Slater v Solicitors Regulation Authority

LORD JUSTICE ELIAS: This is an appeal by Mr Slater, the appellant, against an order made by the Solicitors Disciplinary Tribunal striking him from the Roll of Solicitors. The appeal is against the severity of this penalty because the appellant admitted each of the two allegations made against him by the Solicitors Regulation Authority. In view of the fact that the appeal is solely against sentence, I can set out the facts relatively briefly.

The Tribunal was faced with a case where two solicitors, one employing the other, each admitted that they had mishandled clients' monies. In July 2007 the appellant was engaged as a self-employed consultant by RHF Solicitors and he worked under the supervision of the principal of that firm, Mr Robert Festenstein, who was the other solicitor subsequently subject to these disciplinary sanctions. Under the arrangement between them, the appellant was entitled to receive 60 per cent of the fees that he generated. It was a condition of his practising certificate, which arose from the fact that he had been subject to two disciplinary sanctions in the past, that he was not to be responsible for any client monies. His employment with RHF Solicitors was approved on the basis that he would comply with that term.

In February 2008, some 8 months or so after he had been fined on an earlier occasion for breach of the rules, he directly received from clients sums totalling £26,500. The money went into his account and not the client account. Apart from one payment of £3,000, which Mr Festenstein admitted he knew of and acquiesced in being treated in that way, Mr Festenstein denied any complicity in relation to the balance of those payments. He said that once he had become aware of what had occurred, he caused the client account to be rectified by paying money in it himself. As a result, he was owed some £10,000 by Mr Slater.

The appellant disputed Mr Festenstein's contention that he knew nothing of these payments, save for the £3,000. In effect, he said that Mr Festenstein had given him the green light to accept payments in this way.

The appellant's case before the Tribunal was that the monies were regarded as interest free loans made to him personally, and which, when repaid, would be credited to the client account. His account was supported by the clients themselves who, it is right to say, made no complaint about his conduct. In fact, it was Mr Festenstein, by then in dispute with the appellant over the money which he said was owed to him, who reported the matter to the Legal Complaints Service in November 2008.

The SRA was not willing to accept a basis of plea from Mr Festenstein that he only had knowledge of the payment of the £3,000. As a consequence, there was a Newton hearing, and the Tribunal heard evidence both from Mr Festenstein and also the appellant. The appellant says that he was surprised that he had to give evidence in this way. He was not strictly compelled to, but he agreed to do so. The Tribunal made certain findings in relation to this issue of what precisely Mr Festenstein knew. They concluded that Mr Festenstein's version of events was true and they commented in their disciplinary findings at paragraph 21 on the testimony given by the two parties in the following way:

The Tribunal considered the position of each of the parties separately. The mitigation in relation to Mr Slater was considered at paragraphs 28-32 of the decision. Essentially, the contention was that the lay clients affected were commercial and sophisticated clients who were supporting Mr Slater; there had been no dishonesty; Mr Slater had been driven by financial need at the time; the clients were friends as well as clients; he took compliance seriously and did not breach any conditions of his practising certificate on other occasions; and the Tribunal were shown certain character references on his behalf.

The Tribunal then summarised their conclusions in respect of the two charges against Mr Slater, namely that he had breached the condition of his practising certificate and failed to ensure that the clients' monies were properly paid into the client account. Their findings are as follows:

It is not necessary to say very much about the law because it is not in dispute in this case. The obligation on solicitors to comply with the rules relating to the manner in which client money is kept is a very strict one. As Sir Thomas Bingham MR pointed out in Bolton v Law Society [1994] 1 WLR 512, even for acts of financial irregularity falling short of dishonesty, an order striking a solicitor off the record will often be appropriate. He emphasised in that case that the purpose of sanctions against solicitors in these circumstances is not so much to punish them for what they have done; it is to ensure that public confidence is maintained in the integrity of the profession. This is why sanctions which might otherwise appear harsh sometimes have to be imposed. For the same reason, mitigation will play a less significant role here than it might in a criminal case.

As the Master of the Rolls observed at page 519D, "The reputation of the profession is more important than the fortunes of any individual member."

In Bolton the court followed some observations of the Judicial Committee of the Privy Council in the case of McCoan v General Medical Council [1964] 1 WLR 1107 at 1113 to the effect that it would need to be a very strong case for this court to interfere with a sentence imposed for professional misconduct. It is, however, now recognised that in the light of the Human Rights Act and other developments, that puts the test too high. It is common ground that the proper test is that identified in this way by Jackson LJ, giving the judgment of the Court of Appeal (Sir Mark Potter, Arden and Jackson LJJ) in Salsbury v the Law Society [2008] EWCA Civ 1285; [2009] 2 All ER 487, where he said:

The grounds of appeal.

