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England and Wales High Court (Administrative Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Administrative Court) Decisions >> Mond v The Association of Chartered Certified Accountants  EWHC 1414 (Admin) (28 July 2005)
Cite as:  EWHC 1414 (Admin)
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QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
| David Mond
|- and -
|The Association of Chartered Certified Accountants
(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Mr Michael Fordham (instructed by Messrs Herbert Smith) for the Defendants
Crown Copyright ©
Mr Justice Collins:
"Members should carry out their professional work with due skill, care, diligence and expedition, and with proper regard for the technical and professional standards expected of them as members".
"8(a) A member shall be liable to disciplinary action if:
(i) he , in the course of carrying out his professional duties or otherwise, has been guilty of misconduct.
(ii) he has performed his professional work or conducted his practice, or (in the case of a member ) performed the duties of his employment, improperly, inefficiently or incompetently to such an extent or on such number of occasions as to bring discredit to himself , to the Association, or to the accountancy profession;
(iii) he has committed any breach of these bye-laws or of any regulations made under them in respect of which he is bound
(b) Each of the paragraphs in bye-law 8(a) shall be without prejudice to the generality of any other paragraphs therein.
(c) For the purposes of bye-law 8(a), misconduct includes (but is not confined to) any act or default likely to bring discredit to the member in question. The fact that a member has before a court of competent jurisdiction in the United Kingdom [or a recognised superior court elsewhere] pleaded guilty to or been found guilty of any offence discreditable to him or derogatory to the Association or the accountancy profession or has in any civil proceedings been found to have acted fraudulently or dishonestly, shall be conclusive proof of misconduct. In deciding whether a member has been guilty of misconduct, regard may be had to any code of practice, ethical or technical, adopted by the Council, and to any regulation affecting members laid down or approved by the Council".
Bye-law 9 provides for the Council to prescribe the procedures for disciplinary action. Those must include the right to be given notice of any proceedings, to be represented, to call and cross-examine witnesses and to appeal.
" decide which of the following courses of action ought in all the circumstances to be followed:
(a) the case should be referred to the Disciplinary Committee and, if so, what charges should be proceeded with; or
(b) the case should rest on the relevant person's file".
"(5) Presentations where charges accepted
At the hearing of his case, if the defendant is in attendance he shall be invited to indicate whether or not he accepts each of the charges made against him. If he is not in attendance, reference will be made to any written response to the letter referred to in Regulation 5(1)(d) or other correspondence or note of conversation indicating his acceptance or otherwise of the charges made against him. If he accepts or (if he is not in attendance) has accepted all of the charges made against him, the case against him will be presented in abbreviated form with the object of assisting the Disciplinary Committee in determining the seriousness of the case. The Disciplinary Committee will than make a formal finding to the effect that all the charges made against him have been proved. If he is in attendance he will then be invited to respond to any of the comments made by the presenter and put forward any statement in mitigation. If he is not in attendance, reference will then be made to any statement in mitigation which he has previously made. The Disciplinary Committee may at any time ask any question of the presenter or the defendant and, if the Disciplinary Committee considers it appropriate, may invite the complainant (if present) to comment.
(6) Presentations where charges not accepted
If the defendant does not or (if he is not in attendance) has not accepted all of the charges made against him, the case will be presented against him and the presenter shall be entitled to call witnesses in support, who may include the complainant. The defendant shall then be invited to respond by presenting his defence and may also call witnesses in support. Witnesses may be cross-examined by the defendant and the presenter. At the conclusion of the defendant's presentation, the Disciplinary Committee will retire to consider its verdict and return to announce its findings in respect of each of the charges. If it is found that any of the charges has been proved, the defendant will be invited (if he is in attendance) to make any statement in mitigation. If he is not in attendance reference will be made to any statement in mitigation previously provided by the defendant. The Disciplinary Committee may at any time ask questions of the presenter, the defendant or any witness and, if the Disciplinary Committee considers it appropriate, may invite the complainant (if present) to comment".
