This is the judgment of the court.

This is an appeal by Julian Holy, a solicitor, from the decision of the Solicitors’ Disciplinary Tribunal (“the Tribunal”) dated 19^th April 2005 ordering him to be struck off the Roll of Solicitors.

In order to protect the confidentiality of the clients whose affairs were referred to before the Tribunal, we shall adopt the practice of the Tribunal in its reasons of referring to them by a letter.

The statement served pursuant to rule 4(2) of the Solicitors (Disciplinary Proceedings) Rules 1994 alleged that Mr Holy had been guilty of conduct unbefitting a solicitor in each of 10 particulars, namely:

Allegations (viii) and (ix) concerned alleged conflicts of interest. Allegation (viii) was an allegation that Mr Holy had acted for clients in relation to loans made by one to the other, where there was a conflict of interest between the clients, contrary to Principle 15.01 of the Guide to the Professional Conduct of Solicitors (“the Guide”). Allegation (ix) related to an alleged loan made by a client to Mr Holy personally, where his own interests conflicted with those of the client, in breach of Principle 15.04 of the Guide.

Allegation (ii) was withdrawn at the commencement of the hearing before the Tribunal. Mr Holy admitted all of the remaining allegations other than (viii), (ix) and (x), which he disputed.

The Tribunal found all of the disputed allegations, other than allegation (ix), to have been proved and made the order referred to above. The Law Society did not seek to challenge the finding of the Tribunal on allegation (ix).

Before us, Mr Moger made it clear that the essential purpose of this appeal was to seek the quashing of the order that Mr Holy be struck off the Roll. He submitted:

Allegations (i) and (iv) concerned admitted but minor and technical breaches of the Solicitors’ Account Rules (which we too shall refer to as “the SAR”).

Allegation (iii) concerned an admitted breach of the SAR in failing to obtain written consents in connection with the inter-client loans which were the subject of allegation (viii), instead of the oral consents that Mr Holy said he obtained. Allegation (v) also concerned a failure to obtain a written, rather than merely an oral, consent. These could not justify striking off.

The Tribunal erred in finding allegation (viii) proved.

Allegation (x) was an allegation that Mr Holy failed to make sufficient enquiry as to funds passing through his client account. The Tribunal erred in finding that allegation proved.

Even if the Tribunal was entitled to find allegations (viii) and (x) proved, the Tribunal imposed a penalty that was manifestly excessive.

For the Law Society, Mr Williams submitted that the Tribunal had been correct in its findings and that the penalty imposed was justified and certainly within the range appropriate to Mr Holy’s conduct.

Mr Holy was admitted as a solicitor in February 1974. He was the senior partner of Julian Holy Solicitors, a small firm with only one other equity partner. The practice was what is often today called a niche practice. It had a small clientele of wealthy individuals, and generally acted in high value transactions. Mr Holy had not been the subject of previous disciplinary proceedings, and it was not suggested that there had been previous misconduct or that the firm had ever failed to fulfil its undertakings. The investigation into the affairs of the firm had taken some 20 weeks, and it was not suggested that Mr Holy had not fully co-operated. Indeed, his candour may have been his undoing. In his written response to the Report, in relation to the allegation that what became allegation (viii) involved a flagrant breach of the Guide, he stated:

It was not alleged that he had been guilty of dishonesty in relation to the conduct that was the subject of the allegations. In essence, the Law Society’s case against Mr Holy was that his practice was entrepreneurial as much as legal, and that, as his own statement suggested, he regarded compliance with the account and practice rules applicable to solicitors as optional so far as he was concerned, rather than mandatory: that he would choose whether or not to comply with the rules as he thought fit. It was contended that that attitude and such conduct are not compatible with the practice of a solicitor.

