England and Wales High Court (Administrative Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
DIVISIONAL COURT

		Royal Courts of Justice Strand London WC2
		14 May 2004

1. LORD JUSTICE AULD: The appellant, Duncan James Kidd, challenges the decision of the Solicitors Disciplinary Tribunal of 18th June 2003 striking him off the roll of solicitors for breaching the Solicitors Accounts Rules in failing to keep proper accounts and failing to cooperate with the investigation of his accounts. He maintains that the penalty of striking off was too severe and not appropriate in the circumstances.
2. The Law Society's case before the Tribunal was that on the agreed facts of the case the appellant's conduct fell short of the requisite standard of integrity, probity and trustworthiness. He was in breach of the Solicitors Account Rules and frustrated the proper regulation of his practice in three respects. First, he failed to file Accountant's Reports pursuant to section 34 of the Solicitors Act 1974. Second, he deliberately misled the Society as to the state of his books of account. Third, he refused to grant the Society's investigator access to his books of account and ledgers until made to do so.
3. These complaints were expressed in seven allegations:

"1. he has breached the Solicitors Accounts Rules 1998 (the SARs 1998) in that:

(a) between July 2000 and 5th July 2001, he failed to carry out reconciliations of his client account in accordance with Rule 32(7) of the SARS 1998;

(b) between July 2000 and 5th July 2001, he failed to keep accounting records properly written up in accordance with Rule 32(1) of the SARS 1998;

(c) he received funds in respect of unpaid professional disbursements and paid them into office account but failed within two days to pay such disbursements or to transfer the value thereof to the client account in respect of two matters [the client's are named in brackets]. Such conduct is in breach of Rule 19 of the SARS 1998 and created a shortfall in the client account;

2. he has failed to file Accountant's Reports with the Law Society in accordance with section 34 of the Solicitors Act 1974 and various directions made by Adjudicators of the OSS for the following periods:

(a) 30th September 2000

(b) 31st March 2001

(c) 30th September 2001

(d) 31st December 2001

(e) 31st March 2002

3. he has:

(a) failed to comply with an undertaking given to Messrs Mundays on 20th June 1997; and

(b) failed to comply with the direction given by an Adjudicator of the OSS dated the 11th April 2002 to comply with the said undertaking to Messrs Mundays;

4. he has failed to provide to the Law Society's Investigation Accountant his books and records for the purposes of an inspection pursuant to Rule 34 of the SARs 1998 which commenced on the 30th April 2002 and which was terminated on the 15th May 2002 following the Respondent's failure thereby to comply;

5. he has breached the Solicitors Accounts Rules 1998 in that:

(a) between July 2001 and 5th July 2002, he failed to carry out reconciliations of his client account in accordance with Rule 32(7) of the SARs 1998;

(b) between July 2001 and 5th July 2002, he failed to keep accounting records properly written up in accordance with Rule 32 of the SARs 1998.

6. in a letter to the OSS dated the 2nd November 2001 and in a conversation with Mr Cotter of the OSS on or about the 26th April 2002 the Respondent made representations to the OSS as to the state of his books of account which he knew or ought to have known were not true;

7. he has failed to comply with an award in respect of inadequate professional service made on the 4th December 2002 in respect of a complaint made by [and the lay client is named]."

4. Mr Iain Miller on behalf of the Law Society, has conveniently divided those allegations into two categories. The first, and the more serious, allegations 1, 2, 4, 5 and 6, relate to the appellant's breaches of the Solicitors Accounting Rules and his attempt to cover up those breaches; and the second category, two separate matters, allegations 3, breach of an undertaking, and 7, failure to comply with an inadequate professional service award.
5. I turn to the facts. The appellant, who is 47, was admitted as a solicitor in 1981. At all material times he was the sole principal of Kidd & Co., in Kingston-upon-Thames, Surrey. He had been a successful and well-respected practitioner for some 20 years. He had never before been disciplined by the Tribunal of the Law Society.
6. The story starts for the purpose of this appeal on 5th July 2001 when a Miss Hartley, an investigator employed by the Office for the Supervision of Solicitors, went to the appellant's premises to inspect his books of accounts. On 28th August 2001 the result of that inspection was set out in a letter from a Mr Calvert to a Mr Middleton, both of the Office for the Supervision of Solicitors. It noted that the accounts of the appellant were in some disarray and in any event were not in compliance with the Solicitors Accounting Rules, the letter stating:

"... reconciliation statements as required by the Rules had not been carried out since July 2000."

