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
		11/07/2014

MR JUSTICE FOSKETT:

1. The Appellant is a solicitor (having been admitted as a solicitor on 1 February 1982), albeit now not practising. In circumstances to which I will refer below, he was made bankrupt on 26 April 2013 and as a result his practising certificate was suspended. Prior to that he had been practising in Nottingham as a sole practitioner under the style 'Sinclairs Solicitors'.
2. He appeals, pursuant to section 49(1)(b) of the Solicitors Act 1974, against the decision of a Solicitors Disciplinary Tribunal ('SDT') of 29 July 2013 to impose upon him a fine of £2,000 and an order that he should pay £4,250 by way of costs of the proceedings before the tribunal. Although I have expressed his appeal in that way, he does seek to challenge the finding that he was in breach of Principles 6 and/or 7 of the Solicitors Regulation Authority ('SRA') Principles 2011.
3. The proceedings before the SDT were contested and he faced the two allegations to which I will refer below. The case against him on the first allegation was found proved, but the second allegation was not proved. The SRA seeks, out of time, permission to cross appeal against the dismissal of the second allegation. I will return to that issue below.
4. I can set out the essential background fairly shortly. During 2009 the Appellant acted for a client, who I will simply identify simply as 'SW', in proceedings in the Nottingham County Court. SW was a lady with, it seems, long-standing psychiatric problems. Her husband had died in April 2011. He was bankrupt at the date of his death and his trustee in bankruptcy was a Mr Findlay, a chartered accountant and insolvency practitioner, who practised under the style Findlay James of Cheltenham. He instructed a firm of solicitors in the proceedings to which I will refer below. In view of the allegations made by the Appellant about the conduct of those solicitors, and bearing in mind that they are not parties to these proceedings and thus able to respond to those allegations, I will simply refer to them as 'S'. They briefed a member of the Bar who for similar reasons I will refer to simply as 'B'.
5. The family home of SW and her late husband was in SW's sole name and held on trust for the daughter of their son who had died in a road traffic accident in 1997.
6. Mr Findlay sought a declaration from the court that SW's husband had an interest in the house and for an order for sale. This was resisted by SW and the Appellant acted as her adviser and advocate in those proceedings. The substantive hearing lasted some five days or so and took place in September 2009 when His Honour Judge Mithani decided that SW's husband did indeed have a one-half beneficial share in the property. By an order of 16 September 2009 he so declared, made an order for sale of the property and gave consequential directions. It appears that he took an adverse view of the Appellant's conduct of the hearing and, in particular, of his cross-examination of Mr Findlay. In effect he made a "show cause" order against the Appellant in respect of a possible wasted costs order. He directed that the hearing of that matter should be listed for one day.
7. On 15 January 2010 Judge Mithani ordered the Appellant to pay Mr Findlay's costs of and relating to 15 and 16 September 2009, together with the costs of the wasted costs application, to be assessed in accordance with certain other directions he gave. He ordered the Appellant to pay £8,000 to Mr Findlay's solicitors on account of his liability under this order by 26 February 2010.
8. An appeal against Judge Mithani's judgment on the merits and on the making of the wasted costs order was dismissed by Kitchin J, as he then was, sitting in Birmingham, on 3 November 2010. As will appear below, in due course the Appellant did attempt to appeal against the dismissal of that appeal, but that attempt failed. He indicated to me during the course of the oral hearing that, because the order giving effect to the dismissal of his appeal from Judge Mithani's order has not been sealed, he proposes to invite Kitchin J to review his decision pursuant to what has been known colloquially as the "Barrell jurisdiction" more recently considered by the Supreme Court in Re L and B (Children) [2013] UKSC 8.
9. As things stood at the time of the dismissal of his appeal from Judge Mithani's order, the Appellant was liable to pay the £8,000 as from then, the liability presumably having been stayed pending the appeal. It was not paid and S issued a statutory demand in June 2011. The Appellant applied to set aside the statutory demand, but District Judge Reeson dismissed the application on the papers as having no reasonable prospect of success. He gave as a reason for this conclusion that the demand was based on an unappealed order. That was not correct – it had been appealed, but unsuccessfully. At all events, the application was dismissed and the bankruptcy petition was issued. The Appellant lodged a notice of objection to the petition on 5 October 2011, citing in support of his contention that there was no debt due the revelation that S and B were to be paid for their work for Mr Findlay on a conditional fee basis which had not previously been disclosed and which, he asserted, led to Mr Findlay's representation being flawed and, he says, to B misleading the court with his submissions.
10. Over the next twelve months various applications were made with a view to appealing against the wasted costs order to the Court of Appeal, but on 21 September 2012 Lloyd LJ rejected the application for permission to appeal on the basis that nothing had been done to put the application together properly and on 29 November 2012 Lewison LJ refused to review that order: [2012] EWCA Civ 1721.
11. Subject, therefore, to the argument that the Appellant advances concerning the enforceability of the orders of Judge Mithani and Kitchin J because neither had been sealed (to which I will return below), as from the decision of Lewison LJ, the Appellant faced an enforceable legal obligation to pay £8,000 under the order made by Judge Mithani in respect of which his appeal rights had become exhausted.
12. Without the need to go into a great deal of detail, the Appellant chose not to pay the sum due (even though, subject to an excess of £1,000, his insurers would have been prepared to pay the relevant sum). Not only did he choose not to pay, but it seems that he chose not to do so in order that ultimately he would be made bankrupt. He saw this, he says, as the only way in which he could secure evidence that would support his assertions of dishonesty by S and B in the proceedings to which I have referred. His rationale, as I understand it, is that it is only in bankruptcy proceedings that the court can go behind the order of another court for the purposes of determining whether the obligations created by that order are truly enforceable in the sense that it has been arrived at as a result of a lawful process. The combined purpose of taking this approach was (a) to try to protect SW's interest in the property which, in his view, had been wrongly compromised by the order of Judge Mithani, (b) at the same time to protect her physical and mental well-being since she was suicidal and (c) to rescue his own professional status from what he considered to have been an unjust order made by Judge Mithani.
13. Whilst many would question the judgments made in deciding to pursue this route, the SDT, which heard this broad account from the Appellant, held he had "had held a misguided albeit genuine belief that he had acted in his client's best interest." The SDT made no adverse finding in respect of his integrity.
14. Before turning to the allegations he faced before the SDT and the SDT's conclusions, I should record that his failure to pay the order led to S reporting him to the SRA.
15. He was also made the subject of an investigation by the SRA in respect of unrelated matters and on 14 November 2011 an Adjudicator ordered him to pay £600 towards the costs of the investigation. He failed to pay that sum.
16. As a result of failing to pay the sum £8,000 and the sum £600 he faced allegations before the SDT that he acted contrary to Principle 6 and/or Principle 7 of the SRA's Principles 2011. Those principles and the accompanying commentary in paragraph 2 are set out in the Appendix to this judgment. Principle 6 requires a solicitor to behave in a way that maintains the trust the public places in a solicitor and in the provision of legal services and Principle 7 requires a solicitor to comply with his legal and regulatory obligations and to deal with the regulators and ombudsman in an open, timely and co-operative manner. In relation to the first allegation, the case of the SRA was that the Appellant could not choose simply to ignore a court order even though he had, or felt he had, good reason for doing so. So far as the second allegation was concerned, this was put on the basis that he had failed to deal with his regulators in an appropriate manner.
17. In relation to the first allegation the SDT's findings are set out in the following paragraphs:

