Law Society v Wheeler & Anor

This is an appeal brought by the Law Society pursuant to Part III of the Solicitors Act 1974 against a decision of the Solicitors Disciplinary Tribunal (“the SDT”) filed on 25^th August 2004. The facts giving rise to the proceedings before the SDT are not really in dispute, but both the Law Society (in its grounds of appeal) and the Respondent Mr Wheeler (in his Respondent’s Notice) contend that on those facts the Tribunal reached conclusions which are unsustainable. It is therefore necessary to outline the facts before turning to the conclusions and the attacks that are made upon them.

Mr Wheeler, who is now 52 years of age, was admitted as a solicitor on 1^st December 1976, and Mr Stephens, who is now 71 years of age, was admitted as a solicitor on 7^th July 1956. At all material times they practised in partnership with others from several offices in the Luton area as Stephens Wheeler.

Shirley Lindsey Harrison was admitted as a solicitor on 1^st April 1980. In 1990, when she was practising alone, the Law Society intervened. Investigations revealed a shortage of £67,555.75 from her client account. It was attributed to improper transfers from that account to her office account. She was found to have been reckless, but she was not found to have been dishonest. Nevertheless on 15^th January 1991 she was struck off.

On 25^th August 1993 the Law Society granted permission to two firms, Bland & Co and Malden & Co, to employ Ms Harrison part time. There is no complaint about the work which she did for them, but they were not able to continue to employ her, and in 1994 Stephens Wheeler sought permission to employ her to assist with litigation. Section 41 of the Solicitors Act enables the Law Society to permit a solicitor to employ someone who has been struck off, subject to such conditions as the Society thinks fit, and section 41(4) provides that if a solicitor acts in contravention of any conditions subject to which permission has been granted, the tribunal before which he is brought or this court shall order that his name be struck of the roll or that he be suspended from practice for such period as the Tribunal or the court thinks fit. There is no discretion to impose any lesser penalty.

On 1^st July 1994 the Law Society granted permission to Stephens Wheeler to employ Ms Harrison as a litigation clerk -

“On the condition that strict supervision is provided by A L Wheeler a partner and Mr J M Stephens a consultant of the firm. Miss Harrison to work from the Leagrave Office as set out in the completed questionnaire of April 1994.”

That was a reference to the questionnaire which Stephens Wheeler had completed on 13^th April 1994 as part of its application to employ Ms Harrison, and a material part of it reads -

“Ms. Harrison would assist with matters of a litigious nature, including accident claims, divorce and disputes. Strict supervision will be provided by Mr A L Wheeler, a partner in Stephens Wheeler and Mr J M Stephens, solicitor, and currently consultant to the firm and its recent senior partner. Ms Harrison would work from the Leagrave Office of the firm and her office would adjoin that of Mr Stephens.”

The person completing the form also indicated that he had read the Findings and Order of the STD in 1991 when Miss Harrison was struck off, and, as Mr Treverton-Jones QC for the Law Society pointed out, they make disturbing reading. The person completing the form also indicated that it was not proposed that the prospective employee would supervise any other staff or have the power to sign cheques or have any control over any bank account of the practice.

Initially Mr Stephens supervised Ms Harrison at the Leagrave office. Mr Wheeler was based at another office. For a time all seems to have gone well - so well that additional accommodation was required for the Leagrave office, and in 1996 it was obtained at Sundon Park, about 1 to 1½ miles away. Ms Harrison moved to that office, and initially it seems that Mr Stephens moved with her. However he soon returned to Leagrave. Mr Stephens continued to exercise some supervision over Ms Harrison at Sundon Park. The new office had no separate DX facilities but it had its own letter head and postal address. Mr Stephens paid regular visits, and in June 1997 a Law Society inspection of the firm resulted in an internal Law Society memorandum of 6^th August 1997 on which Mr Hopper QC for Mr Wheeler places considerable reliance. It was written by the Principal Compliance Monitoring Officer of the Office for the Supervision of Solicitors to Mr Stevens, the Acting Assistant Director Solicitors Practice of the OSS. The material part of that memorandum in type script reads -

“A fourth accounts monitoring visit was carried out at the above firm on 25^th and 26^th June 1997 by Peter Hird, Compliance Monitoring Officer. No serious breaches of the Solicitors Accounts Rules were identified during the visit.

