QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
(SIR BRIAN LEVESON)
MRS JUSTICE CARR
| PETER RHYS WILLIAMS
|- and -
|SOLICITORS REGULATION AUTHORITY
Michael McLaren Q.C. and Marianne Butler (instructed by Capsticks Solicitors LLP)
for the Respondent
Hearing dates : 7, 8 and 9 June 2017
Crown Copyright ©
Mrs Justice Carr :
i) Representing that his client did not have a valuation of a certain property in the sum of £3.9million ("the £3.9m representation"): misconduct involving dishonesty;
ii) Representing that negotiations were proceeding between his client and F Limited ("the negotiation representations"): misconduct amounting to a want of integrity; and
iii) Representing that he acted for F Limited ("the F Ltd representations"): misconduct amounting to a want of integrity.
Summary of relevant factual background
Mr Williams and Wilsons
Mr Williams' dealings with the client
i) The purchase from Northern Rock was at market value;
ii) The client obtained a proper valuation, which would be disclosed to Northern Rock;
iii) The connection between the purchaser and the client was disclosed; and
iv) JD instructed an independent solicitor.
" currently engaged in the process of trying to get a firm increased offer and will be pressing the prospective purchaser through solicitors to see if the price can be improved."
"The offer of £2.2 million is not an offer 'by our client'. It is an offer which has been made to our client by a prospective purchaser. Our Client's concern is that the offer of £2.2 million, in a continuing difficult market, will be reduced and not increased."
The Rule 5 statement
i) The headline allegations were spelt out: Mr Williams, in the course of advising and/or acting on behalf of the client in relation to the proposed sale of the property and the related communications and/or negotiations with the client's mortgagee, his trustee in bankruptcy and third parties:
" 1.1 failed to act with integrity in breach of Rule 1.01 of the Solicitors' Code of Conduct 2007 and (from October 2011) Principle 2 of the SRA Principles 2011.
1.2 failed to act in the best interests of his client in breach of rule 1.04 of the Solicitors' Code of Conduct 2007 and (from October 2011) Principle 4 of the SRA Principles 2011.
1.3. failed to behave in a way that maintains the trust the public places in him and in the provision of legal services in breach of Rule 1.06 of the Solicitors' Code of Conduct 2007 and (from October 2011) Principle 6 of the SRA Principles 2011.
1.4 ... took unfair advantage of third parties in his professional capacity in breach of Rule 10.1 of the Solicitors' Code of Conduct 2007 and (from October 2011) as a consequence he failed to achieve the mandatory Outcome (11.1) in the SRA Handbook 2011.
1.5 . deceived or knowingly misled the Court in breach of Rule 11.01(1) of the Solicitors' Code of Conduct 2007."
It was stated that all the allegations were made on the basis of dishonesty. However, "proof of dishonesty was not an essential ingredient for proof of any of the allegations";
ii) The documents relied upon were exhibited;
iii) The facts and matters relied upon were set out. Paragraph 7 stated:
" The thrust of the allegations is that the Respondent devised and sought to implement a scheme to defraud the client's creditors and in an attempt to give effect to the scheme he misled or caused his client to mislead various third parties "
iv) The relevant parts of the Solicitors' Code of Conduct 2007 and the SRA Principles 2011 were then set out;
v) The case was then divided into three parts:
a) Devising the fraudulent scheme;
b) Deceitful misrepresentations; and
c) Misleading the court.
vii) The course of the SRA's investigation was then set out.
i) Misrepresentations as to the value of the property; and
ii) Misrepresentations as to the structure of the transaction.
"(ii) Deceitful misrepresentations
A. The value of the Property
82. The Respondent made statements on behalf of the client in correspondence with Northern Rock and the Trustee (and its solicitors) as to the value of the Property which he knew were false and/or misleading, alternatively he was reckless as to their truth or falsity and thereby:
82.1 failed to act with integrity; and
82.2 failed to behave in a way that maintains the trust the public places in him and in the provision of legal services; and
82.3 took unfair advantage of third parties.