This allegation related to loans made by A to Q and Q Co, by A to LC, and by Mrs K to LC. In the case of the loans by Mrs K to LC, Mr Holy acted as an intermediary. Principle 15.01 of the Guide is as follows:

There was no issue before the Tribunal as to the basic facts giving rise to this allegation. The issue raised by Mr Holy is as to the application of Principle 15.01. It is common ground that the loans made by A were made by Mr Holy acting as solicitor and agent for A. It is also accepted that Q, Q Co and LC were clients of the firm in connection with on-going transactions. However, Mr Holy contends that the borrowers in question were not his clients for the purposes of the loans in question. They did not rely on him for legal, or indeed commercial, advice, in relation to the loans, and had no good reason to believe that he undertook any relevant responsibility to them as to the terms of the loans.

The loans were poorly documented. There was no letter to A setting out Mr Holy’s instructions and authority in relation to the loans, or even a relevant attendance note. The basis of the loans to Q and Q Co appears from Mr Holy’s letter to Q dated 22 November 2001:

It is plain that Q knew that A was Mr Holy’s client. It is also clear that there was a conflict of interest between A as lender and Q Co and Q as borrower and guarantor, and that in offering the loan on behalf of A Mr Holy was taking into account information, which must have included confidential information of Q and Q Co, that Mr Holy had as a result of acting as solicitor for them.

It is accepted that Mr Holy was probably acting for Q and Q Co in a property transaction at the time, and that the loan was required for the purpose of that transaction. However, the nature and scope of the retainer were not documented.

Initially, Mr Holy admitted this allegation. The report dated 20^th February 2003 on the inspection of the firm stated:

The Tribunal’s reasons for its decision were as follows:

We do not find these reasons adequate. They do not explain why the Tribunal concluded that Q and Q Co were clients in relation to the loan transactions. There is of course a risk that in the absence of a clearly defined retainer (here for the borrower), a solicitor will be found to have been acting as such for a borrower where he did not appreciate that that client was looking to him to protect his interests, but where the client was entitled to do so. In evidence to the Tribunal, Mr Holy denied that he acted as solicitor for any of the borrowers of the loans that were the subject of this allegation in relation to the loans. He asserted that the borrowers were competent in business affairs and had no need to, and did not, look to him for advice or protection of their interests in relation to the loans. The Tribunal did not comment on this evidence, as it should have done. (The reference in paragraph 131 of the Tribunal’s findings to no evidence having been produced must, we think, be read as referring to written evidence). It did not expressly rely on his statement as set out in the report of 20th February 2003, but we think that it must have had it in mind.

The facts of the other loans that were the subject of this allegation do not raise different issues and do not call for separate consideration.

The evidence relating to this allegation showed a lack of proper recording of instructions, communications and transactions by Mr Holy, and a use of confidential information relating to one client for the purposes of transactions entered into by another client. We have not found the issue in respect of this allegation straightforward. Ultimately, however, given that Mr Holy was acting for the borrower in the property transaction for which the funding by the loans was required, and his acceptance of the trust reposed in him by his clients, including the borrowers, and the absence of any documented retainer relating to the property transaction, we are persuaded that the Tribunal was entitled to find that Mr Holy acted as solicitor for the borrowers in allegation (viii), and the Tribunal was therefore entitled to find this allegation proved.

Mr Moger submitted that this charge and the Tribunal’s findings assumed that the guidance on issues by the Law Society (commonly referred to as the Blue Card) in relation to the precautions to be taken by solicitors in relation to possible money-laundering is mandatory, rather than simply guidance. While we accept that this appears to have been the approach both of the Law Society and the Tribunal, in our judgment there is nothing in the point. A failure to comply with that guidance is liable to infringe Rule 1 of the Solicitors Practice Rules, particularly if the failure is a serious one, either wilful or reckless. The allegation was presented and treated as one of serious misconduct.

Mr Moger also referred to the lack of any evidence that the funds which were the subject for this allegation were of dishonest origin. Again, while this may be relevant to penalty, it is certainly not relevant to the question whether the allegation was proved. Moreover, it is unreal to expect the Law Society to be able to investigate, let alone prove, the origin of monies such as those received by Mr Holy which were the subject of this allegation.

The allegation related both to the receipt of the funds in question and their payment out of Mr Holy’s client account. Mr Moger submitted that it was only the receipt which might have called for enquiry beyond that in fact made by Mr Holy. If Mr Holy were reasonably assured as to the legitimacy of the funds in question, there could be no question of his having to make any further enquiry before paying out those funds. There is substance in this submission. However, in circumstances where the legitimacy of funds received by Mr Holy was not absolutely clear, the instructions he received for dealing with and paying out those funds might create or increase any doubts as to their legitimacy, and thus give rise to a need for further enquiry.

The larger sum which was the subject of this allegation was an amount of approximately £15 million received from Mr A, who was from Lagos in Nigeria. The bulk of the money was lodged in the client bank account in July 2001. There was no evidence on the Client Matter File of any correspondence or communication coming directly from A to Mr Holy. Mr Holy said that he communicated with Mr A by telephone. Mr Holy had written an internal memorandum to his money laundering officer, MG, dated 26 March 2001. It stated that A wished to invest substantially in UK property. Mr Holy emphasised that since Mr A had been introduced by Mr K, a person “of exceptional substance and undoubted integrity”, he considered Mr A to be “impeccably introduced”. He recorded in the memorandum that Mr A and Mr K would forward to the firm approximately £50 million which would enable Mr Holy to confirm to any prospective vendor that he was in funds to that extent and thereby give credibility to his clients’ intentions.

Following his receipt of Mr Holy’s memorandum, MG gave money-laundering advice to him in a memorandum dated 11 April 2001. He stated:

Mr Holy responded to that advice in a memorandum dated 17th April 2001:

Mr Holy did not take any steps to determine the origin of the funds from Mr A.

There was an attempt on behalf of Mr A to purchase a company which owned a major London building for £33 million. It did not come to fruition. Subsequently, Mr A had requested that certain payments be made to C Investments from the funds held in the client account, the funds being paid to C Investments at Bank Leumi in Tel Aviv. A total of £7.5 million was so paid between November 2001 and October 2002. Mr Holy did not know the purpose of those payments, and considered it not to be his business. He was under the impression that the funds might have been associated with a joint venture involving A and K.

Mr Holy relied on the following matters as justifying the lack of any enquiry as to the source of the funds in question:

Mr A had been introduced to Mr Holy by a long-standing client, K, with offices in Geneva, Monte Carlo and Tel Aviv. K was well known to Mr Holy and of impeccable credentials.

Mr Holy drew the conclusion that Mr A, as a client of Mr K, was himself personally wealthy and above board.

Mr Holy had met Mr A on at least one occasion before 2001, and spoke to him on at least nine occasions on the telephone between March 2001 and October 2002. He was a real person.

Mr Holy had specifically asked his money-laundering officer for advice, and he asked Mr A for a copy of his passport “which I am required to hold on my file in connection with money-laundering requirements”.

There was nothing unusual about the instructions or the underlying transaction, namely the proposed acquisition of substantial property in the UK. The initial investment of £50 million was not an unusually large amount in the context of the firm’s usual business.

Mr Holy had no doubt that the intention to invest was a genuine one.

Having discussed the matter with his money-laundering officer, Mr Holy considered whether he had reasonable grounds for suspicion and decided that he did not. His decision not to complete a Suspicious Clients/Matter Report Form was taken by agreement with MG.

The pressure for a deposit of cash came from Mr Holy rather than Mr A.

There was a genuine reason why the original investment was not purchased.

There was a respectable reason for the substantial deposit remaining on client account after the failure of the proposed transaction, namely to fund an investment when one was identified.

In relation to Mr A’s funds, the Tribunal found that Mr Holy should have been concerned at the secretive nature of the client. It gave the following reasons for that conclusion:

There is justification in Mr Moger’s submission that those matters did not justify a conclusion that Mr A was of a secretive nature.

In paragraph 136 of its findings, the Tribunal stated:

Again, we think that there is substance in Mr Moger’s submission that there was no justification for this finding as such. If Mr Holy was justifiably assured of the legitimacy of the funds in question, there was no good reason for him to be cautious about holding those monies in his client account pending further instructions from the client, if, as Mr Holy stated, the client was seeking another investment in the UK.

However, the question what precautions and enquiries are appropriate in relation to possible money-laundering is very much an area of judgment in which the Court must take into account the expertise of the Tribunal, whose practical experience exceeds that of most if not all members of the judiciary. The receipt of a large sum of money belonging to a Nigerian businessman from an account in the Cayman Islands called for enquiry as to the source of those funds and/or of the wealth of Mr A. The fact that the funds were to be invested in property was irrelevant: investment in property is a favoured method of money-laundering. It was relevant, but not sufficient, that Mr A was known to and a client of Mr K: to regard that as a substantial reason for enquiry to be unnecessary is, in effect, to delegate to Mr K the solicitor’s duty to be reasonably assured of the legitimacy of the funds. Moreover, there is nothing to suggest that Mr Holy made any enquiry of Mr K as to his knowledge of the source of Mr A’s funds or of his wealth. Again, the fact that A was known to exist as a person carries the matter only a little further from Mr Holy’s point of view. Mr Holy’s personal knowledge of Mr A was scant in the extreme (contrary to what Mr Holy told Mr T in a note of 2^nd April 2001).

The fact that Mr Holy received advice from his money-laundering officer to the effect that “with the background you have given, I do not feel that you … are in any way exposed” mitigates the seriousness of this offence. The only justification for MG’s advice was Mr A’s “impeccable introduction”, but as we have said that of itself could not justify not making appropriate enquiry, and we think (and we think that the Tribunal must have thought) that that should have been obvious to a solicitor in Mr Holy’s position and with his experience. It is also not clear what led MG to change his mind about the need to complete a Money Laundering Suspicious Client/Matter Report Form, as Mr Holy said he did, since nothing new came to light between the date of Mr Holy’s memorandum seeking advice and the decision not to complete the Report Form.

We consider that the Tribunal was entitled to find this allegation proved in relation to Mr A’s funds, although not for all the reasons it gave.

The position in relation to the funds received from LC is different. It is unnecessary to set out the relevant facts. Mr Holy told the Tribunal that he knew the source of the funds, and explained what it was, and that they were not of criminal origin. His evidence on this was not expressly rejected. The Law Society’s investigating officer had not suggested that these moneys gave rise to a money-laundering concern. Curiously, the Tribunal’s findings of fact omit any reference to the receipt of funds from LC or Mr Holy’s dealings with them. They are seriously defective in this regard.

The Tribunal gave the following reasons for finding allegation (x) proved in relation to the LC moneys:

These factors may have given rise to other concerns, but neither of them gives rise to money-laundering concerns if the source of the money was legitimate. In the absence of any findings of fact and of adequate reasons for this finding, we would have allowed the appeal on allegation (x) if it had related to the LC funds alone.

None of these allegations was presented to the Tribunal as serious. However, they are not trivial. The failure to identify client accounts as such could place the funds in those accounts at risk in the event of the insolvency of the firm. That failure might also lead to the bank not exercising the care and taking the precautions in relation to the accounts that were appropriate to a client account. These allegations gave substance to the picture painted by the Law Society of a general failure to comply with the regulations relating to solicitors’ practice.

Allegation (iv) was explained by Mr Goodwin, the solicitor advocate for the Law Society, as follows:

In his skeleton argument for this appeal, Mr Williams submitted in regard to allegation (iv):

Since Mr Holy admitted this allegation after the statements of Mr Goodwin to which we have referred, it would be unfair and inconsistent with the basis on which the case was put to and accepted by the Tribunal for this Court to accept that submission. In our judgment, the allegation, admitted by Mr Holy, must be treated by this Court as of the seriousness indicated by the Law Society before the Tribunal.

The facts as found by the Tribunal were set out in paragraphs 57 to 66 of its findings:

The seriousness of this allegation cannot be doubted. The confirmation that the firm held £500,000 in their client account could only have been given at best recklessly. The Tribunal accepted the Law Society’s contention that Mr Holy had been reckless in giving the undertaking. His responsibility was exacerbated by his failure to inform the Court when the order of 9th November 2001 was being considered that the confirmation in his letter of 24th April 2001 that he held the funds in question was inaccurate. The Tribunal’s finding was amply justified.

Allegation (vii) related to the conduct of Ms F, a member of the staff of Mr Holy’s firm, who had certified as true copies of a passport and a driving licence without having seen the original documents. The copies were produced to accountants acting in connection with the purchase of a company.

In his letter of 29th October 2004 to the Law Society, Mr Holy stated that he had exercised insufficient supervision over Ms F, but that he had not authorised any member of staff to certify documents in such circumstances.

If Mr Holy had knowingly authorised or permitted his staff to certify as true copies where they had not examined the originals, this would have been a most serious allegation. The Tribunal treated his conduct as reckless: see paragraph 156 of its findings. At paragraph 164, the Tribunal stated:

This suggests a finding that he knew of the improper certification. However, he denied having any such knowledge, and the Law Society did not contest that he did not know of it. The basis of the allegation was a failure to supervise, not authorisation or connivance: see Mr Goodwin at page 37 of the transcript of the first day’s hearing; and Mr Holy admitted this charge on that basis. We accept Mr Moger’s submission that the Tribunal treated this allegation as more serious than was justified.

This allegation was not at the most serious end of the spectrum, given that it was not suggested that the parties to the loans did not know that both lender and borrower were clients of the firm, and the absence of any suggestion of unfairness in the terms of the loans from the point of view of either lender or borrower, or of the inappropriateness of the terms of the loans, or of any failure to secure terms of the loans requirement properly to protect the interests of either party to them.

We have upheld the finding that this allegation was proved. It seems to us, however, that what was proved was an error of judgment rather than a want of probity.

The allegations proved against Mr Holy did not establish a want of honesty. In the case of allegation (vi), he made an important representation without checking its truth and, as a result, gave an undertaking when he was not in a position to do so. No loss resulted. It showed a marked recklessness, but not dishonesty. However, the evidence generally showed a disregard for a number of regulations affecting solicitors, a disregard that was aggravated by Mr Holy’s assertion that compliance was not consistent with the nature of his practice. This disregard was the underlying cause of the allegations proved against him.

We give full weight to the views of the expert Tribunal. It is clear that dishonesty is not a pre-requisite of an order striking off a solicitor, and that only in a strong case will the Court interfere with the assessment of the Tribunal of the seriousness of a solicitor’s conduct and of the penalty that is appropriate: see Law Society v Bolton [1994] 1 WLR 512. Nonetheless, in our judgment, the allegations proved did not justify striking off. For the reasons we have set out, we consider that the Tribunal erred in treating the conduct of which Mr Holy was found guilty as more serious than was justified.

Reckless disregard of regulations affecting solicitors may well justify striking off. In the present case, we take into account the candour and co-operation shown by Mr Holy during the Law Society’s investigation of his practice, and the admissions made by him.

In our judgment, for the offences admitted by Mr Holy and for the conduct charged by allegations (viii) and (x) together the appropriate penalty was a substantial period of suspension, which would demonstrate to him and to the public the importance of compliance with the regulations affecting the practice of solicitors, no matter how substantial or successful a solicitor’s practice and no matter how entrepreneurial he and his practice may be. In our judgment, that period is 4 years.