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 WC2A 2LL
		2 November 2012

1. LORD JUSTICE ELIAS: Following a hearing on 5 September 2001, the appellant was found guilty of one charge of professional misconduct. There were a further three allegations which were found not proved. The Tribunal was satisfied that he breached Rule 1.06 of the solicitor's code of conduct in that he behaved in a way which was likely to diminish the trust the public places in him or the legal profession. He received a reprimand and was ordered to pay costs in the sum of £6,750. He now appeals, exercising his statutory right under section 49 of the Solicitors Act 1974, against the decision of the Tribunal.
2. The allegations of misconduct arose out of the appellant's conduct in 2007 when he was an employed solicitor in the firm Elliot Stephens & Co in White Lion Street, London. The allegations concerned his involvement in a residential conveyancing transaction relating to a property at 53 Croydon Road, London, E13. The details are set out fully in the decision of the Tribunal, in particular in paragraphs 7 to 24.
3. Putting the matter very briefly, in relation to this property transaction the appellant acted for Mr OO, who purchased the property from Mrs AO for a purchase price of £187,000. In fact, that was £4,000 more than the originally agreed price of £183,000. Mrs AO then immediately sold it on a back-to-back basis to Mr KO for the sum of £240,000. Following completion, Mr KO was given a substantial discount by Mr OO. Initially it was agreed that it would be £17,800 but it appears that was later reduced to £8,000. Moreover, during the course of these transactions, Mr OO changed his solicitors.
4. The charge against the appellant was that he failed to recognise and query the transactions that bore the hallmarks of property fraud contrary to rule 1.02 and 1.06 of the SCC. The obligation to a solicitor with relation to transactions that bear such a hallmark are set out in certain fraud warning cards known as green cards, which have been produced by the profession and are circulated to all solicitors involved in conveyancing matters. The purpose of the guidance is to prevent solicitors from becoming unwittingly involved in assisting a fraud, perhaps in terms of possible mortgage frauds, as might have been in issue here, and perhaps it may be money laundering transactions. The appellant admitted that he knew about the green cards.
5. The green cards themselves identify a number of features which will be the hallmarks of a fraud of this nature. They included, at least in the version of the green card in force at the relevant time, the following: unusual instructions, for example a solicitor being instructed by the seller to remit the net proceeds of sale to anyone other than the seller; incomplete contract documentation, that is contract documents not fully completed by the seller's representative; changes in the purchase price - adjustments to the purchase price; unusual transactions - transactions which do not follow their normal course or the usual pattern of events, such as clients reselling property at a substantial profit, for which no explanation has been provided.
6. The Tribunal considered the contemporaneous documents -- we were told that the original conveyancing file had been made available to them during the course of the hearing -- and the appellant was represented by counsel and gave oral evidence and was cross-examined about his role in the transaction. The Tribunal concluded in this case that the transaction did indeed bear the hallmarks of fraud. It emphasised that it did not have to decide whether there had been a property fraud in relation to the transaction; the relevant question was whether the transaction bore the hallmarks for property fraud and, if so, whether the respondent took appropriate steps to satisfy himself about the circumstances.
7. In this case there are a number of features which the Tribunal thought bore the hallmark of a property fraud. These included the fact that there had been a change of solicitor during the course of transaction; that the purchase price had changed by some £4,000; that Mr OO had immediately sold the property for a substantial profit; that the subsequent purchaser, Mr KO, had received a significant discount; and that there had been certain other discrepancies in the transaction documentation. The question then was whether in the circumstances the appellant had failed to take appropriate steps to satisfy himself that the transaction was not a fraud in accordance with the green card.
8. The Tribunal set out the relevant factors which led it to its conclusion that in this case the appellant had not taken the appropriate steps. It summarised its conclusion at paragraph 27.16:

"The Respondent had shown none of the healthy scepticism which a solicitor should demonstrate when in receipt of unusual instructions. Any solicitor conducting conveyancing should be familiar with the green cards and the warnings contained. The Respondent here was willing to accept explanations from his client without either noting fully the instructions he was given or querying them. The Respondent had given explanations for the way the transaction had proceeded. However, the Tribunal was satisfied that he had failed to pay proper regard to the provisions of the green cards where there were clearly a number of issues in this transaction which should have caused concern. A 'back to back' transaction is not inherently fraudulent, but it is one of the situations in which property fraud can occur. A number of unusual instructions had occurred during the transaction. The Respondent had failed to comprehend that he should consider the totality of the transaction as well as individual instructions and must be conscious at all times of the potential for property fraud. The Tribunal was satisfied that the transaction bore the hallmarks of property fraud and found that the Respondent did not recognise those hallmarks or take appropriate steps to satisfy himself that there was no fraud. His failure to recognise his duties would put at risk clients and the public, including lending institutions. Whilst the Respondent had not shown a lack of integrity, and hence was not in breach of Rule 1.02, the public would rightly be concerned at his failure to abide by the well-known guidance in the green cards. Accordingly, the Tribunal was satisfied so that it was sure that this allegation had been proved in that the Respondent had acted contrary to Rule 1.06 of the SCC."

It will be noted from that paragraph that the Tribunal had regard to the explanations provided by the appellant but it was plainly not persuaded by them, or at least the Tribunal was not satisfied that they amounted to sufficient compliance with the requirements of the green card.

9. I should say that the appellant has not appeared today. He has sent a letter to the court indicating that no disrespect is intended. He had asked for an adjournment but that was refused. He says he does not feel in a sufficiently competent state at the moment to represent himself. But we have his submissions and we are satisfied that we must go ahead with this appeal in his absence, and he does not contend otherwise.
10. Essentially, the two grounds to be extracted from the voluminous grounds of appeal are these. First, he suggests that the Tribunal placed too must emphasis on his failure to provide attendance notes. It is right to say that at a number of points in the decision the Tribunal points out that although the appellant says he took certain steps they were not evidenced by any relevant attendance notes taken at the time. His case is that although he can be criticised for not maintaining attendance notes the failure to do so is not of itself professional misconduct and if the Tribunal accepted his evidence, then the fact that he had not produced attendance notes to confirm the evidence he gave should be treated as entirely irrelevant.
11. In my judgment, this ground cannot be sustained. It seems to me that what the Tribunal has done is recognised that the failure to provide attendance notes is evidence that he had failed to show what it termed in paragraph 27.16 as the "healthy scepticism" which he should have demonstrated in receipt of these unusual transactions. It is particularly important that a solicitor should, when investigating matters of this kind, keep very careful notes not only for the purposes of satisfying any subsequent investigator that he has acted properly but also because it is necessary, as the Tribunal pointed out, to consider the totality of the transaction as well as any individual transactions, and therefore keeping details of all the relevant features is a matter of some significance. The Tribunal, in my view, is entitled to put some weight on that.
12. The second ground of appeal is stated to be that the Tribunal could not have adopted the appropriate standard of proof. That seems to me bound to fail. The Tribunal said at paragraph 7 of its decision: "The Tribunal noted that it was for the applicant to prove its case. The case would have to be proved to the highest standard -- that is beyond reasonable doubt." At paragraph 27.16, which I have set out, it states in the final sentence that the Tribunal was "satisfied so that it was sure" that the allegation had been proved. When a Tribunal properly directs itself as to the appropriate standard of proof and says that it is satisfied to that standard, there would need to be the most powerful evidence to show that notwithstanding it had directed itself properly, it had then failed to give effect to that discretion.
13. In my judgment, there is no evidence at all to suggest that here. Indeed, when one looks at the submissions advanced by Mr Holloway -- and I should say they are very extensive indeed and they roam over various matters which are not strictly raised in the grounds of appeal at all -- his real complaint is that he does not consider that he has done any wrongdoing at all. I will simply recite one relatively brief passage from the 20 odd pages of submissions put before us:

"The requirement is for me to satisfy myself on legitimacy. Each time instructions were given, they were with an explanation. The explanations were all rational and reasonable in my view. There was no point at which instructions were given without explanations and I proceeded to effectuate them. The Tribunal has not found that there was no reasonable basis upon which I could have felt the instructions were legitimate.