83. The Respondent made the following representations to Northern Rock as to the value of the Property:
83.1 In his letter of 22 June 2011 to Northern Rock the Respondent stated
83.1.2 'The Purchaser has offered to buy the Property for £2.2million.'
83.1.4 ' our client will seek to negotiate with the Purchaser in order to try and obtain an increase in the offer, ideally to £2.3 million.'
83.2 As recorded in an Attendance Note of 16 August 2011, during a telephone conversation with JH of Northern Rock that day, the Respondent made the following statements
83.2.2 ' PRW said that he is currently engaged in the process of trying to get a firm and increased offer. PRW said that he would expect at least £2.3million and will be pressing the prospective purchaser through solicitors to see if the price can be improved.'
83.2.3 'PRW said that although there is a very significant negative equity, there is no prospect of the bankrupt estate achieving anything out of this, it is plain that the Trustee in Bankruptcy is going to do nothing to assist '
83.5 In his letter of 1 November 2011 to JH and two other Northern Rock employees, the Respondent stated: 'Our client's concern is that the offer of £2.2million, in a continuing difficult market, will be reduced and not increased.'
84. The Respondent made the following representations to the Trustee as to the value of the Property:
84.5 In his letter of 13 April 2012 to solicitors for the Trustee, the Respondent stated: 'It is correct that the client obtained a valuation. That was from Carter Jones. That was in line with the offer of £2.2million which had been received' and 'the client does not have a valuation of the property at £3.9million.'
85. Accordingly, the Respondent expressly represented to Northern Rock and/or the Trustee that:
85.1 As at April 2011, that there was significant negative equity in the property ie the value of the Property was substantially less than the (roughly) £2.8 million Northern Rock mortgage.
85.2 From at least April 2011 until at least April 2012, the market value of The Property was approximately £2.2million and that the client believed as such.
85.3 A purchaser had offered the client £2.2million for the property and the client had been in negotiations with the purchaser to secure and increase that offer. By implication, the Respondent thereby represented that (i) the offer being made was a genuine one, in that it was being made by a third party, independent of the client and (ii) no higher offers were available for consideration.
86. The Respondent knew these representations to be materially false and/or misleading, alternatively he was reckless as to their truth or falsity, in that:
86.1 The Respondent knew or ought to have known that the value of the property was substantially in excess of £2.2 million and that the client believed such:
86.1.1 As at the 18 February 2010 meeting with the client the Respondent became aware that: (1) it was the client's view that a 'very substantial undervalue' had been put on the property; 2) that an offer had been made on the property for £3.9 million; (3) that another offer was 'floating around' in the same price range
86.1.2 As at the latest 7 June 2011, the Respondent was aware that the client reached an agreement with JD to sell the property for £3.9 million and JD had paid nearly £1 million towards the purchase
86.1.3 In a 9 February 2012 letter to the client, the Respondent asked the financier to lend money to the client based on 'the full value of the onward sale' of the property, i.e. £3.9 million
86.1.4 On 29 February 2012, the client told the Respondent he had spoken to Savills who thought they could sell the property for more than £3.9 million
86.1.5 As at mid-March 2012, the Respondent was aware that the client had obtained substantially higher valuations for the property. In an email dated 18 March 2012 from the client to the respondent, the client referred to an 'off the record' valuation of £3.9 million On 5 April 2012, during a conversation with the Respondent, the client referred to a valuation of £3.95 million and on 23 April 2012 the client informed the Respondent that Hamptons had valued the property at between £3.75 million and £4.45 million
86.1.6 During a meeting on 18 April 2012 with the Respondent, the client stated that 'we know' the value to be in the region of £3.9 million. He also confirmed that Knight Frank wanted to market the property at £4.5m
86.2 The Respondent knew or ought to have known that there was not negative equity in the property:
86.2.1 As at 7 June 2011, an agreement was in place for the client to sell the property to JD, through a company, for £3.9 for which nearly £1 million (later in excess of £1.3 million) had been put towards the purchase, monies which had already been spent by the client. This agreement was later reduced to writing
86.2.2 The price of £3.9 million was in line with at least one other offer made on the property and the client's stated assessment of its value
86.3 The Respondent knew or ought to have known that there was no offer of £2.2 million for the property.
86.3.1 No offer of £2.2 million had been made to the client for the property. The only offer that had been made on the property was JD's offer of £3.9 million, which the Respondent knew as at 7 June 2011 had been accepted by the client.