Regulation 5(8) sets out the orders which may be imposed if a charge is found proved. It provides, so far as material; -
"The Disciplinary Committee may make any one or more of the following orders against the defendant or may order that no further action be taken where it determines that none of the following orders is appropriate in the circumstances:
(a) if the defendant is a member:
(i) that he be excluded from membership;
(ii) that he be severely reprimanded, reprimanded or admonished.
(iii) that his practising certificate, insolvency licence [or any other relevant certificate] issued to him by the Association be withdrawn, suspended, or made subject to such conditions, for the period specified, and as specified, in the order;
(iv) that he be ineligible for any of the certificates referred to in (iii) above for such period as may be specified in the order
(vii) that he be fined a sum not exceeding £50,000;
(viii) that he pay compensation to the complainant of a sum not exceeding £1000".
In addition, there is a power to award costs under Regulation 5(9).
"7. Appeal presentations.
(1) On the hearing of any appeal it shall be for the appellant to satisfy the Appeal Committee on the grounds of the appeal.
(2) When the appellant appeals against findings and orders made by the Disciplinary Committee following a presentation where the charges had not been accepted by the defendant the hearing shall be a fresh hearing. The presenter shall present his case first, supported by witnesses (if any). The appellant shall respond, supported by witnesses (if any). The appellant and all witnesses shall be liable to cross-examination by the other parties. The Appeal Committee may ask questions of either party and their witnesses (if any) at any time.
(3) When the appellant appeals against orders, but not findings, made by the Disciplinary Committee, the presenter shall outline the facts supporting the charges. The appellant may then mitigate and call witnesses (if any) as appropriate.
8. Orders of Appeal Committee
(1) On the conclusion of the hearing of the appeal, the Appeal Committee shall consider the appeal.
(2) In the case of an appeal against the findings and orders of the Disciplinary Committee, the Appeal Committee may do any one or more of the following:
(a) affirm or vary any findings of the Disciplinary Committee:
(b) affirm, vary or rescind any order of the Disciplinary Committee;
(c) substitute any other order which the Disciplinary Committee could have made;
(d) order that the case be heard afresh by the Disciplinary Committee.
(3) In the case of an appeal against the orders, but not the findings, of the Disciplinary Committee, the Appeal Committee may do either or both of the following:
(a) affirm, vary or rescind any order of the Disciplinary Committee;
(b) substitute any other order which the Disciplinary Committee could have made".
It is important to bear in mind that where a charge has been accepted before the Disciplinary Committee (that is to say, the procedure laid down by Regulation 5(5) of the Disciplinary Regulations has been followed) there can be no appeal against a finding but only against an order. Thus the Appeal Committee on such an appeal can only consider the orders made.
"Thereafter, I am somewhat embarrassed to say, the matter was simply forgotten about until well after Mr Kachani was appointed and the present debate ensued. The anticipated letter of advice from my solicitor, or a request from the Official Receiver, or even a routine enquiry from a creditor as to progress would undoubtedly have triggered a need for me to revisit the matter, but the unfortunate fact is that none of those things happened".
He also said that he accepted that with hindsight it would have been preferable if the funds had been paid into a designated client's account. He stated: -
"What happened was a mistake. It does not, in my view, amount to a mistake which equates to professional misconduct".
"It is alleged that Mr Mond is liable to disciplinary action under bye-law 8(a)(i) and/or (ii) in that he failed to:
(i) act with due skill, care, diligence and expedition and with proper regard for the technical and professional standards expected from him as a member in that from 10 January 1997 to 6 December 1998 he held CVA monies in a practice disbursement account when he should not have done so
and / or
(ii) act with due skill, diligence and expedition and with proper regard for the technical and professional standards expected from him as a member in that upon the failure of the CVA (for the period 18 January 1996 to 6 October 1998) he failed to expeditiously
(a) determine ownership of the surplus funds
and / or
(b) notify the Official Receiver about the surplus funds
(iii) act with due skill, care, diligence and expedition and with proper regard for the technical and professional standards expected from him as a member, in that from 1996 to 2002 he failed to issue an annual report within the relevant time limits as required by the Insolvency Rules 1986, Rule 1.29".
These were regarded as three charges, albeit in respect of each it was alleged that the conduct had contravened bye-law 8(a)(i) and/or (ii).