Where there has been full disclosure of all the details of the transaction and I find explanations reasonable, rational and credible, this obviates the reason for or any scepticism. On the occasion where there was serious concerns and proper investigation needed on the transaction, this was carried out when the issue of the third party arose. It was the existence of the third party, which I did not know the extent of their involvement or whether they would be short-changed, that initially raised a concern. Up until then it was clear everyone was getting what they wanted and there was complete openness with all parties, the angle of suspecting any fraud would have been irrational, not based on any real evidence and at best, theoretical."

The rest of his submissions are largely to like effect. In other words, it was not really a contention that the Tribunal adopted the wrong standard of proof; rather it was a contention that on the evidence the Tribunal could not properly reach the conclusion that he had committed the wrongdoing alleged against him.

14. In my judgment, that is entirely hopeless. The Tribunal sets out carefully why it found that he was in breach of his obligations. That was a conclusion it was fully entitled to reach, supported by a lot of evidence. Therefore, the grounds of appeal fail. It follows that the reprimand stands.
15. MR JUSTICE SINGH: I agree.
16. MR LEVEY: My Lord, I am grateful. Might I just seek one more moment of the court's time. We ask for our costs. I have a costs schedule if the court would be in a position -- I am conscious of the time -- to assess those costs.
17. LORD JUSTICE ELIAS: Let me have a look.
18. MR JUSTICE SINGH: Has this been notified to Mr Holloway?
19. MR LEVEY: My Lord, no.
20. LORD JUSTICE ELIAS: I will have a look at it by all means.
21. MR LEVEY: I should mention that there is no Davis and McGlinchey issue in this case. It was not something that Mr Holloway was advancing. He was not relying on Davis and McGlinchey below. He was not putting forward any position about his means below. The Tribunal made an award based on the fact that we had not succeed on all the allegations and for that they reduced the costs but not because --
22. LORD JUSTICE ELIAS: He has not challenged costs below.
23. MR LEVEY: No, he has not. I am just saying that the issues your Lordships were dealing with this morning did not arise in this case.
24. LORD JUSTICE ELIAS: In some ways -- thinking aloud -- I am almost more inclined to send it off to taxation since he is not here to raise any points but you may tell me that the cost and trouble of doing that is out of proportion to the sums involved.
25. MR LEVEY: My Lord, I fear that before I even turn around that is what I will be told. My Lord, may I just take instructions for one moment. My Lord, would it would more convenient to ask for an interim payment of a sum. I do not think that the £6,000 that was ordered below has been satisfied.
26. LORD JUSTICE ELIAS: The other possibility is for us to take a view, as it were, generous in his favour and fix a figure now.
27. MR LEVEY: My Lord, we would be happy to do that. Obviously I can answer any questions. I would respectfully submit that the figure is an appropriate one for an appeal of this nature. Obviously, until today we did not know that Mr Holloway was not going to be here.
28. LORD JUSTICE ELIAS: We will rise for a moment.
(A short adjournment)
29. LORD JUSTICE ELIAS: I would like to record that we are aware that Mr Holloway is not here and has not had an opportunity to comment on the statement of costs but the costs in this case are relatively small and the cost of sending the matter off for assessment would, we think, be disproportionate. So we have, bearing in mind he is not here, looked at these costs to determine whether they should be allowed in full or in part and, as it were, taking the points that we think he might have taken. Can I just ask one point. Work on documents, 7 hours, did you put the documents together or did he?
30. MR LEVEY: We put a separate bundle together.
31. LORD JUSTICE ELIAS: We will reduce the costs from £8,097.60, which is the total sought, to £6,500 including VAT, which we think is, in the circumstances, reasonable and may save the trouble of additional time on it.
32. MR LEVEY: Thank you.