86.3.2 At no point was the client engaged in negotiations with a 'Purchaser' to sell the property for a price of around £2.2 million. The client did not at any time intend to seek 'an increase in the offer, ideally to £2.3 million' nor was he 'engaged in the process of trying to get a firm and increased offer' Similarly, the Respondent never expected to press a 'prospective purchaser through solicitors to see if the price can be improved [above £2.2 million]' Each of these statements were fabrications based on a fictional purchaser, intended solely to hide the true value of the property and the fact that the transfer from Northern Rock was at an undervalue. The Respondent recognized as much when, during a conversation on 23 January 2012, the Respondent advised the client that there should be a 'strict veil of confidentiality' between the two ends of the transaction because if AP saw the sale from Northern Rock at £2.2 million and then the onward sale to his client JD at £3.9 million, the obvious question would be whether there was a transfer at an undervalue "
The hearing and the judgment
i) The £3.9m representation: Mr Williams had acted dishonestly, failed to act with integrity, failed to behave in a way that maintained the trust the public placed in him and the provision of legal services and took unfair advantage of third parties in his professional capacity;
ii) The F Ltd representations: Mr Williams had failed to act with integrity and failed to behave in a way that maintained the trust the public placed in him and the provision of legal services; and
iii) The negotiation representations: Mr Williams had failed to act with integrity and failed to behave in a way that maintained the trust the public placed in him and the provision of legal services.
The Tribunal went on to consider both the question of sanction and costs.
i) The market value of the property in 2011/2012 was in fact £2.2million;
ii) There was no cogent evidence to support the proposition that the market value was substantially in excess of £2.2million;
iii) No valuation evidence to support a case for a market value in excess of £2.2million had been served; and
iv) The sale price achieved in 2014 of £2.4million was determinative of the point.
i) Mr Williams' representation to Northern Rock in the letter of 22nd June 2011 that the purchaser had offered to buy the property for £2.2million was accurate;
ii) The negotiation representations were false and misleading;
iii) Mr Williams' representations as to negative equity were accurate;
iv) Mr Williams did not believe the £3.9m representation to be true at the time he made it. He had consciously and deliberately misrepresented the position; and
v) The F Ltd representations were false and misleading.
Grounds of appeal
i) None of the matters the subject of the adverse findings was sufficiently pleaded in the Rule 5 statement;
ii) The allegations underlying the findings on the £3.9m and the F Ltd representations were not put to Mr Williams in cross-examination or questioning by the Tribunal. Nor were they mentioned in closing argument; and
iii) Each finding was in any event irrational, perverse, unsupported by the evidence given before the Tribunal and inadequately analysed and considered by the Tribunal.
i) The Chair of the Tribunal, Mr James Astle
He sets out his professional experience, alongside that of the other solicitor member of the Tribunal, Mr Kenneth Duncan, and that of the lay member, Mr Stuart Hill. Mr Astle has been a practising solicitor who has worked in private practice since 1980. He practises in criminal, regulatory and town and country planning law. He has been a solicitor member of the SDT since 2009. Mr Duncan has been in private practice since 1971. His principal field of expertise has been in property litigation. He has been a solicitor member of the SDT since 2006. Mr Hill has been a lay member of the SDT since 2009. He has held senior managerial positions in several international companies and in the 1990s was Chief Executive of HM Land Registry and Chief Land Registrar of England and Wales. Mr Astle's statement is said to reflect the views of all members of the Tribunal. He rehearses the Tribunal's findings on dishonesty and describes its approach to the question of sentencing, including by reference to the SDT "Guidance Note on Sanctions" (4th Ed December 2015) ("the Guidance Note"). The Tribunal did not refer and was not referred to the judgment in the Ford case. Its judgment was drafted, as is normal, by the clerk attending on the Tribunal. She provided assistance in accordance with the procedure approved by the Court of Appeal in Virdi v Law Society (Solicitors Disciplinary Tribunal intervening)  EWCA Civ 100;  1 WLR 2840. This process did not involve the clerk referring the Tribunal members to the judgment template or to standard paragraphs or precedents used by her, because she was responsible for the "mechanics" of drafting. She played no part in the actual decision-making process. Each Tribunal member in turn reviewed the draft prepared by her. No member was aware of the judgment in the Ford case. The paragraphs dealing with sanction properly reflected the judgment of the Tribunal, in particular with regard to: the extent of the harm to the reputation of the profession arising from Mr Williams' misconduct; the Tribunal's finding that Mr Williams' evidence had been disingenuous and self-serving; and that his explanation of his conduct had been both incredible and disingenuous. The judgment truly represents the considered opinion of the Tribunal.