The grounds of appeal were put attractively and succinctly by Mr Berkley QC. In essence, his complaint is that if one focuses in particular on paragraph 61 of the decision, it is plain that the Tribunal placed considerable weight on the fact that Mr Slater had shown himself to be an evasive and unreliable witness in the course of the Newton hearing. He submits that the only reason why that hearing took place at all was because the SRA was not prepared to accept the basis of plea of Mr Festenstein. Whilst the outcome of that hearing could be beneficial to Mr Festenstein, and indeed was so in the circumstances of this case, he submits that it ought not to have led to any aggravation of the sanction which would otherwise have been imposed on Mr Slater.

He submits that if there had been no Newton hearing with respect to this matter, whilst it is true that there was a dispute between both Mr Slater and Mr Festenstein about the true position with respect to Mr Festenstein’s knowledge, nonetheless, as far as Mr Slater's position was concerned, it was a relatively unimportant matter and would not have led to a Newton hearing.

Counsel referred us to the leading authority dealing with the way in which a court should deal with matters arising out of a Newton hearing, namely Underwood [2005] 1 Cr App R 13; [2004] EWCA Crim 2256. He referred us to certain passages in the judgment of Judge LJ, and in particular focused upon paragraph 10. More specifically, he relied on the following observation of Judge LJ:

I would merely observe at this point that the Tribunal did not, without more, treat the basis of plea as justifying an adverse conclusion against Mr Slater; they did so as a consequence of assessing evidence he had given about this disputed matter.

Mr Berkley's submission is that the Tribunal ought to have ignored their findings with respect to the reliability of Mr Slater. It was unfair of them to have regard to that finding. It infected the Tribunal's decision, as is plain from paragraph 61. He submits that it also demonstrated, by the observation of the Tribunal in paragraph 59, that the conduct of the appellant was both "blatant and calculated", and that what he had done was for his own self interest. Mr Berkley accepts that that is a perfectly apposite description of what occurred, but he submits that, having regard in particular to paragraph 21 of the decision, which I have already set out, the Tribunal will almost certainly have considered this matter to be graver than they would otherwise have done as a result of their assessment of him as a witness. He does not contend that it would necessarily have been inappropriate for the Tribunal to strike Mr Slater off the record even had they not had regard to their assessment of his reliability as a witness, but he says it is not one of those cases where the result was so obvious that the only proper conclusion is that he would be bound to have been struck off.

In the circumstances, he submits that the Tribunal having had regard to this irrelevant consideration, ought now to reconsider the matter (or possibly a fresh Tribunal should do so) so that Mr Slater has a sentence determined with respect to him which properly reflects the basis on which he pleaded to these charges.

The first fundamental question is whether the Tribunal did err as a matter of law in having any regard at all to their assessment of Mr Slater as a witness. In my judgment, in the circumstances of this case they were entitled to do that.

It seems to me important to recognise that although the Newton hearing arose only because the SRA was not willing to accept the basis of Mr Festenstein's plea, nonetheless the issue which the Tribunal had to consider was one where Mr Festenstein and Mr Slater were directly at odds. It was not a matter which was irrelevant to Mr Slater's own position. Mr Berkley may be right to say that a Newton hearing in respect of Mr Slater's position might not have been required if the SRA had been willing to accept Mr Festenstein's basis of plea, but the outcome of that hearing did, it seems to me, have a bearing on the appropriate sanction for Mr Slater. He was contending that his employer at all times knew of his wrongdoing. That, in my judgment, was potentially a factor which he was relying upon in order, to some extent at least, to mitigate the gravity of his wrongdoing.

This is not a case, which I accept my raise different issues, where the Newton hearing with respect to one defendant had no relevance at all to another defendant’s position. I can see that in such a case different considerations might arise, and it could be said that it would be improper in those circumstances for the Tribunal to have regard to its assessment of a party's evidence. But that is not this case. In my judgment, the Tribunal recognised that their assessment was linked to Mr Slater's own situation. That is clear from the final sentence of paragraph 61.

In those circumstances, I consider it would be wholly unreal for them to put out of their mind the fact that, in reaching a conclusion on that matter adverse to Mr Slater, they must at the same time ignore their assessment of his evidence and the fact that they found him an evasive and unreliable witness. It follows that whilst there may be cases where it would be unfair for a Tribunal to take into account issues arising out of a Newton hearing against a particular party, I do not accept that it was unfair or improper for them to do so in these circumstances.

It follows that the appeal must fail.

Mr Williams QC for the SRA contended that, in any event, it was plain that the striking off the roll was the only appropriate sanction in the circumstances of this case. Here was somebody with 30 years experience, who had twice before been subject to disciplinary sanctions, albeit that in those circumstances, it is right to say, the level of offending was at the lower end and did not involve dishonesty. Nonetheless, this was an offence committed only 8 months after the second sanction had been imposed. They were, as the appellant conceded, offences which demonstrated a lack of integrity. It was not just a single occasion, but there were 11 separate payments which were treated in this unlawful way - money being put into the appellant's account when it should have been kept separate in a client account, and Mr Williams says in all the circumstances this was, in truth, an overwhelming case. There was a fundamental breach of stewardship, and any Tribunal with regard to the history of this appellant would necessarily have applied the same sanction.

