On 12th March 2018 the SRA published a warning notice on the use of Non-Disclosure Agreements (“NDAs”). I have already blogged on the ethical issues that underpin the SRA’s notice here and I am currently working on a more detailed project with others around the use of NDAs that we hope will provide some more assistance to firms. The purpose of this blog is to deal with one aspect of the SRA’s warning notice which is the obligation on firms and solicitors to report “serious misconduct” to the SRA. This is primarily found in Outcome 10.4 of the SRA Code of Conduct although there are also obligations on the firm’s COLP in rule 8.5 of the SRA Authorisation Rules. The SRA deals with the issue in its warning notice in the following way:
“Where you find, or have grounds to believe, that a member of your firm has or may have committed a serious breach of our requirements, we expect you to report such findings or concerns to us. We may wish to investigate and we have statutory powers that are not available to you. Failure to report may be a failure to achieve Outcomes 10.3 or 10.4 and of one or more SRA Principles.”
The question of whether to report under Outcome 10.4 had vexed firms and solicitors (and those advising them) for years but sexual misconduct allegations do provide additional considerations which I will deal with below. For any firm considering reporting under Outcome 10.4 the following are worth bearing in mind:
- Every case is fact sensitive. There are no precedents. In reality, the decision in most cases will be obvious one way or the other. It’s the ones in the middle that present the problems.
- It is safer to report than not report. It is highly unlikely the SRA will criticise a firm or a solicitor for reporting something that the SRA does not find serious. However, in many cases the report has consequences for the individual and the firm and careful thought will be needed as to whether the duty under Outcome 10.4 arises. This may involve independent legal advice.
- It is not necessary for the facts alleged to be proven. In some cases it will be obvious what has occurred. It will be well documented. In others it may involve disputed recollection of witnesses. There must be a sufficient evidential basis for the report and in some cases this will present difficulties. It is possible that an allegation of itself will be enough for the duty to arise. This is clearly the view of the SRA as stated above. However, there may be cases where the allegation viewed in its context does not provide enough to engage the duty.
- Almost always the agonising will be around whether the matter is serious. The SRA takes a wide view of misconduct as being any breach of its regulatory arrangements. Indeed this is the wording in the new Code due to come into force next year. The word ““misconduct” is a hangover from the pre-2011 system.
- The question of whether it is serious is in turn fact sensitive. There are a number of pointers in the rules and elsewhere about what it means but it is not defined in the Code.
- What we regard as serious changes over time. Sir Edward Lund made this point in 1960:
“I should point out at once that standards of professional conduct change as time passes. What is entirely proper for one generation may be slightly irregular for the succeeding generation and highly improper for the next.”
Sir Edward illustrated this point by reference to the fact that it was accepted in the 19th century for solicitors to hold client money in their own account. This generation’s equivalent may well be sexual misconduct. Whilst very serious cases of sexual misconduct were always required to be reported, society’s attitudes have shifted. Something that may not have seemed reportable a year or more ago will now be reportable. In addition, the boundary between conduct in practice and outside practice has become more blurred. Any proper consideration of whether to report has to take account of this shift.
The Outcome 10.4 obligations are not straightforward. In cases where a firm comes to the conclusion that it does not need to report it may be sensible to document that decision making process and, where appropriate, seek external advice on the issue.