ii) The Clerk to the Tribunal, Ms Audrey Osborne
Ms Osborne confirms the nature of her role, as set out above. She uses the SDT's standard judgment template, amended to suit her style. She uses precedents, including judgments from past cases where she has been the clerk. She refers to the facts as per the Rule 5 statement to the extent that they are non-contentious. She writes the sanction section in the same order as the factors which appear in the Guidance Note. Ms Osborne confirms that she was also the clerk and prepared the draft judgment in the Ford case. The Tribunal members dealing with Mr Williams did not refer to the judgment in the Ford case, nor did she refer them to it, either during the hearing or the writing of the judgment. She would have used a precedent for paragraphs 73 to 75 of the judgment. She cannot say definitively if she used the judgment in the Ford case. Whatever precedent she used, she would have adapted it to reflect the specific findings and reasons of the Tribunal's deliberation. The decision drafted by her would subsequently have been considered and approved by the Tribunal as faithfully recording its findings and reasons. The other paragraphs in the sanction section are essentially standard paragraphs.
Dishonesty v want of integrity
"36. It is elementary, and supported by abundant authority, that if you are accused of dishonesty, then that must be spelt out against you with pitiless clarity. In my judgment, you cannot circumvent this obligation by pleading the same facts and matters as want of integrity. We do not have in our system dishonesty in the first degree and dishonesty in the second degree."
The role of the appellate court
"For the avoidance of doubt, the Tribunal read all of the documents in the case, made notes of oral evidence, and referred to the transcript of the hearing. The absence of any reference to particular evidence should not be taken as an indication that the Tribunal did not read, hear or consider that evidence."
Complaints of serious procedural irregularities
"87. The allegations against Ms Francis fall into the category of the most serious. Not only are they fraud allegations; they are fraud allegations against a solicitor
88. Of particular relevance to a case of fraud such as the present is the question of motive. By and large dishonest people are dishonest for a reason. They tend not to be dishonest wilfully or just for fun. Establishing a motive for deceit, or conspiracy, is not a legal requirement, but if a motive cannot be detected or plausibly suggested then wrongful intention (to tell a deliberate lie in order to deceive) is less likely. The less likely the motive, the less likely the intention to deceive, or to conspire unlawfully. In many, if not most, fraud cases this would not be a particularly live point. The defendant is often a person who would be a direct beneficiary of the fraud, and a plausible motive is, to that extent, relatively easily propounded. The present case is, however, different.
89. Miss Francis could not conceivably be said to have any direct benefit in the loan which Mr McGuinness was trying to get. She had no interest in his business. The motive suggested by Mr Hubble was of a different kind. He suggested that Miss Francis was trying to help her client to succeed in his transaction and to ensure his business continued to come to the firm.
90. That, as a motive, would be plausible in some cases. One can imagine cases of small firms with a very important client, to whom a particular partner or solicitor is close in commercial or personal terms, which makes it all the more plausible that the solicitor will assist his client's transactions by being less than straight from time to time. However, in this case I do not find it particularly plausible."
