Solicitors Regulation Authority v Chan and others [2015] EWHC 2659 (Admin), [2015] All ER (D) 124 (Sep).

The appellant Solicitors Regulation Authority (SRA) challenged the Solicitors' Disciplinary Tribunal's (SDT) conclusions and the fine of £15,000 imposed on the first and second respondents. The Divisional Court, in allowing the appeal, held that the evidence and the SDT's primary findings of fact compelled a conclusion that there had been a want of integrity, a failure to act with independence, and that the respondents had acted so as to diminish the trust the public would place in them and the provision of legal services.

What issues did this case raise? Why is it significant?

This appeal saw the SRA successfully challenge the findings of the SDT in the High Court. It also revealed a willingness on the part of the High Court to intervene in professional disciplinary tribunals where it considers that the tribunal's evaluation and conclusion to be wrong.

In the original determination, the SDT found that Mr Chan and Mr Ali had operated a number of schemes to avoid or mitigate the impact of stamp duty land tax (SDLT). While the schemes were of significant potential risk and disadvantage to the clients, they were of considerable profit to the respondents, generating almost £1m in referral fees and commission between 2009 and 2012. In addition, the respondents were the directors and shareholders of one of the providers involved in the schemes.

The SDT was clear that it was not required to make any judgement on the actual efficacy of the SDLT schemes and that the implementation of the schemes was not in itself any breach of professional rules. The key concern was the way in which the respondents had involved their clients in these schemes. The SDT found that there had not been proper disclosure to the clients and rejected the respondents' submissions that there was no need for them to disclose to the lender or purchaser clients the true nature of the transactions and the risks involved.

The SDT found that the solicitors had acted in breach of the Solicitors' Code of Conduct and the Solicitors' Accounts Rules. However, it reasoned that their misconduct arose largely from a failure to understand the requirements of the schemes and their responsibilities under the relevant Accounts Rules. In particular, the SDT was not satisfied that the respondents had acted without integrity or that their independence had been compromised. The SDT therefore determined that suspension or striking off were not necessary and instead imposed a fine of £15,000 on each respondent.

On appeal, the High Court agreed with the SRA's assertions that the SDT's conclusions were inconsistent with their primary findings of fact. Lord Justice Davies determined that the evidence and the primary findings of fact compelled a conclusion that there was a want of integrity, a failure to act with independence and that the respondents had acted in a manner that would diminish the trust the public would place in them and the provision of legal services.
The High Court was clear that the respondents had committed serious misconduct and that the sanction of the SDT could not be maintained in light of the findings. While the SRA asserted that striking off was the only possible sanction in the circumstances, the High Court saw fit to remit the matter back to the SDT for reconsideration of the appropriate sanction.

To what extent does the judgment clarify the law in this area?

It is unusual for the High Court to interfere with a decision made by a specialist tribunal. The authorities in this area emphasise the respect that should be given to findings of fact by a lower tribunal and indicate that courts will be slow to interfere (Cheatle v General Medical Council [2009] EWHC 645 (Admin), [2009] All ER (D) 281 (Mar) and Ghosh v General Medical Council [2001] UKPC 29, [2001] All ER (D) 189 (Jun)). In professional disciplinary proceedings, the
courts consider that a tribunal panel is better placed to judge their fellow members and weigh the seriousness of the misconduct. This principle was more recently endorsed in Smart v Nursing and Midwifery Council [2015] EWHC 1807 (Admin), [2015] All ER (D) 42 (Jul) in which Mr Justice Picken confirmed that it would require a very strong case to interfere with the sentence imposed by a disciplinary committee.

In SRA v Chan, Lord Justice Davis confirmed this approach in his judgment but stated that, where the tribunal's evaluation and conclusion are wrong, then it is the court's duty to interfere. He found that the SDT had seriously underestimated the gravity of its own findings as to the respondents' conduct. It is interesting to note that the court did not interfere with the primary findings of fact and rejected submissions from the respondents which attempted to challenge those findings. In addition, the court remitted the matter back to the SDT to consider the issue of sanction. The scope of the court's interference was therefore limited to the conclusions of the SDT which were based on their primary findings, thereby affirming the general principle that the court will only intervene in exceptional circumstances and only to the extent necessary.

What are the practical implications of this decision for lawyers and their clients?
This case sends a clear message that the SRA is not afraid to challenge decisions of the SDT and, further, that the High Court is not afraid to interfere with a decision when it is plainly wrong. Lawyers and their clients should be mindful of the potential for decisions to be challenged by regulators and the potential for more severe findings and sanctions to be imposed by an upper tribunal.

This case also places the spotlight again on the involvement of solicitors in aggressive or risky SDLT schemes. While the SDT and the court declined to opine on the lawfulness of such schemes, they were clear that lawyers must make their clients aware of the potential risks involved. The High Court also confirmed that a lack of understanding of the schemes or not understanding your professional responsibilities to your clients will not be a defence to such allegations. Where the potential risks to your client are significant, it is vital that explicit and informed consent is received before proceeding.

How does this case fit in with other developments in this area?

The court took the opportunity to comment on the drafting of the charges, describing them as convoluted and verbose. While the importance of the respondent being able to understand the case against them is well established (Ridge v Baldwin [1964] AC 40, [1963] 2 All ER 66 and Stevenson v United Road Transport Union [1977] 2 All ER 941), Lord Justice Davis also emphasised the potential impact of poor drafting on the task of the tribunal. He asserted that such drafting may cause the panel to lose sight of the bigger picture and consequently treat the more and less significant points alike. It was suggested that the aim should be to include 'the minimum number of charges necessary to meet the justice of the particular case'. Regulators should therefore ensure that allegations are articulated clearly and consider whether it is appropriate to include more minor concerns in a charge sheet, while respondents should be ready to challenge unnecessarily complex and lengthy charges.

This article was originally appeared in LexisNexis in November 2015.