England and Wales High Court (Administrative Court) Decisions

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

		Royal Courts of Justice Strand, London, WC2A 2LL
		7th April 2006

Lord Justice Moses :

1. This is the judgment of the court to which its members have contributed.
2. The appellant appeals from a decision of the Solicitors' Disciplinary Tribunal dated 1 March 2005 striking him off the Roll of Solicitors. He challenges the Tribunal's findings of dishonesty and contends that in reaching its conclusion it was improperly influenced by a judgment of Peter Smith J. If no finding of dishonesty should have been made, the sanction was too harsh.

The Facts

3. The appellant, who is now 63, was admitted as a solicitor in 1978. From 1981 onwards he was in practice as the sole principal of John Constant and Company, a firm dealing mainly with conveyancing and litigation, and which in due course was regulated by the Law Society in the conduct of investment business.
4. In October 1997 the Law Society Fraud Intelligence Office issued a warning to the profession in respect of banking instrument fraud (the "Yellow Card"). Among other things, the Yellow Card stated:

"WARNING

BANKING INSTRUMENT FRAUD

Fraudulent investment schemes are on the increase. "Prime Bank Guarantees", "Prime Bank Letters of Credit" and "Zero Coupon Letters of Credit" are not issued by the legitimate banking community. The legitimacy of such investments must always be questioned.

Solicitors should exercise extreme caution if approached by individuals promoting such transactions.

…

Look for typical phrases such as … good clean cleared funds of non-criminal origin …

Beware of any schemes which require the depositing of any substantial sums of money to you for safe keeping at lucrative rates for doing very little. It may sound too good to be true and probably is."

5. In early 1998 Mrs Charis Manolakaki consulted the appellant about the proposed purchase of a house. The proposal did not proceed, but later in 1998 the appellant was involved in arrangements under which Mrs Manolakaki had dealings with Mrs Rosemary Roeters van Lennep ("RVL"), who said she had access to secret schemes which would give a return of 120% per annum on investment of US$ 1 million. Initially a proposed transaction was to take place in March 1998, under which Barclays Bank, with whom Mrs Manolakaki had an account, was to certify that US$ 1 million was held irrevocably and unconditionally blocked, and that the funds "are good, clean, cleared, unencumbered, legitimately earned funds…", a form of words drafted by RVL and passed on to Mrs Manolakaki by the appellant. Barclays responded by informing Mrs Manolakaki that they were terminating the banking relationship with her. Documentation prepared for the March transaction was then revised, and Mrs Manolakaki in April 1998 signed two documents, which were described as:

i) A "Joint Venture Agreement" with RVL involving a "Blocked Funds Investment Program for Project Financing", and

ii) A "Distribution of Profits Agreement" with Westminster Services Limited ("Westminster").

6. The general purpose of these documents was that Mrs Manolakaki would invest a sum of US$ 1 million, this investment being guaranteed over of period of twelve months to generate interest amounting to 120% of capital payable by monthly instalments, with the profit from the investment to be divided equally between Mrs Manolakaki and Westminster up to and including 30 October 1998, and as to 46% to Westminster thereafter.
7. Having parted with US$ 1 million, Mrs Manolakaki received two initial payments of $50,000 each. She received no further sums and all but $100,000 of the money she invested was lost.
8. In 2002 Mrs Manolakaki brought proceedings in the Chancery Division ("the Chancery Action") against the appellant, asserting that he was in breach of duties owed either under a contract of retainer or at common law to exercise reasonable skill and care. In those proceedings reliance was placed on admissions by the appellant that:

i) Westminster was an offshore company and was a client of the appellant and would on completion of the transaction pay any fees due to the appellant.

ii) The appellant knew the identity of the officers of that company, although the appellant declined to disclose such identities.

iii) The Joint Venture Agreement contained a discrepancy as to duration and the appellant was unable to explain the meaning of a "Blocked Funds Investment Program for Project Financing" or to explain how the promised return was achieved.