Shirley Harrison, the struck-off solicitor mentioned in the referral documentation, works at the Sundon Park office of the firm and appears to be adequately supervised by the firm’s consultant, J.M. Stephens. It is not proposed to take any further action in respect of this firm.”

At the foot of the memorandum in manuscript under the heading “New Matter already opened” there is written –

“We need to ascertain whether Shirley Harrison … is employed with consent. Action file is unclear, . If unclear, pursue: if evidence of consent, close.”

That note is signed IRBS (the initials of Mr Stevens) and dated 22^nd August 1997. The SDT had no evidence, and nor do we, as to what happened thereafter, but if enquiries were made they would have revealed that Ms Harrison was employed with consent (see the decision of 1^st July 1994), and there is no evidence of any further communication between the OSS and Stephens Wheeler at that stage.

Part of the work done by Ms Harrison was probate work which, the Law Society contends, fell outside the work normally done by a litigation clerk so, it is contended, from 1996 onwards Mr Wheeler contravened the terms of section 41 of the 1974 Act in that he employed Ms Harrison otherwise than in accordance with the prescribed conditions in three respects -

(1)

She was not employed at the Leagrave Office:

(2)

She was not confined to work as a litigation clerk and, most significantly -

(3)

She was not provided with strict supervision by Mr Wheeler and Mr Stephens.

Mr Wheeler’s position is and always has been that the Law Society knew what was happening and accepted the changes that had occurred.

In 1999 Miss Harrison sought readmission to the Roll of solicitors. The SDT refused to readmit her and in June 1999 the then Master of the Rolls upheld that decision. Her application was supported by her employers, who wanted to continue to employ her, and the Master of the Rolls indicated that if the position were to be the same in 2001 (ten years after her removal from the Roll) and if she were to put forward proposals to make some repayment to the Compensation Fund (which had suffered a loss of about £¼ million as a result of her activities) her application might succeed.

What no one knew in 1999 was that Ms Harrison had begun to abuse the trust of her employers and her probate clients. For example, she was acting in relation to the estate of Mr and Mrs Tipping, who had died in 1997 and 1998, and the Tipping family was far from content with the way that the estate was being handled. In May 1999 that discontent was brought to the attention of Mr Stephens. I will return to the Tipping file later in this judgment.

Then, on 6^th August 1999, the OSS wrote to Mr Wheeler saying that they had received information that Ms Harrison had been working unsupervised at Sundon Park and advising on divorce and probate matters, and it proposed to investigate. On 12th August 1999 Mr Wheeler responded asserting that the Law Society knew where Ms Harrison worked and what she did, and so far as supervision was concerned Mr Stephens and he provided all that was required because she was visited daily and the post was checked. In a reply dated 6^th October 1999 the Law Society drew attention to the terms of the section 41 permission. That provoked a reply from Mr Wheeler dated 29^th October 1999 in which he asserted that Ms Harrison was doing the work originally envisaged when the section 41 permission was granted. As to location the letter said -

“The Sundon Park premises are approximately, only one mile from the Leagrave office and the Sundon Park building is no more than an overflow building due to physical restrictions at the Leagrave office. All administration is conducted from the Leagrave office and all post etc, is read and signed by either Mr Stephens or Mr Wheeler. Our Sundon Park office is to all contents (sic) and purposes, part of our Leagrave office.”

In the penultimate paragraph Mr Wheeler asserted that his firm had “exercised strict supervision and inspection of Ms Harrison’s work during the entirety of her period of work at the Leagrave/Sundon Park office”.

On 5^th February 2000 Mrs Carol Austin, one of the executors and beneficiaries of the Tipping estate, wrote to the OSS to complain that monies that she and her fellow beneficiaries should have received from Stephens Wheeler had gone astray, and that their signatures on discharge forms had been forged. The Law Society then appointed Mr Shaw to investigate. He went to Stephens Wheeler on 31^st May 2000, and he found large sums of money to have been misused by Ms Harrison, some of it to meet personal liabilities. The missing money totalled £223,894.46, and it seems that in the opinion of Mr Shaw the fraud was so sophisticated that even if Ms Harrison had been closely monitored it would not have been observed.