"10.71 With regard to [the first allegation], the Tribunal noted that the Respondent's case was that the order had not been sealed and as such it had not been perfected and was not binding upon him until such time as it was sealed.

10.72 The Respondent also sought to rely upon his intention to re-open his appeal proceedings in the previous civil case in which he had acted for Mrs SW and which had led, inter alia, to the making of the wasted costs order against him.

10.73 It was evident to the Tribunal that until very recently, post the bankruptcy hearing in April 2013, the Respondent had considered himself under a legal obligation to pay the wasted costs order. It noted that regardless of whether the order was sealed or not, the Respondent had believed that the order was due and payable. The other civil courts had made orders on the basis that the wasted costs order stood.

10.74 The Tribunal noted that even after the Respondent had exhausted the appeals route he had not paid the £8,000 and it remained unpaid to date. Three months had passed since the Bankruptcy Order was made yet the Respondent had still not launched any further civil proceedings.

10.75 Irrespective of any reasons put forward by the Respondent, including whether the wasted costs order was sealed or not which was not known, the Tribunal was satisfied that once the appeals process had been exhausted by the Respondent there was no reason why he should not have paid the wasted costs order against him, taking into account that he also had the means to do so by virtue of his professional indemnity insurance.

10.76 The Tribunal found proved that the Respondent had breached Principle 6 of the SRA Principles 2011 and that he had not behaved in a way that maintained the trust the public placed in him by non-payment of the wasted costs order. As a solicitor and as an officer of the court the Respondent was also under a legal obligation to pay a court order made against him and the Tribunal found that the Respondent had breached Principle 7.