"An insolvency practitioner holds CVA funds in trust for the creditors or other third parties. In this case Mr Mond was aware that he had the funds on behalf of either the creditors or the Liquidator. He should have placed the funds in an account that would not be vulnerable in the event of the firm or the partners being made subject to insolvency proceedings".
It was said (and there is no dispute that it was correctly said) that the claimant held the funds for the benefit of others and so they should have been kept in a separate trust account. The comments rejected an assertion that had been made by or on behalf of the claimant that the Associations' Money Rules which specifically required that funds such as these should be placed in a separate account applied. That was because the obligation clearly existed whatever the Rules for the time being in force specifically provided.
"There are two important points to consider here. Firstly, if the practice had become insolvent, then the funds in the disbursement account would not have been available for the creditors of the CVA but would have been available for the creditors of the practice. Secondly, because the monies were mixed with other case monies and were dissipated to a level below the amount transferred from the CVA bank account, there could have been real difficulties in identifying the full amount. It was only through the member transferring, from another account, sufficient funds that the amount had enough funds to enable a cheque to be sent to the liquidator".
The two concerns raised are clearly real, but the claimant has said that there was no danger of insolvency and, provided proper records were kept (as was the case), the amount outstanding could always be identified and monies would have been available, if not from the disbursement account, from another account. In the light of the ability to pay the Liquidator the correct account, the claimant's statements have not been gainsaid.
"The minimum acceptable standards in the profession at the time were that the funds should have remained in a separately designated deposit account until the proper recipient of those funds was established. Once the recipient had been established, the account should have been closed, with all interest earned added to the principal account, and the money transferred to the proper recipient".
"The facts of this matter are substantially agreed. We do not however accept that Mr Mond's actions amount to misconduct such as to bring him, the profession, or the Association into disrepute".
In due course, in a letter of 3 December 2003, the claimant's solicitors wrote to ACCA as follows: -
"I can advise you that Mr Mond will accept the charges that have been made against him.
In the circumstances it would seem to me that there is no need for exchange of Counsel's skeleton argument nor will we be filing an expert's report.
I can advise you that a plea in mitigation will be given at the hearing".
This led to a letter of the same date from ACCA asking for confirmation that the claimant accepted liability "for all three allegations brought under bye-law 8(a)(i) and (ii)". The details of the charges were then set out and the letter continued: -
"Please clarify if Mr Mond accepts each of the allegations on the basis of bye-law 8(a)(i) Please also indicate the basis on which each allegation is accepted, and if ACCA's case is accepted in full".
By letter dated 23 December 2003, the claimant's solicitor enclosed the claimant's written response and dealt with a query whether Mr Supperstone would be required to attend, saying: -
" I would consider that the function of an expert is to provide an opinion on what a practitioner should or should not have done in any given set of circumstances. Mr Supperstone has provided that opinion. My client has indicated that he accepts the charges against him. Whether or not those charges should be dealt with under Bye-law 8(a)(i) or 8(a)(ii) is purely a matter for the Disciplinary Committee itself and I would not consider it a proper function of an expert to take any part in that particular process".
He indicated that the claimant did not intend to be present but would be represented by counsel.
"In essence, he accepts that CVA funds should not have been paid into this firm's disbursement account and such surplus funds forgotten about for 2 years".
He pointed out that he had not concealed the existence of the funds from the creditors. He thought that they would only be there for a few weeks pending receipt of legal advice and had paid no regard to the actual balance standing to the credit of the CVA in the disbursement account since 'in his own mind he knew that the three or four Hodgsons office accounts had throughout that period in time almost always overall large cash balances'. He produced documentary proof of that. He said: -
"In this case it would appear that because of the doubtful status of the monies [the claimant] could not think what else to do with the surplus monies for the short period it would take, he though, to resolve the issue. [he] accepts that he was quite wrong to take the course he did and should have given much more thought to the destination of the monies and to have ensured that interest accrued for the benefit either of the CVA creditors or the company in liquidation. It is submitted that creditors have suffered no loss and it will be noted from the text of the final (final) report to creditors that [he] has made good lost interest at ISA rates for the period in question".