On 10^th July 2000 Ms Harrison was suspended from employment, and on 10^th January 2003 she was sentenced by a criminal court to 3 years imprisonment.

On 21^st January 2004 Ms Bromley for the OSS commenced these proceedings with an application to the SDT that Mr Wheeler and Mr Stephens be required to answer allegations contained in a statement pursuant to rule 4(2) of the Solicitors (Disciplinary Proceedings) Rules 1994.

The allegations heard by the SDT on 24^th June 2004 were as follows -

“(1)

That Mr Wheeler failed to comply with the Solicitors Accounts Rules in two respects, both of which were admitted -

(i)

By withdrawing money from client account irregularly, and-

(ii)

By failing to ensure compliance with the Rules by everyone in the practice.

The remaining allegations were not admitted. They were as follows -

(2)

That Mr Wheeler had been guilty of ‘conduct unbefitting a solicitor in that he had failed to comply with the conditions imposed by the Law Society under section 41 of the Solicitors Act in connection with the employment of Shirley Lindsey Harrison.’

(3)

Both Mr Wheeler and Mr Stephens were alleged to have been guilty of ‘conduct unbefitting a solicitor in that they have failed to exercise due or adequate supervision over the activities of staff, namely Shirley Harrison’.

Clearly the second and third allegations were very similar, but the third allegation contained no reference to section 41, which imposed obligations directly on employers. Mr Stephens as a consultant and no longer a partner was not an employer.

Mr Stephens gave oral evidence. Mr Wheeler did not give evidence. The SDT found there to have been a technical breach of the permission granted pursuant to section 41(2), but not such as to amount to conduct unbefitting a solicitor. It therefore dismissed the second allegation. The SDT found the third allegation to have been substantiated. Mr Wheeler was ordered to pay a fine of £2000, which was not apportioned as between the allegations, and two thirds of the costs of the inquiry and of the application, those costs to include the costs of the investigating accountant. Mr Stephens was ordered to pay a fine of £1000, with a similar order in relation to costs.

Mr Treverton-Jones for the Law Society contends that the findings in relation to the second and third allegations cannot be reconciled, that the second allegation should have been held to have been substantiated, and that the penalty was inadequate.

For Mr Wheeler Mr Hopper submits that because of the history allegations 2 and 3 should never have been made. They amounted to an abuse of process (a point not taken before the tribunal). Alternatively he contends that the conclusion of the SDT in relation to the second allegation should have led to a similar conclusion in relation to the third allegation. Mr Hopper also challenges the fine and the orders for costs.

In the case of Mr Stephens the Law Society abandoned its appeal because of his age and state of health, and by agreement his cross appeal has been adjourned to await our decision.

Mr Treverton-Jones made three principal submissions in relation to the liability. First, he submitted that the reasoning of the SDT is so internally inconsistent that it cannot be allowed to stand. That was not disputed by Mr Hopper, but nevertheless in order to make good the point it is necessary to look at the SDT’s reasoning, which appears in paragraphs 152 to 156 of its decision.

Paragraph 152 is concerned with the first allegation, the admitted contraventions of the Solicitors Accounts Rules, and it ends -

“Whilst accepting that Mr Wheeler was not culpable for those breaches, it has to be recognised that the system in place did little to hinder the improper activities of a dishonest employee.”

The SDT then seems to have turned to the second allegation and paragraph 153 reads -

“The Tribunal has found that Mr Wheeler was guilty of conduct unbefitting a solicitor for permitting Ms Harrison to work as she did. He had initially perfectly properly applied to the Law Society for permission to employ Ms Harrison at a time when there was no thought in anybody’s mind that she might be dishonest. Mr Wheeler had allowed the situation to evolve without having given any real or close thought to the Law Society’s permission and the conditions which attached to it. A careful solicitor would have sought an assurance from the Law Society that it was acceptable for such an employee to undertake probate work when the nature of her work had been described as ‘a litigation clerk’. The employment of a struck off solicitor is not a matter to be taken lightly. If permission is given for such employment the employer must always bear at the forefront of his mind the necessity to protect the public and the good reputation of the solicitors’ profession. It is for this reason that the terms of the employment consent must be regarded with the utmost care and a prudent employing solicitor should seek the approval of the Law Society to any change in the nature and location of the employment. The Tribunal note Mr Wheeler’s view that the Sundon Park office was an annex of the Leagrave office. Prudently he should have checked that the Law Society concurred with that view.”