10.77 The Tribunal had regard to Rule 40.2.1 of the Civil Procedure Rules which states that a judgment or order takes effect from the time the Judge pronounces it and Rule 40.7 that a judgment/order takes effect from the day when it is given or made. The Tribunal was satisfied that the wasted costs order made by Judge Mithani had taken effect as at 15 January 2010 that the Respondent was under a legal obligation to pay the amount specified in the order and that he had not done so to date. The absence of a sealed order was immaterial."

18. I am sure I will not do justice to the way in which the Appellant seeks to advance his appeal against these findings, but I will endeavour to summarise it in this way: (i) there was no breach of the SRA's Principles 6 and 7 because paragraph 2.2 provides that, where any principles conflict, the one that takes precedence is the one that best serves the public interest, especially the public interest in the administration of justice; (ii) the proper administration of justice is based upon truth; (iii) the orders of Judge Mithani (including the wasted costs order) were based upon a lack of truth caused by various fraudulent practices perpetrated by S and B of which, the Appellant asserts, there is now evidence; (iv) the SDT should not have proceeded further, and the court should not proceed further, until the fraud has been exposed; (v) because the orders of Judge Mithani were tainted by fraud, they are a nullity. The Appellant suggests that the orders, whilst effective, cannot be enforced and that he had no obligation to pay the sums due under them. As I have already indicated, he tells me that he is intending to invoke what he perceives to be his right to invite Kitchin LJ (as Kitchin J now is) to review the dismissal of the appeal from Judge Mithani's order on the basis that the opportunity to do so still exists (because the order was not sealed) on the grounds that there is now the evidence of fraud that he says would make all the difference. (Incidentally, it appears that the order of Judge Mithani was never sealed either, but the Appellant does not intend to invite him to review his order because he does not anticipate a favourable reception.) Indeed he invited me to adjourn this appeal on his undertaking to issue his application before Kitchin LJ. I see no justifiable basis upon which to accept such an invitation.
19. As I observed to him during the course of argument, the general principle is that a court order (even one made without jurisdiction) is valid and enforceable until it is set aside. I do not think he challenged that as a working rule. However, his perception is that "fraud unravels everything" and that the evidence he has (or the evidence he will seek to deploy) should operate to render the orders made by Judge Mithani a nullity and thus may be left unheeded in the meantime. I cannot accept that. If he can sustain his allegations of fraud then the orders could, in theory, be set aside, but until they are they remain valid and enforceable. One of a number of analogous situations is the making of an ex parte freezing order on the basis of what proves in due course to have been material non-disclosure: the order is valid and enforceable until it is set aside.
20. On that general basis, the SDT was entirely right in its conclusion and there is nothing in the Appellant's grounds of appeal.
21. His appeal against the fine was, in essence, an appeal against the finding giving rise to it. If and to the extent that it amounted to an independent challenge to the penalty, it cannot possibly succeed. The SDT deliberately reduced the penalty to reflect the Appellant's age and current inability to practise. He was a practitioner with no previous disciplinary findings against him. The penalty was very much a matter for the informed determination of the specialist tribunal and I can see no basis for interfering with its decision.
22. As previously indicated, the SRA, through Mr Geoffrey Williams QC, seeks permission to appeal out of time against the dismissal of the second allegation against the Appellant. The SDT reasoning was as follows:
23. Mr Williams says that the SDT was wrong the approach in the previous case of Bellchamber and wished to obtain an authoritative decision from the court to operate as guidance for the future. The difficulty, as it seemed to me, was that the Appellant also shared some misgivings about the SDT's reasoning and would not, accordingly, have been making the kind of submissions that would have been of assistance to the court when endeavouring to adjudicate between competing arguments. Furthermore, given the passage of time and the fact that an acceptance that the SDT was wrong could have resulted in a further adverse finding against the Appellant (even though no additional penalty would have been sought), it seemed to me overall to be unfair and inappropriate to grant the SRA permission to appeal out of time. Accordingly, I declined the invitation to do so.
24. The net effect therefore, is that the Appellant's appeal is dismissed.
25. I think I should say that, courteously though the appellant's arguments were addressed to me, I am bound to conclude that they were totally without merit. The Appellant will have to beware of pursing totally without merit applications otherwise he will face the prospect of a civil restraint order.
26. If there are any consequential matters to deal with, I will deal with them on the basis of written submissions.
APPENDIX

1: SRA Principles

These are mandatory Principles which apply to all.

