Neutral Citation Number: [2012] EWHC 3373 (Admin)
Case No: CO/7111/2011
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
DIVISIONAL COURT

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 29/11/2012

Before :
LORD JUSTICE MOORE-BICK
MR JUSTICE CRANSTON
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Between :

	Premji Naran Patel	Appellant	
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	Solicitors Regulation Authority 	Respondent	

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Andrew Bodnar (instructed by Alliance Solicitors) for the Appellant 
Michael McLaren QC (instructed by Finers Stephens Innocent LLP) for the Respondent

Hearing dates: 20 November 2012
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Judgment

Mr Justice Cranston : 
Introduction 
1.	This is an appeal under section 49 of the Solicitors Act 1974 against a decision of the Solicitors Disciplinary Tribunal (“the Tribunal”) which resulted in the appellant being fined.  The respondent to this appeal, the Solicitors Regulation Authority (“the SRA”), had charged the appellant with permitting the use of a client account for banking facilities when there was no underlying legal transaction.  In this appeal the appellant contends that that is not a matter of professional misconduct and that the Tribunal was in error to sanction him in any way.  
Background
2.	The appellant was admitted as a solicitor in 1967 and at the material time practised on his own account under the name, Alliance Solicitors. One of the firm’s clients was a company, Club SYR Ltd (“Club”), whose principal was Mr Yap. That company’s business included a scheme for the importation of expensive motor vehicles from Germany at reduced prices, to be sold in this country at a substantial profit. The purchases were made with the assistance of funds from investors. Two significant investors were B and M, large car dealerships. B and M were not prepared to provide funds to Mr Yap directly, because of the failure of his previous business. They wanted some assurance that the moneys would be sent to those selling the vehicles. 
3.	Under an arrangement with Mr Yap, outlined in a client care letter of 31 March 2006, the appellant agreed to hold the funds which B and M advanced in a special client account “to provide the security to [B] and [M] they require”. The client account used was for Club as the client and was entitled “German Autos”. Other investors in the scheme included two members of the Bar. They paid funds into the German Autos client account. In a letter to one of these investors on 30 July 2008 the appellant recalled that Mr Yap had asked him to confirm that funds received from them, on pro forma invoices issued by Club for orders for vehicles, would be utilised for the purpose of securing the order (“vehicles only for you”). The appellant explained that he would send the funds direct to the vehicle manufacturers. Should the transaction not proceed within 7 days, the funds would be returned in full within 7 to 14 days on written demand. Once the vehicles were on the transporter to this country property would pass. “The agreement between the 2 companies [i.e. Club and the investor] are only as above.”  
4.	Funds were received by the appellant under these arrangements. The appellant confirmed the receipt of the moneys to investors and, if necessary, that they were held for the purpose of securing and supplying vehicles to the investor. When the vehicles were sold the appellant distributed the profits in accordance with the arrangements. The appellant checked invoices, purchase orders, and other documentation for the purpose of ensuring that funds were released properly in accordance with the arrangements. In the case of B and M the appellant’s work was limited in this way. In the case of other investors the appellant used a template to draw up a joint venture agreement between Club and them. 
5.	During an inspection of the firm’s books of account in 2008 one of the SRA’s investigation officers identified the “German Autos” client account. The following year it completed a forensic investigation report. It found that from the date of the first transaction in April 2006 until mid 2008 the account recorded total credits and total debits of almost £12 million.  The B and M transactions amounted to some £1 million.  During the course of the SRA’s inquiries the appellant was asked to explain the use of the account. In a response dated 13 November 2009, the appellant’s solicitors accepted that the arrangements for B and M “did not involve his legal expertise”. 
6.	The appellant’s original client care letter to Mr Yap in March 2006 had set out the fees the appellant would charge for the checking and administration involved and for any joint venture agreements which he drafted. In August 2008 the firm finally sent Mr Yap a bill for £3750 plus VAT.  It had already passed on the bank charges for use of the account.    
The Tribunal
7.	In April 2010 the SRA levelled a charge against the appellant in a Rule 5 statement, that “he permitted his client bank account to be utilised by a client and/or third parties to receive and pay out monies where there were no underlying legal transactions”.   There was a hearing before the Tribunal on 12 May 2012. The appellant gave evidence. 
8.	The SRA’s case was that the appellant had provided banking facilities through the German Autos client account when there was no underlying legal transaction.  That offended against the principle stated by the Solicitors Disciplinary Tribunal in Wood and Burdett, restated as note (ix) to Rule 15 of the Solicitors’ Accounts Rules, that it was not a proper part of a solicitor’s everyday practice to operate a banking facility for third parties, whether clients or not.  The SRA’s case was that the provision of security to the investors through the German Autos client account was a breach of the principle of Wood and Burdett. A solicitor’s stock in trade was his knowledge and expertise. 
9.	The appellant submitted that the key issue was whether what the appellant had done offended the principle in Wood and Burdett. The transactions had to be looked at in the round. The mischief at which Wood and Burdett was aimed was money laundering. There was no allegation that the appellant had been dishonest or engaged in money laundering. Provided that there was an underlying legal transaction, even if a solicitor was not required to use legal expertise, there was no need to ask whether the legal work was more than minimal.  Even with regard to B and M the appellant had to examine the invoices and documents to see if there were any problems of a legal nature. 
10.	In its “findings of fact and law”, the Tribunal found that, in the case of the B and M transactions, the allegation was proved because there were no underlying legal transactions.  The work described in the 2006 client care letter was not legal work which, in fact, had been accepted on Mr Patel’s behalf in the 13 November 2009 letter.  The drawing up of the joint venture agreements in the case of the other investors was legal work. There was no breach in relation to that.  The scheme of using the appellant’s client account had been conceived because Mr Yap could not use the conventional banking system. It was designed to overcome the lack of trust investors had in Mr Yap.  It was inconceivable that a client would approach a solicitor for his legal expertise to do the work which the appellant had undertaken for B and M. The work could have been done by a clerk or in a non-legal office. 
11.	As to penalty for the breach in relation to the B and M matters the Tribunal noted that the appellant had been fined on a previous occasion in respect of various account breaches. His mitigation included that the previous disciplinary matter occurred when he had just begun legal practice on his own.  The Tribunal fined the appellant £7500 but expressed its serious disapproval of the overall scheme which the appellant had operated.  It also imposed a costs order of £20000, including VAT. 
The law
(a) The Tribunal and professional misconduct
12.	Section 47 of the Solicitors Act 1974 provides for the jurisdiction and powers of the Solicitors Disciplinary Tribunal. In broad terms the Tribunal is concerned with hearing and determining allegations of professional misconduct or breaches of the rules, regulations or code relating to the professional practice of solicitors.  Cordery on Legal Services divides solicitors’ misconduct into two categories, statutory and non-statutory.  The former is misconduct arising from the breach of specific provisions governing solicitors such as the accounts rules. Non-statutory misconduct includes any conduct which is not dealt with in any specific rule but is nonetheless improper: para. E-351. Cordery asserts that professional misconduct “is simply conduct which is regarded as such from time to time by the Solicitors Disciplinary Tribunal and the judges”: E-356.  
13.	That latter proposition is no mandate for the Tribunal to characterize a solicitor’s behaviour as professional misconduct in an arbitrary fashion.  One aspect of the principle of legality is that solicitors should be able to ascertain what is demanded of them.  At the same time the Tribunal must be able to stigmatize behaviour as unacceptable against a background of societal changes or technological developments. One basis for the Tribunal to move with the times is if public confidence would be undermined should solicitors be able to act in a certain way.  Another is if there is a consensus within the profession that certain conduct is wrong. In giving the judgment of the court in Ridehalgh v Horsefield [1994] Ch. 205, Sir Thomas Bingham MR considered the meaning of the word “improper” in section 51(7) of the Supreme Court Act, the wasted costs jurisdiction. He held that the term applied to conduct including that which would be regarded as improper according to the consensus of professional, including judicial, opinion whether it violated the letter of a professional code or not: 232E. 
(b) The rules
14.	From 1998 guidance note (ix) to rule 15 of the Solicitors’ Accounts Rules 1998 stated:
“Solicitors may need to exercise caution if asked to provide banking facilities through a client account.  There are criminal sanctions against assisting money launderers”.
Rule 2(1) of those Rules provided that the rules were to be interpreted in the light of the notes to them. In March 2009 that rule was amended so that the notes “form[ed] part of the rules and are mandatory”.
15.	In March 2004 the note to rule 15 was revised to reflect the decision of the Solicitors Disciplinary Tribunal in Wood and Burdett. As a result, the note took in paragraph 143 of that decision – that it was not the proper part of a solicitors’ everyday practice to operate a banking facility for third parties, even if they were clients. The note continued: 
“Solicitors should not, therefore, provide banking facilities through a client account. Further, solicitors are likely to lose the exemption under the Financial Services and Markets Act 2000 if a deposit is taken in circumstances which do not form part of a solicitor’s practice. It should also be borne in mind that there are criminal sanctions against assisting money launderers.”
The preface to the Solicitors Accounts’ Manual, 9th edition, explained that, from 17 March 2004, note (ix) to rule 15 had been updated to reflect the view of the Solicitors Disciplinary Tribunal, “that the provision of banking facilities through a client account does not form part of a solicitor’s practice”.
16.	In 2011 the SRA Accounts Rules were recast.  There is now a clear distinction between the rules, which are mandatory, and the guidance notes, which are not. Thus rule 2.1 states that “the guidance notes do not form part of the rules”. The thrust of note (ix) to Rule 15 has now become a rule, rule 14.5. It reads:
“You must not provide banking facilities through a client account.  Payments into, and transfers or withdrawals from, a client account must be in respect of instructions relating to an underlying transaction (and the funds arising therefrom) or to a service forming part of your normal regulated activities.”
The note to rule 14.5 provides that the rule reflects decisions of the Tribunal that it is not a proper part of a solicitor’s everyday business or practice to operate a banking facility for third parties, whether clients or not. 
17.	On behalf of the appellant Mr Bodnar submitted that rule 14.5 was the crystallization of the rule established in Wood and Burdett.  Moreover, he submitted, the second sentence of rule 14.5 had to be read disjunctively: payments into and out of a client account have to relate to either (a) an underlying transaction or (b) a service forming part of the solicitor’s normal regulated activities. To read in a requirement that the underlying transaction be a legal transaction would be to elide the two categories identified in the rule.  Solicitors must not permit their client account to be used as a banking facility but will not be in breach of the rule if its use occurs as a consequence of a client’s instructions in relation to an underlying transaction, albeit not a legal transaction.  
18.	For my part I agree with Mr Bodnar that rule 14.5 is a crystallization of the principle established in Wood and Burdett.  I return to that decision below.  However, it seems to me clear that even taking rule 14.5 in isolation Mr Bodnar’s interpretation is not tenable.  The first sentence of the rule contains the prohibition on the use of a client account to provide banking facilities.  Use of the term “instructions” in the next sentence of the rule implies professional instructions, in other words instructions relating to the accepted professional services of solicitors.  The term is being used in rules concerned with the work of solicitors and takes its meaning from that context. Thus the import of the first limb of the second sentence of rule 14.5 is that movements on a client account must be in respect of instructions relating to an underlying transaction which is part of the accepted professional services of solicitors.  In shorthand the instructions must relate to an underlying legal transaction.  The other limb of that second sentence requires that movements on a client account must be in respect of instructions related to a service forming part of the normal regulated activities of solicitors.  That is a provision the ambit of which is to be measured in terms of the regulatory regime for solicitors.  There is no need to explore in detail how the reach of these two limbs may differ although I agree with the observations of Moore-Bick LJ on the matter.
(c) Wood & Burdett 
19.	On 23 December 2003 the Solicitors Disciplinary Tribunal handed down its decision in Wood and Burdett (No 8669/2002). There were a number of allegations against the two solicitors before the Tribunal on that occasion, including revised allegation (vi), “that the cashing of cheques amounted to a breach of Practice Rule 1”. Allegation (xii) was that the respondents had acted in breach of Practice Rule 1 in acting in breach of the good repute of themselves as solicitors, or the solicitors’ profession, and further in breach of the Solicitors Accounts Rules. 
20.	The background was that there were client accounts with substantial entries not associated with any underlying transaction for which the firm had acted other than with respect to the transmission of the money itself. The explanation given by Mr. Burdett was that he had decided to broaden his business interests. Clients of the firm, and two staff members, were able to deposit cheques with the firm and to receive immediate, cleared payments in cash or by way of a bank transfer, including bank transfers to third parties.  It was said to be for the convenience of clients, who referred work to the firm. For Mr Burdett it was submitted that there was no rule of conduct that solicitors could not operate their client account in this way. It might not be part of the service that solicitors habitually provided, but that did not mean it was disreputable. 
21.	The Tribunal held that, even though there had been no breach of any specific rule with regard to allegation (vi), the solicitors had acted in breach of their own good reputation and the good reputation of the solicitors’ profession by allowing their client account to be used in this way: [55]-[56], [58]. It was not a proper use of a solicitor’s account to allow it to be used by clients or members of staff as a bare banking facility: [57]. The proper use of a solicitor’s client account was to hold money and disburse it as required in connection with a client matter of which the solicitor had conduct on behalf of that client: [57]. The facility made available by the firm to their clients and others could have been utilised by an unscrupulous person as a vehicle for money-laundering: [58].
22.	The Tribunal restated its approach in general terms in the context of fixing the penalty to be imposed. While Mr Burdett was not in breach of any written rule, his behaviour flew in the face of the philosophy “that a solicitor maintains client account in order to protect clients’ money, that money being held by the solicitor in connection with professional work undertaken by him on behalf of that client”: [141]. Solicitors should not hold money simply because they had been asked to do so without their taking charge of that money and disbursing it in accordance with a client’s instructions “in connection with professional work undertaken on behalf of that client”: [142]. It was not the proper part of a solicitor’s every day business or practice to operate a banking facility for a third party, whether a client or not: [143]. 
23.	The Tribunal handed down its decision in Gauntlett, Beveridge and Ford (No 8951/2003;9090/2004) on 7 June 2007, although the behaviour sanctioned in that case occurred between 2000 and 2003. There a matrimonial executive of a solicitors’ firm named Ford, not a solicitor, entered into arrangements in which a number of companies acknowledged that moneys paid to the firm were at the instructions and order of S Limited in relation to business transactions. They further acknowledged that such moneys were not third party payments to the firm.  Rather, they were for credit to the account of S Limited and were to be invoiced for the provision of the online banking services the firm provided. In fact the various companies taking advantage of this “online banking facility” were vehicles for VAT fraud.  
24.	Ford was convicted of using the client account of the firm to launder its proceeds and was sentenced to six years’ imprisonment. Gauntlett and Beveridge were acquitted of criminal charges but faced a disciplinary charge, that they had been guilty of conduct unbefitting solicitors in that they permitted their client account to be utilised to receive and make payments in circumstances “where there were no underlying transactions.” The Tribunal determined that the solicitors had been lax in supervising Ford: [92]-[94]. It then said:
“95. This Tribunal repeats what it has said before, namely that a solicitor is paid for his expertise and legal knowledge. It is extremely likely that any client who wishes to pay money into client account and withdraw it without availing himself of the solicitors’ advice and professional services is more likely arranging for the movement of money for nefarious purposes. The Respondents have accepted that they … inevitably permitted their client bank account to be utilised to receive and make payments in circumstances where there were no underlying transactions and, indeed, where it transpired that those receipts and payments amounted to the laundering of the proceeds of crime. “
The appellant’s case
25.	In advancing the appellant’s case Mr Bodnar submitted that there is nothing improper in solicitors holding funds as a custodian so that a client is entitled to have them used in a particular way.  Thus there is nothing against a solicitor acting as an escrow agent. Similarly, if solicitors are retained to assist with a transaction, or to provide legal advice, and their client account is used to receive and pay out funds connected with this, the activity on the client account is an integral part of the service the solicitors are providing and cannot be professional misconduct. 
26.	Mr Bodnar submitted that this follows because of the mischief at which Wood and Burdett is directed, namely money-laundering. Insofar as Wood and Burdett is aimed at any wider mischief it is to ensure that solicitors’ client accounts are used only in connection with the practice of a firm and are not made available to others, whether clients or third parties, to use as their own. For solicitors to permit a client account to be used as a vehicle of convenience, when there is no underlying transaction for which they are retained, would provide an avenue which the unscrupulous could exploit. But there is no basis for any wider mischief of preventing solicitors from trading on their good name. Nor are solicitors confined to using a client account in relation to legal, as opposed to administrative, work.  That would preclude solicitors acting as custodians or executors of estates.  
27.	Thus Mr Bodnar contended that it is not surprising that the principle in Wood and Burdett, now contained in rule 14.5, prohibits a firm’s client account from being used for purposes unconnected with its practice and in which the solicitor has no involvement, or only a minimal involvement. Since a solicitor’s firm is not a deposit-taking institution it is inevitable that if the firm’s only involvement in any arrangement or activity is to permit its client account to be used as such, others might infer that the arrangement is in some way illicit. That would bring the profession into disrepute.  However, there is nothing in Wood and Burdett or rule 14.5 which demands that funds can only pass through a solicitors’ client account when there is an underlying legal transaction.  
28.	The rule 5 statement, and the Tribunal in its determination, had therefore been wrong to require that there be an underlying legal transaction.  The complaint was phrased in a manner which carried with it the implication that the conduct alleged constituted misconduct per se, regardless of the circumstances. The Tribunal’s approach was that, whatever the motives of the appellant, a breach of the principle in Wood and Burdett occurred.  The Tribunal had held that the drawing up of joint venture agreements in relation to investors other than B and M was sufficient to prevent the appellant breaching the principle in Wood and Burdett.  Thus it must follow that it would have dismissed the complaint in its entirety had he done that for B and M.  That fragile distinction revealed the flaw in the Tribunal’s approach because in the case of B and M a memorandum of understanding could easily have been drafted.  Nowhere in the allegation was it said that the appellant committed acts unbefitting a solicitor, which were likely to bring the reputation of the profession into disrepute, or which otherwise constituted professional misconduct.  Thus the Tribunal could not have used that principle as a basis for sanctioning the appellant.  
29.	As a secondary submission, Mr Bodnar contended that, if he were wrong, and the Tribunal had been entitled to ask whether there was an underlying legal transaction, the purpose of the appellant’s involvement in the B and M matters was to give effect to a legal arrangement between B and M on the one hand and Mr. Yap on the other. The circumstances were that B and M did not trust Mr. Yap’s handling of funds. In checking invoices and delivery notes the appellant’s role was not to ascertain whether the vehicles had been delivered, but whether funds should be paid out or received pursuant to the arrangements which the appellant understood. It was unquestionably work which a clerk could have done, but the same could be said for the work needed, say, in a routine conveyance. It had been wrong for the Tribunal to hold that, however routine, the services provided by the appellant did not constitute legal services.
30.	Regarding the fine imposed, Mr Bodnar submitted that it had to be seen in the context of the loss of reputation the appellant suffered and the conditions the SRA imposed on the firm as a consequence, such as the restrictions on taking trainees. When coupled with these consequences the fine had had a very substantial impact on the appellant. Yet there had been no allegation of dishonesty or of money-laundering. Moreover, the Tribunal was in effect acting ex post facto, since it had never previously sanctioned a solicitor in the same position as the appellant. The solicitors in cases such as Wood and Burdett and Gauntlett and Beveridge had acted in a much more culpable manner. The costs the appellant was ordered to pay were also disproportionate. 
Discussion 
31.	The appellant’s use of the German Autos client account, which gave rise to the allegation the SRA brought against him, occurred between April 2006 and mid 2008.   As I have said, the Tribunal’s decision in Wood and Burdett was in December 2003 and the following March the note to rule 15 was revised to reflect that decision. As a result, the note took in paragraph 143 of the Tribunal’s decision, that it was not a proper part of a solicitors’ everyday practice to operate a banking facility for third parties, even if they were clients.  The preface to the Solicitors Accounts Manual, 9th edition set out the effect of the revised note. The note did not have the effect of a rule until March 2009.   
32.	In Wood and Burdett the Tribunal had reached its decision without reference to any rule.   It said that the proper use of a solicitor’s client account was for money required in connection with a matter the solicitor was conducting on behalf of a client. The principle, the Tribunal continued, was that a solicitor maintains a client account to protect clients’ money which is being held in connection with professional work undertaken on the client’s behalf. Client money should only be moved in accordance with the instructions of clients in connection with professional work undertaken on their behalf. The Tribunal restated this principle in Gauntlett, Beveridge and Ford in June 2007, where it said expressly that a solicitor is paid for his expertise and legal knowledge.
33.	With this as background it seems to me there was no error in the Tribunal’s approach in the appellant’s case. It was entitled to treat the principle in Wood and Burdett, incorporated in the guidance note to rule 15, as a ground of decision, independently of any breach of a rule or an allegation that the conduct adversely affected professional reputation. Indeed in his submission to the Tribunal the appellant accepted as the key issue in the case whether the principle in Wood and Burdett applied. Thus the issue in this appeal is whether the Tribunal can be said to be wrong in its decision that that principle applied to the circumstance of the appellant’s case. That being the case, the Tribunal’s concern as to whether there was an underlying legal transaction, as opposed to any underlying transaction, was the correct focus.  Wood and Burdett was premised on a client account being used in relation to professional work undertaken on a client’s behalf.  
34.	For my part I cannot accept the submission that the principle in Wood and Burdett should somehow be limited because its origins lie in a concern with money-laundering or the prevention of illegal activity of a similar nature. That is certainly one of the legal purposes behind the principle but by no means the only one. In Wood and Burdett itself a rationale referred to at paragraph 141, quoted earlier in this judgment, is that solicitors maintain a client account to protect clients’ moneys which they holding in connection with professional work undertaken on their behalf. The revised guidance note to rule 15 states that it is not a proper part of a solicitor’s everyday business or practice to operate a banking facility for third parties, whether clients or not. One element of that might well be the purpose for the Wood and Burdett principle suggested by Mr McLaren QC, that if solicitors could operate a banking facility for third parties, without doing any legal work for them, they would be trading in effect on the trust and reputation which they acquired through their status as solicitors.  
35.	In this case Mr Yap was able to use the appellant’s client account as a banking facility, when he could not obtain access to the ordinary banking system for his business. Indeed, use of the client account was not confined to Mr Yap’s own funds but was available for the moneys of investors, who did not want to pay Mr Yap but wanted the security of the money being held by a solicitor. The arrangement which the appellant set out in the client care letter in March 2006, and in the letter to one of the investors of 30 July 2008, amounted to his giving Mr Yap’s own customers an assurance of trustworthiness derived from his position as a solicitor.  But in relation to B and M that was all.  The appellant was not holding the money in his client account “in connection with professional work undertaken by him on behalf of that client [Mr Yap]”, to use the phraseology of the Wood and Burdett decision. He did not undertake legal work for Mr Yap, B or M. The arrangements between Mr Yap and B and M were commercial transactions in relation to which the appellant undertook administrative work. The appellant should not have been offering them the use of his client account as a banking facility.
36.	It seems to me that there is a distinction between what the appellant was doing and the role of a solicitor operating an escrow account or acting as a conveyancer or the executor of a will.  Here the moneys of Mr Yap and the various investors were mixed and there were no escrow conditions as to their dispersal.  In any event, if solicitors are involved escrow conditions are typically related to legal work. While many of the functions associated with conveyancing and acting as an executor are of an administrative nature, their long association with the legal profession gives them the character of professional services. They are part of the everyday practice of solicitors.  What the appellant did here, as described in the client care letter, was purely administrative.  He was the custodian of funds.  That had no association with the professional duties of a solicitor and was not in relation to an underlying legal transaction.   
Conclusion
37.	It is well established that this court will not lightly interfere with the decisions of the Tribunal.  For the reasons I have given there are no grounds for interfering with the Tribunal’s conclusion in this case.  Nor is there any basis for interfering with what the Tribunal imposed as a fine or with how it awarded costs.  I would dismiss the appeal.
Lord Justice Moore-Bick: 
38.	I agree that the appeal should be dismissed for the reasons given by Cranston J. and add a few words of my own only because of the importance of the question to which this appeal gives rise.
39.	In Wood and Burdett (No. 8669/2002) the Solicitors Disciplinary Tribunal emphasised that the purpose of maintaining a client account is to protect money held by the solicitor in connection with professional work undertaken on behalf of that client. It therefore confirmed an earlier decision that a solicitor should not hold money simply because he has been asked to do so without his taking charge of that money and disbursing it in accordance with a client’s instructions in connection with professional work undertaken on behalf of that client. It also made it clear that it is not a proper part of a solicitor’s everyday business or practice to operate a banking facility for third parties, whether they are clients of the firm or not. 
40.	In Wood and Burdett the firm’s client account was used for the purposes of cashing cheques for third parties. It was, therefore, an obvious invitation to money laundering and a conspicuous example of how a client account can be abused. Nonetheless, the principle that the purpose of a client account is to hold funds received in connection with professional services provided to the client is in my view of broader application. 
41.	Rule 14.5 of the SRA Accounts Rules 2011 provides as follows:
“You must not provide banking facilities through a client account.  Payments into, and transfers or withdrawals from, a client account must be in respect of instructions relating to an underlying transaction (and the funds arising therefrom) or to a service forming part of your normal regulated activities.”
42.	This rule was not in force at the time when Mr. Patel operated the “German Autos” client account, but Mr. Bodnar submitted that it fairly encapsulates the principles enunciated in Wood and Burdett. Like Cranston J., I think that is right, but the decision itself is illuminating in as much as it sheds light on the meaning to be given to the expression “underlying transaction (and the funds arising therefrom)”. Mr. Bodnar submitted that the word “or” is to be read disjunctively and that the existence of an underlying transaction of any kind which a solicitor can lawfully undertake, including one that does not form part of a solicitor’s normal professional activities, is capable of supporting the use of a client account. The tribunal, he submitted, had erred in conflating the two limbs of rule 14.5 which had led it to hold that there must be an underlying transaction of a legal nature.
43.	In my view that argument states the position too broadly. The primary purpose of maintaining a client account is to segregate funds held for the client from the solicitor’s own funds in order to provide the client with a measure of protection. One would therefore expect it to be used to hold funds which have come into the solicitor’s hands in relation to services carried out for the client, to be paid out in due course to the client or in accordance with his instructions. Rule 14.5 of the SRA Accounts Rules refers to instructions relating to an underlying transaction or a service forming part of the solicitor’s normal regulated activities. The expression “regulated activities” includes in this context all forms of legal activity as defined in section 12 of the Legal Services Act 2007. That means the provision of legal advice or assistance in connection with the application of the law or with any form of resolution of legal disputes and the provision of representation in connection with any matter concerning the application of the law or any form of resolution of legal disputes. It follows that in most cases the receipt of client funds will result from the provision of services forming part of the solicitor’s normal regulated activities, but some recognised professional services, such as acting as an executor, will not fall into that category. There is clearly scope, therefore, for funds to arise from underlying transactions of a kind which, although they form an accepted part of the professional services provided by solicitors, do not fall within the definition of regulated activities. They are likely, nonetheless, to be legal activities in the broad sense of the expression.
44.	The difficulty in the present case, however, is that in the case of B and M there was no underlying transaction out of which the funds in question arose, much less one that could be said to involve the provision by the appellant of legal or other recognised professional services.  The only transaction was the transfer of funds from the buyers of vehicles into the appellant’s client account and the subsequent transfer of those funds from that account to the sellers. Neither the providers of the funds nor the recipients of the bulk of them were clients of the firm. What were described as administrative services (the checking of documents etc.) was in reality no more than a means whereby the appellant was able to satisfy himself that the conditions for transferring funds to the sellers had been satisfied. The service provided by the appellant was not very different from that provided by a banker who pays the seller the price of goods on behalf of a buyer against the presentation of documents.  
45.	It may well be that the scheme under which funds were transferred into and out of the appellant’s client account in this case was not so obviously open to abuse as that which was considered in Wood and Burdett and some of the subsequent decisions to which our attention was drawn (though it is interesting to note that in some cases the source of funds is not identified in the relevant ledger). Nonetheless, in my view the tribunal was right to hold that in this case there were no transactions of a professional nature underlying the movements of funds into and out of the client account. Moreover, the way in which the appellant made use of the client account in this case was contrary to the prohibition in the first sentence of rule 14.5. I would therefore dismiss the appeal.