Afolabi v Solicitors Regulation Authority

This is an appeal by Mrs. Aminat Afolabi under section 49(1)(b) of the Solicitors Act 1974 against the order of the Solicitors Disciplinary Tribunal dated 12^th January 2012 that she be struck off the Roll of Solicitors. That order was made following a hearing at which the tribunal considered three allegations of professional misconduct made against her by the Solicitors Regulation Authority (“SRA”). Mrs. Afolabi was represented on that occasion, as on this appeal, by Mr. Ivan Krolick.

The proceedings in this case have taken a rather unusual course. In July 2008 the SRA made a number of allegations of professional misconduct against the appellant and two others with whom she had been in practice under the name Ann Francis & Co. The tribunal found the following three allegations proved against her:

Allegations C to H and J involving breaches of the Solicitors’ Accounts Rules were made against all three respondents, but were not found proved against the appellant because she had not been a solicitor at the material times. Two unrelated allegations of professional misconduct, allegations K and L, were made against the other two respondents, but not against the appellant.

As a result of its findings the tribunal ordered that the appellant be struck off the Roll. It also ordered her to pay one third of the costs of the proceedings. The other two respondents were ordered to pay one third of the costs each.

The appellant challenged the tribunal’s decision by appeal to this court. The matter came before Holman J. in July 2011. He upheld the tribunal’s findings in relation to allegations A and B, but set aside its finding in relation to allegation I and remitted the matter to a differently constituted tribunal to reconsider that allegation. At the same time he set aside the order striking off the appellant and the order for costs, both of which were to be reconsidered by the tribunal following its decision on allegation I.

Before the first hearing the SRA had already added another allegation to the proceedings, allegation M, which charged the appellant with having been convicted of four offences of money laundering contrary to sections 328 and 329 of the Proceeds of Crime Act 2002. That allegation was not considered by the tribunal at the first hearing because the appellant had appealed against her conviction and that appeal was still pending. By the time of the second hearing, however, the appeal had been concluded and two of the four convictions had been quashed. Allegation M in reduced form was therefore considered by the tribunal at the second hearing. After hearing the appellant the tribunal dismissed allegation I, but found allegation M proved. Taking into account allegations A and B and allegation M, the tribunal ordered that the appellant be struck off the Roll. It reinstated the order for costs made on the former occasion and ordered the appellant to pay half the costs of the second hearing.

The appellant cannot and does not seek to challenge the findings of the tribunal in relation to allegations A, B and M. Mr. Krolick submitted, however, that to strike her off the Roll was too harsh a penalty. As to the costs of the proceedings, he submitted that the tribunal should have departed from the order for costs made on the first occasion to reflect the fact that the appellant had succeeded in her defence to allegation I. He also submitted that the SRA should be ordered to pay two thirds of her costs of the second hearing (and that she be ordered to pay only one third of the SRA’s costs) because its pursuit of that allegation for a second time was wholly unreasonable.

Before considering the appellant’s submission that the penalty imposed on her was unduly harsh it is necessary to describe in greater detail the tribunals’ findings in relation to the three allegations proved against her.

It is convenient to consider these allegations together, since they both arise out of the establishment and management by the appellant of the firm Ann Francis & Co and were treated by the tribunal as different aspects of the same complaint. The firm was established by the appellant on 1^st July 2005 at a time when she was unqualified. Formally she held the position of practice manager, but the tribunal found that in reality the firm’s affairs were entirely under her direction and that she ran it as her own business. A qualified solicitor, Mr Peter Herbert, although nominally a partner, played little or no part in the management of the firm’s affairs. Another qualified solicitor, Mr. Augustine Otah, was held out as a partner from October 2006, but he did not attend the office and received no remuneration or profits. In September 2005 the appellant embarked on a training contract. She was admitted as a solicitor on 16^th April 2007 and immediately became a partner in the firm.

The first tribunal found that Ann Francis & Co. was effectively a sham partnership, one of the main reasons for its being operated in the manner described being to gain lender panel status. In effect the tribunal found that, although the firm was being held out as a true partnership between solicitors, it was in substance a business run by the appellant as a sole proprietor for her own benefit. It is clear from the way in which the tribunal expressed its conclusions that it would have found allegations C to H and J (which involved breaches of the Solicitors’ Accounts Rules) proved against the appellant if she had been a qualified solicitor at the time.

In July 2009 at Inner London Crown Court before His Honour Judge Wakefield the appellant was convicted of four offences of money laundering contrary to sections 328 and 329 of the Proceeds of Crime Act 2002. Two of those convictions were subsequently quashed on appeal on the grounds that the property in question did not represent the proceeds of crime, but two convictions, those on counts 2 and 5 of the indictment, were upheld.

