. It is also worth noting that the order for costs made against the First Appellant and Mr. Kemp were suspended orders i.e. they were not to be enforced without the leave of SDT.
Mr Williams QC concedes that it was wrong in principle for SDT to direct that the Second and Third Appellant should be jointly and severally liable for the sum of £28,000. He submits that I should quash that order but direct that the Second Appellant should pay costs in the sum of £14,000; he makes that submission on the basis that it is appropriate to direct that the Third Appellant should also pay costs in that sum.
In my judgment Mr Williams QC is correct to concede that the order for joint and several liability should not stand. I can think of no principled basis upon which it was proper for SDT to make the Second and Third Appellant jointly and severally liable for a sum of £28,000.
Mr Williams QC submits that a substantial order for costs should be made against the Second Appellant because he failed to comply with the directions that he should file a statement of means supported by a statement of truth and, in consequence, there was no information before SDT which would allow it to take account his means to pay costs.
I acknowledge that SDT had no information before it as to the Second Appellant's means because he failed to comply with appropriate directions issued by SDT. That does not mean, however, that it was proportionate or reasonable for SDT to make a very substantial order for costs against him. The plain fact is that by far the greater part of the costs incurred by SRA must have related to Mr Kemp and the First Appellant. A cursory glance at the documentation in this case demonstrates that that is so. The obligation of SDT was to apportion to the Second Appellant a sum of costs which was fairly and reasonably related to the process against him. In failing to adopt that approach SDT fell into error.
It is almost impossible for me to make an assessment of an appropriate amount. Given a total assessment of costs at £42,000, however, it is difficult to imagine that the costs attributable to the Second Appellant should be more than £5000.
The next issue is whether or not I should make an order directing that the payment of the sum should not be enforced without further order of SDT. At the conclusion of the oral hearing before me I made a direction that the Second Appellant should file detailed information as to his means. He has done so. It is clear to me that he does not have the means to pay the sum of £5000 within a reasonable timescale. I propose to order that SDT's order for costs against the Second Appellant should be quashed and I will direct that the Second Appellant should pay costs to SRA in the sum of £5000 but that such order should not be enforced without further leave of SDT.
The appeal of the Third Appellant
In her written material and her oral submissions the Third Appellant made it clear that she did not wish to pursue an appeal against the order under section 43 of the 1974 Act. Her only concern was the issue of costs.
Much of the reasoning applicable to the Second Appellant is equally applicable to the Third Appellant. Like the Second Appellant, the Third Appellant did not file a statement of means and she did not attend at the hearing on 13 December 2010 although it is to be observed that she sought an adjournment to that hearing by emailing a request to Mr Marriott's office and SRA on 7 December 2010 in which she explained that she was having an operation on 9 December 2010 and, therefore, would be unable to attend the hearing. I should record, too, that she had told SDT at the hearing in September that her only income was derived from state benefits.
The reasons why I decided to quash the order for costs made against the Second Appellant are equally applicable in the case of the Third Appellant. A fair and reasonable assessment of the costs attributable to her is also £5000 and given her means it is appropriate to direct that enforcement of payment should not occur without the leave of SDT.
The First Appellant's appeal against sanction is allowed. His appeal against the finding in relation to allegation 7 is dismissed.
The Second Appellant's appeal against the finding that he exerted influence and/or control over a solicitor's practice and the order under section 43(2) of the 1974 Act is dismissed. His appeal against the order for costs is allowed to the extent indicated above.
The Third Appellant's appeal against the order for costs made against her is allowed to the extent indicated above.
Copyright Policy |
Donate to BAILII