I see very considerable force in that submission, but in the circumstances I do not finally need to resolve it and I do not do so. Suffice it to say that I am satisfied that the Tribunal did not err in law, and on the assumption that they did not err in law, Mr Berkley realistically accepts that it is not possible for him to say that this was a sanction which the SRA could not properly impose.

MR JUSTICE SINGH: I agree.

This appeal must be dismissed for the reasons that my Lord has given in relation to the main issue which has been argued before us. I agree that there has been no error of law in the way in which the Tribunal approached its task.

If it had been necessary to deal with Mr Williams QC's alternative submission that even if there had been an error of law the outcome would have been inevitable, I also see force in that submission, but for my part would have been more hesitant in accepting it. It may well be that it would have been probable that the outcome would have been the same, but I would not necessarily have concluded that such an outcome was inevitable. This is particularly because this was not an offence of dishonesty even on this third occasion, and the appellant had received two relatively modest fines for his previous two breaches.

Nevertheless, for the reasons that my Lord has explained, it is in the circumstances unnecessary to reach a final view on this alternative submission, and for the reasons that have been given, I too would dismiss this appeal.

MR BERKLEY: Before my learned friend jumps up and deals with the question of costs, in the light of the judgments that have been handed down I would ask your Lordships to consider granting permission to appeal. The reason for that is that the point at issue here, the fundamental point at issue here, is the absence of any apparent direction from the Tribunal when they considered that they had to be cautious about how they dealt with the issue concerning the Newton hearing.

What my Lord in the leading judgment stated was that on this occasion, as far as this case is concerned, they do not appear to have taken the wrong factors into account. What is also apparent is that they have failed to direct themselves to exercise caution, and have not considered, it would appear, the need to be vigilant to prevent that prejudice occurring to Mr Slater. These are matters that go beyond this case. They are important matters. They do not appear to be the subject of any decided authority, either in the area of regulatory tribunals or even within the criminal jurisdiction. But it is important and fundamental, and I would invite your Lordships to consider granting me permission to appeal this to the Court of Appeal.

LORD JUSTICE ELIAS: We will consider that in a moment. There is the question of costs, I expect, too. We can go and consider them both outside. Can we just take that at this stage?

MR WILLIAMS: My Lord, I make an application for costs. I hope than you received the schedule that has been sent to the court. It was sent to Mr Slater by first class post on 23 October. He says and I accept that he has not seen it until this morning. But it is reasonably plain in its terms. I also add that this is an unusual case in that, in light of Mr Slater's personal difficulties, we took on the task of preparing all the documentation for the court and acquiring the transcript because he was unable to do it himself. So that extra work was taken on by those instructing me. I ask the court to conduct a summary assessment of costs based on that schedule.

MR BERKLEY: We have only recently seen this, but the observations I have about the schedule are two areas. I have no criticism of the rate in relation to the solicitors' costs. It does appear, although I accept that there was the preparation of the appeal bundles, but preparation of appeal bundles in terms of collating documents and putting them together can be done by support staff, not necessarily by a qualified solicitor. Therefore the 19.4 hours charged at solicitor rates, which is really clerking work, can be reduced, and then with all due deference to my learned friend, the other item which I do question is counsel's fees. This is not a case which involved leading counsel in any significant research. My learned friend's skeleton deals with only fundamentals that would have been well-known to him and which would not have involved any heightened degree of responsibility. I ought to say that the fees may be fees that the SRA are willing to pay, but it is not fair that the paying party should be paying £12,000 for counsel's fees on this application. I can tell you by way of comparison that my brief fee for today is £4,000 plus VAT, and £12,000, in my submission, is not a reasonable sum for the paying party to have to pay.

So, in my submission, those are the two areas of challenge: the number of hours of work done on documents should be reduced, and I would invite you to cut down the amount payable in relation to Mr Williams' brief fee.

LORD JUSTICE ELIAS: We will rise.

LORD JUSTICE ELIAS: Mr Berkley, you will have to persuade the Court of Appeal, I am afraid, not least because it seems to us -- it will be for them anyway -- I am not sure that it would matter whether they cautioned themselves or not if they reach a conclusion that they are entitled to reach. But there it is. You can try and persuade the higher court.

On the question of costs, we think it should come down to £12,448.10 It is not a criticism of the fee of Mr Williams in the sense that it is perfectly proper for your clients to think they want you here and they are willing to pay it, but we do not think that the opposing party should bear the full brunt of it in the circumstances of the case. So £12,448.10 will not be, we think, an inappropriate figure. We award costs in that sum.

MR WILLIAMS: Much obliged, my Lord.