Count 2 charged the appellant with being concerned in an arrangement which she knew or suspected facilitated the acquisition, retention, use or control of criminal property by or on behalf of another person. In order to commit the offence it is sufficient for the accused to have suspected that the property in question represented the proceeds of crime. The appellant’s husband was a professional fraudster who had obtained substantial sums of money from gullible victims. Some of that money had been used to buy a house in Danbrook Road, London. When the house was sold part of the sale proceeds were paid into a bank account operated by the appellant. It was her case that she had received the money by way of repayment of a loan that she had made to her husband. Count 5 charged the appellant with acquiring funds which she knew or suspected were criminal property. Between 5^th June 2005 and 31^st July 2007 substantial sums of money had been transferred from a bank account operated by the appellant’s husband into an account operated by the appellant herself.

By their verdicts the jury indicated that they were satisfied in each case that the money in question did represent the proceeds of crime and that the appellant at least suspected that that was the case. However, for the purposes of passing sentence the judge was entitled to make his own findings about the nature and circumstances of the offences, provided those findings were consistent with the jury’s verdicts. In the course of his sentencing remarks the judge found that the appellant must have been aware that her husband had been deriving a substantial income from fraud and that she knew he was buying the house in Danbrook Road with money derived from his criminal activity. On the sale of the property the appellant received part of the proceeds and, although the judge did not say so in terms, it must follow from his other findings that she was aware that the ultimate source of the funds was her husband’s fraudulent activities. As to count 5, the judge thought the jury must have been satisfied that of the sum of about £93,000 transferred to the appellant at least £44,000 represented transfers of criminal property and that the appellant had had the use of that money knowing that it had been derived from her husband’s criminal conduct.

The judge’s findings, which are not open to challenge, are clearly very significant. As Mr. Krolick correctly pointed out, the offences under sections 328 and 329 do not require proof of dishonesty and nowhere in his sentencing remarks did the judge use that expression. Nonetheless, he made it quite clear that the appellant was aware that her husband was a fraudster and that the money that she received represented the proceeds of his fraud. Mr. Krolick sought to persuade us that the judge reached that conclusion only as a matter of inference, because he said that the appellant “must have been aware” that her husband was deriving a substantial income from fraud. However, I do not see how that helps him, because whether one says that she “knew” or “must have known”, it comes to the same thing. More important is what those findings disclose. Given the state of the appellant’s knowledge, the line separating her conduct from dishonesty is a very fine one, if it exists at all.

In Bolton v Law Society [1994] 1 W.L.R. 512 Sir Thomas Bingham M.R. sought to explain the reasons why the tribunal often imposes a sanction that might otherwise seem harsh. In a well-known passage at page 518F-H he said:

“There is, in some of these orders, a punitive element: a penalty may be visited on a solicitor who has fallen below the standards required of his profession in order to punish him for what he has done and to deter any other solicitor tempted to behave in the same way. Those are traditional objects of punishment. But often the order is not punitive in intention. Particularly is this so where a criminal penalty has been imposed and satisfied. The solicitor has paid his debt to society. There is no need, and it would be unjust, to punish him again. In most cases the order of the tribunal will be primarily directed to one or other or both of two other purposes. One is to be sure that the offender does not have the opportunity to repeat the offence. This purpose is achieved for a limited period by an order of suspension; plainly it is hoped that experience of suspension will make the offender meticulous in his future compliance with the required standards. The purpose is achieved for a longer period, and quite possibly indefinitely, by an order of striking off. The second purpose is the most fundamental of all: to maintain the reputation of the solicitors' profession as one in which every member, of whatever standing, may be trusted to the ends of the earth. To maintain this reputation and sustain public confidence in the integrity of the profession it is often necessary that those guilty of serious lapses are not only expelled but denied re-admission.”

Mr. Krolick submitted that this is a case in which a criminal penalty has been imposed on the appellant and satisfied and, moreover, one in which no finding of dishonesty has been made that might undermine public confidence in the trustworthiness of the profession. It was therefore unnecessary and disproportionate to impose the sanction of striking off. In support of that submission he applied to adduce evidence of a decision by the adjudicator in July 2012 to grant an application by a firm of solicitors called Alpha Rocks to employ the appellant as a caseworker and clerk in its immigration department. In giving her reasons for that decision the adjudicator stated that she was satisfied that permitting the appellant to be employed in that capacity was unlikely to give rise to an unreasonable risk to the public.

Mr. Wheeler for the SRA opposed the application on the grounds that the evidence was irrelevant, both because it was not available to the tribunal, which could not therefore have erred in failing to take it into account, and because the role of a caseworker and clerk is so far removed from that of a practising solicitor as to make the comparison meaningless. For my part I would refuse the application to adduce this evidence because I agree with Mr. Wheeler that it is of no relevance to the issue which we have to decide. The difference in terms of role and professional standing between a solicitor (even one whose right to practise is subject to conditions) and a caseworker or clerk is substantial and of critical significance in the eyes of the public. As Sir Thomas Bingham M.R. explained, even in cases where it would be inappropriate to impose a sanction for reasons of punishment, it will often be appropriate to impose one in order to protect the standing and reputation of the profession. In my view this is a case in which considerations of that kind might properly apply.

In Salsbury v Law Society [2008] EWCA Civ 1285, [2009] 1 W.L.R. 1286 the Court of Appeal drew attention to the expert nature of the Solicitors Disciplinary Tribunal and to the fact that it is well placed to assess the measures required to protect the interests of the public and the profession. Its decisions are therefore entitled to particular respect. In this case the tribunal had to deal with the appellant in respect of two matters of serious professional misconduct: misleading the public about the nature of Ann Francis & Co. and two offences of money laundering. When deciding what sanction to impose the tribunal looked at the matter in the round. Mr. Krolick criticised the tribunal for failing to indicate what sanction it would have imposed for these matters if it had had to deal with them individually, but his purpose in doing so was mainly to support his submission that neither justified striking off the appellant. In my opinion the tribunal was not only entitled to consider the matter in the round but was right to do so. Both matters cast doubt in their different ways on the appellant’s integrity and it would not have been right to view each of them in isolation. The only question is whether the penalty of striking off was excessively severe.

In reaching its decision the tribunal said in paragraph 28 of its judgment:

“All of the allegations that had been substantiated against the Respondent were serious. In particular, the public could have no confidence in a solicitor who had been given an eighteen month prison sentence for what were serious criminal offences.”

Mr. Krolick submitted that this paragraph betrayed an error on the part of the tribunal because it showed that it had proceeded on the basis that the imposition of an 18-month immediate custodial sentence is invariably sufficient to undermine public confidence in a solicitor. It should, he submitted, have considered the particular circumstances of the appellant’s case, including the fact that no finding of dishonesty had been made against her.

In my view that is not how paragraph 28 is to be understood. It has to be placed in the context of the judgment as a whole and when read in that context it is clear that when referring to the sentence and its effect on public confidence the tribunal had in mind the particular offences for which the sentence was imposed in this case. Moreover, although no express finding of dishonesty was made against the appellant, the judge’s findings, which provided the basis on which she was sentenced, significantly undermine her integrity and trustworthiness. It is for that reason that I am also unable to accept Mr. Krolick’s submission that the conduct which led to the appellant’s conviction and sentence was of less significance because it was not committed in the context of her practice as a solicitor. The fact is that conduct of any kind that tends to undermine a person’s integrity and trustworthiness also undermines confidence in him and the profession as a whole.

It is true that in the case of Taylor (No. 10501-2010), to which Mr. Krolick drew our attention, the tribunal did not exercise its power to strike off the respondent, despite the fact that the respondent in that case had been convicted of a money laundering offence. He submitted that the conduct of the appellant was not significantly more serious and that the penalty imposed on her was therefore unduly harsh. Taylor had been convicted of one offence of disguising criminal property contrary to section 327 of the Proceeds of Crime Act 2002. Her boyfriend wanted to disguise the source of funds that represented the proceeds of drug dealing. In order to assist him she produced on a sheet of paper a series of figures purporting to be the income, expenses and profit from a motor trading business for him to give to his accountant. She was convicted on the basis that when she produced the figures she at least suspected that the money was the proceeds of some form of criminal activity which she disguised as the income of supposed motor trading. She was sentenced to 39 weeks’ imprisonment suspended for 18 months. She was also ordered to perform 200 hours community work, to pay a fine of £5,015 and costs in an amount which is not reported.

The tribunal in that case noted that the offence of which Taylor had been convicted did not require proof of dishonesty and did not consider that she presented a risk to the public. For those reasons it concluded that it would be disproportionate to order that she be struck off. It suspended her for 12 months and ordered her to pay the costs of the proceedings in the sum of £2,000. Mr. Krolick understandably sought to draw a parallel between that case and the present, but in my view there are a number of important distinguishing features. In the first place, the appellant was convicted of two quite separate offences of money laundering, the second of which reflected a course of conduct which she had persisted in over a period of three years. In each case the appellant stood to benefit personally from the offence. Most importantly, however, the judge found that the appellant knew that her husband was a fraudster and that the money she received had been obtained directly or indirectly from his fraudulent activities. It does not appear that Taylor was aware of the source of the money she was asked to disguise; she was convicted on the basis that she suspected that it was the proceeds of criminal activity. Moreover, the tribunal in the present case also had to take into account allegations A and B concerning the misleading description of the firm Ann Francis & Co. That was another indication that the appellant was not trustworthy.

It was for the tribunal to decide what sanction was appropriate for the professional misconduct of which it found the appellant guilty and in doing so it was fully entitled to view her conduct as a whole. I am entirely unpersuaded that the tribunal committed any error of principle in reaching its decision; nor do I think that the sanction imposed on the appellant can properly be described as excessive. On the contrary, it seems to me to reflect quite properly the considerations to which Sir Thomas Bingham M.R. referred in Bolton v Law Society. As he pointed out at page 518D-E, if a solicitor is shown to have fallen below the required standards of integrity, probity and trustworthiness, an order for striking off may well be appropriate, even in the absence of proven dishonesty.

Under section 47(2) of the Solicitors Act 1974 the tribunal has a broad discretion in relation to costs and its decision cannot be overturned unless it can be shown that it exceeded the ambit of that discretion. By its original order the tribunal apportioned liability for the SRA’s costs of allegations A-J equally between the three respondents, despite the fact that only allegations A, B and I were found proved against the appellant. In reaching its decision it may have been influenced by the fact that Mr. Herbert had made some admissions at an early stage and the fact that the appellant had escaped adverse findings in relation to allegations C to H and J only because she had not been admitted as a solicitor at the time.

The tribunal dealt with the matter very briefly in paragraph 36 of its judgment simply by expressing the conclusion that the original order for costs should be reinstated. The question for us, therefore, is whether that was a decision to which no reasonable tribunal could have come and so fell outside the ambit of its discretion. In my view this court should be very slow to interfere with an order of the tribunal in relation to costs. We do not know much about the course of the first hearing or about the amount of time and money spent on investigating, preparing and presenting the various different allegations. Moreover, the tribunal had heard the evidence and argument relating to allegation I for itself and it might be thought that, since the appellant had lost on allegations A and B and had succeeded on allegations C toH and J on little more than a technicality, the original order was quite generous to her. Despite the appellant’s ultimate success at the second hearing in relation to allegation I, I am not persuaded that in reinstating the order for costs made following the first hearing the tribunal exceeded the bounds of what was properly open to it in those circumstances.

The only question that arises in relation to the costs of the second hearing is whether the SRA should have been ordered to pay part of the appellant’s costs to reflect her success in relation to allegation I. Mr. Krolick accepted that it is not normally appropriate for the SRA as a regulatory body to be ordered to pay a successful respondent’s costs (see Baxendale-Walker v Law Society [2007] EWCA Civ 233, [2008] 1 W.L.R. 426), but he submitted that in this case the SRA had acted improperly in pursuing allegation I for a second time and for that reason should have been ordered to pay the costs incurred by the appellant in meeting it.

In my view there is no merit in that submission. Mr. Krolick accepted that the SRA had been justified in pursuing the allegation at the first hearing; indeed, he could hardly have suggested otherwise, given that the tribunal found it proved. Holman J. remitted the matter to a differently constituted tribunal principally because he was not sure that the tribunal had applied the proper (i.e. criminal) standard of proof when coming to its decision. It is clear from his judgment, however, that he found it a difficult question and that it was by no means an open and shut case. There is nothing in his judgment from which one might infer that he thought the allegation would be likely to fail on a re-hearing. Had he thought that, he would surely have indicated as much. Instead he remitted the matter to the tribunal so that it could be re-heard.

Mr. Krolick was unable to point to any subsequent development that might have led the SRA to think that allegation I could not be substantiated at a second hearing and in the light of the judge’s order, the serious nature of the allegation and the finding of the chairman of the Employment Tribunal that her evidence had been dishonest I think that it might well have been open to criticism if it had declined to pursue it. Moreover, it is necessary to bear in mind that the appellant had admitted at the first hearing that she had realised at the time she gave evidence before the Employment Tribunal that what she had said was not correct. At all events, I can see no basis on which it could be said that the SRA acted improperly and in those circumstances it would have been wrong for the tribunal to have ordered it to pay part of the appellant’s costs.

For those reasons I would dismiss the appeal.

I agree.