The letter went on to record:

"5. The inspection was adjourned in order for the books to be brought up to date. The inspection was resumed on 7th August 2001 but the books of account were still not in compliance with the Solicitors Accounts Rules as a listing of all the balances shown by the client ledger accounts of the liabilities to clients had last been extracted in July 2000 and the clients' ledgers were still not up to date.

6. Mr Kidd said that he had been working on the books of account himself and he admitted that not all postings to ledgers had been done. He agreed that there were blank ledgers and in two instances, he was not able to produce ledgers which he said existed in respect of the clients concerned.

7. Further, a number of adjustments detailed on a list dated 30th August 2000, prepared by the firm's accountant had not been posted. In a written note provided to Miss Hartley, Mr Kidd stated '... my accountant has identified this as the main reason he has not been able to complete his report to end September 2000.'"

7. On 11th October 2001 the Office for the Supervision of Solicitors wrote to the appellant asking for his comments on Mr Calvert's letter, prior to it considering any regulatory steps, including intervention and disciplinary proceedings. The appellant replied by letter of 2nd November 2001, stating so far as material:

"I believe that the statements on my books of accounts had not been reconciled ... I am seeking further guidance on this from my accountant but I believe that I have now fully understood the requirements and reconciliations will be carried out correctly in the future.

... I have also continued to carry out a considerable amount of work since the termination of the inspection on 9th August 2001 and I have had a meeting with my accountant since that date. I believe my books of account are now up to date.

... In addition there were certain postings to the ledgers that had not been undertaken which were to deal with adjustments identified by my accountant. I am pleased to say that these adjustments have now taken place. As I have indicated earlier in this letter I have had a meeting with my accountant since the termination of the investigation and we are now in the process of dealing with last minute queries which will lead to the filing of the Accountant's Report for the six months ending the 30th September 2000 and the six months ending the 31st March 2001 and I am confident that these reports will be filed with the Law Society by the close of business on Friday 9th November 2001.

I believe my clients ledgers are now up to date."

8. No such Accountant's Reports for the six month period ended 30th September 2000 or 31st March 2001 were filed with the Society.
9. On 30th April 2002, a Mr Cotter, an investigator employed by the Office for the Supervision of Solicitors, began a second inspection of the appellant's books of account. The report of that inspection was contained in a letter of 23rd May 2002, again from Mr Calvert to Mr Middleton. It indicated that Mr Cotter had been unable to obtain access to the appellant's premises, notwithstanding persistent efforts to do so. Of particular significance is Mr Cotter's report of a telephone conversation with the appellant on 26th April 2002:

"Mr Cotter asked if the books of account were up to date and reconciled. Mr Kidd replied that he felt that they were. Mr Cotter asked who was writing up the books and Mr Kidd said that he was. Mr Cotter then asked if it would be possible to fax his latest client account reconciliation and a copy of the relevant client bank statement to the Office. Mr Kidd said that he didn't have time as he was due away on his holiday soon."

10. In the light of Mr Cotter's inability to gain access to the appellant's books of account, the Society resolved on 2nd July 2002 to intervene in his practice. But it was not until an order in support of the intervention was obtained, following an application to the Chancery Division, that the intervention was effected.
11. It then became apparent that the appellant had taken no, or at least no significant, steps to keep his books up to date or to cure the deficiencies in his bookkeeping, identified in Mr Calvert's letter of 28th August 2001. In particular, no books of account had been written up after July 2001, that is, shortly before the first inspection report of the Intervention Agent. It follows that the assertions made by the appellant in his letter of 2nd November 2001 that his client ledger was up to date were untrue, as were the statements he had made more recently to Mr Cotter on 26th April 2002.
12. In addition, the appellant had failed to file Accountant's Reports in accordance with section 34(1) of the Act.
13. On 21st August 2001 the appellant had been directed by the Society to provide Accountant's Reports on a half-yearly basis. A further direction had been made that such report would be provided on a quarterly basis. By the time of the intervention five Accountant's Reports were outstanding.
14. In the light of the state of the appellant's books of account, it would not have been possible for an accountant to provide an unqualified report. However, the appellant over the period made a number of representations to the Society. On 2nd March 2001 he maintained:

"I am confident that following a meeting with my accountant next Thursday the Accountant's Report for 30th September 2000 will be filed by Monday 12th March."

On 13th March 2001 he stated, by letter of that date:

"Further to our letter of the 2nd March we have now met with our accountant and he is in the process of finalising the Accountant's Report for the due period. He is going to be on holiday for a week but will be in a position to file the Report by the 28th March. We trust this is acceptable but if there are difficulties could you please inform us as soon as possible."

