QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
RICHARD CHARLES PRESCOTT
- and –
SOLICITORS REGULATION AUTHORITY
| RICHARD CHARLES PRESCOTT
- and –
|SOLICITORS REGULATION AUTHORITY
Mr. R. Mulchrone (instructed by Capsticks Solicitors LLP ) for the Respondent
Hearing dates: 12 JUNE 2019
Crown Copyright ©
MR JUSTICE LANE :
"1.6 Having received monies for the purpose of discharging professional disbursements he failed to either pay those disbursements to the appropriate recipients and/or in the absence of such payments, transfer the monies from office to client account in breach of Rule 17.1 (1)(b) and (c) AR 2011 and Principles 2 and 6 of the SRA Principles 2011.
The facts and matters relied upon in support of this allegation are set out at paragraphs 91-113 of this statement.
1.7 On dates including 6 May and 25 August 2016, in the course of litigation, he filed Defences (endorsed by Statements of Truth) which were disingenuous and misleading in response to claims made by professionals for their unpaid fees, contrary to all (or any) of Principles 2 & 6 SRA Principles 2011 and Outcome 5.1 SRA Code of Conduct 2011.
The facts and matters relied upon in support of this allegation are set out in paragraphs 113-126 of this statement."
Dishonesty was alleged with respect to the allegations at paragraphs 1.6, 1.7, however proof of dishonesty was not an essential ingredient for proof of those allegations.
Rule 5 statement
"Upon the court noting that Judgment has been entered against this firm of solicitors in circumstances where:
(a) there is clear evidence of liability
(b) liability is denied in a defence endorsed with statement of truth signed by a solicitor defendant
(c) the denial is contradicted by the written commissioning of the work and the subsequent unfulfilled promise of payment
(f) this is the second time this claimant has obtained judgment in this court against this defendant and in similar circumstances
And having regard to the Solicitors' Code of Conduct 2011 and in particular the requirement that a solicitor:-
(a) acts with integrity
(b) behaves in a way that maintains the trust the public places in him and the provision of legal services and
(c) complies with his legal obligations
The Court Manager is directed to direct the Court files in this case and … to the Solicitors Regulation Authority to consider what, if any, further action or investigations may be appropriate".
(a) a letter from the appellant's firm to CPL, dated 29 May 2015, instructing it to prepare a report on liability and causation;
(b) a letter from CPL to the firm, dated 29 March 2016, requesting payment of fees;
(c) a letter from CPL to the firm, dated 29 April 2016, requesting payment of fees;
(d) an email from the appellant to CPL dated 18 May 2016 stating that "we thank your (sic) recent telephone call and apologise for the delay regarding your fees. Our cashier is currently on holiday but we confirm we will pass your fee note to her when she returns";
(e) a letter from CPL to the firm dated 23 June 2016, chasing payment of outstanding fees;
(f) an email from the appellant to CPL dated 8 July 2016, which stated that "we thank you for your recent telephone call and sincerely apologise for the delay regarding your fee. We will speak to the cashier and ask her to send a cheque to you today or on Monday".
127. Dishonesty is alleged in respect of allegations 1.6 and 1.7. The Supreme Court has held in Ivey (Appellant v Genting Casinos (UK) Ltd t/a Crockfords (Respondent)  UKSC 67 that the appropriate test for dishonesty (Paragraph 74 of the Judgment) is:
"When dishonesty is in question the fact-finding tribunal must first ascertain (subjectively) the actual state of the individual's knowledge or belief as to the facts. The reasonableness or otherwise of his belief is a matter of evidence (often in practice determinative) going to whether he held the belief, but it is not an additional requirement that his belief must be reasonable; the question is whether it is genuinely held. When once his actual state of mind as to knowledge or belief as to facts is established, the question whether his conduct was honest or dishonest is to be determined by the fact-finder by applying (objective) standards of ordinary decent people. There is no requirement that the defendant must appreciate that what he has done is, by those standards, dishonest."
128. Paragraphs 96 – 101 above detail that in the specimen example of Client H the Firm received its costs including the professional fees of Counsel and the Respondent failed to make payment to Counsel, notwithstanding that he transferred the funds necessary to do so from client to office account.
129. The Respondent would have been aware that funds received by the Firm for the purpose of paying professional disbursements had been transferred from the client to office account, but that payment to the appropriate 3rd party had not subsequently taken place.
130. He would have known this both from the fact that he solely controlled the Firm's accounts so instructed or authorised the transfers from client to office account and also by the volume of complaints received, putting him on notice (if he wasn't already) that there were unpaid professional disbursements. The Respondent was therefore aware that the correct recipient of the funds had not been paid and the Firm had had the benefit of funds that were properly owed to others.
131. By retaining disbursement monies properly due to others and submitting Defences endorsed with a statement of truth, which were untrue and misleading, ordinary decent people would objectively regard this as dishonest behaviour.
132. In the course of the proceedings issued by [MR DR] who claimed £11,375.06 primarily for his unpaid counsel's fees, the Respondent submitted a Defence which stated that he 'denied' entering into any agreement. Judgment was secured against the Respondent for the sum claimed.
133. The Respondent admitted to the FIO that he had instructed [MR DR] and should not have 'denied' that. The Respondent claimed that the issue was really about whether payment was due within 30 days or at the conclusion of the matter as he contended. These fees however related to the case of Client H and the Respondent was aware that liability for costs had been agreed by the time he filed his Defence and were later paid in full. Notwithstanding this, the Respondent failed to pay [MR DR] and attempted to bring an appeal against the judgment.
134. The Respondent knew that he had instructed [MR DR] and knew that fees were due to him. He knew that the Firm had received all costs due to them in the matter of Client H by 1 August 2016 and by failing to address the misleading Defence he had submitted on 6 May 2016 and then bringing an appeal on 25 October 2016 based on the erroneous premise that there was no basis for [MR DR's] claim, he must have known that his Defence was disingenuous and misleading. In it is inconceivable that the Respondent did not appreciate that it was dishonest to defend claims by denying that he had instructed counsel when the opposite was true.
135. The Respondent filed a number of other defences in similar circumstances supported by a statement of truth. As an experienced litigator he would be aware of the clear distinction between not admitting (putting to strict proof) facts in pleadings and denials of them.
136. Judges have made it clear that misleading the court is an extremely serious matter and such conduct will be considered gravely. In the case of Brett v SRA  EWHC 2974 (Admin) the Lord Chief Justice commented as follows:
"… misleading the court is regarded by the court and must be regarded by any disciplinary tribunal as one of the most serious offences that an advocate or litigator can commit. It is not simply a breach of a rule of a game, but a fundamental affront to a rule designed to safeguard the fairness and justice of proceedings. Such conduct will normally attract an exemplary and deterrent sentence. That is in part because our system for the administration of justice relies so heavily upon the integrity of the profession and the full discharge of the profession's duties and in part because the privilege of conducting litigation or appearing in court is granted on terms that the rules are observed not merely in their letter but in their spirit. Indeed, the reputation of the system of the administration of justice in England and Wales and the standing of the profession depends particularly upon the discharge of the duties owed to the court … Where an advocate or other representative or a litigator puts before the court matters which he knows not to be true or by omission leads the court to believe something he knows not to be true, then as an advocate knows of these duties, the inference will be inevitable that he has deceived the court, acted dishonestly and is not fit to be a member of any part of the legal profession."
137. District Judge Jones concluded that the Respondent's Defences were misleading and noted that this was not the first time he had seen a misleading Defence produced by the Respondent. He stated there was "clear evidence of liability" but that "Liability is denied in a defence endorsed with a statement of truth signed by a solicitor defendant." And he found that "The denial is contradicted by the written commissioning of the work and a subsequent unfulfilled promise of payment".
138. There was a clear benefit to the Respondent in retaining monies received for payment of professional disbursements rather than pay them to their rightful recipients. The Respondent benefitted significantly given the scale of the disbursement monies retained.
139. Although according to the test set out in Ivey "There is no requirement that the defendant must appreciate that what he has done is, by those standards, dishonest", the Respondent relied on Defences which were untrue in seeking to evade liability for monies he must have known were due for payment to professional he had instructed. The overwhelming and irresistible inference therefore is that he knew the Defences were misleading when he submitted them. The Lord Chief Justice in Brett held that where a solicitor does this "… the inference will be inevitable that he had deceived the court, acted dishonestly and is not fit to be a member of any part of the legal profession."
The SDT's judgment
(a) Findings on allegation 1.6
"20.20 The Respondent accepted that he had breached the SAR as alleged. The exemplified matter of H provided clear evidence of the Respondent's breach of the SAR. Accordingly, the Tribunal found beyond reasonable doubt that the Respondent had breached the SAR as alleged and admitted. The Respondent accepted that it was his responsibility to ensure that professional disbursements were paid in accordance with the Rules. He also accepted that the table detailing £146,215.42 of unpaid Counsel's fees was accurate. Further he accepted that in a number of cases he had failed to pay Counsel's fees after receipt of the monies to pay those fees. He explained that the non-payment was "not intentional" but was due to the problems with accounts". It was clear that in the exemplified matter of H, the Respondent was fully aware of the amount of costs received, and the disbursements which ought to have been paid. The Tribunal did not accept that the failure to pay those fees was a result of "accounting errors". The Respondent knew that SH, who usually dealt with those matters, was only at the office sporadically. He was the sole operator of the Firm's accounts and it was he who had transferred the monies from client to office account. He did so knowing that the disbursements needed to be paid but he failed to do so.
20.21 The Tribunal considered the chronology in the H matter
20.2.1 April 2016 - Counsel in that matter had issued proceedings against the Respondent (albeit that the proceedings wrongly named the Respondent's Firm as the defendant). "
20.21.2 6 May 2016 - the Respondent filed a defence to the claim.
20.21.3 10 May 2016- Mr H's matter was settled by consent.
20.21.4 5 July 2016 - the Respondent received £30,000 as an interim payment towards the costs.
20.21.5 13 July 2016- the Respondent was informed by his costs lawyers that costs had been agreed in the sum of £45,000.00. That letter included a breakdown of those costs, including the sums agreed for Counsel.
20.21.6 1 August 2016 - the Respondent received the balance of costs in the sum of £15,000.
20.21.7 16 August 2016 – by this date the monies received had been transferred from client to office account.
20.21.8 30 September 2016 - Counsel obtained judgment against the Respondent
20.21.9 25 October 2016 – the Respondent obtained permission to appeal
20.21.10 10 January 2017 - HHJ Lochrane ordered that the Respondent's permission to appeal be set aside.
20.22 The Tribunal determined that the Respondent knew that the monies were owed to Counsel. He was aware, having filed a defence, of the proceedings issued by Counsel for the outstanding fees. Indeed, it was only 4 days after having filed his defence that the matter was settled. The Tribunal determined that at the time of the settlement, the Respondent was fully aware of the amounts owed. It was inconceivable that having settled the matter so soon after filing his defence, the Respondent did not recall that he was being sued for outstanding fees by Counsel in the case. It was also inconceivable that on receipt of the letter from his costs lawyers and receipt of the funds, the Respondent did not realise that he needed to pay Counsel's fees. Even on the Respondent's own case, namely that fees were not due until the matter was concluded, he ought to have paid Counsel in August when he received costs in full. He did not do so. Counsel successfully obtained Judgment on 30 September 2016. At this point the Respondent still did not pay Counsel's fees despite having received the monies to do so over 8 weeks prior to that date. Instead, on 25 October 2016, some 12 weeks after he had received the funds, he obtained permission to appeal against the Judgment. Even as at 20 April 2017, 9 months after receipt of funds to pay, the Respondent had not paid Counsel.
20.23 The Tribunal noted that the Respondent had accepted, both in interview and during his oral evidence that there were other matters where funds to pay professional disbursements had been received, transferred from client to office account, but had not thereafter been used to pay the disbursement.
20.24 That the Respondent had breached Principle 6 was plain on the evidence. Members of the public would expect a solicitor to use monies for the purposed for which those were provided. Such conduct did not maintain the trust the public placed in him and in the provision of legal services. Thus the Tribunal found beyond reasonable doubt that the Respondent had breached Principle 6 as alleged.
20.25 The Tribunal considered that it had become the Respondent's practice to use professional disbursement monies to support his Firm. That much was clear from the level of the shortage on client account. As to the Respondent's position that Counsel's fees should be treated differently to monies received from a client personally, and that the proposed amendments to the SAR would no longer treat monies for professional disbursements as client monies, the Tribunal considered this was a non-point. The Rules, as they stood at the time of the Respondent's conduct (and still stand as at the time of the Tribunal's consideration) were that monies received for professional disbursements are client monies. This was abundantly clear. The Tribunal found beyond reasonable doubt that no solicitor, acting with integrity, would use client money to support his business in breach of the SAR. Thus it found that the Respondent had breached Principle 2 as alleged.
20.26 The Tribunal agreed that the appropriate test for dishonesty was that detailed in Ivey. The Tribunal determined that the Respondent knew that he was using client money to support his business. His position as to the chaotic nature of the accounts did not explain his conduct as regards, for example, the payment to Counsel in the H matter above. Not only did he not pay Counsel in the clear knowledge that the money had been received, he continued to dispute that monies were owed. Not only was this conduct lacking in integrity, such conduct was dishonest. The Respondent knew he had received the monies to pay Counsel's fees, transferred that money into his office account and then utilised those monies for his own purposes. Reasonable and decent people would consider such conduct to be dishonest.
20.27 Accordingly, the Tribunal found allegation 1.6 proved beyond reasonable doubt, including that the Respondent's conduct had been dishonest"..
"21.17 The Tribunal noted that in the MSA matter, the Respondent had denied liability. He had not made clear in that Defence that he disputed the time for payment as opposed to liability for the payment. The Tribunal found that to deny liability for the fees when the Respondent knew that the fees were owed was misconduct. That liability had been denied was evident from the Order of DJ Jones. The Tribunal found the Respondent's submission that as he was acting as a litigant in person Outcome 5.1 did not apply, unattractive. As a solicitor of the Supreme Court, the Respondent was under a duty not to knowingly or recklessly mislead the Court at all times, not just when he was acting as an Advocate or exercising a right to conduct litigation.
21.18 The Tribunal noted that in the CPL matter the Respondent had instructed SPC on 29 April 2016, and had emailed him on 18 May and 8 July 2016 promising to settle the invoice. In his Defence to the claim he did not admit that he had entered into any agreement or that he had failed to pay the sums due in relation to the provision of any professional services. He denied that he was indebted to CPL as alleged or at all. His defence of this matter was, in essence, the same as his defence to the MSA matter above.
21.19 The Tribunal found beyond reasonable doubt that in denying liability, when the Respondent knew that he owed the monies claimed and had made an unfulfilled promise to pay, the Respondent had knowingly attempted to mislead the Court. Nowhere in the Defences did the Respondent explain that whilst the services had been provided, the monies were not due as the case had not been concluded. Nor was such an issue raised with SPC when he emailed promising to settle the invoice. Such conduct breached Principle 6 - Members of the public would not expect a solicitor to file a Defence, on his own account, which he knew to be untrue. That such conduct lacked integrity was plain. No solicitor acting with integrity would file a misleading Defence. The fact that the denials of liability were contained only in the pleadings and not in witness statements was immaterial. The Defences signed by the Respondent contained a statement of truth. Having found that the Respondent had knowingly attempted to mislead the Court, it was evident that the Respondent's conduct had been dishonest. Reasonable and decent people operating ordinary standards of honesty would consider that in knowingly attempting to mislead the Court, the Respondent's conduct was dishonest.
21.20 The Tribunal noted the Defence in the H matter. Whilst it was not clear that the Respondent was challenging the time in which payment was due, it was clear that he did not dispute instructing Counsel on that matter. It was plain that he denied that the entity named in the Claim was the correct Defendant, as he had denied that the "Defendant named in the Claim form" had entered into any agreement. The Tribunal did not find this to be misleading or disingenuous. Consequently, the Tribunal also found that the Respondent's conduct as regards this matter was not dishonest. Accordingly allegation 1.7 as regards the H matter was dismissed.
21.21 Accordingly, the Tribunal found allegation 1.7 proved beyond reasonable doubt including that the Respondent's conduct was dishonest save for the H matter, in [sic]"
"35. … we do not consider that the allegations of dishonesty were clearly and properly made in the Rule 4 statement. The Rule 4 statement, after alleging conduct unbefitting a solicitor, should have identified that conduct and stated with precision in relation to each aspect of the allegedly guilty conduct the respect in which it was said to be dishonest. "
"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".
"55. This appeal proceeds by way of review and not re-hearing. The tribunal is a specialist tribunal, which had the particular advantage of hearing and seeing all the evidence over many days. Interference with its findings will not be made lightly, and will be justified only if those findings are "plainly wrong", or there has been some serious procedural irregularity – see Barnett v SRA  [EWHC] 1160 (Admin) ; and Law Society v Salisbury  [EWCH] Civ 1285;  WLR 1286 at ".
"62… Motive is not a necessary ingredient of dishonesty (or want of integrity) … it may of course be relevant, the importance of its role being fact-specific to each case."
"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, 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 conspire unlawfully…"
The appellant's challenge
"15. In this case, the appellant was met with schedules and faced with cumulative tables. Allegation 1.6 was wrongly drafted. Each particular allegation of dishonesty should have been extracted from the large body with each one forming its own separate allegations. Each separate act of dishonesty should have been investigated, separately put to the appellant and then separately determined by the requisite statutory body. In this case it was not. The SRA fell into error".
"TB do you understand the seriousness of there being an ongoing shortage in the client bank account?
TB …your position is you're going [to] wait for those costs to be settled before you rectify…?
RP Well we may, we may get another interim payment and obviously if we do then I… can settle it out of that interim payment…
TB Can I ask why you don't just settle it out of the interim payment you have already got?
RP We had to use that to cover other things, other outgoings".
"21. Outcome 5.1 in the SRA Code of Conduct 2011 requires a Solicitor to achieve the outcome of not attempting to deceive or knowingly or recklessly mislead the court. However, the context of outcome 5.1 is chapter 5, which concerns a Solicitor exercising a right to conduct litigation or acting as advocate. Its purpose is to set out outcomes that achieve a balance between the otherwise conflicting duties owed by a solicitor to his client and to the court.
22. In none of the proceedings referred to in the supervision report was I exercising the right to conduct litigation or acting as an advocate. I was not representing a client, I was a litigant myself and the obligations in chapter 5 did not apply."