You must:

27. uphold the rule of law and the proper administration of justice;
28. act with integrity;
29. not allow your independence to be compromised;
30. act in the best interests of each client;
31. provide a proper standard of service to your clients;
32. behave in a way that maintains the trust the public places in you and in the provision of legal services;
33. comply with your legal and regulatory obligations and deal with your regulators and ombudsmen in an open, timely and co-operative manner;
34. run your business or carry out your role in the business effectively and in accordance with proper governance and sound financial and risk management principles;
35. run your business or carry out your role in the business in a way that encourages equality of opportunity and respect for diversity; and
36. protect client money and assets.

2: SRA Principles - notes

2.1 The Principles embody the key ethical requirements on firms and individuals who are involved in the provision of legal services. You should always have regard to the Principles and use them as your starting point when faced with an ethical dilemma.

2.2 Where two or more Principles come into conflict, the Principle which takes precedence is the one which best serves the public interest in the particular circumstances, especially the public interest in the proper administration of justice.

2.3 These Principles:

(a) apply to individuals and firms we regulate, whether traditional firms of solicitors or ABSs, in private practice or in-house. Where a firm or individual is practising overseas, the Overseas Principles apply;

(b) will be breached by you if you permit another person to do anything on your behalf which if done by you would breach the Principles; and

(c) apply to you to the fullest extent if a sole practitioner or manager in a firm, but still apply to you if you work within a firm or in-house and have no management responsibility (for example, even if you are not a manager you may have an opportunity to influence, adopt and implement measures to comply with Principles 8 and 9).

2.4 Compliance with the Principles is also subject to any overriding legal obligations.

Principle 1: You must uphold the rule of law and the proper administration of justice.

2.5 You have obligations not only to clients but also to the court and to third parties with whom you have dealings on your clients' behalf - see, e.g., Chapter 5 (Your client and the court) and Chapter 11 (Relations with third parties) of the Code.

Principle 2: You must act with integrity.

2.6 Personal integrity is central to your role as the client's trusted adviser and should characterise all your professional dealings with clients, the court, other lawyers and the public.

Principle 3: You must not allow your independence to be compromised.

2.7 "Independence" means your own and your firm's independence, and not merely your ability to give independent advice to a client. You should avoid situations which might put your independence at risk - e.g. giving control of your practice to a third party which is beyond the regulatory reach of the SRA or other approved regulator.

Principle 4: You must act in the best interests of each client.

2.8 You should always act in good faith and do your best for each of your clients. Most importantly, you should observe:

(a) your duty of confidentiality to the client - see Chapter 4 (Confidentiality and disclosure) of the Code; and

(b) your obligations with regard to conflicts of interests - see Chapter 3 (Conflicts of interests) of the Code.

Principle 5: You must provide a proper standard of service to your clients.

2.9 You should, e.g., provide a proper standard of client care and of work. This would include exercising competence, skill and diligence, and taking into account the individual needs and circumstances of each client.

Principle 6: You must behave in a way that maintains the trust the public places in you and in the provision of legal services.

2.10 Members of the public should be able to place their trust in you. Any behaviour either within or outside your professional practice which undermines this trust damages not only you, but also the ability of the legal profession as a whole to serve society.

Principle 7: You must comply with your legal and regulatory obligations and deal with your regulators and ombudsmen in an open, timely and co-operative manner.

2.11 You should, e.g., ensure that you comply with all the reporting and notification requirements - see Chapter 10 (You and your regulator) of the Code - and respond promptly and substantively to communications.

Principle 8: You must run your business or carry out your role in the business effectively and in accordance with proper governance and sound financial and risk management principles.

2.12 Whether you are a manager or an employee, you have a part to play in helping to ensure that your business is well run for the benefit of your clients and, e.g. in meeting the outcomes in Chapter 7 (Management of your business) of the Code.

Principle 9: You must run your business or carry out your role in the business in a way that encourages equality of opportunity and respect for diversity.

2.13 Whether you are a manager or an employee, you have a role to play in achieving the outcomes in Chapter 2 (Equality and diversity) of the Code. Note that a finding of unlawful discrimination outside practice could also amount to a breach of Principles 1 and 6.

Principle 10: You must protect client money and assets.

2.14 This Principle goes to the heart of the duty to act in the best interests of your clients. You should play your part in e.g. protecting money, documents or other property belonging to your clients which has been entrusted to you or your firm.

Breach of the Principles

2.15 Our approach to enforcement is proportionate, outcomes-focused and risk-based. Therefore, how we deal with failure to comply with the Principles will depend on all the particular circumstances of each case. Our primary aim is to achieve the right outcomes for clients