In relation to the second allegation, he expressed his regret that there was 'an abysmal failure to resolve the outstanding issue of entitlement of the surplus monies following the winding up order".
He made the point that the monies were never at any real as opposed to theoretical risk. He said: -
"[The claimant] very much regrets the unaccountable delays in this case. In essence, the allegations overlap. While [he] accepts that it was wrong for the surplus monies to have been paid into his practice's disbursement account, this mistake would never have gone on for so long had there not been an unfortunate failure to progress the destination of the surplus monies. This is regrettable.
Furthermore, this failure meant that a CVA terminated in late 1995 was strictly speaking open thereafter and unfinalised for a number of years, without creditors being duly notified in accordance with the Insolvency Rules. In vernacular terms, [he] considers this case to be a complete 'cock-up'".
"I understand that, as matters are now admitted, your counsel will present an abbreviated form of the case to the panel".
" I believed that I was facing charges of, at worst, negligence or incompetence. If I was in fact to be facing charges of a serious breach of trust I would have taken advice and, if I had been aware of the increased seriousness and implied culpability on my part, I would not have admitted the charges but would have defended the case. My whole approach to the proceedings against me had been on the basis that the claim was negligence or incompetence. I would have approached matters differently if this had not been the case from the outset".
"Miss Agnello [Counsel for ACCA]
Reliance has been placed on 8(a)(i) and (ii). They are in many respects alternative, although it is fair to say when one reads (i) and (ii) it can be envisaged that many charges could easily fit in under (i) or (ii)
Mr Berry [Chairman]
Well, for my part anyway, I have proceeded in the past upon the basis that 8(a)(i) is more serious than 8(a)(ii), although the word 'improper' also comes in 8(a)(ii) it has always puzzled me, it doesn't really belong there with the rest of it but are you presenting the case as an 8(a)(i) or an 8(a)(ii), or do you say that there is no difference between the two, and that they both sweep up together?
No, I think there is a difference between the two, but for the purposes of the ACCA for this current hearing, we have put in 'or the alternative (i) and (ii)'. We say it is either (i) or (ii) and we leave the Committee to determine it.
But each of these charges is serious enough to potentially fall within (i) in the facts of this case?
Yes. That is why it has been presented as an 8(a)(i) or (ii) case. We specifically haven't either gone for either (i) or (ii). We leave that to you and your Committee. My concern is simply to indicate that cases could easily fall within (i) or (ii). There is considerable amount of overlap. The ACCA is not pressing for it to be considered by your Committee as a (i) or (ii); we leave it to you and your Committee".
"Please note that our counsel will present this case on Monday based on the Case Summary and documents previously sent to you. We see no reason to incur further costs in this matter by our counsel preparing written submissions".
Miss Agnello proceeded to present the case against the claimant. She made and dwelt on the point that the balance in the disbursement account often fell below the amount of the CVA funds, eliciting this observation from Mr Berry as the Committee was taken through the movements in the account over the relevant period: -
"So without the credit, it would have gone over that account's overdraft limit. The subsequent payments were only capable of being made with that deposit".
"The distinction between Mr Mond's actions being improper, and being incompetent. Could you just take us to the evidence which you say would justify this Committee finding that [his] actions were consciously improper rather than incompetent".
She replied: -
"This is a matter for the Committee, but what I will say, as the ACCA have indicated in their case summary: -
'At the time of the compulsory winding up order, there were two possibilities. Either the money belonged to the liquidator, or the money was held on trust for the CVA creditors. By the terms of the CVA, Mr Mond as supervisor was under an obligation to hold these monies in a deposit account until it was resolved by the court'".
The rest of that clause indicated 'by an application to the court by any interested parties'. Mr Mond did not make any application. He knew that there was a dilemma because in his correspondence he accepts that there was an uncertainty. Knowing that there was the uncertainty at the time, a year later he transfers the funds to the Hodgsons disbursements account".
The Committee member then said: -
"Yes, but is that specific evidence that you would want to that shows that his state of mind was one of conscious impropriety, rather than (shall we say) incompetence?"
Miss Agnello replied: -
"No. We are simply relying on what we have presented in this case, and the obligations that Mr Mond was under, and his awareness that there were those two possibilities. But no, there is not a specific piece of evidence that the ACCA are relying on".
The Committee member said: -
"If this Committee is to come to a conclusion of conscious impropriety, that would be inferential from the evidence that you have put before us, rather than direct evidence pointing to that state of mind, is that right?"
Miss Agnello agreed it was.
"Perhaps deliberate but improper behaviour. For example, in this case, perhaps saying 'I've got a practice overdraft. I've got an overdraft on the disbursement account. I'll tuck that money away there and it'll save me some overdraft interest. And, if he thought that's a handy place to stick that money, that would be improper. But then in (ii) we still have the word 'improperly' but I think, as I indicated earlier, certainly my approach to those things in the past has been that we are really looking at serious inefficiency and incompetence that brings the gentleman here rather than at the end of a writ or something like that".
"The Committee has taken the view that this admitted misconduct as a whole, but particularly in relation to charge 1, falls to be considered under bye-law 8(a)(i). That is to say, it amounts to misconduct by the improper performance of his duties by Mr Mond, rather than under bye-law 8(a)(ii) which would have been the case if we had taken the view that the conduct really amounted only to inefficiently or incompetence. The Committee has taken the view that 8(a)(ii) is appropriate for count 2, in that he performed his work improperly, inefficiency or incompetently but sufficiently seriously to bring himself and the Association into discredit. Count 3 clearly falls into 8(a)(ii) in the category of inefficiency and incompetence rather than with any impropriety being involved".
They described what the claimant had done as a 'serious breach of trust' and concluded: -
"The terms of the CVA were clear and must have been clear to Mr Mond. On no showing could those funds have been appropriate for payment into one of his firm's accounts, let alone an account which was occasionally overdrawn and on which overdraft he was paying a commercial rate of interest. The account was overdrawn so that the fund was mixed into an account which in fact could not have been drawn upon to replace those monies were it not for the fact that Mr Mond put funds into the account so that it had sufficient credit to allow for the balance to be paid over to the liquidator. Mr Anthony Supperstone made the point that in the event of Mr Mond's or his firm's insolvency [the company] would have to prove as an unsecured creditor On no showing whatsoever should those funds ever have been available for Mr Mond's firm Mr Mond should be told that he has come within the finest whisker of being excluded".
Serious though the breach of trust was, the penalty was a severe reprimand and a fine of £40,000. It was only not the maximum because the Committee recognised that his plea of guilty entitled the claimant to a discount.
"It has certainly never been our case of any dishonesty on the part of Mr Mond where the appropriation was for his own benefit. But in the ACCA's submission, what is being said there is that the reality is that by transferring into that account, the practice had the benefit. That is not the same as saying that that is what Mr Mond wanted to happen".
"The question in relation to complaint (i) is whether his admitted failure to act with due skill, care, diligence and expedition and with proper regard for the technical and professional standards between 10th January 1997 and 6th October 1998 amounts to misconduct. With regard to the issue of whether by implication the Disciplinary Committee thought that Mr Mond appropriated the monies for his own benefit, Ms Agnello confirmed to us that ACCA was not alleging this, and we accept what she told us. Indeed, whilst it could be said that there would be some minor financial advantage to Mr Mond's firm in having in excess of £46000 in his firm's disbursement account, and that interest would not be earned on those monies whilst they were in that account compared with where they were in the estate accounts, and that he did nothing to resolve the outstanding issues in relation to those funds for a lengthy period, nevertheless we have not heard or read any evidence which indicates to us that this was a deliberate attempt to appropriate monies for his own benefit.
However considering the facts as whole we agree with the Disciplinary Committee that the transfer of the surplus into the firm's disbursement account was a serious breach of trust. As Mr Supperstone put it in paragraph 26 of his report: "The member clearly failed to comply with these regulations and mixed what were indisputably clients monies held on trust for others (whoever they may have been) with his own firm's monies". Also if, as Mr Supperstone points out in paragraph 20: "the practice had become insolvent, than the funds in the disbursement account would not have been available for creditors of the CVA but would have been available for the creditors of the practice". It is a basic principle that monies held by or on behalf of others should not be intermingled with the Supervisors own funds. Not only was it a serious breach of trust, and a failure to comply with such principle but also Mr Mond took no steps to deal with the question of which group of creditors was entitled to the monies. Having taken the decision to transfer the surplus he should have ensured that he obtained legal advice and if necessary made application to the Court as envisaged by the terms of the CVA Proposal. We feel that the combination of these factors leads to the conclusion that Mr Mond has been guilty of misconduct. Our view is that his actions and inaction amount to more than professional work that was improper, inefficient or incompetent, although it was also all of those things. His actions and inaction also fall within the last article of the guidance in bye-law 8(c)".
The point was made that, although the claimant was not trying deliberately to gain a financial benefit for his firm, nonetheless his failures did amount to misconduct in that he acted in breach of trust in a way which properly attracted the use of the adjective serious and in breach of professional rules and regulations.
MR JUSTICE COLLINS: The result is that I propose to quash the decision of the Association. I have had the opportunity of seeing your written submissions. What is agreed? It is agreed that Mr Fordham pay the costs.
MR FORDHAM: Yes. If you have my sheet, point 1 is agreed, that the finding of misconduct and breach of byelaw 8(a)(i) and the orders of both committees be quashed. We will come back to 2. Point 3 is agreed. We can update you. In the second sentence of 3 we have also agreed the amount of the interim payment. The second sentence should now say "the defendant to make an interim payment" and to delete if possible, "in the sum of £40,000." That paragraph is agreed. That leaves 2 and 4.
MR DAVIES: Your Lordship has the power to remit.
MR JUSTICE COLLINS: I can either substitute or remit.
MR DAVIES: The difficulty in remission is that it goes back to the first decision-makers who are faced with dealing with badly drafted charges.
MR JUSTICE COLLINS: I am sure that is right. There would have to be a fundamental reconsideration. It would not be difficult to put the issue in a proper form, so that everybody knows what the situation should be. I do not think that is an issue. There can be amendments, even at this late stage, to the charges, provided that no injustice results. I take the technical point, but I think that there are more fundamental points to be raised, not least the lapse of time.
MR DAVIES: That was the point that I was going to raise, not only the lapse of time but the cost in terms of both anxiety and financial cost to Mr Mond.
MR JUSTICE COLLINS: He has accepted and always has that he was guilty of 2 and 3 and that he was guilty of 8(ii) in respect of the first charge. The only real issue is (a) the question of misconduct, and whether breach of (a)(i) should be reconsidered, and (b) in any event, whether or not it is reconsidered, what is the appropriate penalty. I suppose you would want it to be reconsidered whether, in all the circumstances, anything should be done now.
MR DAVIES: Of course. The publicity attracted by this case has to be taken into account. The world will know exactly what has appeared and taken place. That too is a penalising fact. You may remember that at the bottom of the order the decision of the committee is being published. That happens by virtue of the proceedings.
MR JUSTICE COLLINS: You would say that, in the light of the acceptance before the Appeal Committee that there was no question of any use deliberately to his own benefit, in effect they were not going behind what he accepted he had done. In those circumstances it would be verging on perverse to find misconduct, if by misconduct one means what it appears the committees believed misconduct amounted to. One thing that comes out of this is that it is about time that the byelaws are reconsidered. You would say, would you not, that, in all the circumstances, because of the perception of misconduct, and 8(i) is that much more serious, it would be quite wrong to go back and fight over misconduct. It should be accepted that this is a breach of 8(ii) and the penalty -- I suppose that I could decide what the appropriate penalty should be.
MR DAVIES: You could. I am aware of the authorities that suggest it.
MR JUSTICE COLLINS: I think that it would be wrong for me to do it myself. There is nothing to stop me indicating a steer.
MR DAVIES: I would invite you to do that.
MR DAVIES: If my learned friend were to invite you to remit on the basis of the Association proceeding in relation to the 8(ii) matter and to fix the penalty on that basis, that it was not misconduct, then I would not resist that.
MR JUSTICE COLLINS: I have to bring these proceedings to an end. I cannot leave them open-ended. I have to remit or substitute. The basis upon which I remit is a matter that we should deal with. I cannot leave it open. I cannot approach it on the basis of "wait and see what they want to do." That would leave these proceedings uncompleted. I do not think I can do that. I think that I should make an order that brings this to an end. Apart from anything else, he says that he wants to appeal. You would want me to remit -- your primary submission is "do it yourself", but you recognise the difficulty of that -- and remit on the basis that they should not reconsider misconduct but should consider what the appropriate penalty should be in relation to the admitted breaches of 8(ii). I have to bring this to an end by some order.
MR FORDHAM: There are some cases where judicial review courts give relief. It is not satisfactory, not in a case like this. I commend to you the order that we have suggested at paragraph 2. It covers the fact that we say that the case has to go back. It can go back to the disciplinary level. We have also said that it would be differently constituted.
MR JUSTICE COLLINS: That I have no difficulty with.
MR FORDHAM: There were the two points raised yesterday. You could not do misconduct on the charges as currently framed and we would have to carefully consider it. I have said that they are entitled to consider how to proceed. They will need to consider it. You have set out your views, and in particular at paragraph 41 you have come as close as you came in your analysis as to whether this in principle is capable of being misconduct, and have said that it may be, at the top of the page. It would not necessarily be serious enough. I submit to you that the difficulties are in relation to a substitution order. Your Lordship has not got the argument to be able to say: "Even on the 8(a)(ii) matters it should be a reprimand; the fine should be X." That means that it goes back for that reason alone. The first point is this: is it abusive after this lapse of time? The second point, leaving that aside, is: would it be perverse for a reasonable decision-maker to characterise this as misconduct? That would be the only two bases for prohibiting any further consideration by this court. The court has not had argument in relation to abuse. No prohibition order was sought. Mr Davies did not seek to establish ----
MR JUSTICE COLLINS: It is something which is now going to have to be considered.
MR FORDHAM: Decisions were made by committees. They were challenged. They were properly challenged and we have ended up where we are.
MR JUSTICE COLLINS: The reality is that these are stale charges. They are 10 years old.
MR FORDHAM: The difference between where we are now and where we were is that we have had a judicial review.
MR JUSTICE COLLINS: Because you got it wrong.
MR FORDHAM: I accept that, but if we are in the position where we are on remittal, we have accepted that the real point on 8(a)(i) is: would it be perverse? It is stale. In relation to both these points he did not seek a remedy. He did not seek to develop an argument to say that there should be a prohibition. His claim form asked for remittal for reconsideration. The difficulty in saying that it is perverse is that we have to reargue 41 of your judgment -----
MR JUSTICE COLLINS: The last sentence of 41 ----
MR FORDHAM: That is the steer.
MR JUSTICE COLLINS: I see the force of that.
MR FORDHAM: When careful consideration is given it will be given by my client and by a committee. If there are arguments about staleness, they can be aired and a view formed. There is a remedy, should at that point it be said that this is now off limits. I am asking you to decline to take a new point that was not raised yesterday. The correct order is the one that we have set out at paragraph 2.
I deal with permission to appeal. I hope that you have had an opportunity to read paragraph 4, where I have set out the different view of this case that we say could be taken. Unless you want me to I do not elaborate it. It is a familiar argument. It is the argument that did not attract your Lordship. I make these submissions. The question on permission to appeal, difficult though it is for anybody in my position -- I am not seeking to suggest to you that you should think that your approach is the wrong one --
MR JUSTICE COLLINS: Do not worry about that. I am capable of accepting that I might have got it wrong and that others may take a different view.
MR FORDHAM: That is the position. All I am submitting is that that different approach to this case is one that could be taken by the Court of Appeal. Then the question is: is it unrealistic to suppose that that view -- it is raised in a letter prior to the hearing -- and you take the decision that you think that you have a strong argument on misconduct and you are not going to attend. When it comes to the appeal committee the committee does consider it afresh. The argument would be that they do have jurisdiction to do that. He did not plead guilty to the misconduct charge. I understand and I accept that your analysis is a different one and you have rejected that approach. It is not fanciful to suggest that the Court of Appeal would take a different approach to this case. I am asking you to look at this and ask yourself if one could be in a different position.
MR JUSTICE COLLINS: I need not trouble you on appeal. So far as the other is concerned, is there anything you wanted to add?
MR DAVIES: It would need careful direction if you decide to remit. The penalty imposed and the way the matter was dealt with under the disciplinary committee was to treat the matter as a whole.
MR JUSTICE COLLINS: They were punishing your client for misconduct. 2 and 3 were subsumed in 1. That one would accept. They perfectly properly took an overall view of what was the proper penalty for the conduct that they had found against him.
MR DAVIES: It would need careful direction as to how it would be approached and dealt with.
MR JUSTICE COLLINS: The question is, what is the appropriate order to be made in consequence of my decision? It seems to me that it is clear that it would be wrong for me to seek to substitute a penalty. The appropriate course for me to take is to remit the matter to the disciplinary committee. It must start afresh if it is to start at all. The claimant has at all times accepted that he has been in breach of byelaw 8(a)(ii). The issue below, so far as he was concerned, was whether he was guilty of misconduct. What I have said in my judgment in paragraph 41 is that, had he given evidence -- he did not because of a misunderstanding on the part of his advisers as to the scope of the hearing, and equally a failure by the committee to appreciate that they had no power to deal with the matter in the way that they did -- the result of all that was that he was not there to put forward his case. He accepted that he had acted wrongly, but his case was that he was not in any way guilty of the serious misconduct which was alleged to be a breach of byelaw 8(a)(i). It was negligence and incompetence, not anything deliberate. The test to have been adopted by the disciplinary committee was such that would not, in my view, have justified a finding of a serious breach of trust if it was accepted that the claimant had acted as he admitted, and that there was nothing more sinister than that. That appears to have been accepted by the defendants at the appeal hearing through their counsel. But it is not by any means certain that the matter can be dealt with in that way. I am bound to say that I would be somewhat surprised if the decision was made, in all the circumstances, to try to resuscitate the issue of misconduct and breach of byelaw 8(a)(i), but I do not feel that it is possible, in all the circumstances, for me to say categorically that that should not be done.
Clearly the matter will have to be reconsidered, not least because in addition there is the lapse of time. These matters are very stale indeed. The conduct in question was conduct which occurred in the mid-1990s, and so we are now almost 10 years on. Furthermore, it is well known, because the findings have been published and these proceedings and this judgment can be made known, if that is considered appropriate to the profession, that the claimant has accepted that he did wrong, that he was negligent, that he was incompetent, and it may be that that would in all the circumstances suffice. That is all a matter for the disciplinary committee and the defendants to reconsider. What they cannot do, in the light of my judgment, is to proceed on the basis of the charges as drafted. If it is decided that it is appropriate to carry on, that is not an insuperable obstacle, because it would be possible to amend in order to make it clear what was being alleged. If necessary, it can be done by dividing the two which merely constitute 8(a). What is now the first charge would be split into two. On any view it would be appropriate to resuscitate 2 and 3 because there has been a finding that they do not breach byelaw 8(a)(i). It is a consideration as to whether the first charge should be reconsidered.
In those circumstances it seems to me that the appropriate order is that this is remitted to a differently constituted disciplinary committee. What I have said will be on the transcript and will be referred to and considered as well.
The other matter in contention was an application for permission to appeal. I am satisfied, as I would be having decided it, that there was a breach here of procedural propriety. That in itself does not preclude leave to appeal but, in all the circumstances, it seems to me that this is a case where it would be appropriate, if it is to go further, for the defendants to seek the leave of the Court of Appeal.
The other matters are agreed. The order will be that the findings of misconduct and breach of byelaw 8(a)(i) and the orders of both the disciplinary committee and the appeal committee be quashed, and that the defendants pay the claimant's costs of these proceedings, to be the subject of detailed assessment if not agreed, and the defendant to make an interim payment on account of costs within 14 days from the date of handing down judgment -- that is today -- in the sum of £40,000.