On 12th June 2001 he stated by letter:

"In fact a meeting with my accountant at 12 noon today to finalise the accountant's report for the relevant period and we will be in a position to file the report by close of business on Monday 18th June. I have calculated this to be just three working days after the period referred to in the adjudication. Can you let me know if this can be agreed? You will be able to contact me on the above telephone number."

On 19th September 2001 he wrote:

"I acknowledge that the Accountant's Report for the period ended 31st March 2001 has not yet been received by the Law Society. My accountant is currently in the process of finalising the report and I anticipate it should be filed by the 28th September 2001. Difficulties have been encountered because my bookkeeper recently left my employment. Please be advised that your office conducted an investigation of my records which was concluded on the 8th August 2001. If you need me to provide you with further details of this investigation please let me know and I will do so."

On 2nd November 2001 he wrote:

"I have experienced certain difficulties in organising mutually convenient appointments with my accountant. However I had a meeting with my accountant on the 5th October 2001. I believe I have now provided my accountant with everything that was outstanding.

2. Pursuance of the matters raised in numbered paragraph 1 above, I can realistically propose that the outstanding report will be filed by close of business on Friday 9th November 2001 and if I am going to encounter any difficulties in filing the report by that date I will of course inform Dr Dhatt immediately."

Then, finally, on 20th November 2001, he wrote:

"I am in contact with my accountant and I will be able to comply with the deadline contained within your report to deliver the report by 03.12.02 and will ensure I do so. Delays have been caused by the resignation of my bookkeeper and I apologise."

15. In mitigation before the Tribunal of his professional misconduct the appellant relied on the great pressures that had fallen upon him as a sole practitioner, the loss of his supporting staff gradually over the period, the difficulties he had had in undertaking not only his own work but that of a former fee earner employed by the firm, leaving him with very little time to attend to the administrative running of the firm and the claiming of fees from the Legal Services Commission. He also called a Miss Julie Cooper, a solicitor, who had known him professionally for many years, having initially been in partnership with him and under whose supervision he had worked for seven months with the permission of the Law Society whilst awaiting the outcome of these disciplinary proceedings. Miss Cooper spoke highly of his work.
16. The Tribunal, in its findings, carefully weighed the balance between the appellant's conduct and the mitigating factors. It said in paragraph 60:

"The Tribunal had given particularly careful consideration to the appropriate penalty to be imposed upon the Respondent. In reaching its conclusion the Tribunal had taken into account a number of mitigating factors. The Respondent had admitted almost all of the allegations at an early opportunity. He enjoyed a hitherto unblemished record before the Tribunal. The Respondent had not taken client money. The Tribunal also paid due regard to the helpful testimony of Miss Cooper.

61. There were, however, a number of aggravating factors. The breaches of the Solicitors Accounts Rules were extremely serious. The Respondent appeared to have disregarded those Rules for a long period of time and as a result no proper protection was afforded to the public at all. The Respondent had not kept proper books of account nor had he filed annual (and subsequently required six monthly) Accountant's Reports. The Respondent's conduct in relation to the investigation by the OSS demonstrated a willingness to deceive the Respondent's own professional regulatory body. He had committed deliberate acts to defeat the proper progress of the investigation over a period of time. Not only had the Respondent not assisted with the FIUO's investigation, he had written letters and given assurances which were untrue and he had not cooperated with the Law Society's intervention into his practice. Ultimately his co-operation was obtained only following the inconvenience and expense of having to apply to the Court for an Order upon which a penal notice was endorsed.

62. The Tribunal was forced to conclude that the Respondent had fallen well below the standards of probity, integrity and trustworthiness required of a number of the solicitor's profession. The Tribunal concluded that it was appropriate in all the circumstances to impose the ultimate sanction upon the Respondent..."

17. The relevant legal principles are well-known in this court and to the parties. They are taken from Bolton v The Law Society [1994] 1 WLR 502, per Sir Thomas Bingham, Master of the Rolls (as he then was) at 518B; Langford v The Law Society [2002] EWHC 2802 Admin; and Nahal v The Law Society (unreported, 24th July 2003).
18. In summary form, for the purpose of this judgment, those principles are:

1. Any solicitor who does not discharge his professional duties honestly and reliably should, in the interest of maintaining the high standards and in consequence public confidence in the profession, expect a severe sanction.

2. For that reason mitigating factors should have less effect in this disciplinary process than in the exercise of a criminal jurisdiction.

3. The court, in considering whether to interfere with a decision of the Tribunal whilst having due respect to its expertise, should give it such weight as it, the court, thinks appropriate.

19. Mr Noel Lucas, on behalf of the appellant, has submitted to the court that the penalty of striking off was too severe in the circumstances of this case. He emphasised the appellant's good professional character, the high regard in which he was held in the local and legal community, the pressures under which he had come as a single practitioner and the warm praise for him from Miss Cooper of his performance whilst working under her supervision and subject to restriction whilst awaiting the Tribunal's determination of these disciplinary proceedings. He suggested that the Law Society cannot have considered his misconduct as so serious as to warrant striking him off the roll, otherwise it would not have permitted him to continue in practice during that period. He made a similar point about the Law Society's grant of permission to him since the striking off to work as a Law Clerk under Miss Cooper's supervision.
20. Mr Lucas, in addition, invited the court to consider material in the form of testimonials from a number of persons that were not before the Tribunal, all of whom spoke very highly of his professional ability and the respect in which he was held as a practising solicitor. These are Miss Susan Graham, the Bench Legal Manager at Kingston-upon-Thames Magistrates Court, Mr Andrew Vickers, the Senior Court Clerk at that court, and Mr Keith Hadrill of counsel, who has known him professionally for 12 years. And this morning Mr Lucas has put before the court a letter from the appellant's wife as to the difficulties he faced and the pressures he was under as a sole practitioner at the material time. There is also, I should have said, a further letter from Miss Cooper in similar favourable terms to that put before the Tribunal, but this time referring to the appellant's work as a clerk under her supervision since the Tribunal decision.
21. Mr Lucas stressed, as the appellant had done before the Tribunal, the administrative difficulties for him as a sole practitioner and fee earner during the relevant period, of having to cope, not only with his own files, but also those of another fee earner formerly employed by him. The consequence, Mr Lucas said, was that the appellant got very behind with submitting claims to the Legal Services Commission and bills to clients and in maintaining his accounts. The result of all that was that he received very little by way of income. Mr Lucas also mentioned the difficulties for the appellant towards the end of the period in having no bookkeeper or accountant. Despite all that, Mr Lucas pointed out, there had been no criticism of the quality of the service that the appellant had provided, or any allegation that he had behaved dishonestly or otherwise inappropriately in relation to client funds.
22. Mr Lucas submitted that the penalty of striking off was disproportionate given his previously unblemished record and the absence of complaint about the quality of service to his clients or that he had been dishonest in his dealings with them and their monies, the relative shortness of the period of those lapses in his professional conduct and his praiseworthy work with Miss Cooper while awaiting the outcome of these proceedings. Overall, he suggested that the appellant's conduct had not put the public at risk in any way, as distinct from his misleading conduct to the Law Society. In the circumstances he suggested that it would be an appropriate and sufficient sanction for this experienced and hitherto exemplary solicitor to allow him to practise, but with restrictions of the sort imposed on him whilst he was employed as such by Miss Cooper.
23. Mr Miller, on behalf of the Law Society, prefaced his submissions by the obvious but important observation that the Solicitors Accounting Rules exist to protect the integrity of client's funds and, themselves, impose a professional obligation on a solicitor to comply with them. There are, in addition, the requirements in section 34 of the Act for annual independent chartered accountant's reports on the books of a solicitor and the provision for inspection of those books by the Office for the Supervision of Solicitors.
24. Mr Miller, turning to the individual allegations of misconduct, submitted that the appellant, by that conduct, had frustrated all three methods of control and in doing so had placed himself outside the regulatory framework designed to protect the public. Such a framework required the active co-operation of members of the profession in order to be effective. The appellant had ignored, he said, not only his professional and statutory obligations, but also specific directions given to him by the Society. In particular, he did not comply with directions to file the Accountant's Reports, he had also misled the Society as to the true nature of his books of account. It was difficult to imagine, he submitted, a more extreme case of a member of the profession who simply refused to be regulated. Equally it was difficult to understate the risk which such conduct represented to the public and to the reputation of the profession.
25. Mr Miller also had a number of comments to make about the submissions of Mr Lucas. First of significance was that he had confused the Society's regulatory regime in customarily permitting a solicitor facing disciplinary proceedings to work in approved employment with the Tribunal's disciplinary powers to strike him off if necessary when it had found him guilty of professional misconduct. That approach, Mr Miller pointed out, protects the public without interfering with or otherwise prejudicing a solicitor's right to practise whilst awaiting determination of the disciplinary proceedings. Mr Miller's second criticism was that Mr Lucas had been wrong to suggest that the public had not in any way been put at risk by the appellant's actions, since in failing to keep proper books and records concerning client's money, and deliberately misleading the Society about it, he had indeed put the public at risk. And third, and much the same point, Mr Miller said that Mr Lucas had drawn a false distinction between misleading members of the public or clients and misleading the Society, since deception of the Society is no less serious than direct deception of a member of the public. The Society is there in its role of maintaining high professional standards to protect the public.
26. Those were the submissions on each side for the court in the course of this hearing.
27. This is a sad case, unfortunately not uncommon in the profession, where a single practitioner with a previously unblemished professional record has become overwhelmed by his practice and has lost firm administrative control of it. However, there are, as the Tribunal observed, a number of less common but serious aggravating features in the case: notably in the lengthy period and seriousness of the appellant's deliberate breaches of the Solicitors Accounts Rules and his misleading and obstructive behaviour towards the Office for the Supervision of Solicitors in their investigation of his affairs. There was, as a result, an undoubted risk of harm to the public and, despite his history of honesty and proper dealings with clients and their money, a dishonesty in his response to his regulating body's intervention on behalf of the public, leading it, as Mr Lucas acknowledged in his submissions, something of a dance. There were, in addition, the two separate offences the subject of allegations 3 and 7 -- breach of an undertaking and failure to comply with an inadequate professional service award -- both matters of significance.
28. As against those matters the Tribunal properly considered the strong factors of personal mitigation put before them that I have summarised. But they clearly took the view that his conduct overall had fallen so far below the high standards required of the solicitor's profession that such factors had to yield to the imperative emphasised by Sir Thomas Bingham, Master of the Rolls, at pages 518H to 519B of his judgment in Bolton, of marking its disapproval of failure to observe those high standards and its determination to secure them. Assessment of the level of seriousness of the appellant's failure to do so and the balance to be drawn with the strong personal mitigation in this case are matters for which the Tribunal was well fitted. The court should, as I have said, have due regard for its expertise whilst reserving to itself the right to give its decision such weight as it thinks it deserves.
29. Even with the additional matters of personal mitigation and the other factors so powerfully and attractively put before the court by Mr Lucas, I can see no basis for questioning the Tribunal's decision. It took account of all the relevant circumstances for and against imposing the ultimate sanction of striking-off. In my view, it properly applied to them the relevant general principles of law that I have summarised governing such a decision. Accordingly, I would dismiss the appeal.
30. MR JUSTICE PITCHERS: I agree.
31. MR MILLER: Would your Lordships dismiss the appeal with costs in favour of the Society? I lodged with the court earlier and provided to Mr Lucas' solicitors a schedule of costs. I am not sure whether it has made its way --
32. LORD JUSTICE AULD: I regret I have not seen it.
33. MR MILLER: I can certainly hand up copies. I comprehend from my conversation with Mr Lucas that there is not going to be great resistance on the issue of either principle or quantum.
34. LORD JUSTICE AULD: You understand Mr Lucas agrees the amount at any rate?
35. MR MILLER: I am not sure I can put it that far, but I certainly do not anticipate any great fight.
36. MR LUCAS: I have looked at these, my Lord, and I have considered them with my instructing solicitor. They seem extremely reasonable. It is clear to us that costs follow the event and there is nothing further I can really say in those circumstances.
37. LORD JUSTICE AULD: Yes. Very well. The appeal will be dismissed with the costs summarily assessed to the Law Society in the figure of £2,945.94. We are grateful to both of you for your assistance.
38. MR LUCAS: Thank you, my Lord. My Lord, having declined your Lordships earlier offer to recover the letter, I am instructed now to ask for it.
39. LORD JUSTICE AULD: Yes. Thank you very much.
40. MR LUCAS: I do not know if it is necessary for me to apply for any sort of time for the payment of costs. It will plainly be difficult.
41. LORD JUSTICE AULD: If you need time please ask for it.
42. MR LUCAS: Then I do, my Lord. My instructions are two months. I anticipate that is (inaudible) assessment by Mr Kidd. Two months are my instructions.
43. LORD JUSTICE AULD: I did not hear the middle sentence.
44. MR LUCAS: My instructions from Mr Kidd, having asked him the question, is that he asks for two months. I anticipate that is optimistic on his part, but that is my application.
45. LORD JUSTICE AULD: Can you see any reason why he should not have two months, Mr Miller?
46. MR MILLER: My Lord, I am quite content with two months.
47. LORD JUSTICE AULD: Two months to pay.