9. Meanwhile the Law Society resolved to intervene into the appellant's practice in October 2001 under Schedule 1, Part 1 of the Solicitors Act 1974 ("the Act"). Suspected dishonesty was a ground for the intervention. The intervention suspended the appellant's practising certificate – see section 15 (1A) of the Act. The Law Society granted the appellant a conditional practising certificate in April 2002 under Section 16 (3) and (4) of the Act, but the appellant has not in fact practised since the intervention. On completion of their investigation, the Law Society on 4 February 2003 made an application that the appellant be required to answer allegations set out in a "Rule 4 Statement". These allegations were that the appellant had been guilty of conduct unbefitting a solicitor in each of the following respects, namely:-

a) He had wrongly paid clients' funds into his office account contrary to Rule 3 Solicitors' Accounts Rules 1991;

b) He had acted improperly in a conflict of interest situation;

c) He had failed to act in the best interest of a client.

d) He accepted instructions to advise a client in a matter in respect of which he was unable to properly advise.

It was further alleged that the appellant had breached the terms of Rule 1 Solicitors Practice Rules 1990 in the following respects:-

Rule 1 (a) – Independence and integrity.

Rule 1 (c) - His duty to act in the best interests of his client.

Rule 1 (d) – The good repute of the profession.

Rule 1 (d) – His proper standard of work.

10. Paragraph 24 of the Rule 4 Statement was as follows:

"In summary:-

a. This was a fraudulent transaction in which [the appellant's] client lost US$1,000.000 capital.

b. [The appellant] should not have acted for [Mrs Manolakaki] at all given the conflict of interest.

c. Furthermore he should not have acted given his professed inability to understand the documents he was advising upon. No Solicitor should accept instructions unless he is competent to perform them.

d. Having acted he dismally failed to protect the interests of his client [Mrs Manolakaki]. Whatever the level of her determination to proceed with the scheme [the appellant] was under a duty to render the clearest possible advice to the effect that the scheme was fraught with danger.

e. [The appellant] was at least reckless in the extreme.

f. Furthermore the question of whether or not [the appellant] had behaved dishonestly is an issue for this honourable Tribunal. I submit that subject to any further explanation that may be offered [the appellant] has behaved dishonestly."

11. The disciplinary proceedings came before the Solicitors' Disciplinary Tribunal at a hearing on 25 September 2003. The trial in the Chancery action had been set down for February 2004.
12. The appellant's representative on 25 September 2003 sought an adjournment of the disciplinary proceedings until the Chancery action had come to an end. The adjournment application was granted, upon the appellant undertaking that he would not practise as a solicitor until both the civil proceedings and the disciplinary proceedings had been concluded.
13. The Chancery Action was heard in February and March 2004 before Peter Smith J. Judgment was given on 2 April 2004. The appellant was held to have owed Mrs Manolakaki duties under a general retainer as a solicitor, to have been in breach of those duties, and to be liable in damages to Mrs Manolakaki. The Judge concluded at paragraph 78 of his judgment that RVL was clearly a sophisticated fraudster who "certainly successfully deceived [the appellant]." In a section of his judgment entitled "Conclusion on Main Action" the Judge said this:

"193. It is difficult to overstate the level of failure on the part of the Defendant. I have rejected his limited retainer argument. If I was wrong on that, it was plainly incumbent on him to spell out that his role was a limited one rather than a general retainer as a solicitor. He failed even in that task.

194. He bore scant regard to the Yellow Card, his duties as regards clients and potential conflicts that might arise between his client and other clients and him and his client.

195. He failed to give any advice at all of any significant nature in relation to these transactions. He should have viewed the transactions with great suspicion; instead he surrendered his independence to RVL and allowed himself to become a mere cipher for meaningless documents prepared by her as part of her fraud exercise."

14. The Judge held that the appellant's insurers were under no obligation to indemnify him in relation to his liability to Mrs Manolakaki. Among other reasons, this was because there was dishonesty on the appellant's part. This dishonesty, was not, however, dishonest conspiracy with RVL to defraud Mrs Manolakaki. The arrangements in which the Judge held the appellant to have been involved were arrangements which would lead to financial reward for him through Westminster only if the Joint Venture Agreement succeeded. In a section of his judgment entitled "Conduct During the Trial", the Judge said that the appellant had lied extensively in his evidence, and that after the matter went wrong the appellant acted in a dishonest way as part of a cover up exercise. The important consideration, however, was how the appellant's conduct before 15 June 1998 should be considered. This was described by the Judge as "a jury question". In answering that question, the Judge said at paragraphs 210 to 212 as follows:

"210. I was troubled about the finding of dishonesty against the Defendant in respect of this transaction because profit motive is usually a major factor in dishonesty. He only obtains money if the arrangement is a success. It is difficult to see how he acted dishonestly when he only stood to gain if the fraud was not actually a fraud. There is no evidence to show that he has personally benefited from the transaction in any other way.

211. I put this to Mr Pooles QC [counsel for the insurers] in his closing submissions. His response (T13 page 1684) was that applying the Twinsectra test the Defendant necessarily has to have knowledge that what he is doing will be regarded as dishonest by honest people. As Mr Pooles QC has submitted, the Defendant in his first three answers in cross-examination acknowledged that it was dishonest to withhold information wilfully from one's client, to lie to clients and to lie to third parties. He did all of these things. He knew they were wrong. I have to be careful to weigh answers that are given by reference to what the Defendant appreciated at trial as against what he appreciated and believed at the time the events took place. He was cross-examined extensively for many days. I am satisfied that during the course of his evidence as I have said, he lied and I have rejected his evidence extensively.

212. I am satisfied that the liability arises from dishonest or fraudulent acts or omissions committed or condoned by the Defendant in accordance with Clause 6.9 of the Policy of Insurance. The main fraud was that by RVL. I accept that the Defendant was taken in by her. He was plainly mesmerised by the large amount of money that he believed would come his way as a result of this proposal. This so overwhelmed him that he cast aside all his professional duties and standards. I have set out extensively all the dishonest acts that he took. I am satisfied that, whilst he might not have obtained the money on the evidence unless the transaction had proceeded, he nevertheless condoned RVL's fraud (by his abject surrender of duties and responsibilities and lies) but also, he knew what he was doing was dishonest. I appreciate the line between gross incompetence and dishonesty in this case is a very fine one, but having seen his performance and his inability to explain large amounts of the documentation and transactions, the way in which he conducted himself in relation to the transaction afterwards, my firm conclusion is that he acted in a dishonest way. There were numerous occasions when, if he had stopped for one minute and considered everything the Claimant would not have been deprived of her money. The Defendant has repeatedly denied that he was dishonest, but to my mind that is setting his own test of honesty which is not permissible as shown by the Twinsectra case."

15. No appeal was brought against the decision of Peter Smith J. The matter came back before the Solicitors Disciplinary Tribunal for hearing on 28 February 2005. At that hearing, the appellant did not contest the facts asserted by the Law Society, and in particular did not contest that there had been a general retainer. Nor did he contest that he was guilty of the charges advanced in the disciplinary proceedings. His case, however, was that his failings had not involved dishonesty on his part.
16. A preliminary issue arose at the outset. The Law Society had given notice that it proposed to rely upon the judgment of Peter Smith J under Rule 30 of the Solicitors (Disciplinary Proceedings) Rule 1994. This provides, among other things, that:

a) the judgment of any civil court may be proved by producing a certified copy of the judgment.

b) the findings of fact upon which such a judgment is based shall be admissible as prima facie proof of those facts.

c) the Tribunal has a discretion not to apply the strict rules of evidence at any hearing.

17. The appellant's representative objected to the Tribunal reading the judgment of Peter Smith J. It was said that the judgment was so overwhelmingly and comprehensively prejudicial to the appellant that no Tribunal which had read it could thereafter perform its task fairly and properly. In this regard it was said on behalf of the appellant that the question of dishonesty was "not clear, or…that the allegation of dishonesty was, as it were, semi-detached from the rest of the [Rule 4] statement."
18. The Tribunal resolved the preliminary issue in favour of the Law Society. As to reliance upon the judgment of Peter Smith J, the Tribunal noted that it was an expert tribunal accustomed to considering such matters. The Tribunal was aware that findings in the Chancery Division were made on the balance of probability. If the Tribunal were invited to find dishonesty against the appellant it would have to direct itself to adopt a criminal standard of proof.
19. The Tribunal then retired to read the judgment. On their return submissions were made by Mr Williams. The appellant's representative interrupted those submissions, saying that he was increasingly concerned by specific references to the judgement in which opinions of the Judge were cited. For example, a comment made by the Judge about the reaction of Barclays Bank in March 1998 had been read to the Tribunal. The appellant's representative said that this was comment, and that the Judge's comment should not be produced as some sort of supporting evidence on the disciplinary charges. The Chairman replied that the Tribunal had that point. He added that when the application had been made to permit introduction of the judgment into evidence, Mr Williams had said that it would be for the Tribunal to give to the judgment "such weight as is appropriate". He anticipated that he and his colleagues on the Tribunal would wish to associate themselves with those words, "such weight as is appropriate."
20. The appellant's representative nevertheless submitted that the Tribunal should consider itself disqualified from continuing to hear the charges against the appellant, its members having become privy to damaging information which would have an impact upon their ultimate decision. The Tribunal decided that its members were not disqualified from continuing to hear the case. The written reasons of the Tribunal stated as follows (paragraph 28):

"When called upon to make a decision as to whether or not the [appellant] had acted dishonestly and ultimately, in the light of the admitted allegations, to decide the sanction to be imposed on the [appellant], the members of the Tribunal would confine themselves to the [appellant's] conduct relating to his association with [Mrs Manolakaki] and the relevant issues."

21. On the afternoon of 1 April 2005 the Tribunal announced its conclusions in these terms:

"We find that that there has been dishonesty, particularly in relation to the conflict allegation… we came to this view entirely independently of the judgment. We have applied the criminal standard of proof in our decision."

22. The Tribunal then proceeded to hear mitigation on behalf of the appellant, before announcing the sentence that he be struck off from the Roll of Solicitors.
23. A written judgment was prepared setting out the Tribunal's reasons. Under the heading "The Tribunal's Finding on the Question of Dishonesty", the written reasons said this:

"139. The Tribunal found that [the appellant's] behaviour had been dishonest. In making that finding it referred particularly to the conflict of interest which existed at the time when [the appellant] agreed to act for [Mrs Manolakaki] and Westminster Services Limited, a company which was to benefit and did benefit, from the investment, and of which another client was a beneficiary. A company moreover in which he himself was a shareholder and a director, and from which he expected to receive a very substantial fee if [Mrs Manolakaki's] investment business had reached fruition. It was dishonest of [the appellant] not to disclose these significant conflicting interests to [Mrs Manolakaki]. The Tribunal considers that it was dishonest for [the appellant] to encourage [Mrs Manolakaki] to believe that he was competent to advise in an area of work in which he had no knowledge or competence.

140. In [Mrs Manolakaki's] case the sum of money involved was very large indeed. She was at risk of making a very substantial loss. It is not possible to envisage any reason why [the appellant] became involved in the scheme other than the fact that the involvement of a solicitor and the use of his firm's client account would lend a cloak of responsibility to an otherwise transparently bizarre and fanciful scheme, allied to the fact that he and two other clients stood to gain from the transaction.

141. The Law Society's Yellow Card warned that "if it seemed too good to be true then it probably was."

142. [The appellant] was a conveyancing solicitor and would have been well aware of standard rates of interest charged, for instance, by mortgage lenders and he would not have failed to realize that in a climate where mortgage lenders were lending at five or six per cent per annum where the loan was secured by property, that a return of 120% per annum was mythical. If it had not been no doubt mortgage lenders would have diverted their funds to such investments rather than obtain a low return on mortgage lending.

143. The Tribunal has reached its findings that [the appellant] was dishonest by applying the two part test in Twinsectra v Yardley. The Tribunal is in no doubt that the actions of [the appellant] would be regarded as dishonest by ordinary honest members of the solicitors' profession, and the Tribunal was in no doubt that [the appellant] as an ordinary but experienced member of the solicitors' profession must have known that what he was doing was wrong and dishonest.

144. The Tribunal has reached this decision upon the facts placed before it by the [Law Society], which [the appellant] did not dispute, and without taking into account any part of the Judgment relating to the civil trial.

145. The Tribunal has satisfied itself beyond reasonable doubt that [the appellant] had been guilty of dishonesty."

24. On the question of sentence, the written reasons were as follows:

"160. The Tribunal found the admitted allegations to have been substantiated and, as stated above, found that [the appellant's] conduct amounted to dishonesty.

161. The Tribunal found this to be a very sad case involving as it did a solicitor of long standing and well thought of in the community in which he practised, having had a previously unblemished career in the law.

162. [The appellant] had very properly admitted the formal allegations and after a great deal of consideration the Tribunal had reached the conclusion that [the appellant's] behaviour had been dishonest.

163. The Tribunal has taken into account the fact that [the appellant] had not practised as a solicitor since The Law Society's intervention into his practice, has given him credit for the excellent character witnesses who gave evidence in his support, and has taken into account all the submissions made on [the appellant's] behalf. Whilst the Tribunal had taken all of these matters into account and recognising that the Tribunal's Order represents a personal tragedy for [the appellant], the Tribunal had made its decision in the light of its duty to protect the public and the good reputation of the solicitors' profession. The Tribunal concluded that it was both right and proportionate to impose a Striking Off Order upon [the appellant]. The Tribunal also ordered that [the appellant] should pay the costs of and incidental to the application and enquiry to include the costs of the forensic investigation accountant of The Law Society, such costs to be subject to a detailed assessment if not agreed between the parties. For the avoidance of doubt the Tribunal wishes to make it plain that such costs shall include the costs of the two interlocutory hearings before the Tribunal prior to the substantive hearing."

Grounds 1-3 Admission of the judgment of Peter Smith J.

25. The appellant contended that the Tribunal was wrong to admit in evidence the judgment of Peter Smith J. and to allow the Law Society to make submissions based upon that judgment. The essence of this ground of appeal was that the judgment was so prejudicial to the appellant that no tribunal which read it could fairly and properly perform its task. There was no dispute but that the judgment of Peter Smith J., proved by a certified copy, was prima facie evidence of the findings of fact by the High Court (see Rule 30 of the Solicitors (Disciplinary Proceedings) Rules 1994). The whole of the judgment of Peter Smith J., so it was contended, was so riddled with adverse comment as to the dishonesty and untruthfulness of the appellant that it was bound, however carefully the Tribunal sought to dismiss it from their minds, to have influenced their judgment.
26. The poisonous effect of that judgment was exacerbated by the fact that the judge's conclusions as to the dishonest behaviour of the appellant and the untruthfulness of his evidence did not relate to the particular allegations made against him before the Tribunal. It is unnecessary, for the purposes of this judgment, to identify all the passages in which the judge found the appellant lacking in honesty and integrity, a sample has been quoted in paragraph 14.
27. It appears that the Tribunal chose to read the judgment in part because it took the view that because the appellant had asked for an adjournment of the original hearing on 25.9.2003, it did not lie in his mouth to object to the judgment being received in evidence.
28. We agree that the mere fact that an adjournment had been sought was no basis for admitting the judgment, but there could be no reasonable objection to the Tribunal reading it, provided it was clear and rigorous in its approach to that judgment. The judgment was admissible to prove background facts in the context of which the appellant's misconduct had to be considered. But that was the limit of its function, in the particular circumstances of this case. The judge's views as to the appellant's dishonesty and lack of integrity were not admissible to prove the Law Society's case against this appellant in these disciplinary proceedings. We are far from ruling that a judge's conclusions as to dishonesty cannot amount to findings of fact within the meaning of Rule 30. There will be cases when a finding of fact, be it in a civil or criminal case, of dishonesty will be prima facie evidence of that dishonesty. But in the instant case the judge's conclusions were far more wide ranging than the allegations made against the appellant in the disciplinary proceedings. They were not relied upon by the Law Society as proof of dishonesty. At paragraph 21 it was recorded that the Law Society only intended to rely upon the judge's description of the appellant's behaviour and to limit the references to the allegations made in the disciplinary proceedings. Furthermore, the Tribunal directed itself that it was an expert and experienced Tribunal which was bound to apply a different standard of proof to that applied by the judge (see paragraph 21 of the decision of the Tribunal).
29. Nevertheless, having read the judgment, the Tribunal merely remarked that it would confine itself to the appellant's conduct relating to his association with Mrs Manolakaki and what it described as "the relevant issues". As Mr Bartlett, on behalf of the appellant, pointed out that was so wide as to provide no assurance that the Tribunal did not use the adverse comments of the judge in a way which was prejudicial to the appellant.
30. We have read the judgment and we have read the way the Law Society's case was opened against the appellant, as recorded in a transcript of the hearing. The Law Society's advocate chose to read out sections of the judgment which included the comments of the judge as to the honesty and integrity of the appellant. He took no steps to distinguish between the findings of fact useful in order to describe the factual context and the comments of the judge as to the appellant's behaviour. However, it is plain to us that the Tribunal disregarded the judgment when reaching their own conclusion as to the appellant's dishonesty. The chairman said so in terms after the Tribunal retired to consider its decision as to dishonesty (see page 77 of the transcript of the second day of the hearing). Further, the Tribunal, in its written decision stated:-

"The Tribunal has reached this decision upon the facts placed before it by the applicant, which the respondent did not dispute, and without taking into account any part of the judgment relating to the civil trial."

31. The appellant does not and cannot dispute that that is what happened. Mr Bartlett, for the appellant, contends that it was impossible for the Tribunal not to be influenced by the judge's views as to the appellant. A reasonable observer would be bound to take the view that, with the best will in the world, any tribunal could not remain uninfluenced by the opinion of the judge as to the appellant's behaviour.
32. We do not agree. The Tribunal, with its lay member, was a skilled and expert body well able to reach its own conclusions, uninfluenced by the conclusions of another, even if that other was a judge of the Chancery Division. There is no basis upon which we could say that the Tribunal's rejection of the judgment as a basis for a finding of dishonesty did not represent its state of mind. In those circumstances we reject the first three grounds of the appeal.
33. We ought, however, to record that we do not see why it was necessary to refer to the judgment at all. The background facts were not in dispute. Provided they were clearly set out within the Rule 4 statement there was no need to rely upon it save in so far as it emerged that the appellant disputed those primary facts. However, the Rule 4 statement was itself a mixture of assertion of fact and argument. We would suggest that had a simple account of the facts been set out with a reference to relevant paragraphs in the judgment there would have been no further need to refer to it.

Finding of dishonesty

34. In order to analyse the challenge to the Tribunal's findings of dishonesty it is necessary to identify the way the case was put against the appellant in paragraph 2 of the Rule 4 statement (cited in paragraph 9 herein).

These allegations were repeated at the end of the Rule 4 statement. In paragraph 24 it was said:-

"e. The respondent was at least reckless in the extreme,

f. Furthermore the question of whether or not the respondent has behaved dishonestly is an issue for this honourable Tribunal."

35. We should stress that we do not consider that the allegations of dishonesty were clearly and properly made in the Rule 4 statement. The Rule 4 statement, after alleging conduct unbefitting a solicitor, should have identified that conduct and stated with precision in relation to each aspect of the allegedly guilty conduct the respects in which it was said to be dishonest. It should have alleged that when the appellant acted, despite the conflict of interest, that that conduct was dishonest by the ordinary standards of honest behaviour and that he knew that he was transgressing the ordinary standards of honest behaviour (see e.g. Lord Hoffmann in Twinsectra Ltd. v Yardley [2002] 2 AC 164 at 170). A similar allegation should have been made in relation to the failure to advise his client that he was unable to give proper advice about the scheme. In the alternative it should have been alleged that, if it is not proved that he was dishonest in that sense, he recklessly disregarded his obligations, as a solicitor to the client both in relation to the conflict of interest and his inability to advise. Mr Williams, the Solicitor Advocate for The Law Society, suggested to us that the Tribunal would have required the Law Society to choose whether it was pursuing the allegation of dishonesty or recklessness. We do not understand why that should have been so. If that is the approach of the Tribunal, it is wrong. There is no reason why, provided that the position is clear in the Rule 4 statement, The Law Society should not allege dishonesty or, in the alternative, a state of mind falling short of dishonesty, as described by Lord Hoffmann at paragraph 22, page 170 of Twinsectra, namely that he took a blinkered approach to his professional duties as a solicitor. There is every reason why, in the public interest, such an alternative approach should be adopted. The Tribunal would be failing in its obligation to protect the public and preserve the integrity of the profession if a solicitor had to be acquitted merely because The Law Society was unable to prove dishonesty. A reckless disregard of the obligation of a solicitor to his client is itself serious and conduct against which the public should be protected.
36. In the instant case, however, it does not seem to us that the appellant was misled by the Rule 4 statement. It is clear that he was well aware that he was accused of dishonesty. The submissions advanced on his behalf sought to meet the allegations of dishonesty. The whole burden of those submissions was that the appellant may have been naive but that he was not dishonest (see, for example, pages 70-72 of the transcript of 1st March 2005).
37. The central question, as we see it, is whether the conclusions of the Tribunal were justified.
38. There was a conflict of interest in two respects. Firstly, there was a conflict of interest between Mrs Manolakaki and Westminster Services Limited both of whom were clients of the appellant. Secondly, there was a conflict of interest between Mrs Manolakaki and the appellant himself who stood to obtain a substantial profit out of Westminster Services Limited, should the scheme prove profitable. The Tribunal concluded:-

"It was dishonest of the Respondent not to disclose these significant conflicting interests to Mrs Manolakaki." (paragraph 139).

39. Mr Bartlett, on behalf of the appellant, contends that that finding was not open to the Tribunal because it was not the subject matter of any allegation. The allegation was not of a failure to disclose. The essential charge was of choosing to act in circumstances in which he should never have acted for Mrs Manolakaki in this transaction. The Respondent accepted that he should not have done so. But he also accepted that he had not advised Mrs Manolakaki that Westminster Services Limited was a client nor that he expected remuneration from that client should the venture prove successful (see the arguments advanced on behalf of the appellant paragraph 120 of the Tribunal's decision). In those circumstances it seems to us that the Tribunal was entitled to conclude that the failure to disclose those conflicting interests was dishonest. The conclusion did not stray outwith the confine of the allegations. The submissions made on his behalf at that time, demonstrate that he appreciated that his non-disclosure was an integral part of his failure.
40. The appellant also contends that in reaching its conclusion, as to dishonesty, the Tribunal failed to have regard to the evidence given on his behalf by Mr Yoannides. He was the Chief Executive, in the United Kingdom, of the Bank of Cyprus. He told the Tribunal, on the second day of the hearing, that whilst the appellant had a good reputation and the allegations of dishonesty came as a "great shock" he was, nevertheless, "a little naive and gullible". Mr Yoannides was surprised at the appellant's lack of judgment in matters of investment and the bank had tried to dissuade him from him investing his own money in what the bank regarded as highly risky investments (see page 25).
41. It is inconceivable that the Tribunal did not take into account that evidence. But there was no obligation on the part of the Tribunal to refer to it. The Tribunal was entitled to conclude that the agreement by the appellant to act for both Mrs Manolakaki and Westminster Services Limited in the transaction when he himself was a potential beneficiary was dishonest by the ordinary standards of honest behaviour and that he knew that at the time he acted. It was entitled to conclude that it was dishonest by such standards not to disclose such a conflict and that the appellant knew that it was dishonest by those standards. In reaching that conclusion there was no obligation on the Tribunal to refer to evidence which did not lead to an alternative view. We reject the contention that it was bound to refer to the evidence of Mr Yoannides. There is no basis for the suggestion that it ignored that evidence.
42. The second basis upon which the Tribunal found the appellant dishonest related to his competence to advise in relation to the transactions. It concluded:

"The Tribunal considers also that it was dishonest for the Respondent to encourage Mrs C M to believe that he was competent to advice in an area of working of which he had no knowledge or competence." (See paragraph 139).

Mr Bartlett contends that there was no evidence to suggest that the appellant encouraged Mrs Manolakaki in that belief. In every aspect of the transaction for which the appellant was responsible, the introduction of Mrs Manolakaki to the scheme, the preparation of documents, he failed to give any warning or advice about the transaction. The mere fact that he chose to act in that way amounted to a warranty to his client that he was competent to do so. The very fact of acting as a solicitor led his client to believe that he was competent so to act. It was unnecessary for The Law Society to prove more than he did act in that way. It was not necessary for it to establish that there were any words of encouragement, action in the capacity of solicitor was enough.

43. There was stronger merit in criticism of the Tribunal in its conclusions in paragraphs 140 and 142:

"140. In Mrs CM's case the sum of money involved was very large indeed. She was at risk of making a very substantial loss. It is not possible to envisage any reason why the Respondent became involved in the scheme other than the fact that the involvement of a solicitor and the use of the firm's client account would lend a cloak of respectability to an otherwise transparently bizarre and fanciful scheme, allied to the fact that he and two other clients stood to gain from the transaction.

141. The Law Society's Yellow Card warned that "if it seemed too good to be true then it probably was."

142. The Respondent was a conveyancing solicitor and would have been well aware of standard rates of interest charged, for instance, by mortgage lenders and he could not have failed to realize that in a climate where mortgage lenders were lending at five or six per cent per annum where the loan was secured by property, that a return of 120% per annum was mythical. If it had not been no doubt mortgage lenders would have diverted their funds to such investments rather than obtain a low return on mortgage lending."

44. It should be recalled that The Law Society did not contend that the appellant was himself guilty of fraud. It did not contend that he knew that the scheme was fraudulent merely that he ought to have known that it was. Indeed, it is apparent that the appellant believed that there was an opportunity for him to earn a profit, afforded by the scheme. He believed that if it should prove profitable he would himself gain from it. It was that belief which prompted him to act when he should not have done because of the conflict of interest and when he was not competent to act. The paragraphs we have cited might suggest that he chose to act in order to lend a cloak of respectability to the fraudulent scheme and must have realised that it was fraudulent because of the extraordinary return of 120% per annum. However, we take the view that whilst the decision could have been expressed with greater clarity, it does not show that the Tribunal regarded the appellant himself as being guilty of fraud. They must be read in the context of the submissions and conclusions, considered as a whole. Participation of the appellant did lend a cloak of respectability and that explains the gravity of his conduct. The extraordinary rate of interest did demonstrate the level of incompetence to which he had sunk. In those circumstances, whilst we acknowledge that the relevance of the paragraphs was not sufficiently explained by the Tribunal, we do not conclude that the Tribunal was diverted from the allegations made in the Rule 4 statement. There was no suggestion that the appellant was guilty of fraud. The judgment of Peter Smith J did not suggest to the contrary. The Law Society had made no such allegation and it seems to us sufficiently clear that the Tribunal's finding of dishonesty was in the context of the conflict of interest and the absence of competence and on no other basis.
45. In those circumstances we conclude that the Tribunal's conclusions as to the appellant's dishonesty were justified. The appellant had sought to make a profit from the opportunity presented by the scheme. In his pursuit of that profit he had acted in a position of plain conflict with the interests of his client Mrs Manolakaki, which were themselves in conflict with the interests of his other client, Westminster Services Limited. That hope of profit had lead him to advise in a scheme as to which he had no knowledge or competence to advise. Dishonesty was plainly demonstrated and, in the absence of any evidence given by the appellant, we are not surprised as to the Tribunal's conclusion.
46. Mr Bartlett accepts, in frank and helpful submissions, that if the finding of dishonesty is upheld he has little ground for complaining against the order that the appellant be struck off. The case, as the Tribunal remarked, is sad. The appellant has earned the respect of many in his community. It is a matter of great regret that after serving clients and his community with distinction, and having earned a good reputation, he should have behaved in this way. A finding of dishonesty in these circumstances will generally lead to the conclusion that the solicitor should be struck off. We can identify nothing to suggest that the Tribunal was wrong in the penalty which it imposed. In those circumstances this appeal is dismissed.