"Mr Lawrence submitted that it was 'almost vanishingly unlikely' that the Respondent was consciously dishonest in this case. He may well have made some mistakes and he may well have written some letters about which concessions had been made. He regretted that, but was 'very, very, very unlikely' that there was the sort of conscious dishonesty which was a precondition of a finding of dishonesty before the Tribunal."
Pleading and putting allegations of dishonesty
"It is a cardinal principle of litigation that if serious allegations, in particular allegations of dishonesty are to be made against a party who is called as a witness they must be both fairly and squarely pleaded, and fairly and squarely put to that witness in cross-examination."
" unless notice had already been given of the cross-examiner's intention to rely upon such matters, it is necessary to put to an opponent's witness in cross-examination the nature of the case upon which it is proposed to rely in contradiction of his evidence " (per Hunt J, in Allied Pastoral Holdings (supra)).
" no obligation to raise a matter in cross-examination in circumstances where it is perfectly clear that (the witness) has had full notice beforehand that there is an intention to impeach the credibility of the story which he is telling."
What he was saying was that:
" it will not do to impeach the credibility of a witness upon a matter on which he has not had any opportunity of giving an explanation by reason of there having been no suggestion whatsoever in the course of the case that his story is not accepted."
"So long as it is clear from the thrust of the cross-examination (or from notice given beforehand) that a witness' evidence will be challenged, I do not see that it is necessary to continue exploring a point in detail when the witness has already had an opportunity to state his case."
On the facts of that case, Nugee J held that further cross-examination would have been an "empty technicality" (again at ).
The finding of dishonesty in relation to the £3.9m representation
i) Before mid-March 2012, Mr Williams made repeated statements to third parties that an onward sale had been agreed:
a) On 9th February 2012, he wrote to a financier concerning " the onward sale for £3.9m which has been agreed";
b) On 17th February 2012, he wrote to another financier concerning " the onward sale by the company to [JD] which has been agreed in principle at £3.9m";
c) On 8th March 2012, he wrote to Barclays Bank plc stating "our client has agreed, subject to contract, to sell [the property] for £3.9million"; and
d) On the same day he wrote to HSBC in identical terms;
ii) On 18th March 2012, the client emailed Mr Williams stating that:
"[T]he valuation took place on Monday and valuer told me off record that he was happy with its value at £3.9m so just need him to confirm this in writing.";
iii) The next day, Mr Williams responded by email with the word "Good";
iv) An attendance note of Mr Williams recorded a conversation with the client on 20th March 2012, where the client told him that: "the valuation had gone well" and that "UTB have already spoken to [Mr Williams]. [The client] has given them a copy of the valuation just obtained. [The client] thinks they will proceed" ;
v) On 22nd March 2012, solicitors for the client's trustee in bankruptcy, CKFT, wrote to Wilsons stating that they knew of a valuation at £3.9m:
"[UTB] state that a broker acting on behalf of your client has stated that the Property has been valued at £3.9million and that your client has been paid £1.3million by a third party who is ultimately going to purchase the property from [the special purchase vehicle]. This is clearly a matter of some concern".
vi) On 26th March 2012, Mr Williams wrote to the client describing the letter as "plainly disastrous";
vii) On 26th March 2012, Mr Williams produced the first draft of the letter that went out on 13th April 2012. It contained the £3.9m representation;
viii) On 27th March 2012, Mr Williams wrote to the client stating that he had decided to "slow things down". He attached a slight re-working of the draft letter, but the £3.9m representation remained;
ix) On 30th March 2012, Mr Williams recorded the client's approval of the draft, save in a minor, immaterial respect. He also recorded the client informing him that HSBC might contact him seeking confirmation that the property was on the market for £3.9m;
x) On 5th April 2012, Mr Williams recorded the client telling him that "the valuer has just completed the valuation of £3.95 million";
xi) On the same day, Mr Williams wrote to the client with detailed advice as to the fact (and consequences of the fact) that, under the Insolvency Act 1986 (as amended by the Enterprise Act 2002), the trustee in bankruptcy's interest in the property would re-vest in the client on the third anniversary of the client's bankruptcy, ie 17th April 2012. His advice was that it would be sensible to send the draft letter "not long before 17 April". The letter gave nothing away, but "appears to be a straightforward response to the questions" which had been raised;
xii) On 10th April 2012, Mr Williams recorded the client's agreement that the letter should be sent to CKFT that Friday;
xiii) On 11th April 2012, Mr Williams was sent an email by a financier, attaching a completed draft loan proposal, recording the "Total Valuation" to be £3.9m. (Mr Williams' evidence to the Tribunal was that he probably did not open this attachment);
xiv) On 12th April 2012, Mr Williams sent a final draft with further amendments to the client, stating that it would be sent the next day;
xv) On the same day, Mr Williams wrote to CKFT apologising for not having been in touch earlier, stating that was an oversight, and that the delay in the response to CKFT's letter of 22nd March 2012 was that it had "managed to slip through the net"; and
xvi) On 13th April 2012, Mr Williams sent out the letter to CKFT, in which it was stated, amongst other things, that the client did not have a valuation of the property at £3.9million.
