Fuglers LLP & Ors v Solicitors Regulation Authority (2014)
The Solicitors Disciplinary Tribunal had been justified in imposing a total fine of £75,000 upon a firm and two partners who had been found guilty of misconduct after allowing the firm's client account to be used as a banking facility by a client who was at risk of insolvency. There had been payments through the account of over £10 million and the solicitors had made decisions which involved the favourable treatment of some unsecured creditors over others. The misconduct was sufficiently serious to require the highest level of fine.
The appellants (S, B and F) appealed against fines imposed upon them following findings of misconduct by the Solicitors Disciplinary Tribunal.
S was a firm of solicitors and B and F were its equity partners. They had acted for a football club which was at risk of insolvency and had allowed it to use S's client account as a banking facility. The misconduct amounted to improper use of the client account by using it as a banking facility for a client; operating their client account contrary to the Solicitors' Accounts Rules 1998 r.15 note (ix); and breaching the Solicitors' Code of Conduct 2007 r.14 and r.1.06. A fine of £50,000 had been imposed against S, £20,000 against B, and £5,000 against F.
S, B and F submitted that (1) the individual sums imposed were disproportionate; (2) the extent of F's involvement was such that he ought not to have been fined at all; (3) it was wrong to penalise partners as well as the firm.
(1) In determining sanction, it was necessary to assess the seriousness of the misconduct; keep in mind the purpose for which sanctions were imposed; and choose the sanction which most appropriately fulfilled that purpose for the seriousness of the conduct concerned. In assessing seriousness the most important factors were culpability and the harm caused by the misconduct. A factor of the greatest importance was the impact of the misconduct upon the standing and reputation of the profession as a whole. In determining sanction, the tribunal would properly have in mind the message which the sanction would send to other solicitors for the purposes of promoting and maintaining the highest standards and the high standing of the profession with the public at large, Bolton v Law Society  1 W.L.R. 512 followed. Where a fine was appropriate, its level would be influenced by whether the case was at or near the top, middle or bottom of the category; the fines imposed in analogous cases; the size and standing of the solicitor or firm concerned; and the means available to the individual or firm (see paras 28-35 of judgment). In considering the mischief at which the prohibition in r.15 note was aimed, there were at least three strands. First, it was objectionable for a solicitor to be undertaking or facilitating banking activities because solicitors were qualified and regulated in relation to their activities as solicitors, not in relation to banking activities. Second, allowing a client account to be used as a banking facility, unrelated to any underlying transaction which the solicitor was undertaking, carried the risk of money laundering. Third, where there was insolvency or a risk of insolvency, to allow a client account to be used as a banking facility was objectionable because it allowed the client to achieve what it would normally be unable to achieve from any bank. There was also the risk of disaffection or opprobrium involved in favouring one creditor over another and a risk of the Insolvency Act 1986 s.127 requiring creditors to reimburse payments from the client account in a subsequent liquidation. A solicitor who knowingly made or facilitated such payments might be subject to a personal liability (paras 38-42). In the instant case, a number of factors increased the seriousness of the misconduct. B and F were experienced solicitors who consciously allowed S's client account to be used as a banking facility for over four months, in circumstances where they knew that P's banking facilities had been withdrawn. There had been payments through the account of over £10 million, a significant number of which were unconnected with any particular underlying transaction. B had made decisions as to which creditors should or should not be paid, on a commercial, rather than legal basis. The payments involved the favourable treatment of some unsecured creditors over others and the insolvency background made that misconduct all the more serious. Members of the public would take a dim view of that and it was likely to diminish the trust and confidence placed in the profession. The misconduct was sufficiently serious that the tribunal might reasonably have considered imposing suspension. It was therefore appropriate to impose the highest level of fine consistent with taking into account S, B and F's financial circumstances and the overall financial consequences. Although the fines were the largest ever imposed by such a tribunal, different financial circumstances in other cases might have precluded a fine at a higher level, or it might have been thought necessary to impose a suspension. A total fine of £75,000, being six months' profit for a notional firm making a 15 per cent profit on an annual turnover of £1 million was not disproportionate or excessive (paras 43-52). (2) The tribunal had been entitled to conclude that F had personally sanctioned the course of conduct. A personal fine was appropriate (para.53). (3) There was no error in the tribunal imposing a penalty on the firm as well as the partners (para.54).
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05 Feb 2014
Queen's Bench Division
LTL 12/2/2014 :  EWHC 179 (Admin)
Mark Cunningham QC