Mr Treverton-Jones is content with all of that but, as both he and Mr Hopper point out, it is totally at odds with the finding in relation to allegation 2, which finding is set out in paragraph 134 of the decision. Mr Hopper submits that the word “not” may have been omitted before the word “guilty” in the first sentence of paragraph 153, but to reconcile the two paragraphs would require more re-drafting than that.

Turning to allegation 3 the Tribunal said in paragraph 156 -

“With regard to allegation 3 the Tribunal recognises that a determined dishonest employee will circumvent any system of supervision or other office system, however carefully it might have been devised. Again the Tribunal considered that there is some force in the assertion that the Law Society’s allegation of lack of supervision came to the fore only when Ms Harrison’s dishonest activities came to light. Nevertheless the Tribunal is of the view that, particularly knowing that Ms Harrison had been struck off the Roll in circumstances where another division of the Tribunal had found her to have been reckless in accepting her bookkeeper’s advice without at any time checking the same, the respondents had been guilty of a degree of abdication of their responsibilities. The Tribunal had not been able to over look the serious breaches of the Solicitors Accounts Rules committed by Ms Harrison nor the substantial shortfall on the client account. The Tribunal pointed out that a solicitor must be meticulous in his observance and compliance of the rules governing the custody of client’s funds and the accounting for them. Although the Tribunal had not found in the past Ms Harrison to have been dishonest they clearly had the gravest possible concerns about her ability to run a solicitor’s practice and had made a striking off order even in the absence of a finding of dishonesty. The Tribunal takes the view that such a person would require a very close degree of supervision. Against this the Respondents permitted her to have an office physically separate from their own to which and from which correspondence could be sent over which they would have no control. Ms Harrison employed her own staff and handled other matters at this office to all intents and purposes as if she was a sole practitioner. While there might be nothing inherently wrong with this arrangement the Tribunal considers that a reasonable solicitor would have been reluctant to allow this state of affairs, in the case of an employed struck off solicitor, to arise.”

In the light of all that was said by the SDT in both paragraph 153 and 156 Mr Treverton-Jones asks how it was possible for the tribunal to conclude that allegation 2 was not proved.

Mr Treverton-Jones’ second submission was concerned with the SDT’s finding in paragraph 134 that with the passage of time there was “technical breach” of the permission granted pursuant to section 41, but not such as to amount to conduct unbefitting a solicitor. For present purposes it is unnecessary to dwell further on the question of whether authorisation to work as a litigation clerk in a relatively small firm includes authority to advise and act in probate matters and in divorce. As was said by the SDT, if a solicitor employer is in any doubt he or she should seek advice. What is, however, submitted for the Law Society is that at the heart of these section 41 conditions was the requirement for strict supervision, and that was something that was never relaxed, either as a result of the inspection in 1997 or in correspondence. At the time that the permission was granted what was envisaged was Ms Harrison working from the Leagrave office with her office adjoining that of Mr Stephens who, together with Mr Wheeler, would provide strict supervision. Mr Treverton-Jones submits that initially, until Mr Stephens returned to the Leagrave office after the opening of Sundon Park, there may have been adequate supervision but that thereafter the failures were manifest, and amounted to much more than a technical breach of the conditions which had been imposed. Mr Stephens did undoubtedly exercise some control over the activities of Ms Harrison at Sundon Park. He was able to check materials sent by DX and such post as was presented to him, but the office had its own letter-head, with its own telephone number, and Ms Harrison had authority to engage staff. Furthermore she kept 75% of the fees which she generated, and then paid a contribution to cover the firm’s costs. She was not authorised to sign cheques, but she could overcome that difficulty by getting them made out to banks, building societies, the Inland Revenue and even a stockbroker to whom she owed money.

Mr Treverton-Jones drew our attention to the Tipping file as an illustration of the absence of effective supervision. From late 1998 onwards the beneficiaries were pressing Ms Harrison for accounts and explanations, asserting that money which they should have received had not got to their accounts. Eventually, in May 1999 their solicitor, Mr Needham, spoke to Mr Stephens, and there was also direct contact between Mrs Westley, one of the beneficiaries, and Mr Stephens, but there were no dramatic results. Letters addressed to Mr Stephens at Sundon Park may or may not have reached him, but in August 1999 the OSS wrote to Mr Wheeler indicating that they had reason to believe that Ms Harrison was being employed otherwise than in accordance with the permission granted under section 41. Mr Wheeler, as I have said, replied promptly to that letter, but, Mr Treverton-Jones submits, the enquiry from the OSS, taken together with the complaints made to Mr Stephens, should surely have led strict supervisors to carry out a careful examination of the Tipping file. I agree. The complaints should have rung a warning bell in the light of what Mr Wheeler and Mr Stephens knew of the reasons for the striking off. That the file was not examined is clear, because when it was eventually examined the shortcomings were obvious.

I have already referred to the complaint of forgery made by Mrs Carol Austin to the OSS on 5^th February 2000. It is not clear whether it was that letter which was forwarded by the OSS to Mr Wheeler on 14^th February 2000, but his response, dated 13^th March 2000, sought to assure the OSS that all was well with the Tipping file. In the final paragraph of that letter Mr Wheeler points out that another executor, Mrs Westley, has requested a “remuneration certificate and we are dealing with that”. That, Mr Treverton-Jones submits, was simply untrue. Nothing was done about a remuneration certificate until after Ms Harrison was suspended in July 2000. The letter was probably drafted by Ms Harrison, whose explanations must have been accepted by Mr Wheeler and Mr Stephens without proper investigation.

As soon as Ms Harrison was suspended Mr Wheeler did review the Tipping file, and Mr Treverton-Jones submits that the letter which he then wrote to Mrs Austin on 7^th July 2000 makes it clear beyond doubt that up to that point Ms Harrison had not been properly supervised in her conduct of that file. The first paragraph of that letter reads -

“I write to advise that I have taken over the files and conduct of the above matter from Ms Shirley Harrison. Following my perusal of these papers I can fully understand and appreciate the basis of your dissatisfaction regarding the conduct of the file and the matter generally. Both the correspondence and the state of the ledger account give me cause for concern and I trust that you will bear with me while I attempt to regularise matters.”

In the fourth paragraph the letter accepts that “no steps whatsoever have been taken in connection with the requested remuneration certificate”. In my judgment that letter, as Mr Treverton-Jones contends, constitutes a full and frank confession that in her conduct of the Tipping file Ms Harrison was not properly supervised.

Mr Treverton-Jones also invited us to consider the evidence given by Mr Stephens to the SDT. He admitted that he had accepted explanations given by Ms Harrison, and the replies which he sent to members of the Tipping family were based on the explanations she gave. In substance what Mr Stephens said was that as time went by he learnt to trust Ms Harrison, and so he relaxed. He did not admit that the strictness of his supervision relaxed , but, as it seems to me, the facts speak for themselves.

Mr Treverton-Jones then turned, in his third submission, to deal with the Law Society visit to Stephens Wheeler in 1997 which resulted in the memorandum to which I have already referred. It was not expressly referred to by the SDT when giving its reasons, but it is, Mr Treverton-Jones submits, of limited assistance to Mr Wheeler and Mr Stephens, not least because at the material time they never saw it. Mr Stephens said in evidence that he told the inspector where Ms Harrison was working, and that he attended “usually daily”. He also told the inspector about the post, but it cannot seriously be contended that the inspector’s visit which was an “accounts monitoring visit” gave the approval of the Law Society to alterations to the section 41 conditions for which no application had been made. In particular, as Mr Treverton-Jones contends, it cannot seriously be said that thereafter all that was required was something less than strict supervision. If strict supervision was not provided that was a breach of the employer’s obligation as set out in section 41, and Parliament has made it clear that for any meaningful breach there must be at least a period of suspension, so no such breach can properly be regarded as technical. Furthermore a clear failure to provide the standard of supervision required by the section 41 conditions must amount to conduct unbefitting a solicitor whether or not any loss ensues.

Mr Hopper made a number of points which could be regarded as mitigation. He pointed out that the fraud was sophisticated, and could have been successfully carried out even if Ms Harrison was closely supervised. I agree, but close supervision does tend to inhibit fraud, and in any event the primary issue with which we are concerned was whether strict supervision was provided. Mr Hopper further pointed out that Ms Harrison had no direct access to client’s funds. That was not a condition imposed by the Law Society. It was a safeguard provided by Stephens Wheeler, but, as I have indicated, it was not very effective.

Mr Hopper submitted that within the meaning of section 41 Ms Harrison was employed by Stephens Wheeler. I accept that for the purposes of this appeal, even though she was in effect self-employed and the arrangements for her remuneration were unusual. However, when someone in her position is allowed to operate independently in separate premises with the benefit of such arrangements it is very difficult to ensure that she is strictly supervised.

Mr Hopper pointed out that only the Tipping family made any significant complaint, and when that family’s complaints reached the OSS Mr Wheeler responded promptly to letters which he received from that body. He also indicated a willingness to accept any advice he might receive.

Mr Hopper then took us to some of the correspondence following the discovery of the fraud. The points made in that correspondence, and in the statement of Mr Boon, the auditor of Stephens Wheeler, have already been made earlier in this judgment.

Essentially Mr Hopper’s submission is that in 1997 the Law Society accepted the alterations made by Stephens Wheeler to conditions imposed under section 41, that the supervision provided thereafter did amount to strict supervision, and that the Law Society should not be allowed to resile from the concession it had made. To pursue allegations 2 and 3 amounted to an abuse of process (a point as I have said not taken before the SDT) and, as Mr Wheeler and Mr Stephens did what they reasonably believed to be expected of them the SDT should have found neither allegation 2 nor allegation 3 to be proved.

In my view nothing which happened in 1997 or thereafter weakened the obligation of Mr Wheeler and Mr Stephens to provide strict supervision or made it in any way inappropriate for the Law Society to act if supervision was not provided, so the abuse of process argument should have had no prospects of success even raised before the SDT. It is far too late for it to be raised now, particularly when in reality a tactical decision was taken not to raise it at an earlier stage.

For the reasons which I have given it is clear that strict supervision was not provided. The failure to provide it constituted a breach of Mr Wheeler’s obligations under section 41, and in the circumstances it constituted conduct unbefitting a solicitor. There was no room for the distinctions drawn by the SDT, and the decision of the SDT in relation to allegation 2 cannot be allowed to stand. That allegation also must be held to have been proved.

The SDT was right to take account of the good record of Mr Wheeler, his personal honesty, and his co-operation with the OSS, but, because of the terms of section 41(4), a period of suspension was inevitable. Reflecting so far as I can the views of the SDT I would limit the period of suspension to 28 days in respect of allegation 2 and impose no separate penalty in relation to allegation 3. That means setting aside the unapportioned fine of £2000, much of which must have been attributable to allegation 3. It is in my judgment desirable that when the SDT does impose a fine it should be apportioned. Having regard to what was said by the SDT in relation to allegation 1 I would impose in respect of that allegation a fine of £500.

Mr Hopper submits that we should amend the order made in relation to the costs of the investigation because it was the criminality of Ms Harrison rather than the actions of Stephens Wheeler which gave rise to those investigation costs. I see the force of the argument, but Stephens Wheeler took the risk of employing a solicitor who had been struck off, and when that proved to be a bad risk I see no compelling reason why the general body of solicitors should have to bear the burden of the investigation which then inevitably ensued. The SDT had to exercise its discretion. It did so, and I agree with its conclusion.

I would therefore allow the appeal to the extent that I have indicated, and I would dismiss the cross appeal.

I agree.

I also agree.