i) The statements by Mr Williams;
ii) Mr Williams' state of mind (knowledge or recklessness); and
iii) That thereby the relevant principles in the Solicitors' Code of Conduct were breached.
i) It is likely that it would have been addressed substantively and in some detail on behalf of Mr Williams in closing submissions; and
ii) It is unlikely that the Tribunal would have made the error that it did (at paragraph 90.4), to the effect that the £3.9m representation was introduced only after a first draft of the letter had been produced. This was a potentially material point in terms of Mr Williams' alleged design and thought processes.
The findings of want of integrity: 22nd June, 16th August and 1st November 2011
i) That "... our client will seek to negotiate with the Purchaser in order to try and obtain an increase in the offer ";
ii) That Mr Williams was "currently engaged in the process of trying to get a firm and increased offer";
iii) That Mr Williams "would be pressing the prospective purchaser through solicitors to see if the price can be improved"; and
iv) That "[o]ur client's concern is that the offer of £2.2million, in a continuing difficult market, will be reduced and not increased."
"89.87 The Respondent explained in his oral evidence that he regretted the words 'to negotiate' and that he would not use those words if writing the letter [of 22nd June 2011] again. Further, he stated that he had in mind a negotiation with Northern Rock. The Tribunal did not accept this. It was clear when the Respondent referred to 'negotiation' in his communications with Northern Rock that he was referring to negotiations between his client and the purchaser. It was also clear from the evidence that at no time did the Respondent seek to have the Client negotiate with the purchaser. There was no real negotiation between the Client and the purchaser in terms of trying to achieve a higher figure. The Tribunal found that the Respondent had made the representations as to negotiation with the sole purpose of seeking to make the deal more attractive to Northern Rock. Accordingly, the Tribunal found that the representations made to Northern Rock in relation to negotiations about the price were false and misleading.
89.88 The Tribunal found that the Respondent's statement to Northern Rock relating to concern that the offer in the declining market would be reduced and not increased, was also false and misleading. It was the Client's desire that the offer be reduced, not his 'concern' that it might be. The Tribunal noted that in an attendance note of 25 October 2011, the Respondent recorded the Client as stating that 'he "wants to shave" more money off the price to be paid to Northern Rock' and that 'although he does not rule out completely the possibility that we might engage in some "shaving" last minute with Northern Rock, realistically this is unlikely '. Further, the Respondent referred to the deal with Northern Rock being 'on a knife edge' and advised that there should be no consideration or reducing the price from £2.2million. The Tribunal determined that [the] Respondent had represented that the Client was genuinely worried about a reduction in the offer price when in actuality, the Respondent knew that the Client himself wanted to reduce the price. Accordingly the Tribunal also found the statement made to Northern Rock on 1 November 2011 to be false and misleading."
The complaint of judicial plagiarism
"The Tribunal may prescribe the duties to be performed by the clerks or for which they shall be responsible and those duties shall include arrangements for
(f) preparing summaries of allegations, evidence and submissions for inclusion in the Tribunal's detailed findings; "
Sir Brian Leveson P: