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England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Sheikh v The Law Society [2005] EWHC 1409 (Ch) (01 July 2005)
URL: http://www.bailii.org/ew/cases/EWHC/Ch/2005/1409.html
Cite as: [2005] EWHC 1409 (Ch), [2005] 4 All ER 717
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CHANCERY DIVISION
Strand, London, WC2A 2LL |
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B e f o r e :
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| Anal Sheikh |
Claimant |
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| - and - |
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| The Law Society |
Defendant |
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Hodge Malek QC and Andrew Peebles (instructed by Russell-Cooke) for the Defendant
Hearing dates: 04.05-06.05 & 09.05-13.05
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Crown Copyright ©
- These are as follows.
- Miss Anal Sheikh is a solicitor. Her firm is called Ashley & Co. She joined the firm as an as an assistant in 1987, and after periods as a salaried partner and then (I believe) as a partner she became the sole proprietor of the practice in 1993. Since then and until the events earlier this year which I will describe she has been the sole . practitioner in the firm. In 2004 the Law Society commenced an inspection of and investigation into the practice. I will describe some aspects of it later in this judgment, but the outcome was that a report prepared by officers of the Society was . placed before an Adjudication Panel of the Society's Compliance Board, to which the Society's powers of intervention under the Solicitors Act 1974 (the Act) have been delegated. Intervention is a drastic process. In detail there are three consequences: first the Law Society, through intervention agents, takes control of the practice moneys of the intervened upon solicitor or firm; second the Society, also through its intervention agents, takes possession of the firm's documents; third the practising certificate of the intervened upon solicitor is suspended. The practical effect of an intervention, particularly on a sole practitioner, is to bring the practice to an end and to put the solicitor out of business. The Panel met on 17 February of this year, 2005, . and resolved to intervene into the practice, of Ashley & Co. The Law Society can only intervene in a practice on one or more specific grounds which are set out in the Act. One such ground is if there is reason to suspect dishonesty on the part of the solicitor in connection with his or her practice. Another is if there have been breaches of the Solicitors Accounts Rules. The resolution of the Panel that the Society should intervene in this case was stated by the Panel to be based on those two grounds.
- Miss Sheikh had of course known about the Society's inspection of and investigation into her firm, but she did not know about the report to the Panel. The first that an intervened upon solicitor hears of the intervention is after a Panel has resolved that there shall be one, and that is how it was in this case. The Act contains provisions under· which the solicitor can apply to the court for orders which direct the Society to withdraw the intervention. Miss Sheikh made such applications in this case. There have been quite a number of applications in the past in relation to other interventions. As far as I am aware none of them has succeeded. However, in this case, after an eight days trial in which a very extensive body of documentary material was considered, 'much evidence was given (especially by Miss Sheikh herself), and substantial arguments were presented to me both for the Law Society and for Miss Sheikh, I have concluded that I should direct that the intervention be withdrawn. Because Miss Sheikh had been excluded from her practice from 18 February, because the trial did not begin until May, because the matter was one in which I felt that I would need to reflect and to reread much of the documentation and of the evidence before I could finally make my mind up, and because every day which passed was potentially damaging to Miss Sheikh even if her application succeeded in the end (because clients would progressively melt away and take their business to other firms), there was discussion in the hearing of the possibility of my announcing my decision first, as soon as I was confident of what it was, but preparing my judgment and delivering it or handing it down later. I decided to take that course, and on 9 June 2005 I announced my decision. I now hand down my reasoned and regrettably lengthy judgment.
- The issues are too numerous and complicated in their details for me to be able to encapsulate them in short form in an overview which introduces my judgment. I will only say now the following. First, on the basis of the evidence and arguments before me (which it is right for me to take fully into account, not limiting myself to what the Panel had before it), I do not think that there is reason to suspect Miss Sheikh of dishonesty in relation to the practice of Ashley & Co. Second, I accept that there have been some breaches of the Solicitors Accounts Rules, but I do not think that they were serious enough to merit the drastic and (in practice) terminal step of intervention. ' Third I do not say that everything about Ashley & Co was entirely satisfactory. On the contrary there were (as well as breaches of the Solicitors Accounts Rules) some other aspects of the firm's practice about which the Law Society could legitimately feel concern, but in my view they were not remotely as bad or unacceptable as has been contended before me on behalf of the Society.
- I record that Mr Gregory Treverton-Jones QC appeared on behalf of Miss Sheikh, and that Mr Hodge Malek QC and Mr Andrew Peebles appeared on behalf of the Law Society.
- The Law Society is, as everyone knows, the governing body of the solicitors' profession. It has a regulatory function and regulatory powers under the Solicitors Act 1974. One of its most drastic powers, possibly the most drastic, is the power to intervene in a solicitor's practice. S.35 of the Act is headed: 'Intervention in solicitor's practice'. It provides:
- The circumstance described in sub-paragraph (c) is where -
- The operative provisions of paragraph 1 of the Schedule do not themselves use the word 'intervene' or 'intervention' (nor indeed does the text of s.35), but those words do appear in the heading to the Schedule and in the heading to Part I of the Schedule (as does 'intervention' in the heading to section 35). When the Law Society exercises its powers under the Schedule the process is customarily referred. to as an intervention. The consequences of an intervention are set out in detail in Part n of the Schedule. For the most part I do not need to examine them in detail. They operate in three main ways ..
- The Act does, however, give to an intervened upon solicitor an ability to bring the matter before the court. The ability arises under sub-paragraphs of paragraphs 6 and 9 of Schedule I (sub-paragraph (4) of paragraph 6 and sub-paragraph (8) of paragraph 9). The initial provisions of paragraphs 6 and 9 deal directly only with the effect of an intervention on practice monies and practice documents, but an application which invoked both subparagraphs amounts to a challenge to the intervention in its totality. So far as paragraph 6 is concerned I have said earlier that, for the paragraph to take effect, the Council of the Law Society has to pass an appropriate resolution.· Paragraph 6(3) provides that the Society must serve a copy of the resolution on the solicitor, and subparagraphs (4) and (5) then provide as follows:
- Before I turn to the particular circumstances of this case in some detail I wish to make some general observations about the power of intervention and about the jurisdiction of the court when the intervened upon solicitor makes an application such as that which Miss Sheikh has now made.
- Although I have decided that the notice of intervention should be withdrawn in this case, I do not for a moment question the value and desirability of the power of intervention which the Law Society possesses under the Act. It is essential that the public should feel confidence in the honesty of solicitors. If there are grounds to suspect dishonesty on the part of a solicitor the governing body of the profession must be able to do something about it, and to do it quickly and effectively. Further, while it is obviously right that an intervened upon solicitor should be able to bring the matter before the courts, I accept that any judicial process must come after the intervention and not before it. The law reports give information about a significant number of cases in which the power of intervention has been exercised. In so far as the reports disclose the factual backgrounds of past cases it seems to me that the Law Society was fully justified in intervening, and that it was highly desirable for it to do ·so. Most of the cases have been ones where it was clear that a solicitor was improperly and knowingly using money which belonged to clients for his or her own purposes, and doing that on a substantial scale. See for example Giles v Law Society (1995) 8 Admin LR 105, Holder v Law Society [2003] EWCA Civ 39, [2003] 1 WLR 1059, Preedy and Okoronkwo v Law Society [2004] EWHC 2709 (Ch), Sritharan v Law Society [2004] EWHC 2932 (Ch), [2005] EWCA Civ 476. Typically the Solicitors Accounts Rules were being breached in serious respects, if indeed there was any attempt to comply with them at all. In one case there was considerable ground to suspect that the solicitor was knowingly allowing his firm to be used in connection with a large fraud, even if he was not a participant in the fraud himself: Potter v The Law Society (unreported, 20 December 1999). For reasons which I will try to explain as this judgment progresses I do not believe that the present case is like those earlier cases in any significant respect.
- It is possible that the intervention action which the Law Society has already taken, and which has been in place for several months before my decision, may already have done substantial damage to the practice of Miss Sheikh's firm. I am sorry if that is so, but a consequence like that may be a risk. which must be accepted in the wider interests of preserving the confidence of the public in the solicitors' profession as a whole. I do, however, wish to add something which I only became aware of in a detailed way from a hearing which took place to consider the interim consequences of my having announced my decision on 9 June but not yet having explained my reasons. When it was becoming apparent that it would be months rather than weeks before Miss Sheikh's applications could be brought forward for hearing by a judge she and her solicitor (Mr Saffron of Radcliffes Le Brasseur) were understandably worried about the damage which might be done to Ashley & Co by time inexorably passing without her or anyone else on her behalf attending to the affairs of current clients, even if she won the case in the end. Mr Saffron wrote two letters to the Law Society which made proposals of a restricted nature for her to be allowed in the meantime to continue to have conduct of a limited number of specific matters on conditions which were intended to protect clients against all risks of the sort which appeared to be causing the Law Society concern. One of the conditions was that she would not issue any bills to clients. The letters were detailed, moderate in tone, and seemed to me to put forward entirely reasonable proposals. The Law Society turned them down in one sentence. I am prepared to believe that there may have been good reasons for the attitude which the Society took, although it is not apparent to me what they can have been, but it is remarkable that Mr Saffron did not receive the courtesy of a reasoned reply to his carefully formulated and explained proposals.
- I now wish to make some observations about the nature of the court's jurisdiction in a case (like this one) brought before it by applications under paragraphs 6(4) and 9(8) of the Solicitors Act. The jurisdiction is not, as it seems to me, to be exercised on· grounds analogous to those which arise in judicial review cases. That is to say, I do not consider that the court can only direct the Law Society to withdraw a notice of intervention if it considers that the notice was one which no reasonable body in the position of the Law Society could have decided to serve. The statute simply provides that the applicant can apply for an order directing the Society to withdraw the notice. In principle I believe that the court should make its own mind up on whether the notice of intervention should he allowed to stand. However, what I say in that respect· is subject to two significant qualifications.
- Another proposition affecting paragraphs 6(4) and 9(8) applications which should be mentioned is that the judge is not limited to deciding whether the circumstances which were known to the Law Society when it decided to intervene were sufficient to justify the decision. The whole of the evidence put before the judge can and should be taken into account by him in deciding whether or not to direct that the notice of intervention should be withdrawn. See Sir Robert Megarry V -C in Buckley v The Law Society .[1984] 1 WLR 1101 at 1105, and also Sedley J ·in Giles v The Law Society (supra) at p.118G. Post-intervention facts or post-intervention discoveries may be taken into account. In this case, as I will explain, Mr Malek places considerable reliance on some things which Miss Sheikh did after the intervention as supporting his contention that the intervention should be left in place. The point does, of course, cut both ways. Miss Sheikh acknowledges that she had been deficient in providing explanations to the Law Society's officers in the course of the inquiries which preceded the decision to intervene. She can, however, put before me evidence which she failed to present to the Law Society at the earlier stage, and submit (as Mr Treverton-Jones has done on her behalf) that, even if the Law Society's Panel which decided to intervene could understandably have thought that there was reason to' suspect dishonesty given the absence then of answers from her to, questions about matters which had caused the Society's officers concern, the position now is different: I should, taking account of her evidence, conclude that there is no reason to suspect dishonesty in any respect which could rationally justify the drastic (and effectively terminal) step of intervention.
- The Solicitors Accounts Rules played quite a significant part in the arguments presented to me in this case. From time to time as this judgment progresses I shall have to examine some aspects of them in some detail. It may be helpful for me to attempt an outline now of some of their salient features. The rules currently in force are referred to as the Solicitors Accounts Rules 1998, but similar rules have been in force from long before 1998, and the present rules incorporate amendments which have been made from time to time after 1998. The rules are delegated legislation made under powers conferred by the Solicitors Act 1974 and the Administration of Justice Act 1985. Thus they have statutory force. They are made by the Council of the Law Society with the concurrence of the" Master of the Rolls. They are a formidable document, and are not in all respects easy (or at least I do not find them so). There are 50 rules, most of which contain several sub-rules, and most of which are immediately followed by notes, in the light of which they must be interpreted (rule 2(1». The rules are classified into seven parts, designated A to G. There are five appendices. The Parts which are of most relevance to this case are Part A ('General') Part B ('Client Money, Controlled Trust Money and Operation of a Client Account'), "Part C ('Interest'), and Part D (' Accounting Systems and Records').
- Part A begins by stating several general principles in rule 1. The principles are expanded upon in a detailed way in the later Parts of the rules. The general principles include that a solicitor must:
- Part A of the Solicitors Accounts Rules also includes rule 13, which provides that all money held or received by a solicitor falls into one of three categories. (a) 'Client money' is all money held or received for a client, and all other money which does not fall into categories (b) and (c). Thus client money is money which is held for the time being by the solicitor but belongs to the client. It may, for example, have been paid by the client to the solicitor on account at the commencement of a matter. Or it may have been received by the solicitor from a third party in the course of a matter, for instance as damages from a defendant or as the price of a property sold in a conveyancing transaction. (b) 'Controlled trust money': the important instance of this for the present case is money belonging to a deceased's estate of which the solicitor is a personal representative. (c) 'Office money': this is money which is held or received in the course of practice but belongs to the solicitor or the practice. In general the first two categories, client money and controlled trust money, are treated in the same way under the rules.
- Part B, comprising rules 14 to 23, is fundamental importance. Its main operation is in relation to bank accounts. Rule 14 requires the solicitor to keep one or more client accounts at a bank or building society. There will invariably be a general client account for holding the moneys of clients generally. There can also be one or more separate designated client accounts which are specific to a single client or controlled trust. No issue concerning accounts of that nature arises in this case. For simplicity I can assume for the purposes of this judgment (although the reality would rarely be so simple) that a solicitor simply has one general client account at a bank, and that he or she holds all client moneys in that account. (Miss Sheikh had, I think, three general client accounts with three different banks, but I believe that the active one - and certainly the one which is relevant to this case - was the account held at Lloyds TSB. The rules refer to such an account as simply a 'client account', but in this judgment I shall occasionally use the slightly longer expression 'client bank account' if in the context there might be possible confusion between accounts which are bank accounts and accounts which are not of that nature, but rather are accounting documents and records. The rules require controlled trust money (meaning, so far as this case is concerned, moneys belonging to estates of which Miss Sheikh was' a personal representative), as well as client money, to be held in the client bank account. By rule 15 all client money and controlled trust money must be paid into the client bank account, and the general rule (subject to exceptions which do not matter in this case except in the respect described in paragraph 21 below) is that only client money and controlled trust money may be held in the client account. The underlying policy is that clients' money and controlled trust money should be rigorously kept separate from the solicitor's own money, and that there should be no mixing or confusing of the two. Rule 22 itemises the only circumstances in which the solicitor can cause client money or controlled trust money to be withdrawn from the client account.
- Unless I am missing something, the rules, while requiring the existence of a bank account which is a client account, do not require the solicitor also to have a bank account which is an office account, that is a bank account separate from the client account, to be used in connection with the practice (rather than the solicitor's private affairs) and to hold money belonging to the solicitor rather than to clients or to controlled trusts. However, I believe that virtually all solicitors do have one or more office bank accounts, and certainly Miss Sheikh's firm, Ashley & Co, did. Rule 2(2)(q) contains a definition of 'office account' (it includes an office cash box as well as a bank account), thus recognising the reality that a solicitors' practice is almost certainly going to have an office account.
- An important aspect of the rules is the mechanism whereby money in the client account can be taken from that account by the solicitor in payment of his or her fees and disbursements (fees and disbursements being together referred to by the rules as 'costs': rule 2(2)0». This is dealt with by rules 19(2) and 19(3), which provide as follows:
- Before I leave Part B of the rules I should mention rule 22(8), which provides that a client bank account must not be overdrawn, except in two special circumstances, which are irrelevant to this case. It is quite common for solicitors to have overdraft facilities, not for their client bank accounts, but for their office bank accounts. If a solicitor's client account is in credit, but the office account is overdrawn to a level which exceeds the limit allowed by the bank, there is a temptation to transfer money from the one account to the other. The only situation where this can properly be done under the rules is the situation covered by rule 19(2) and (3), where money is transferred in payment of fees for which a bill has been rendered. Unfortunately it sometimes happens in other circumstances as well, where it ought not to happen and where, particularly when done deliberately, it constitutes a serious breach of the Solicitors Accounts Rules. Many interventions - I think it may be correct to say most interventions -'- arise in such circumstances, and in my view are fully justified. As I will explain later,. I cannot accept submissions on behalf of the Law Society that the present case is of that nature.
- I move to Part C of the rules, comprising rules 24 to. 28. These rules deal with interest. Where a solicitor holds clients' money and controlled trust money in a general client bank account the account will almost certainly be a deposit account upon which the bank will pay interest. The bank pays the interest to the solicitor, who typically receives it in his or her office bank account. However, rule 24(2) provides that, subject to certain de minimis limits, the solicitor must account to the client or controlled trust for a sum in lieu of interest. Rule 25 indicates, in a way which I need . not describe, how the amount to be accounted for is to be ascertained.
- Part D of the rules deals with accounting systems and records. It (and in particular rule 32) imposes obligations on solicitors to keep accounts and records which should record all the solicitor's dealings with client money and controlled trust money, and with office money relating to client matters or controlled trust matters. If I understand the position correctly the practice should maintain ledgers which appropriately record the global position relating to client money and office money: a 'client cash account' referred to in rule 32(2)(a) and an 'office cash account' referred to in rule 32(4). (The word 'account' in these two instances, and in some others, refers to an accounting record, not to a bank account.) In addition the practice must also maintain separate client ledger accounts for each client (or, if the practice chooses, more than one separate client ledger accounts for one client if the client has more than one different matter in progress). These separate client ledger accounts should have a 'client side' and an 'office side'. On the client side should be recorded dealings with client money or with controlled trust money, and on the office side should be recorded all dealings with office money relating to any client matter or to any controlled trust matter. The balances at any time on the two sides of the client ledger accounts should be shown or be readily ascertainable. Rule 32(7) requires a solicitor to carry out reconciliations every five weeks. At the risk of some over-simplification, it is probably enough for me . to say that the essence of the reconciliations is to check that the balance in the client bank account corresponds to the amounts recorded in the accounts ·and ledgers maintained by the firm as required by the earlier paragraphs of rule 32.
- Ashley & Co maintained all of the ledgers and accounts required by the rules, but there are complaints by the Law Society that in some respects they were not maintained correctly, and that breaches of the Solicitors Accounts Rules occurred. I will have to say more about these aspects of the case later, but I can usefully record now that Miss Sheikh accepts that there have been some breaches. However, she says that they have not been serious breaches, and she also says that in several respects things which are asserted by the Law Society to have been breaches were not breaches at all. There are two matters which arose in the hearing which I can usefully mention at this point.
- Miss Sheikh qualified as a solicitor in 1987, and in that year joined the firm of Ashley & Co. She became a salaried partner in 1989, and on the retirement of the senior partner in 1993 acquired the practice in that year. She has carried on the practice as a sole practitioner from then until the intervention of 18 February 2005. As far as I know she has never had a qualified solicitor as an employee. The office is in Willesden. Miss Sheikh describes herself as a general practitioner. The largest part of the practice is litigation, and she has done a lot of work where her clients have been legally aided or, since the Access to Justice Act 1999, supported by community funding from the Legal Services Commission. She has also undertaken probate and . administration of estates work, sometimes herself being an executrix or administratrix of an estate where the legal work is done by Ashley & Co. As will appear later, most of the matters about which the Law Society complain have arisen in connection with probates. Miss Sheikh's evidence is· that probate work is quite a small part of her practice: ' .. in the last ten years of so I have handled between 2,500 and 3,000 files~ Of those a mere 73 have been probate matters and of those only between 30% and 50% were matters of any substance. '
- I can speculate that the reason may be related to a number of complaints against Miss Sheikh which the Law Society had received, most of which had been upheld. Nevertheless 1 feel that 1 am left in the dark about this. Miss Sheikh says in one of her witness statements that over 17 years of practice she has been the subject of 16 successful complaints, of which five were requests for remuneration certificates (that is, the client challenging the amount of the bill). Over the years she believes that she' has opened between 2,000 and 2,500 files, and that in recent years she has been opening some 200 files a year. The point she is making is that against that background 16 successful complaints does not seem unacceptably bad. I am wholly unable to form a view about this. One of the Law Society witnesses ~as Mr Penson, the manager of the Society's Intervention and Disciplinary Unit. Mr Treverton-Jones asked him whether there were arty statistics which could assist on whether the level of complaints against Miss Sheikh was abnormally high. Mr Penson was unable to assist. Miss Patrick, another Law Society witness, said that she had no statistics at . hand to be able to say whether a history of eight remuneration certificate reductions over a 13 years period (I think the question should have referred to five reductions, not eight) was remarkable or not, compared to other solicitors.
- Whatever the reason for the Law Society's decision to inspect Ashley & Co may have '.been, the inspection commenced with a visit to the office on 23 February. That visit . appears to have lasted for two or three days. There were five further visits, making six in all. The last one was on 21 July. Several of the further visits lasted for more than one day. The inspectors of the Law Society also wrote six lengthy letters to Miss . 'Sheikh while the process was going on, asking numerous detailed questions about six specific matters. The general thrust of the Law Society evidence about this phase was that Miss Sheikh and Mr Sampat were fully cooperative on the occasions when the inspectors visited them at the office: they answered questions put to them, and when asked to produce files and the like were generally able to do so. There was no suggestion that they had been obstructive. Mr Treverton-Jones asked Mr Shaw if he agreed with the proposition that he received a high level of cooperation from Miss Sheikh and Mr Sampat during the many months that he spent carrying out this investigation. The answer was: '1 personally think 1 did, yes.' However, when it came to answering the Law Society's detailed letters it was a different matter. I may be wrong in detail, but 1 believe that Miss Sheikh did not reply in writing to any of them. 1 shall comment further about this later.
- After the last inspection visit in July 2004 Miss Sheikh and Mr Sampat did not hear anything for several months. Mr Sampat said that they had the impression that they were going to get a report which probably told them: 'You have to tighten up here. You have to tighten up there. Clear this out. We need an answer for that.' That was what they expected, and they were waiting for that report. In the event what they were expecting did not happen, and something much more serious happened instead.
- Mr Shaw and Miss Patrick had been working on a detailed report which was not in the nature of advice to Miss Sheikh (though it would be and in time was sent to her), but rather was a report to be considered internally within the Law Society by officers or panels with authority to consider whether the Society should take specific action in relation to Ashley & Co. In form the report was, in accordance with normal Law Society practice, expressed as a letter from Mr Calvert, the Head of Forensic Investigations, to Mr Middleton, the Head of Investigation and Enforcement in the Society's Compliance Directorate. The letter is dated 22 November 2004. However, the contents of the letter had been drafted as to part by Mr Shaw and as to the rest by Miss Patrick. The report, though in form a letter, has in general been referred to in the case as' the FI Report (Forensic Investigations). It is 33 pages long, and was supported by between 70 and 80 pages of appendices, including a report by Mr Shelley, a costs draftsman, on the levels of charges made by Miss Sheikh for five probate matters on which her firm had acted. Mr Shelley's report is dated 5 July 2004, and Miss Sheikh had been sent a copy of it before the last inspection visit which Mr Shaw and Miss Patrick made on 21 July 2004. I shall have more to say about Mr Shelley's report later.
- On 10 December 2004 Miss Patrick wrote a long letter to Miss Sheikh. She did not at that stage send to Miss Sheikh a copy of the FI Report. Rather she particularised allegations of professional failures which were being made against Miss Sheikh and called upon her to reply by 4 January 2005. The letter is long (19 pages) and detailed. It is formal in tone (properly so in the circumstances). It was 'not at all the sort of thing which Mr Sampat said that Miss Sheikh and he had been expecting. The receipt and the nature of it must have taken Miss Sheikh aback, but in my view there is nothing unfair or aggressive about it. It summarises matters which had arisen in the various visits made by Miss Patrick and others to Ashley & Co earlier in 2004, and it requests comments on eight different alleged failures. In general they were categorised as failures to comply with particular provisions of the Solicitors Practice Rules (not the Solicitors Accounts Rules) and with associated principles in the Guide to the Professional Conduct of Solicitors. As far as I can see there is no reference to the Solicitors Accounts Rules in it, nor do I find anything 'which could be regarded as an allegation of actual dishonesty on Miss Sheikh's part. Miss Sheikh, despite being reminded in the letter that she had a professional obligation to reply to the Law Society, did not reply by the specified date of 4 January 2005 or indeed at all. Generally her failure to deal with. correspondence from the Law Society is a bad feature of this case from her point of view. I will, of course, return to it later.
- On 23 December 2004 the Law Society wrote another letter to Miss Sheikh - possibly an even more important one than Miss Patrick's letter of 10 December - to which Miss Sheikh also did not reply. This was a letter signed by Mr Penson. It enclosed the FI report (in form the letter dated 22 November 2004, to which I referred in paragraph 34 above) and its appendices. It invited Miss Sheikh to comment on paragraphs 6 to 134 of the report by 10 January 2005. It also contained several allegations (expressed, in my view, in rather hostile rather than dispassionate tones) of breaches of the Solicitors Accounts Rules, and invited comments upon the allegations .. ·On the last page of the letter is a statement that Mr Penson was satisfied that Miss Sheikh had failed to comply with provisions of those rules, and that therefore the intervention powers set out in Part II of the Solicitors Act 1974 were exercisable. I cannot find any specific allegation of dishonesty in the letter. The letter does (as I have just said) warn that the Society's powers of intervention on account of breaches of the Solicitors Accounts Rules may have arisen, it does not warn that the same powers may also have arisen on account of there being reason to suspect dishonesty: However, even if it had it would not have made any difference, because (as I explain in the next paragraph) Miss Sheikh did not read it.
- Miss Sheikh's evidence was that on the evening of23 December 2004 (the date of Mr Penson's letter) she received at home a telephone call from a caseworker at the Law Society called Sarah Bartlett who had been involved in some respects in the investigation (though I do not think that Sarah Bartlett had been present at any of the visits to Ashley & Co's office). Sarah Bartlett informed Miss Sheikh that the next day there would be a large and important parcel waiting for her at the office; she should be sure to collect it and read it in order to reply by 10 January. Miss Sheikh was going away on holiday with her mother to India on 24 December, the next day (her first holiday of any sort for over a year, as she told me). She said to Sarah Bartlett that she could not possibly deal with a large communication from the Law Society by 10 January, and asked for an extension of time. She was told that no extension could be given. She went to India with her mother without collecting the parcel. While in India she and her mother were in an area which was severely damaged by the Boxing Day tsunami, and they witnessed distressing scenes of damage and loss of life. When she returned to this country the Law Society parcel was waiting for her, but she admitted that she could never bring herself round to opening it. 'The package was obviously there waiting for me. I am ashamed to say that I did not look at it. I had a lot of mail there. I did not deal with it for one reason: I knew I could not deal with it. ' She did not know what was in it, but expected that it would be full of detailed accounting materials. as respects which she would need to engage someone else to . deal with them because she could not deal with them herself. She was concerned about her ability to look after her current clients. '] knew, had] attended to this, other clients would be in very serious problems.' She admitted that she had not even opened the parcel by the time of the intervention on 17 and 18 February. 'I am ashamed to say that I was on the point of instructing a solicitor, but I had not. It was there. I knew I had to deal with it, but I had not. I had not .... I believed that I knew what was in them, which was a lot of accounting stuff, but] am sorry to say I had not. '
- In the foregoing paragraph I have moved forward in time somewhat out of date order. I need to go back to events within the Law Society in January 2005. Various disciplinary and regulatory powers, including the power to decide whether to intervene in a solicitor's practice have been delegated to the AdjudicatioJ:,1 Panel of the Compliance Board. Questions relating to Miss Sheikh's conduct of the practice of Ashley & Co were going to be referred to a Panel, and staff of the Law Society prepared notes for the Panel. In an undated report which bears the initials of Sarah Bartlett the following passage appears:
- However, the Panel (three members, including one lay member) met on 17 February, and decided that there should be an intervention. The minute of the meeting records that the Panel considered the Fill Report and then adopted several resolutions. I will quote the first five:
- I have more points to make later about the resolutions and some of the implications of them, but at this stage I record that the intervention then took place. The Law Society sent a copy of the resolution by fax to Ashley & Co in the late afternoon of 17 February 2005 (although Miss Sheikh did not receive it then, as I will explain later). The next morning various persons attended at Ashley & Co's office' on behalf of the Law Society. They included in particular Mr Weaver of Russell-Cooke, whom the Law Society appointed its agent for the purposes of the intervention. Russell-Cooke took control of the moneys in Ashley & Co's bank accounts, and over following days also took possession of all of the firm's documents. An automatic consequence of the intervention was that Miss Sheikh's practising certificate was suspended: s.l5(IA) of the Act. There were a number of specific events which happened around or after the time of the intervention which I will have to describe, because the Law Society seeks to base arguments upon them, but I will not deal with them now. I will describe an~ consider their significance, if any, under headings which include 'Post-intervention' towards the end of this judgment.
- As I have described, the intervention was resolved upon on 17 February 2005 and was acted upon later that day and on 18 February. The intervention was in place from then until a few days after 9 June 2005, on which date, as described in the Overview at the beginning of this judgment, I announced my decision to direct the Law Society . to withdraw the notices of intervention, for reasons to be explained in a judgment (this judgment) to be delivered later. On 25 February 2005 Miss Sheikh had issued the claim form in this case, whereby she sought an order pursuant to paragraphs 6(4) and 9(8) of Schedule 1 to the Act that the notices of intervention should be withdrawn.
- I now wish to return to the Panel's resolutions to intervene, the relevant parts of which I have quoted in paragraph 39 above. The Panel 'resolved that it was satisfied that it , had reason to suspect dishonesty on the part of Miss Sheikh in connection with her practice as a solicitor (resolution 1), and that Miss Sheikh had failed to comply with the Solicitors Accounts Rules (resolution 2). Without those resolutions the intervention could not have been made. There are certain other grounds set out in the Act which may permit an intervention to be made, but there is no suggestion that any of them applies in this case. It is important to note that the Act does not permit the Law Society to intervene in a practice in any case where it (acting presumably by one of its Panels) considers that an intervention is desirable for any reason or reasons. So far as the present case is concerned the Act only permitted an intervention if, either there was reason to suspect dishonesty, or there had been breaches of the Solicitors Accounts Rules, or both.
- In relation both to the Panel's resolution that there was reason to suspect dishonesty on the part of Miss Sheikh and to its resolution that there had been breaches of the Solicitors Accounts Rules absolutely no particulars are given. In this particular case I consider that the absence of particulars causes considerable difficulty, especially as regards the finding of suspected dishonesty. What precisely was the dishonesty, and what precisely were the grounds which raised a suspicion of it? The Panel does not say. This is, I understand, in line with standard practice for Law Society Panels. In normal cases (which in my opinion this case is not) the absence of particulars in a Panel's finding of grounds to suspect dishonesty may not particularly matter, because the nature of the dishonesty and of the grounds of suspicion is perfectly obvious to anyone. (Nevertheless I comment that the s.10 of the Tribunals and Inquiries Act 1992 requires tribunals and, in a few cases, Ministers, to give reasons for decisions. I do not have sufficient experience of cases about interventions to have an informed view of whether it would be sensible for Law Society Panels to adopt a similar practice. I do, however, draw attention to s.10 in case the Society might wish to consider reviewing its normal practice.) In all the earlier cases of interventions which I was shown the alleged dishonesty was clear for all to see. Similarly, in so far as the;: intervention may also have been founded on breaches of the Solicitors Accounts Rules, the breaches were equally obvious, and almost always consisted of solicitors either not having client accounts at all in breach of rule 14 or taking money off client account and using it for private purposes or for their own professional purposes (like reducing the office overdraft or paying the office rent) In circumstances where the taking of the money was prohibited by rule 22. Furthermore; as far as I can ascertain, although the members of the Panel in Miss Sheikh's case presumably did know what sort of dishonesty they suspected and what their grounds for suspecting it were, nobody else in the Law Society knew. The Law Society officers who gave evidence before me (Mr Penson, Mr Shaw, and Miss Patrick) did not know. Mr Shaw observed, absolutely rightly, that, if he had been involved in the investigation and in the preparation of the report placed before the Panel, it would not have been right for him to be present during the Panel's deliberations~ No evidence was called by the Law Society from any member of the Panel.
- This has caused substantial difficulties in the case, and in my view has had an unfortunate effect on the nature of the proceedings. Miss Sheikh did not know any detail of what sort of dishonesty was being alleged against her, and in her first witness statement could do little more on this aspect of the case than to say that she utterly refuted any suggestion that there was reason to suspect dishonesty on her part. She has always accepted that she failed to reply to correspondence and that there have been some technical infringements of the Solicitors Accounts Rules, but she denies any kind of dishonesty. Since she does not know what specific kind of dishonesty the Panel suspected, she has great difficulty in doing more than making a general denial. Her legal team in this case, Mr Treverton-Jones QC and his instructing solicitors, Radcliffes Le Brasseur, could only speculate as to the case which they had to meet. In a criminal case an indictment which merely charged that there was reason to suspect dishonesty would never survive. The same would apply to a pleading in a civil claim.
- I as .the judge was in the same position as. Miss Sheikh's legal advisers .. And, importantly as it seems to me, the Law Society's legal team~ headed by Mr Malek QC were also in that position. They must look for their instructions to Mr Penson's department within the Law Society. That department has the responsibility for following through and implementing the Panel's resolution that there should be an intervention, one ground for which (probably the main ground) was that there was reason to suspect dishonesty. Mr Penson's department's responsibility is not limited to carrying out the intervention: it includes defending the intervention against the legal challenge to it which Miss Sheikh has brought. Mr Penson and his colleagues have not asked the members of the Panel to give particulars of their reasons for suspecting dishonesty. I assume in this respect that they followed normal practice, but a consequence must have been that they have been unable to give any specific. instructions to Mr Malek and Mr Peebles on this critical part of the case.
- In the circumstances it seems to me that Mr Malek and Mr Peebles have had to do the best they can to find in the extensive documentation in the case any features which, as it seems to them, might have given rise to a suspicion of dishonesty, to present them to me as giving rise to such a suspicion, and to cross-examine Miss Sheikh and Mr Sampat in a way which entails alleging dishonesty in numerous different respects. This has had a major impact on the nature of the trial. Mr Treverton-Jones (who, I might mention, has great experience in cases of this nature, nearly always representing the Law Society, not the solicitor) has complained vigorously about it. I quote some extracts from his written closing submissions. They are expressed in trenchant terms. In a judicial capacity I might look for less high octane ways of making the points, but I have to say that I agree with everything that Mr Treverton-Jones is saying: 'endless hours of labour by Law Society's legal team in seeking to , unearth "smoking guns" in the thousands of pages of documents before the court '; 'a case in which so many scattered allegations have been made against the intervened . upon solicitor '; 'the court is asked by the Law Society to continue an intervention, the 1< original rationale of which had never been properly explained '; 'forensic tactics of the Law Society (perhaps understandable in the light of the unexplained decision of the Panel) in relentlessly seeking to paint almost every act or omission of Miss Sheikh in its most sinister colours '; 'every allegation, large or small, has been pursued ... As a consequence the litigation has occupied many days of court time, most of it taken up by submissions or prolonged cross-examination by the Law Society '.
- It seems me that Parliament visualised that applications under Schedule I paragraphs 6(4) and 9(8) for orders that notices of intervention be withdrawn could and would be brought quickly to court, and would be capable of being dealt with quite speedily, since by that time the solicitor would know what was alleged against him or her. Subparagraphs 6(4) and 9(8) require the Law Society to be given 48 hours notice of such an application, but no more. Giles v The Law Society and Holder v The Law Society (both supra) have rejected arguments that the intervention procedure is flawed, either under the rules of natural justice or under the European Convention on Human Rights, on the ground that the solicitor does not initially know what the case against him is. The reasoning in both cases is that, if the solicitor exercises his right to apply to the court for the intervention to be withdrawn, he should then receive all the material which the Panel had before it, and will know the basis on which the Panel found that one or more of the conditions for intervention existed. In normal cases that will be true: if the Panel has found that there were reasons to suspect dishonesty, once the solicitor (and his legal advisers), upon commencing proceedings for the intervention to be withdrawn, read the materials which were before the Panel it will be obvious what the reasons were. That is simply not the case here in so far as the Panel found that there were reasons to suspect dishonesty. Miss Sheikh and her advisers did have the documentary materials which the Panel had, but they do not to my mind make it clear at all what the alleged dishonesty was or what the grounds for suspecting it were.
- Miss Sheikh's case did not come before the court quickly, and it did not proceed at all speedily. The intervention began on 18 February. Miss Sheikh has been unable to carryon her practice since then. The moneys held on client account and the practice documents (which include the. files relating to current matters) are with Russell-Cooke. Russell-Cooke are not, of course, carrying on with legal work on matters which were in progress at the time of the intervention. Clients were informed of the intervention, and several of them have already transferred to other firms. All delay before Miss Sheikh can have her applications decided is potentially damaging. Despite that, the trial did not begin until 4 May. I may be wrong, but I think that it was primarily the Law Society which had problems with an earlier commencement.
- Mr Treverton-Jones (who, as I have already said, has considerable experience in cases of this nature, usually representing the Law Society) observed in relation to this case: 'It is submitted that it was never the intention of Parliament in enacting the Solicitors Act 1974 that an application to set aside the intervention would give rise to proceedings of such length and complexity. The Act envisaged a swift procedure.' I do not have comparable experience in cases of this nature, but on the admittedly limited basis of this case I find myself very much in sympathy with what Mr Treverton-Jones says.
- I am approaching the point at which I will attempt to describe, to evaluate, and to examine the significance of many of the detailed charges which have been advanced against Miss Sheikh: not all of the, detailed charges, because they have been so numerous and some of them involve accounting points of such obscurity that it would be virtually impossible and unacceptably time-consuming for me to attempt to deal with everything. However, there are some general observations which I wish to make first.
- Perhaps the most important general observation is that in this case, unlike in virtually all other cases of interventions of which I am aware (an exception would be the Potter case in which the solicitor seems to have allowed his firm to be used as part of a large scale fraud by other persons: see paragraph 12 above), there is no evidence that any client's money has gone missing. Surely the overarching reason which lies behind the extensive regulatory and disciplinary powers which Parliament has conferred on the Law Society is that solicitors are regularly in possession of other persons' money, and that strong powers need to be held by the governing body of the profession in order to protect clients of unscrupulous or unconscientious solicitors from the risk that the solicitor may in some way make away with their money. An allegation along those lines was not directly put forward against Ashley & Co in the FI Report (on which the Panel resolved that the Society should intervene into Ashley & Co), but it was not disavowed either, and I would not be in the least surprised if the panel had in mind that there just might have been some misappropriation of clients' money somewhere in this case. Of course (at the risk of labouring a point which I have made already and may well make again) I cannot be sure about whether the Panel had something like that in mind,· because the Panel has not stated what its reasons were and no-one involved in the Law Society's preparation of this case knows what they were.
- With reference to the proposition that no client's money is missing, or at least that there is no evidence to that effect and surely there would be by now if it was the case, , I add that Mr Weaver of Russell-Cooke said that the accountant within his firm had established that the client account balances in the books of Ashley & Co 'balanced'. I think that he meant by that that the money in the client bank was the amount which it should have been on the basis of the client ledgers of the firm. He added a reservation about some credit balances on the office side of the ledgers. I address that point in a later paragraph (see paragraph 99 below), and I do not think that it gives rise to any concern. Mr Weaver's evidence comes close to specifically confirming that no . client's money has gone missing. This is an important point. The Law Society might have been expected to volunteer the outcome of the accountant's investigation'. In fact the point only came out in Mr Weaver's cross-examination.
- Perhaps the second most important general observation is that I observed Miss Sheikh being searchingly cross-examined for a little more than two days. On the critical question of whether I consider that there is reason to suspect dishonesty on her part in connection with her practice I believe that I can and should ask myself: what impression did she make upon me? The answer is that she made a very good impression. She did not remotely strike me as the dishonest, grasping incompetent implied by the Law Society' multiple attacks upon her. She answered all questions put to her directly. Sl.1e was in no way evasive. Listening to her she never struck me as someone who was dissembling or seeking to mislead the court. When I say that she answered all questions put to her I do not mean that she was always able to give a detailed answer to every question which was put. There were occasions when Mr Malek took her into the arcane recesses of the accounting records, and when he was able to suggest that some entry or other did not seem appropriately to tie in with what appeared somewhere else. In those cases, if she did not have an answer there and then, she frankly said so. She made realistic and sensible admissions. In several" respects she readily acknowledged that there was room· for improvement. I do not myself see that sort of thing as giving rise to a suspicion of dishonesty. If anything the contrary is the case. She is a sole practitioner with a busy practice, and it would be surprising indeed if she got everything right all of the time. It is a sign of basic honesty on her part that she admitted that some matters put to her in cross-examination were not ones which she could satisfactorily deal with, and certainly not there and then.
- There were some overriding matters, however, on which she was constantly firm, and as respects which her evidence had to me the ring of total conviction and sincerity. One was that she was never dishonest in the conduct of her profession. On more than one occasion she said something to the effect that interventions were what should happen to solicitors who steal other people's money, and she is not such a solicitor. She said it with a conviction which I felt to be deep and impressive .. Something else on which she was consistently firm was that, if there was something apparently wrong with a ledger which she or Mr Sampat produced to the court, it was not a matter of misleading the court: it was a mistake. (Two examples: Q. You realise the consequence, if it does turn out that those ledgers are not reliable, that you have set out to mislead the court? A. I do not accept that conclusion. If they are not reliable, then I have made a mistake. And some answers at a later point in relation to small bills for copying charges which should have been drawn up and entered into the ledgers: These are bills that should be in the system. It is an oversight .... Ii is a very small matter, Mr Malek. You have slip-ups from time to time. ')
- Similarly with Mr Sampat: I am convinced that he was a sincere and honest witness.
- In saying what I have in the last few paragraphs I should not be understood as saying or implying that there were no problems with the practice of Ashley & Co. There obviously were problems, and I have commented on some of them at earlier points in this judgment. I shall have to refer to others later. The complaints which had been made about the practice (which probably prompted the investigation of the firm, and most of which have been' upheld by the Law Society) in themselves suggest that everything was far from perfect. However, I would like to make three comments, I hope fairly briefly, with reference to complaints here. I shall briefly return to the same topic later.
- I will now move on and say something about the relevance or lack of relevance to the present case of alleged failings· on the part of Miss Sheikh which have nothing to do with any suspicion of dishonesty or with breaches of the Solicitors Accounts Rules. The Law Society has tried to ensure that I am aware of virtually every respect in which they say that Miss Sheikh's performance as a solicitor is open to criticism. Some of the upheld complaints are examples of this, such as the complaints (to which I have already referred) in the matters of Modood, Wiggs and Helman. Another example would be her failure to reply to letters from the Law Society, which was a breach of a professional obligation. Mr Malek accepts that matters of that nature could not have been relied on by the Panel to justify its decision to intervene in Miss Sheikh's practice, because they are not within subparagraphs (l)(a) of (l)(c) of paragraph 1 of Schedule 1 to the Solicitors Act. However, he says that, once the intervention had been implemented on the basis of a resolution by the Panel that there were reasons to suspect dishonesty (subparagraph (l)(a» and that there had been breaches of the Solicitors Accounts Rules (subparagraph (l)(c», other matters such as failure to reply to letters should be taken into account by the court in deciding under. paragraphs 6(4) and 9(8) whether to direct the withdrawal of the notice of intervention.
- I am very doubtful about that proposition. I accept that I should look at the evidence as it exists when the case is presented to me, and that I am not limited to considering only the materials which were before the Panel when, some months previously, it resolved to intervene. See the cases cited in paragraph 15 above. Thus, if there is new evidence of the existence of reasons to suspect dishonesty or of breaches of the Solicitors Accounts Rules, I can certainly take account of it. It is far from clear, however, that I should take account of new evidence (or for that matter old evidence) of alleged shortcomings on the part of Miss Sheikh which do not bear on any suspicion of dishonesty or on breaches of the Solicitors Accounts Rules. I made the point in ·paragraph 42 above that a Panel cannot resolve that a practice be intervened upon on the basis of a general opinion that the practice is unsatisfactory, and that it :will be in the public interest for the Law Society to intervene. That being so, I am ,unconvinced that a general opinion of that nature should carry any substantial weight when it comes to deciding whether the court should order an· intervention to be withdrawn. Suppose that it had appeared to the Panel that there was no reason to suspect dishonesty and that, although there had been breaches of the Solicitors Accounts Rules, they were not themselves of the sort which could justify the drastic step of intervention. Could the Panel nevertheless have decided that the Law Society should intervene in Ashley & Co because there were other aspects of the firm's practice which the Panel considered to be unacceptable? I think not. Is it, therefore, any different at the stage when the court is considering whether an intervention should be withdrawn? Again, I think not. In deference to the submissions made to me on behalf of the Law Society (which appeared to· me to seize on any aspect, large or small, of Miss Sheikh's conduct of her practice which the Society thought might warrant criticism) I shall comment on at least some such aspects. But I do so on the basis that, . as it seems to me, many of the complaints which the Law Society ventilated before me, while no doubt highly relevant to matters such as charges brought against Miss Sheikh before the Solicitors Disciplinary Tribunal, ought to carry little or no weight on the particular question which I have to decide.
- I shall now move on and examine some of the particular matters which featured in the Law Society's submissions. I cannot hope to cover them all, so numerous and (in Mr Treverton-Jones's justified expression) scattered were they, but I will try to deal with all of the principal points. The allegation of '3 minimum cash shortage' of £41,125 in relation to the estate of Mr Thirkettle
- This was a major allegation made against Miss Sheikh in the FI Report, the principal document which was before the Panel: ' ... no opinion can be expressed as to whether or not sufficient funds are held on client bank account accounts to meet Miss Sheikh's liabilities to clients. However, Mr Shaw calculated that a minimum cash shortage of £41,125.00 existed on client bank account as at 31 January 2004.' The same allegation was also prominent among those which were advanced before me. The" Law Society's principal witness was Mr Shaw, and the first detailed assertion which he made in his witness statement was: '1 identified a minimum cash shortage in relation to costs transferred from client account to office account in respect of the estate of Mr Thirkettle, in the sum of £41,1 25.00.' The opening impression given by the first significant document which the Panel saw was that £41,125.00 was missing from the client account. It is true that the FI Report and Mr Shaw's witness statement do continue to indicate that Miss Sheikh sees the matter differently. Nevertheless, in my opinion the way in which the matter was presented, particularly to the Panel, was unfair, for reasons which I will try to explain.
- ' I begin with a point of a general nature. A common situation (probably the most common situation) which has given rise to many justified interventions is the one to which I have referred on several occasions in this judgment already: the solicitor is short of money; either for private purposes or for purposes of the practice which he is . not allowed to pay for out of clients' funds; he or she takes money from the client bank account, knowing perfectly well that he or she is committing a deliberate breach of the Solicitors Accounts Rules. It is apparent from the authorities that such cases are frequently referred to as 'shortages on client account' or something similar. For example, Giles v The Law Society (supra, loc. cit. at p. l06) - 'a minimum cash shortage on the client account'; Bolton v The Law Society [1994].1 WLR 512 at 515 'this shortage on the client account'; Holder v The Law Society (supra, loc. cit. at 1061 - 'an agreed minimum cash shortfall on client account'; Sritharan v The Law Society (supra, at paragraph 3 of Hart J's judgment) - 'a substantial cash shortage (almost £1.2ni) on the firm's client account'. The Law Society's materials in this case start the reader off with the impression that he is going to find that this is just another case where a solicitor improperly and dishonestly helped herself to clients' money. In time I came to realise that that impression was quite wrong. As I will describe, there are issues about the £41,125.00 in connection with the Thirkettle estate, but they are essentially of a technical nature, and on no basis can what happened with the £41,125.00 be equated with the 'cash shortages' referred to in the earlier cases, some of which I have mentioned earlier in this paragraph.
- In paragraph 21 above I have reproduced rules 19(2) and (3) of the Solicitors Accounts Rules. They describe the circumstances in which a solicitor can properly cause client money held in the client account to become office money and transfer it from client account to office account. They contemplate a situation where the solicitor has done work for the client for which he or she is entitled to be paid. The solicitor must first give or send a bill of costs, or other written notification of the costs incurred, to the client. He Of she may then transfer the amount billed (which has become office money) out of client account and must do so within 14 days. On 9 July 2002 Miss Sheikh prepared a bill headed 'Thirkettle deceased; Interim Account (estimated only).' The description was: 'TO PROFESSIONAL CHARGES for the provision of legal services following the death of the late Albert Thirkettle. Dealing with administration of estate and trust thereafter. Detailed account to follow.' The. amount was £35,000.00 plus VAT of £6,125.00, making the total of£41,125.00. On the same day Miss Sheikh caused £41,125.00 to be transferred from the client account to office account.
- Now, there mayor may not have been things technically wrong with how the transfer o(the £41,125.00 was arranged, but one thing which is clear is that the situation cannot fairly be compared or equated with the sort of unjustified raids on the client account which have featured in other cases. The Law Society say that on the date of the transfer the office bank account was overdrawn. They make the same point in relation to several other similar occasions involving other clients, as if it was inherently sinister. But it was not. If the office account is overdrawn, particularly if it is already at or around the overdraft limit set by the bank, it is entirely natural and to be· expected that a solicitor will wish to make a transfer from client account to office account to the extent that the law and the circumstances permit. The critical question is whether the law and the circumstances permit it or not. The offensive cases are those where the law and the circumstances do not permit such a transfer but the solicitor goes ahead and makes it nevertheless. In the case of the Thirkettle estate, the deceased had died in June 1999, appointing Miss Sheikh his executrix. The estate had been in administration for some three years by the time of the transfer. A considerable amount of work had been done, and in principle Miss Sheikh was entitled to make a charge to the estate in respect of it. Further, she was entitled to make an interim charge for the work which she had done so far.
- Another strand in Mr Shaw's thinking seems to be that the interim bill was too high. Why did he think that? The answer, it seems, is that Mr Shelley, the costs draftsman who has written a report for the Law Society, expressed the view that it was too high. Mr Shaw links the quantum of the bill with the word 'properly' in rule 19(2): A solicitor who properly requires payment of his or her fees must [etc]. Because Mr Shelley advised that the interim fee of £35,000 plus VAT which Miss Sheikh charged to the estate was excessive, it followed in Mr Shaw's opinion that Miss Sheikh did not 'properly' require payment of the fee and could not bring herself within rule 19(2), notwithstanding that she had set out to comply with rule 19(2) by preparing a bill and only transferring from client to office account the amount comprised in it. I cannot agree with Mr Shaw in this respect. If a solicitor charges a client too much there are clear protections for the client, in particular in non-contentious matters like probates . the process of requiring the solicitor to obtain a remuneration certificate from the Law Society. The protections do not include any variation in the entitlement of the solicitor to take payment from funds held on client account by complying with rule 19(2). Nor in my view could they rationally include anything of that nature. In this case Miss Sheikh created the bill on 9 July 2002. Mr Shelley produced his report on 5 July 2004, almost two years later. When Miss Sheikh created the bill she (in my opinion) believed that the bill was not excessive. She still believes that. She might, of course, be wrong. Mr Shelley, it appears, disagrees with her. But what was Miss Sheikh supposed to do when she delivered the bill on 9 July 2002? Rule ·19(3) required her to transfer the £41,125.00 out of the client account within 14 days. The whole mechanism becomes totally unworkable on Mr Shaw's approach. The problem is not of course one which only arises in the exceptional situation where. the Law Society obtains advice from someone like Mr Shelley. It would arise in almost every case where a bill is delivered and the solicitor wishes, by complying with rule 19(2) and (3), to make from client to office account a transfer which the solicitor believes to be wholly proper. The reason why, on Mr Shaw's approach the problem would arise in virtually every case is that, when a solicitor delivers a bill, he or she cannot know whether the client is going to argue about the amount of it, whether the client will require it to be made the subject -of an application for a remuneration certificate, or whether, in such a case, the assessing authority within the Law Society will reduce the bill or leave it alone. The only basis on which rule 19(2) and (3) can work is that, if the bill is delivered in good faith (as in my view this one was, although the Law Society dispute the point and I will have to consider it later), the two sub-rules fall to be operated by reference to the amount which is then charged by the bill.
- There are two further detailed points touching on what I have just said which I should make.
- I said a few paragraphs above that in my view Miss Sheikh delivered the bill for £41,125.00 (£35,000 plus VAT) in good faith. My main reason for saying that is that it reflects my assessment of her, having listened to her giving evidence under quite hostile cross-examination for over two days. I simply do not believe that she would deliberately inflate the interim bill in order to maximise the, amount which she could transfer from client to office account. On any view quite a lot of work had been done on the estate, some of it by herself and some of it by Mr Sampat, and on any view she was entitled to make a fair charge for that work. It is just not credible that they should have got up to a dishonest conspiracy to falsify the facts and secure a larger interim payment. In any case, it was only an interim bill, and if on the calculation of a final bill it appeared that the interim bill was somewhat greater than it should have been, that would fall to be adjusted at the stage of the final bill. The final bill could well be the subject of an application for a remuneration certificate, and now, given what has happened in this case, probably now will be. I would accept that, whether there is any formal rule about it or not (and none was cited to me), it seems wrong in principle that an interim bill should be greater than the value of the work done up to the interim stage, but surely that is something which might happen by accident every now and then and which would be sorted out at the time of the final bill.
- A great deal of time was occupied in the trial with Mr Malek and Mr Peebles on behalf of the Law Society trying to show that the way or ways in which Miss Sheikh and Mr Sampat believe that they arrived at the round sum of £35,000 before V AT cannot have been right. I decline to go into these matters in depth: the judgment would become interminable and unacceptably tedious if I did. I will, however, make a few comments.
- I have no more specific comments to make about the Thirkettle interim bill. I have dealt with it at some length, but that reflects· the considerable attention which it received from the Law Society in the trial. .
- This is another aspect of the Thirkettle estate. The Law Society devoted some attention to it: in my opinion inappropriately, but I will deal with it. It concerns a few items of jewellery which had belonged to Mr Thirkettle in his lifetime, which came into the possession of Ashley & Co after his death, and which have gone missing.
- Mr Thirkettle was a retired postal worker. For some time before he died he was a widower with ~o relatives. He lived in a residential home. He had some money and assets (hence there having been an estate which required - or at least absorbed - quite a lot of Miss Sheikh's and Mr Sampat's time in its administration). Miss Sheikh knew him and said that, although he owned stocks and shares, he had a modest lifestyle. He died on 8 June 1999. Miss Sheikh was his executrix. By his will he left a few small legacies, and then left the rest of his estate on trust for the income to be paid to the Alzheimer's Trust in perpetuity. On 19 June 1999 one of the staff at the home wrote to Miss Sheikh. referring to· an earlier telephone conversation and ~ding that she had forgotten to mention that the home had in its safe for Mr Thirkettle four gold rings, one gold signet ring, one diamond and sapphire ladies' ring,. and one gold locket. It seems that there were actually three gold rings, not four. On 19 October 1999 items of jewellery were sent to Ashley & Co ·under cover of a letter. Miss Sheikh thinks that they were in a plastic bag in the envelope. An internal attendance note of 20 October 1999 recorded that something to be considered was whether the jewellery should be valued. That is the last reference to it. It is not at Ashley & Co now, and no-one knows what has happened to it. Miss Sheikh could not remember. She speculated that it may have been given to a local charity shop. In her evidence she commented that in earlier years she always used to have minor items of jewellery valued, but had come to realise that the cost of valuation was often more than the jewellery would turn out to be worth.
- The Law Society made quite an issue of this in the PI Report (the document on the basis of which the Panel decided to intervene). In my opinion that was unreasonable. Obviously something went wrong which in a perfectly run office would not have gone wrong. Miss Sheikh acknowledged that: 'Something has gone wrong in my office. I . cannot account for it.' There should have been a record somewhere of what had happened to the jewellery, and there was not. But accidents occasionally happen; or things are done deliberately but the need to make a note is overlooked. In relation to the jewellery there was plainly no point to be made in connection with the Solicitors Accounts Rules. So why was this minor matter pursued as it was? Was there a tacit suggestion that Miss Sheikh might dishonestly have pilfered the jewellery for herself? Mr Malek disavowed anything of the sort, but I continue to wonder why the Law Society have continued to draw attention to it. After I expressed my view that I found this particular element of the Law Society's case unappealing (using less diplomatic terms than that) Mr Malek's point seemed to be that Miss Sheikh had not informed the income beneficiary of the estate (the Alzheimer Trust) about the loss. In cross-examination Miss Sheikh said that she supposed that she should tell the Trust. I cannot find anything seriously blameworthy in her not having done so already. The Trust is only entitled to the income from the estate, not to the estate itself (although Miss Sheikh has said that she sensibly wishes to explore whether there is any way by which the fund could be transferred to the Trust outright, given that the Trust is entitled to the income in perpetuity). As the will now stands, if the jewellery had been valued and sold, and the proceeds remaining after the expenses invested, I wonder ho~ much extra income would have been payable to the Trust. Not more than a few pounds a year I fancy.
- The Thirkettle jewellery issue shows that there has been a slip up somewhere, but it really is a minor matter, and I am unimpressed by the way that the Law Society are simply not willing to say that, although it should not have happened, they accept that it cannot sensibly have any impact on the result of this case.
- Many transfers which Ashley & Co made from client account to office account were in round sums. The Law Society seem to regard this as inherently objectionable in all circumstances. In the briefing paper which the officers of the Law Society prepared for the Panel they implied that the round sum transfers were the most serious matter. I quoted earlier the office's· recommendation that it was not necessary to intervene, but that the matter was 'finely balanced'. The paper continues: ' ... particularly given the size and amount of the round sum transfers made by Miss Sheikh and the subsequent delays in allocation of the round sum transfers to the appropriate client ledgers' . The second of the two points there mentioned (delay in allocation to ledgers) is a more technical issue which I will address later, but the thrust of the first point seems clearly to be that the round sum transfers which Miss Sheikh made were altogether wrong and might by themselves support a decision by the Panel that Miss Sheikh's practice should be intervened upon.
- I do not agree with that approach on the part of the Law Society, and I shall explain why not. However, before doing that I comment that I can understand why, when investigating officers of the Law Society like Mr Shaw examine the records of a firm, they will wish to scrutinise transfers from client account to office account, and will be particularly looking for transfers which are in round sums. One of the foremost things which a Law Society investigator will want to check is whether the solicitor has been transferring money from client account for his or her own purposes and doing so otherwise than in circumstances where the Solicitors Accounts Rules permit the transfers. I can easily imagine that, if a solicitor is going to give in to the temptation of taking clients' money which he or she should not take, it is likely that he or she will take round sums. If an investigator sees from the client cash ledger iU;1d the office cash ledger that round sums have been transferred from the client bank account to the office bank account his suspicions will probably be aroused. So I believe that I understand why Mr Shaw or his colleague who preceded him on the occasion of the first one or two visits to Ashley & Co's offices looked for round sum transfers. ~However, they seem to have thought that, when they found such transfers, their mere ,existence was evidence which raised a suspicion of dishonesty and of breaches of the Solicitors Accounts Rules. If that was indeed what they thought, I do not agree. In the discussion which follows I will first assume round sum transfers which related to single matters. There have also been some round sum transfers, in the nature of block transfers, which related to several different matters. Additional considerations arise in connection with such block transfers, and I shall deal with them later.
- Focusing initially on single matter round sum transfers, I have already mentioned more than once that the legal position under rule 19 (2) and (3) is that, if the solicitor has done work for the client for which he or she is entitled to be paid, and if there is a bill for the costs (the fees and the disbursements), money in the client account equal to the amount of the bill becomes office money; the solicitor can lawfully transfer it to office account, and indeed must do within 14 days. As far as I know there is no rule' anywhere which says that a bill cannot be stated in a round sum. Therefore, if an investigator notices a round sum transfer from client account to office account, he may want to check whether it was a case of the solicitor unlawfully raiding the client account. But if he discovers that there was a bill in the amount of the transfer and that work had been done which justified the solicitor in making a charge to the client, then in my opinion nothing wrong has been done.
- By way of illustration I return briefly to the £41,125.00 interim bill in the case of the Thirkettle estate. £41,125.00 was £35,000 plus VAT, and £35,000 was a round sum. The bill itself said that it was an interim bill and was an estimate. A fully itemised bill, which has still not been prepared, would obviously be a much more detailed affair and would be most unlikely to come out in a round number. Now, as I have said the Law Society challenge the Thirkettle interim bill on the ground that it was unjustifiably high. But let it be supposed that there was no concern of that nature, and everyone agreed that Miss Sheikh had done work which was fully sufficient to justify an interim bill of at least £35,000 plus VAT (a total of £41,125.00). Would the transfer of £41,125.00 from client to office account be objectionable simply because the pre-VAT figure was a round sum? I could not work out from the evidence or from the submission~ whether the Law Society think that the answer is yes, but in my opinion the answer is: no. There would, no doubt, in almost all such cases have to be a further stage when a fully itemised bill would be prepared, the amount of which would be unlikely to be in a round sum, and a final payment made (or, if the interim bill had been overestimated as the Law Society says ~ay have happened with the Thirkettle bill, a repayment made). But I cannot see anything inherently wrong in the concept of a round sum transfer being made on the basis of a round sum bill in a case where the work had been done.
- Miss Sheikh's evidence was that, in all cases where round sums were transferred from client to office account, work had been done which entitled the firm to be paid, and that bills always existed. As far as I know the only example of such a bill which was included in the extensive files of documents presented to the court was the Thirkettle estate bill (at least that was the only bill which was specifically shown to me), but, unless I have misunderstood, Miss Sheikh cannot be criticised for not producing more bills. She told me that all the firm's bills were kept in books of bills, and that those books~ together with all the other practice documents, were in the custody of the Law Society's intervention agents Russell-Cooke. I see no reason to doubt Miss Sheikh's evidence in this respect. I note also that Mr Shaw accepted in cross-examination that he was unable to point to any round sum transfer where a bill had not been issued. He also said that he had confirmed that the Thirkettle bill for £41,125.00 was created on the same day as the transfer of the money from the client bank account to the office bank account. I should, however, add that there is a detailed point in relation to the estate of Helen Strupczewski deceased which I will consider later. See paragraphs 87 to 89 below .
- Before I move on to consider round sum block transfers I should refer to note (x) to rule 19 of the Solicitors Accounts Rules:
- I move on to consider round sum block transfers. Several transfers of round sums from Ashley & Co's client bank account to the office bank account did not refer to a single matter for a single client, but were the aggregate of amounts referable to several different matters or clients. Miss Sheikh described her practice. When she arrived in the office in a morning and before going to court she quite often went through the following steps. First she checked the level of the office bank account. It the account was in overdraft at or close to the bank's prescribed overdraft limit it was desirable to make such transfers from office to client account as she believed she was entitled to make under the rules. Second she printed out from the computer a schedule which listed current matters and itemised in two columns (a) the amounts of any outstanding bills which existed at the time, and (b) the amount of each client's money which was held on client account at the time. In relation to each matter she could transfer from client account to office account the lower of the two amounts. Third, she marked with a highlighter pen on the print out the matters as respects which she had decided to effect transfers that day. Fourth, she rounded down the aggregate to a round sum and instructed the bank (or possibly left a note for her staff later in the day to instruct the bank) to transfer the round sum from client account to office account. Fifth she retained the highlighted print out so that· the appropriate accounting entries (often referred to as postings) could be made to individual client ledgers later.
- If (have understood correctly, she did things that way because she was very busy, and . did not have time to proceed in a more individualised way. It was a routine which she could operate quite quickly. Typically it was early in the morning; she was going to have to leave to go to court quite soon; she could not delay that departure; and there were undoubtedly other matters which she had to deal with before leaving - for example checking the morning's mail. Mr Shaw in his evidence sounded to be quite sympathetic:
- The general point is that there was a degree of comer-cutting in the way that Miss Sheikh carried out round sum block transfers. It produced technical breaches of the Solicitors Accounts Rules, and time lags between events occurring and them being fully recorded in all of the books of accounts in which they had to be recorded. I accept those points, but these particular breaches of the Solicitors Accounts Rules could not conceivably 'be such as to justify intervention and the effective closing down of Miss Sheikh's practice. It also seems plain to me that, when the position is properly understood, including the reasons for the system on which Mr Shaw commented sympathetically, there is no realistic basis on which these round sum transfers can have given reason to suspect dishonesty. I do not know whether the Panel thought that they did give reason to suspect dishonesty, because, as I keep saying, no-one knows what the Panel's reasons for its decision were. However, the Law Society materials which were before the Panel seem to me to have portrayed the round sum transfers in a suspicious light which the true facts do not support.
- A final general point on round sum transfers is that Miss Sheikh gave evidence, which I see no reason to doubt, that, when in the course of one of the Law Society's visits to Ashley & Co's office Mr Shaw explained his view that there were objections to her system of making round sum block transfers she stopped making them. The Panel did not know that, but I do, and it underlines my view that, substantial though the Law Society's concentration on round sum block transfers has been, there is nothing in the ' circumstance that Miss Sheikh used to make them which could possibly support the continuation of the intervention.
- There are, however, two other matters which I need to say something about before I can move on to a different topic altogether. The first is this. On 7 June 2001 a single matter round sum transfer of £20,000 was made with reference to the estate of Helen Strupczewski deceased. The bill in respect of the matter (including VAT) was ,£19,975. An astonishing amount of time was devoted on behalf of the Law. Society to the missing £25. This is the matter of which Miss Sheikh said, in a passage which I have quoted earlier: 'It is a very small matter, Mr Malek. ... You have slip-ups from time to time.' Nevertheless, given the stress which Mr Malek sought to put on it, I need to say something about it. Mr Malek's. point was that, although Miss Sheikh said that she always prepared the bills before she made any transfer from client to office account, the missing £25 shows that she did not do so in the Strupczewski matter; perhaps that casts doubt on the truthfulness and reliability of all her evidence.
- Miss Sheikh agreed that the bill for professional services to the estate was only £19,975, but she said that an examination of other documents showed that the firm had provided some copying services for which it was entitled to bill the estate for further sums. Those further sums were small in themselves ,but were more than £25. Documents to which I was taken did show that the copying work was done, and that a charge for it was taken into account in calculating the final value of the net estate for distribution to the beneficiaries. Miss Sheikh's initial evidence was that she believed that there would be another bill somewhere, as well as the bill for £19,975. ,But searches by the Law Society team at the trial failed to find one. When this was put to Miss Sheikh she accepted that it appeared in this particular instance that there had been an oversight, and that a bill which should have been drawn up was not drawn up. She added that, although the main bills were prepared by herself, minor and supplementary ones of this nature were delegated to a secretary. 'We have this problem a lot. They forget to put the photocopying bill separately. It is an oversight .. I add that, although I have not been able to trace the reference in writing this judgment, I recall from reading through the transcripts that there were references to another matter in which a supplementary bill in an amount of a few hundred pounds should have existed but seems not to have been drawn up.
- I decline on account of these features whereby there is a missing bill for the copying charges to the Strupczewski estate and the main bill is £25 lower than the round sum transfer, to reject Miss Sheikh's evidence either generally' or on this particular aspect' of the case.
- The second matter on which I should say something before I move on to a different topic concerns delays in posting round sum block transfers to individual client ledgers. (In fact this particular criticism by the Law Society of Ashley & Co's bookkeeping systems may not be limited. to matters which involved round sum block transfers, but that is certainly the main area in which the criticism was ventilated, so it is convenient to deal with it here.) I can summarise my general view on this' particular matter by saying that the Law Society has a point: in this respect Ashley & Co" did not operate the accounting systems required by the Solicitors Accounts Rules , as well as the firm could (and probably should) have done. However, in general the entries required were eventually made, even if rather late. The position was improving rather than getting worse. The delays have not meant that any client's money has been shown to have gone missing, and on the contrary. the strong indications are that all clients' money has always been intact. The delays may have been a respect in which (as Mr Sampat expected - see paragraph 33 above) the Law Society could call on Ashley & Co to 'tighten up'; they do not justify intervention.
- There is more to say about the posting of transfers to individual client ledgers. In more detail the position is as follows. When a transfer from client bank account to office bank account is made in circumstances permitted by rule 19(2), two sets of book entries are required. The amount transferred should be recorded in ~he client cash account and the office cash account - the ledgers which record the global positions of the client account generally and the office account generally. And the transfer is also required to be recorded in the client ledger for the client and matter to which it related. If I understand correctly the amount should be debited to the balance on the client's side of the client ledger and credited to the balance on the office side of the client ledger. Entries of this nature are commonly referred to as postings. I believe that in the case of Ashley &. Co the entries were made promptly in the client cash account and the client office account (the ledgers which recorded the positions of clients and the firm globally), but the postings were not made so promptly in the client ledgers. The rules do not specify a time by which the postings have to be made. By implication they may have to be made within a reasonable time, but I have no evidence of how long the reasonable time might be. I believe, however, that the Law Society recommends in the case of small practices that the postings should be performed at least once a week. The evidence of Miss Sheikh and Mr Sampat was to the effect that pressure of other matters meant that sometimes there were delays. Miss Sheikh said that in general, when the reconciliations which the rules required to be carried out every five weeks were performed .rule 32(7) of the Solicitors Accounts Rules, referred to in paragraph 24 . above), 'any unposted transfers were picked up then and appropriately entered into the client ledgers. In a small number of cases there had been longer delays. Mr Sampat said that at one time they had a problem with computer corruption. There was a letter from the supplier of the computer accounting system which confirmed what he said. It is possible, though not certain, that the long delays (78 days in the longest case and 66 in the next longest) could have been contributed to by problems with the computer system.
- In the case of a block round sum transfer there is, before the postings to client ledgers can be made, a prior stage of allocating the round sum between all the different client matters in order to know what amounts should be posted to the separate client ledgers. However, Miss Sheikh explained (convincingly, as it seems to me) that she always knew the allocation because it appeared on the highlighted print out which she used in deciding' what amount to transfer. (See paragraph 83 above.)
- Mr Sampat has produced a full print out which shows, among other things, all client account to office account transfers over various periods. He has added a column of his own which specifies the number of days delay between the date of the transaction and the date of the posting of it. He has also calculated averages. There are a great many entries when the number of days delay was nil, and a few when it was (at least to outward appearances) unreasonably high, like the 78 days and 66 days which I mentioned two paragraphs earlier. I hope that in the following summary I do not misstate Mr Sampat's statistics. In a period of 656 days from 1 May 2001 there were 67 transfers and the average delay between the making of the transfers and the posting of them to the client ledgers was 10 days. In a period of 533 days beginning on 1 January 2002 there were 58 transfers, and the average period of delay until posting was 9 days. In a period of 335 days beginning on 1 May 2002 there were 50 transfers, and the average period of delay until posting was 7 days. The average delays do not strike me as entirely unacceptable, and in any event the position was improving. However, I believe that Mr Sampat's figures related to all transfers from client account to office account, and not just to those which were round sum transfers. As respects round sum transfers Mr Shaw has calculated an average delay of 26 days. I would accept that there was room for improvement in that area.
- Having just referred to Mr Sampat's print out from which he was able to calculate the averages which I have given I am prompted to mention another point here.· It is not a point which is specific to round sum transfers, so it has a relevance which goes beyond the subject matter of this part of my judgment. However" it needs to be mentioned somewhere, and this is as good a place as, any. One of the Law Society's complaints has been that Ashley & Co's ledgers recorded dates of transactions but not the dates when the transactions were entered into the computer system. The system permitted retrospective posting for (I believe) up to 60 days. (The Law Society have even said that that feature of the system was objectionable, which is remarkable given that it was a standard computerised package for solicitors' accounting systems which was purchased by Ashley & Co from a reputable arm's length software company.) However, the information as to the date of entry into the system was always there in the computer memory and capable of being reproduced if the appropriate commands were given to the system. That is how Mr Sampat was able to make the calculations which he did. This links up with a short exchange between Mr Treverton-Jones and Mr Shaw in Mr Shaw's cross-examination, which I wish to reproduce.
- Ashley & Co did a lot of litigation work where its clients received community funding from the Legal Services Commission, the LSC. The Law Society disagree with the way in which the firm treated the LSC monies. This is, to my mind, an extremely technical issue as respects which there can be no possible suspicion of dishonesty on the part of Miss Sheikh. It is arguable that the accounting - treatment which Miss Sheikh and Mr Sampat were adopting to record what the firm did with LSC receipts did not fully comply with the Solicitors Accounts Rules, but if that is so any breaches were not conceivably of the sort which could merit intervention.
- One rule in the Solicitors Accounts Rules which I have not mentioned yet is rule 21. It deals specifically with payments to a solicitor from the LSC, either by way of an advance payment in anticipation of work being carried out, or by way of payment for 'costs' (defined as a solicitor's fees and disbursements in rule 2). Rule 21(1) provides (in summary - the full contents of the sub-rule become quite detailed) that money received from the LSC may be held in office account rather than in client account, even if it is strictly client money. After October 2003 Ashley & Co did hold money received from the LSC in its office bank account.
- The result has been that, in the case of Ashley & Co, the LSC ledger or (if there were separate ledgers for each different case on which community funding was provided a detail where I am not sure what the position was - the LSC ledgers) recorded substantial credit balances on office side, superficially giving the impression that the firm might owe substantial sums to somebody, 'when', to quote Mr Shaw, 'in truth, of course, they do not'. The Law Society's position is that that was wrong and· amounted to a breach of rule 32(4). As to that Mr Shaw agreed with the following proposition which was put to him by Mr Treverton-Jones: 'All that has gone wrong, you would say, is that, simply on these legally aided, publicly funded matters, they have not made the appropriate entry on the ledger when the special payment on account came in. 'Miss Sheikh and Mr Sampat did not accept that rule 32(4) had this particular effect in relation to LSC funded matters. (Mr Sampat in particular held strong views about it, and virtually insisted on diverting Mr Peebles' cross-examination of him into this area, when Mr Peebles really wanted to discuss other. matters altogether.) I shall refrain from attempting to decide this relatively abstruse point, but, if Mr Shaw is right and Mr Sampat failed in this respect properly to understand what rule 32(4) required, that is an error of interpretation and nothing worse than that.· I do not accept that Miss Sheikh has somehow wrongfully made away with LSC monies or contrived by inappropriate accounting in this 'very difficult' area to divert to herself receipts from the other parties in community funded litigation which ought to have been paid on to the LSC.
- What I have said in the foregoing paragraphs should substantially cover points made in paragraphs 54 and 55 of the FI Report, taken with Appendix IV, which relate to credit balances on the office side of client ledgers having an aggregate at 31 January 2004 of £95,706.01. Mr Shaw confirmed in his evidence that credit balances of that sort were not necessarily breaches, but he said that they should be investigated and the appropriate accounting entries made. Miss Sheikh had analysed the £95,706.01 and produced a schedule showing that over £90,000 of it represented receipts from the LSC where the firm had not made the entries which Mr Shaw considers were required by rule 32(4). If those entries had been made the credit balances would have been only some £5,000 odd. The explanations of that other £5,000 odd were plainly satisfactory, and no point was made about them on behalf of the Law Society.
- In essence what I have said in the foregoing paragraphs should also cover another point which the Law Society made in the FI Report about three transfers, aggregating £58,000, of monies received from the LSC and originally held by the firm on the client bank account but then transferred to office account (as rule 21 permitted). There was in my view no possible dishonesty in relation to the £58,000. The Law Society's complaint, if it can be described as such, is that the firm did not make book entries which allocated the £58,000 between all the different LSC-funded cases which contributed to it. Apparently most of it had been allocated by the time of the inspection visits to the office, but some £13,000 of it had not. I can accept that such an allocation was sensible so as to avert uncertainties over whether recoupments of costs or receipts of damages from third parties might necessitate onward payments by Ashley & Co to the LSC. That does not necessarily mean that an allocation was positively required by the Solicitors Accounts Rules, although Mr Shaw's view, which could well be right, .is that it was. Miss Sheikh and Mr Sampat told Mr Shaw. and the other investigators that the information to make the allocation was available, and in fact it has now all been allocated (including the remaining £13,000 odd).
- . In my judgment these points about the ways in which Ashley & Co made records in its books relating to LSC-funding receipts ought to have played no part in this case. I can well see that the Law Society might have wished (and, if its statutory powers are wide enough, required) Miss Sheikh and Mr Sampat to attend a course on these aspects of the Solicitors Accounts Rules. I cannot, however, see that contentions that the firm was not getting these matters right in its accounting records can carry any weight in connection with an intervention, where the effect of what the Law Society is seeking to do is to close Miss Sheikh's practice down completely and put her out of business. This case is bedevilled by the Law Society having put 'everything which it felt might be wrong about Ashley & Co into the. FI Report, with no effort to sift the numerous criticisms into those which realistically could support an intervention and those which could not, and then having put the whole matter before the Panel. The problem is made worse in this particular case (although I would accept that in many other intervention cases it might not be) by the Panel, following normal practice, simply finding that there was reason to suspect dishonesty and that there had been breaches of the Solicitors Accounts Rules without giving any particulars at all. Was the Panel influenced by what the Law Society said in the FI Report about these LSC related matters? Perhaps not, but I have no idea; nor has anyone else involved in the case. So these esoteric issues have been laboriously examined and I have had laboriously to address them in this judgment.
- This matter is hardly touched on in the FI Report, but Mr Malek has raised it before me and has questioned Miss Sheikh about it, so I need to say something about it. When a client matter is finally over - when all bills have been paid, all receivables have been collected in, and the client has received whatever he or she is entitled to -. the ideal is that there should be no balances left on either the client side or the office side of the client ledger. Sometimes the ideal does not happen. In particular, sometimes a matter appears to be all over and the file is dormant, but there is still a credit balance on the client side of the ledger. That would normally indicate that the practice owes an amount of money to the client, and that the amount has not been paid. There can be other explanations - for example that the solicitor is expecting to receive an invoice for some payment to a third party which, when made, will be a disbursement attributable to the matter - but the existence of credit balances on the client side raises the question of whether the solicitor has fully accounted to the client.
- I add in this connection that Mr Treverton-Jones wrote in his closing submissions that 'in fact, credit balances on the client side of dormant ledgers are something of an occupational hazard for solicitors.' I have no personal knowledge about this, but Mr Treverton-Jones has considerable experience in matters relating to solicitors' practices, and I am sure that he would not have written what he did if it was not the case. More generally I have no difficulty in accepting the general point that, where a business is of a kind which commonly holds money for other persons, it does happen from time to time that the owners of the money do not turn up to claim it and cannot be traced. A bank where an account is in credit but the account holder disappears is one example. Another is an auctioneer where the client never turns up to claim his money and cannot be traced. (For an interesting case exploring the tax aspects of that situation, see Morley v Messrs Tattersall (1937) 22 TC 51.r
- The Law Society investigators identified a number (not many) of apparently dormant ledgers where there were small credit balances on the client side of the ledgers. In my judgment these matters cannot make any significant contribution to this case. It is not suggested to me that the existence of the balances is a breach of the Solicitors Accounts Rules. As regards suspicion of dishonesty, as long as the balances are on
- There mayor may not be some type of disciplinary complaint which could be brought against Miss Sheikh along the lines that. she ought to have tried harder to find the clients in the dormant matters and to ensure that the outstanding credit balances on the client sides of their ledgers were paid to them. There is in my judgment no basis on which this issue can have any significance attached to it in the context of the present case.
- In privately funded legal matters the level of a solicitor's charges is initially a matter of contract. Commonly a solicitor at the commencement of a matter will supply to the client a copy of the solicitor's normal terms of business, and in such cases the terms will usually set out the solicitor's principles of charging. Miss Sheikh had standard terms of business which she (at least usually) supplied to clients. The solicitor is not entitled to charge at higher rates than those appearing in such terms of business. And prima facie the solicitor is entitled to charge the client in accordance with whatever the contractual terms are. However, in non-contentious civil matters there is a system, prescribed in detail by statutory instrument (the Solicitors (Non-contentious Business) Remuneration Order 1994), whereby a dissatisfied client can require the solicitor to obtain a remuneration certificate from the Law Society. Applications of that sort are delegated within the Law Society to an adjudicator, with the possibility of a review by another adjudicator if the solicitor (or, I imagine, the client, though this is not a detail which I have checked) is dissatisfied with the first adjudicator's decision. So a solicitor's charges in non-contentious matters (like probate work which consists of the administration of an estate), even if in accordance with the contractual terms of business, can be reduced under the remuneration certificate procedure if the adjudicator considers that they exceed a fair and reasonable sum for the work done. In contentious business are other procedures under which a solicitor's charges can be challenged.
- There have been several occasions on which adjudicators have reduced Miss Sheikh's charges, usually in probate matters. Sometimes they have reinforced their decisions with reprimands or severe reprimands. I have mentioned earlier (see paragraph 30 above) Miss Sheikh's evidence that there have been five remuneration certificate decisions, a number which she suggests is not unacceptable given the length of time she has been in practice. I also noted earlier that the Law Society have produced no statistics by reference to which I can evaluate what Miss Sheikh says in that respect. Miss Sheikh has also said in evidence to me that she is unhappy about some of the decisions, but she accepts that if they go against her she must abide by them.
- The Law Society say that overcharging is, or at least can be, dishonest, and that the remuneration certificate decisions which have gone against Miss Sheikh, coupled with the views of Mr Shelley that Miss Sheikh's charges -in six probate matters were too high, at least give grounds to suspect dishonesty. I do not accept this. There are several different points which I wish to make.
- First, I would agree that, if a solicitor knowingly overcharges a client (e.g. by deliberately charging for work which the solicitor knows that he or she has not done or, if he or she has done it, knows that he or she is not entitled to charge for it), that would be dishonest. However, I do not accept the proposition which may be implicit in much of what Mr Malek says on this aspect of the case, namely that typical cases of overcharging are of that nature. Typical cases of overcharging are ones where the . solicitor takes one view of what is an appropriate amount for him or her to charge, but where a person with authority to take a decision upon it (like an adjudicator under the remuneration certificate procedure) takes a different view. If a solicitor's charges are too high in a case like that, they are too high because of misjudgement by the solicitor, not because of dishonesty. The misjudgement may be culpable':- and Miss Sheikh has been reprimanded in some cases for culpable overcharging - but it is not dishonest.
- Second, I have heard Miss Sheikh in the witness box for over two days. The Panel in this case did not hear her speak on her own behalf. I believe that, in forming a view on whether any overcharging which occurred in her case was the dishonest type of overcharging or not, I am entitled to take account of my own evaluation of her. I do that, and my view is that any overcharging was not dishonest. In general I am prepared to accept that, if an adjudicator has found that Miss Sheikh has overcharged in a matter, then, even if Miss Sheikh explains to me reasons why she disagrees with the finding, I should not attempt to second guess the adjudicator. Apart from anything else I believe that there may be disciplinary proceedings in future in which overcharging may be an issue. I do not think that I should say anything which might be argued to have a substantial effect on those proceedings. However, whether any overcharging has been dishonest or not is a matter for me to form my own view on in the present case, and that is what I have done.
- Third, by way of partial exception to what I said in the middle part of the foregoing paragraph, I think that I ought to record what Miss Sheikh said to me about one matter where the adjudicator decided that she had overcharged. I only heard her side of the matter, but what she said did at least raise a question mark about the adjudicator's decision. This relates to a probate matter: in the estate of Cecil Burrows deceased. It .is the most dramatic of the reductions made by adjudicators to Miss Sheikh's charges. She charged £15,000 (before VAT). The adjudicator reduced the charge to £3,850. The adjudication was upheld on review. (Miss Sheikh had requested a review, but did not submit any representations to the reviewing adjudicator. I am prepared to assume that, being a busy solicitor with many other current matters on the go, she found that she had more pressing things to which to devote her time.) Her evidence was that her bill was made up of a number of separately identified. items aggregating to £15,686.42, which she then rounded down to £15,000. The separately identified items included item charges for letters written and received and for telephone calls, and 42.3 hours work. on documents, Her calculated charge for the letters and calls was £2,522.25, and her charge for the hours on documents was £7,832.28. Those were her figures before the addition of a 50% uplift, which she now, in accordance with the report of Mr Shelley, accepts was no longer the generally accepted way of charging: see paragraph 71(i) above. The addition of the uplift and a few other minor items produced the sum which she rounded down to £15,000. The adjudicator has allowed her £2,527.84 for letters and calls: as near as makes no difference the same as her own figure. The adjudicator's total figure of £3,850 means that he has allowed her only £1,322.16 for all the rest of her work on the estate. At an hourly rate of£185 (i.e. no uplift) that represents 7.1 hours of work. The file covered some 9 months, and what Miss Sheikh said to me was that for her to be allowed a mere seven hours work on a probate which took that amount of time 'was a manifestly unfair award and does not make any sense to me.' As I have said, I only heard her side of this particular issue, but she could have a point.
- Fourth, there is a different matter relating to the Burrows estate. I am not sure that it quite fits within the general heading of overcharging, but it is something for which Miss Sheikh has been heavily criticised by Mr Malek, and I should deal with it somewhere. Miss Sheikh's bill in the amount of £15,000 plus V AT had been entered into the records on 7 May 2003. The ledgers show that on 13 October 2003 Miss Sheikh, on the basis of that bill, caused £12,000 to be transferred from client bank account to office bank account. Apart from the existence of the family's request for a remuneration certificate she would, in my view, have been fully entitled to make that transfer by virtue of rule 19(2) of the Solicitors Accounts Rules. However, the family had requested a remuneration certificate. Indeed the transfer of the £12,000 occurred ,at a time when the first adjudicator had already issued a certificate for only £3,850 but the matter had not yet been decided by the second adjudicator on review. Mr Malek suggested that in the circumstances it was wholly improper for the transfer to have been made when it was. Miss Sheikh's general answer to the question was:
- In my view for Miss Sheikh to cause the transfer of £12,000 to be made when it was a rather provocative thing to do. Or at least it was if Miss Sheikh realised that the bill by reference to which she was making a transfer of £12,000 was the one which an adjudicator had reduced so drastically. She said in evidence that she was not sure that she even knew about the first adjudicator's decision. I think, on the basis of letters on the file, that she must have been informed about it.· I would not, however, rule out the possibility that, when she was carrying out her morning exercise (described in paragraph 83 above) of looking at the day's print out of (1) amounts owed by clients and (2) amounts held on client account for those clients, with a view to highlighting matters as respects which a transfer to office account should be made, she did not realise that a matter which she highlighted for a transfer of £12,000 was the one where the adjudicator had already reduced the pre-VAT fee down from £15,000 to £3,850. She did say in her evidence: 'You have to accept that one is sometimes putting two hats on. When I put my accountancy hat on I, to some extent,· shelve other matters. ' But, even accepting that the transfer was provocative, and one which it would have been better for her not to have made, I am not clear that there was anything about it which was in breach .of the Solicitors Accounts Rules, and certainly I cannot see any dishonesty. I repeat that .in evidence Miss Sheikh said that 'obviously' if the adjudication went against her she would have to pay the money back, and that that is precisely what she did. The transfer may have been unwise, and it may merit some criticism, but I do not think: that it has any valid impact on the specific issues with which I am concerned: the issues of whether an intervention expressed to have been based on reason to suspect dishonesty and on breaches of the Solicitors Accounts Rules (which must in the context mean serious breaches) should be allowed to continue.
- Fifth, I have a number of observations to make with reference to the evidence of Mr Shelley, the costs draftsman whose report for the Law Society was among the appendices to the FI Report which the Panel had before it. Mr Shelley gave evidence before me, and he confirmed that his report represented his opinions.
- I will now try to draw the threads together on the issue of overcharging. I am prepared to accept that there have been 'matters on., which Miss Sheikh has overcharged her clients. I suspect that there are few solicitors of whom that has not been true on some occasions. However, although any case in' which a finding of overcharging by a solicitor is made is regrettable (particularly when the adjudicator adds a reprimand or a severe reprimand), the number of cases on which findings have been made against Miss Sheikh does not seem to me to be so large as to indicate a consistent and regular pattern of serial overcharging, particularly not of deliberate overcharging. I simply do not accept the portrayal of Miss Sheikh as an exploitative solicitor who systematically milks her clients, or. at least estates in the course of administration where she is handling the legal work, for all that she can get. In any event law provides means for the protection of clients against solicitors who show a tendency to overcharge their clients. In particular there is the remuneration certificate procedure, and of course (something which I have hinted at but not specifically mentioned yet) in contentious matters there are procedures for the assessment of costs by experienced Costs Judges and District Judges. Interventions are not needed to achieve such protection. I repeat my opinion that, in so far as Miss Sheikh has overcharged on occasions, she has not done. so dishonestly but rather by misjudgement. In all the circumstances, although Mr Malek placed considerable reliance on his allegations about overcharging, I do not accept that they justify the continuance of the intervention. It is worth adding that interventions are not intended as means of punishing a solicitor: they are intended for the protection of the public. The public do not need this intervention in order to be protected against overcharging by Miss Sheikh. Further, given Miss Sheikh's experience so far in this case she will, I believe, take all the care which she can in future to secure that justified allegations of overcharging cannot be made against her.
- In paragraph 23 above I outlined the provisions of the Solicitors Accounts Rules which require a solicitor, subject to .de minimis limits, to account to clients or to controlled trusts (typically deceased's' estates in the course of administration) for interest calculated by reference to money held by the solicitor in the general client bank account. The Law Society say that in some of the probate matters which were investigated Miss Sheikh did not account for interest to the extent that the roles provided. I accept this, but for reasons which I will attempt to describe without getting excessively bogged down in a morass of detail, I think that it was a matter of slackness (perhaps understandable slackness but slackness nevertheless) and not of dishonesty. However, I certainly think that Miss Sheikh needs to improve in this respect. She needs to make efforts to comply with the interest requirements of the Solicitors Accounts Rules as meticulously as she can, which requires more than she has been doing in the past.
- There were passages in Miss Sheikh's oral evidence where she effectively accepted that she has to do better. For example: 'Interest ... is one of the things I do have to refine and set up a procedure for. There are certain procedures in place. Broadly, most of the money I have is legal aid money and interest just does not arise.' So [I wonder if the word was 'But'] in special areas of work, such as probate, I have to find a method of dealing with it.' She observed that in some cases the cost of the work which has to go into an interest calculation (and, dealing with tax documentation for it) is probably far higher than the interest payable. 'It is a vast amount of work - I am sure any practitioner would agree that - to deal with sometimes very small amounts of interest.' And a little later: 'I do not think any practitioner would pretend that accounting for interest at the end of a case is easy, but I also accept that procedures do need to be tightened up.' but I have not done that with probate yet. ' With reference to Miss Sheikh's comments about how much work is involved I should add this. The computer programme which Ashley & Co used makes an automatic calculation of interest by reference to (I think) credit balances appearing on the client's side of the client ledger. However, J assume from Miss Sheikh's evidence that there are further calculations 'and adjustments to be made, and that they are time-. consuming. Some manuscript calculations appearing on a ledger page which is one of the appendices to the FI Report appear to bear this out. Although Mr Malek criticised or disputed numerous points in Miss Sheikh's letter, he did not say anything to cast doubt on what she had said in this respect.
- In Miss Sheikh's first witness statement she wrote: 'In those cases where I have to acknowledge that interest was not accounted for I would submit that the payment of. interest on other cases demonstrates that my firm did not have a general practice not to account for interest, and that failure to account for interest in these specific cases was simply an oversight. I am willing to undertake to make good that oversight. ' With reference to the last sentence, the position is complicated by the feature that I have already announced my decision, but 1 would like to know if the undertaking is still offered.
- The Law Society had looked at five specific matters - all concerned with deceaseds' estates - to examine whether interest had been properly accounted for. In one of the five matters there were two different files and two different client ledgers, so that essentially six matters need to be dealt with.
- Generally on interest, I consider that this may be the weakest part of Miss Sheikh's case, and as I said at the beginning of this part of my judgment she needs to tighten up and comply properly with the rules. I accept that it can be time...;consuming and may cost more to do than the amount of interest involved. Nevertheless, it is a statutory obligation, and in my view it should be complied with strictly and not short-circuited. I do not think that Miss Sheikh's inadequacies in this respect justify intervention, particularly given her acceptance in her evidence that she needs to improve. in this respect. I can imagine, however, that the Law Society may wish to check from time to time to verify that Miss Sheikh is putting her good intentions into practice. I should add by way ~f postscript that, according to Miss Sheikh's evidence, it was generally Mr Sampat who .dealt with payments of interest to clients. I of course accept that, if Miss Sheikh's firm omitted to pay interest in cases where it should have paid it, she must accept responsibility for the breach of the legal obligation. Miss Sheikh would not question that that is so. But allegations of personal dishonesty on her part are not seriously maintainable.
- The Law Society say that a few files or parts of files have not been produced and appear to be missing. I am prepared to assume that that is true. It is of course regrettable, but I cannot find it altogether surprising in a busy practice where the administrative support to the fee earner and proprietor of the practice (Miss Sheikh herself) seems to be barely adequate, if adequate at all, for the various things which need to be done. I would only think that this feature gave any significant support to the Law Society's case if I suspected that. the files had gone missing because they would have revealed evidence of dishonesty on Miss Sheikh's part. Having seen her under lengthy cross-examination and having formed my own opinion of her I do not suspect anything of the sort.
- The Law Society, particularly through Miss Patrick, has criticised Ashley & Co's policy and practice for destroying files. I do not attach any weight to this. Some large firms of solicitors virtually never destroy files, and incur very considerable costs in storing them, often in warehouses in rural areas where space is not so expensive. I cannot believe that a policy of that nature is realistic for a one person practice like Ashley & Co. Miss Sheikh described the sort of value judgments which she made on which files to keep and for how long, which to dispose of entirely, and which to dispose of as respects much bulky material while extracting some key documents which it was sensible to retain. Her general policy sounded quite sensible to me, but I am no expert, and if the Law Society considers that she should have a different file destruction policy they may be right. In relation to files which (or some of the contents of which) Miss Sheikh decided to destroy, just as with a few files which are not recorded as having been destroyed but somehow have gone missing, I do not think that Miss Sheikh has selected files or contents of files for destruction as part of a plan to conceal documents which would show dishonesty. She simply is not that sort of solicitor.
- If I have followed a rather esoteric point correctly, it-does seem that there are a few LSC-funded matters where there are credit balances on the office side of the ledgers and where the files cannot now be traced. This links up with the subject which I considered in paragraphs leading to paragraph 99 above. It has meant that Mr Shaw has not been able completely to satisfy himself that there are no amounts repayable by Ashley & Co to the LSC. It could be that, if these particular files were ones which Miss Sheikh decided did not need to be kept (or as respects which some essential parts did not need to be kept) she made a mistake in this aspect of the administration of her practice. If so, it is not a mistake which should in my view carry weight on my decision whether or not to leave the intervention in place. The drastic statutory process of intervention is' not intended for a case' in which the essence of the complaint against the solicitor is that he or she made some mistaken administrative decisions.
- This is the last specific pre-intervention matter to which I shall refer. I have touched on it at an earlier stage in this judgment, and I said there that I would return to it. This is the point where I do that. During the inspection period Miss Patrick wrote several long letters to Miss Sheikh asking a great many detailed questions. Miss Sheikh did not reply to any of them, and according to her first witness statement now bitterly regrets it. She had a professional obligation to reply, and she did not fulfil it. As I have said earlier, this may be a subject of disciplinary proceedings against her. In my view it is not a matter which should go to intervention. Nevertheless I can conjecture that the complete absence of any responses from her must have created an unfavourable impression on the part of the Panel. For example the Panel might understandably have thought that the complete absence of replies from Miss Sheikh was a strong indication that she just had no answer to the various allegations against her upon which she had been asked to comment.
- I would, however, like to say, in agreement with Mi Treverton-Jones, that it is not all one way on this aspect of the case. It strikes me that this is one of those intractable issues which arise occasionally where each of two parties has an entirely reasonable position, but where there is no way of giving practical effect to both positions. I have looked at Miss Patrick's letters, and they are very demanding. For example, the first of the letters related to the Burrows Estate. It is eight and a half pages long, and on my quick count it asks 34 detailed questions. Most of Miss Patrick's other letters were not significantly shorter or less demanding. I remind myself that Miss Sheikh was a busy sole practitioner with clients to look after and without much in the way of high grade supporting staff in her office, and I say to myself that there was just no way that she could have dealt with the letters in the detail which Miss Patrick was calling for without neglecting her current clients and risking failing in her duty to them. On the other hand, when Mr Treverton-Jones asked Miss Patrick about this in cross-examination, Miss Patrick answered most impressively:
- In essence Miss Patrick is saying that she knows that the solicitor has an intractable problem, but somehow the solicitor has got to reply. Mr Treverton-Jones is saying: 'But Miss Sheikh, if she is going to carry on being a solicitor, simply cannot reply.' From their own points of view, both are right. I do not have a solution to this dilemma. Perhaps Miss Sheikh should have written letters (which, however, would have been unlikely to satisfy the Law Society) saying that she simply could not reply in detail without sacrificing the interests of her current clients, but she would attempt to give some general answers to the main strands of the questions. Perhaps Miss Patrick might have given more recognition than she did to the realities of Miss Sheikh's practice, and substantially moderated the detail and intensity of her questions.
- I do not think that I can or should say any more than that on this particular issue.
- I am not going to say anything more of a specific nature about allegations or criticisms advanced by the Law Society which relate to matters which preceded the intervention. So numerous and 'scattered' were the Society's allegations that it is virtually certain that there will be some points which Mr Malek and Mr Peebles have made which I have not addressed. I will only say that I hope and believe that I have addressed all the main points of any substance. On the basis of matters as they stood before the intervention (and taking account of evidence which I had of such matters, whether the Panel had it or not), I believe that the intervention should be set aside. The Law Society, however, seek to strengthen their case by relying on matters (essentially three matters) which occurred after the intervention, and to those matters I now turn .
- The Panel's decision that the Law Society should intervene in Ashley & Co's practice was reached on 17 February, but in circumstances which I will explain later under the heading of 'Post-intervention: the £254,000' was only effectively put into effect on 18 February (a Friday). From mid-morning onwards on that day various persons involved in the process were present at the office. Miss Sheikh was there, and so was Mr Weaver of Russell-Cooke, the Law Society's intervention agents. At some time in the course of the day Mr Weaver told Miss Sheikh that Russell-Cooke wished to be provided with complete printed out copies of all the client ledgers (and possibly some other client related documents as well- I am not sure of the exact details of what was required). The facilities and staff at Ashley & Co's office would not be capable of providing the items requested on that day, so an arrangement the precise content and status of which are disputed was ·made. A part of it was that files would be provide4 to Russell-Cooke by the end of the Monday. Russell-Cooke did in the end get everything which they had asked for, but not by the end of the Monday. For them to get all the files took a good deal longer than they had expected. I am not sure that I have the details exactly correctly. However, I believe that a large number of ledgers were provided on the Monday, but that there were still about 150 left to be copied and provided. Most of them were provided on or by a date which I cannot pin point exactly but which seems to have been in the first half of March. The last five ledgers were provided by 14 March (or possibly 18 March - the documents are not entirely clear about this).
- Mr Weaver believes that on the first day of the intervention (Friday 18 February) Miss Sheikh gave an oral undertaking that the ledgers would all be provided on Monday 21 February. They were not all provided on that day, and it is said by Mr Malek that Miss Sheikh was thereby in breach of a solicitor's undertaking, which, he says, is a serious matter and reinforces the Law Society's case that the intervention should be continued. Miss Sheikh's recollection is that she did give one formal undertaking, but it was not the one which Mr Weaver recalls. Her belief is that she undertook that ail post addressed to Ashley & Co would be forwarded to Russell-Cooke, which has been done. As respects the ledgers she thinks that there was an understanding, not a undertaking, that they would be provided on the Monday. She explains in one of her witness statements that the task of making copies of all of the ledgers proved to be substantial and ongoing. It was made more difficult by the fact that she had only one assistant, who was not particularly skilled or experienced, and who was working only part time.
- There is a factual dispute here which I do not think that I can resolve. (Was there a formal undertaking or not?) What is, however, clear to me is that there is no force in Mr Malek's suggestion that the alleged delays in providing copies of all of the client ledgers reinforces the Law Society's case in favour of the intervention.· Whether that case is good or bad, it is not affected one way or the other by this matter. Mr Penson, the head of the Law Society's department with the responsibility for implementing interventions, was not personally involved in this intervention, but he has made the point in his witness statement that the software system which Ashley & Co used permitted a degree of retrospective alteration to ledgers. I can understand that, since he and his colleagues (including Mr Weaver for this purpose) knew only that the Panel had resolved to intervene in Ashley & Co's practice on the basis that there was reason to suspect that she was dishonest, they would have been concerned by the possibility that Miss Sheikh was· falsifying some aspects of the ledgers before providing copies. However, I consider that I am in a better position to take a view on that now than they were then. They had hardly met Miss Sheikh, and they had probably not studied the papers which were before the Panel in any detail. In contrast, as I have mentioned at several points already I have observed Miss Sheikh under rigorous cross-examination for over two days. I am firmly of the opinion that she is not a dishonest person, and I do not think that there is any sinister explanation behind the fact that it took longer for all of the copies of the ledgers to be provided than had been requested by Mr Weaver; and (as I am willing to accept) longer than Miss Sheikh had originally expected.
- This is another respect in which it is alleged by the Law Society that something which Miss Sheikh did after the intervention and which it says she should not have done supports its case for the intervention to be upheld. ' The argument, I think, is that it shows a continuing inclination to do things which might be regarded as dishonest.
- What it really boils down to is one telephone conversation which Miss Sheikh had with another solicitor in which she did not disclose that she had been intervened upon. She had been acting for the estate of a Mr Munir. There was a court case of some sort between the estate and Mr Munir's former wife. It related to a property, which I suppose may have been. the house where Mr and Mrs Munir had lived. Abbey National had a mortgage secured on the house, and was concerned about whether its position could be affected by the case between the deceased husband's estate and Mrs Munir. A large firm of solicitors, Eversheds, were instructed on behalf of Abbey National. Abbey National was not a party to the case. When the intervention took place Miss Sheikh informed her clients (I assume the executors or administrators of Mr Munir's estate) about it, and also informed the solicitors who acted for Mrs Munir. As far as I know Miss Sheikh took no further steps in the case. - However, Eversheds did not know of the intervention, and on 4 March 2005 Miss Conte of Eversheds telephoned and spoke to Miss Sheikh. Miss Conte was asking for information. Her_ attendance note suggests that they spoke for a short time, and that Miss Sheikh answered a few questions but did not say very much.
- I cannot see anything in the nature of a smoking gun here. Miss Sheikh did not inform Miss Conte that Ashley & Co had been intervened upon by the Law Society. However, as far as I know she was under no obligation to do so. It- would have been an embarrassing thing to disclose to a fellow-solicitor, and I cannot blame Miss Sheikh for not saying anything about it. It is true that in consequence of the intervention Miss Sheikh's practising certificate was suspended, and that, by s.1 (c) of the Solicitors Act 1974, a person is not qualified to 'act as a solicitor' unless he or she has a practising certificate in force. When Mr Malek attempted to take Miss Sheikh to task over this in cross-examination her response was that, -simply by speaking to Miss Conte, she was not acting as a solicitor. I can see a lot of force in what Miss Sheikh said. The conversation did not relate to any step in the case between Mr Munir's estate and Mrs Munir. It did not relate to any proposed legal transaction upon which Miss Sheikh was acting. Because of the intervention Miss Sheikh was not holding any current instructions to act for the estate of Mr Munir, and she had informed her former clients of the position. Miss Sheikh had not made the call: she was answering a call made to her. It is true that the call had been made because Miss Conte believed that Miss Sheikh was the solicitor for the estate, but I am not convinced that therefore Miss Sheikh was acting as the estate's solicitor when she had a short conversation with Miss Conte instead of refusing to speak to her at all. The matter could, of course, be affected by what Miss Sheikh said, but from Miss Conte's note it does not appear that she said very much. In any case, if there is an argument that it was wrong for Miss Sheikh to have spoken to Miss Conte at all, it is a very minor matter, and does not to my min~ add any force to the Law Society's case on the issues which I have to decide.
- This is a much more substantial matter. It is quite a tangled story. Not all of the aspects of it are entirely clear, and I fear that it may take some time for me to give such explanation of it as I can. Mr Treverton-Jones justly observes in his written closing submissions: 'Were it not so serious, the chain of events set out in the hundreds of pages devoted to this issue in (he files before the court could be described as a comedy of errors.' The events of the intervention happened more or less to coincide with some events affecting a sum of £254,000 which Miss Sheikh had borrowed in her personal capacity, not in her capacity as Ashley & Co. I think that it may help if I first give such description as I can of the precise events by which the intervention came to be in place, ignoring the £254,000 at that stage, and if I then seek to slot in what happened in relation to the money .
- The intervention events
- The events concerning the £254,000
- By reference to those events Mr Malek attacks Miss Sheikh's conduct in several ways. He says it exhibits dishonesty and should reinforce me in a· decision to leave the intervention in place even if, without this complicated history of the £254,000, I might not have done. His first submission is that Miss Sheikh knew about the intervention when she told Mrs Taylor to instruct the bank to transfer the money out of an Ashley &Co hank account; the intervention meant that such a transfer was unlawful; Miss Sheikh knew that, and for her to have given instructions for it to be done was clear dishonesty. I do not agree, and it was .with that submission of Mr Malek in mind that in paragraph 136(ix) above I said that I accepted Miss Sheikh's evidence that she did not know about the intervention at the time of her telephone. conversations with Mrs Taylor and that I spelt out in some detail my reasons for accepting it.
- I should, however, say that I do believe that Miss Sheikh was impelled to give the instructions to Mrs Taylor because of a generalised feeling that she just did not want the money to be in the client account when the Law Society arrived. She would, I believe, have felt exactly the same way if she had realised that the money was in the office account, not the client account: she would still have wanted to get the money out of any practice account. So the error over which account the money should' have been in is irrelevant.
- The more general point is that I cannot find it in me to condemn Miss Sheikh for wanting to get the money out of an Ashley & Co bank account before the Law Society arrived. She did not (in my view) know that the Law Society was coming to effect an intervention into her practice, but after the second telephone call from Mrs Taylor she apprehended that something of a serious nature was quite likely to happen, .and she must have felt deep concern about what might happen to this large sum of money which she had borrowed personally only the day before. It must have been a desperate anxiety to her that, because the money had gone into an Ashley & Co bank account, it might become entangled with the problems which it seemed that she was going to have with the Law Society. Feelings of that nature would surely have been enhanced by the reflection that the money might be regarded as still really being hers and not as belonging to a client yet. She was of course under the erroneous impression that the money was being held in the firm's client account. (She said in evidence to me that her first thought on hearing that Law Society officers were coming was that she would be castigated by them for allowing money which, oil proper analysis was still her own money to be held in a client account, in breach of the Solicitors Accounts Rules, and in particular rules 1 (b) and 15(2).) She did not realise that the money was in fact in the firm's office account, but I comment that it was not appropriately held there. The £254,000, if (as I suspect was correct) it did not yet belong to Red River but still belonged to Miss Sheikh, did not belong to her in her capacity as the sole proprietor of the practice. On 18 February the £254,000 did not really have anything to do with the practice. She had just borrowed it on a mortgage of her private house, and it was intended to be invested in a commercial project in which she (and/or her mother) would be participating as an investor and not in her solicitor capacity.
- In retrospect Miss Sheikh might have been better advised just to leave the money alone and wait fatalistically to find out what was going to happen to it, but I can well understand that it did not seem that way to her at the time. I repeat that I cannot find it in me to say that wanting to remove the money from (as she thought) the Ashley & Co client account was so objectionable a thing that I should leave in place an intervention upon her practice which otherwise I would direct to be withdrawn.
- Moving on from that, the other aspect of the events concerning the £254,000 which is strenuously attacked by Mr Malek is that she told Mrs Taylor to sign the instruction to the hank and to sign it 'A Sheikh', not for example 'M. Taylor p.p. A Sheikh. I do not know whether the bank would have acted on a signature in the latter form, hut in any event, in so far as a 'p.p signature' instructed a withdrawal from client account (as of course it would have done, albeit mistakenly), it would not have complied with rule 23(1)(a) of the Solicitors Accounts Rules, which requires authorities for withdrawals from client account to he signed by a solicitor who holds a current practising certificate.
- There is no getting away from it: Miss Sheikh should not have told Mrs Taylor to sign the instruction to the bank as she did. Mr Treverton-Jones has always acknowledged that on Miss Sheikh's behalf. All the same, how bad a thing to do really was it? I disapprove, hut not to the extent that I say that it shows that Miss Sheikh is inherently dishonest to such an extent that she should not be allowed to carry on her practice as a solicitor. Mr Malek says that the signature was a forgery. I am not sufficiently knowledgeable in criminal law to say whether that is technically right or not. What I do know, however, is that the sort of case which is commonly thought of as forgery is where Mr A somehow manages to get hold of Mr B's cheque book or credit card, and for as long as he can get away with it goes around signing cheques or vouchers as Mr B, usually trying to disguise his handwriting so that it looks like Mr B's. This case was not remotely like that. The person with authority to give instructions to the bank was Miss Sheikh, and she specifically authorised Mrs Taylor to sign the instructions in her (that is Miss Sheikh's) name. There is no suggestion that she told Mrs Taylor to try to make the signature look like her own (Miss Sheikh's signature), and Miss Sheikh said that it did not look at all like her signature .. If, as was the case, Miss Sheikh specifically authorised Mrs Taylor to sign a document 'A Sheikh' (but without any instruction to try to copy Miss Sheikh's style of writing), and Mrs Taylor did what she was authorised to do, was Mrs Taylor guilty of forgery? And was Miss Sheikh guilty of some offence associated with forgery? Possibly so, but it is not obvious to me that in either case the answer as a matter of policy ought to be: yes, or that anything inherently blameworthy was being done.
- There is another point affecting this aspect of the matter which should be considered and which, to my mind, substantially mitigates any degree of fault in what was done. The instruction to the bank only became a real problem because, first, unknown to Miss Sheikh the bank was not permitted by law to make the transfer which Miss Sheikh (acting by Mrs Taylor) instructed to be made, arid, second, the bank made the transfer which it ought not to have made. Suppose that there had been no resolution the previous afternoon by the Panel to intervene and thus that the firm's bank accounts were not frozen: the Law Society were corning to Ashley & Co's offices, but not for the purpose of implementing an intervention. Suppose that in other respects the events were exactly as actually happened: Miss Sheikh told Mrs Taylor to sign an instruction to the bank 'A. Sheikh'; Mrs Taylor did that; the bank acted on the instruction. Suppose that later the bank learned that the name 'A Sheikh' had been written by Mrs Taylor, not by Miss Sheikh. Would there have been a problem? I do not think so. Miss Sheikh obviously would not and could not have complained against the bank for acting on the instruction. Possibly the bank, for good order, might have asked her to confirm the instruction in a letter which bore her own signature written by herself, in which case I am sure that Miss Sheikh would have done as requested. It is of some relevance here to record that Miss Sheikh said in evidence that she knew the bank manager, Mr Martin Cockell, well and had a good relationship with him. Indeed, Mr Cockell himself says in a witness statement that until the recent events involving the Law Society (I think he means the events involving the £254,000) 'Miss Sheikh's account of Ashley & Co had been well run, . and indeed she was considered to be an. excellent customer of the Bank.' If the Panel's resolution to intervene had not been adopted on 17 February, what happened with the signature on 18 February would, I believe, have been regarded by everyone as no more than an irregularity to which no consequences should attach.
- In the foregoing circumstances I consider that it would be harsh, disproportionate and unreasonable for me to be swayed by the post-intervention events involving the £254,000 into upholding an intervention which I believe, on the basis of the pre-intervention events, I should direct to be withdrawn.
- I believe that I have now covered everything which I wish to deal with in this judgment, even if I have not dealt with all of the multiplicity of points which were raised by the Law Society in the protracted course of the trial. I have of necessity dealt one by one with specific matters raised by the Law Society. I do not consider that any of them is sufficient to justify this intervention remaining in place. That is also the view which I take if I consider the various matters collectively rather than individually. I end by saying that the reasons which I have explained at length in this judgment are the reasons which led me on 9 June 2005 to announce that my decision was that the Law Society should be directed to withdraw the notices of intervention.
Mr Justice Park:
Abbreviations, dramatis personae, etc.
| Adams, Mr | Costs draftsman whom Miss Sheikh consulted about the contents of Mr Shelley's report. |
| Ashley & Co | The solicitor's practice, with an office in Willesden, of which the sole proprietor has been Miss Sheikh,. and which is the subject matter of the intervention challenged by Miss Sheikh in this case . |
| Bain, Mr | . Andrew Bain; solicitor; an Intervention and Disciplinary Unit officer at the Law 'Society; was involved in two telephone calls at the time of the intervention into the practice of Ashley & Co which is the subject matter of this case. |
| Burrows, Cecil, deceased. | Miss Sheikh's conduct as solicitor of the administration of the estate of Cecil Burrows deceased was the subject matter of an application for a remuneration certificate. The adjudicator heavily reduced Ashley & Co's fees and directed that there be an investigation of whether there had been culpable overcharging. |
| Calvert, Mr | Mr MJ Calvert, Head of Forensic Investigations. at the Law Society; signatory of the FI Report. |
| Dogan, Mr | A client of Ashley & Co who, through Red River, was seeking to carry out a property development project. |
| FI Report, the | The Forensic Investigations Report which was placed before the Panel, and which, together with its appendices, constituted the material on the basis of which the Panel. resolved that the Law Society should intervene in the practice of Ashley & Co .. In form the FI Report is a letter from Mr Calvert to Mr Middleton.· Part of it was written by Mr Shaw and part by Miss Patrick. |
| Jones, Mr | Ian Jones; solicitor; an Intervention and Disciplinary Unit officer at the Law Society; was involved in events at the time of the intervention into the practice of Ashley & Co which is the subject matter of this case. |
| Law Society, the | The governing and regulatory body of the solicitors' profession in England and Wales; the defendant in this case. |
| LSC, the | The Legal Services Commission, the public body which effectively replaced the Legal Aid Board as the provider and administrator of the system of community funding of legal expenses of qualifying persons. |
| Malek, 'Mr | Hodge Malek, QC, leading counsel for the Law Society in this case, leading Mr Peebles. |
| Middleton, Mr | Mr David J Middleton, Head ,of Investigations and Enforcement, Compliance Directorate, at the Law Society; nominally the addressee of the FI Report. |
| Panel, the | Usually a reference to the Adjudication Panel of the Compliance Board of the Law' Society which resolved on 17 February 2005 that the Society should intervene in the practice of Ashley & Co. The . Panel's resolution in that respect is the subject matter of this case. |
| Patrick, Miss | Kirsten Patrick; an investigation caseworker with the Multiple Complaints Investigation Team, a division within the Compliance Directorate of the Law Society; involved m the inspection of and investigation into the practice of Ashley & Co; one of the writers of the FI Report; a witness in the case. |
| Peebles, Mr | Andrew Peebles; junior counsel to the Law Society in this case, led by Mr Malek. |
| Penson, Mr | Robin Penson; Manager of the Law Society's Intervention and Disciplinary Unit, a department within the Compliance Directorate; a witness. |
| Radcliffes Le Brasseur | Solicitors for Miss Sheikh in this case. |
| Red River | Red River (UK) Ltd; company controlled by Mr Dogan which had a property development project. |
| Russell-Cooke | Firm of solicitors which act for the Law Society in this case; also the firm in which Mr Weaver (q.v.), the Law Society's nominated agent for purposes of the intervention into the practice of Ashley & Co, is a partner; |
| Saffron, Mr | Partner in Radcliffes Le Brasseuur; solicitor acting. for Miss Sheikh in this case. |
| Sampat, Mr | Nitin Sampat; bookkeeper; part-time employee of Ashley & Co; a witness. |
| Shaw, Mr | Accountant; a senior investigator with Forensic Investigations, a department within the Law Society's Compliance Directorate; involved in the investigation of Ashley & Co; one of the writers of the FI Report; a witness. |
| Sheikh, Miss | Miss Anal Sheikh; solicitor; proprietor of and sole practitioner in Ashley & Co; the claimant in this case; a witness. |
| Shelley, Mr | Nick Shelley; Fellow of the Association of. Law Costs Draftsmen; partner in a firm of Costs Draftsmen; writer of a report which was an appendix to the FI Report; a witness. |
| Strupczewski, Helen, deceased | Ashley & Co were responsible for the legal work in the administration of the estate of Helen Strupczewski, deceased; several issues related to the estate arose in this case. |
| Taylor, Mrs | Malini Taylor, a part-time secretary employed by Miss Sheikh at Ashley & Co. |
| Thirkettle, George, deceased | Miss Sheikh was executrix of the estate of Mr Thirkettle; Ashley & Co was generally responsible for the legal work in connection with the administration of the estate; several issues related to the estate arose in the course of this case. |
| Treverton-Jones, Mr | Gregory Treverton-J ones QC, counsel for Miss Sheikh. |
| Weaver, Mr | John Edmund Weaver, solicitor; partner in Russell-Cooke; the solicitor nominated by the Law Society as its agent for the purposes of the intervention into the practice of Ashley & Co; a witness. |
Overview
Interventions: the law and the practical effect
''The powers conferred by Part II of Schedule 1 shall be exercisable in the circumstances specified in Part I of that Schedule. "
Paragraph 1(1) of Schedule 1 provides that 'the powers conferred by Part II of this Schedule shall be exercisable where' anyone or more of the circumstances described in sub-paragraphs (a) to (1) are present. For the purposes of this case I need only refer to sub-paragraphs (a) and (c). The circumstance described in sub-paragraph (a) is where -
"the Council have reason to suspect dishonesty on the part of (i) a solicitor ...
in connection with that solicitor's practice or in connection with any trust of which that solicitor is or formerly was a trustee."
By virtue of s.87 (the definition section) the reference to a trust of which the solicitor is or was a trustee includes a deceased's estate or which the solicitor is or was a personal representative. In the present case Miss Sheikh was the executrix of certain estates which are material to issues before me.
"the Council are satisfied that a solicitor has failed to comply with rules made by virtue of section 31, 32 or 37(2)(c)."
The rules made by virtue of s.31 are the Solicitors Practice Rules; the rules made by virtue of s.32 are the Solicitors Accounts Rules; the rules made by virtue of s.37(2)(b) relate to professional indemnity. By paragraph 1(2) of Schedule 1, the power under paragraph 1(1)(c) (to intervene in the event of breach of rules) is only exercisable if the Council of the Law Society has given the solicitor advance notice in writing. In this case such notice was given to Miss Sheikh as respects breaches of the Solicitors Accounts Rules. The Law Society say that Miss Sheikh has been in breach in some respects also of the Solicitors Practice Rules, but the notice in writing to Miss Sheikh referred only to breaches of the Solicitors Accounts Rules. So the Law Society can and do rely on alleged breaches of those rules. as causing the power to intervene to have become exercisable, but they cannot and do not rely in a similar way on breaches of the Solicitors Practice Rules even if, as the Law Society assert, such breaches have occurred. It follows that the Solicitors Accounts Rules play an important part in this case, but that the Solicitors Practice Rules are of less direct relevance.
i) All sums of practice money (and the right to receive them) vest in the Law Society (paragraph 6(1) and (2)(a». This requires the Council of the Society to pass an appropriate resolution, but I believe that the Council does that in all cases of intervention, and certainly it did so in this case.
ii) Practice documents: the Law Society may by notice require the intervened upon solicitor to deliver practice documents to its nominated agent (paragraph 9(1». It always does that, and did so in this case.
iii) Practising certificates: if the intervention is on grounds of suspected dishonesty or of breach of the Solicitors Accounts Rules (as was the intervention in this case) the solicitor's practising certificate is automatically suspended by s.15(IA) of the Act.
9 .. In a case where those three consequences of an intervention arise (which effectively means in the case of virtually all interventions) the consequences are very severe indeed for the solicitor. At least in the case of a sole practitioner, like Miss Sheikh, it· effectively means the total destruction of the practice. Mr Penson of the Law Society agreed with Mr Treverton-Jones that, for sole practitioners, intervention invariably brings a practice to an end. Miss Sheikh said:
"I cannot understand how they can have intervened in my firm, but they having intervened I knew what was in store for me. All solicitors do. It means bankruptcy. It means I am going to lose my house. It is going to mean I am going to lose all the assets I have worked hard for for the last 15, 17 years. I have nothing left now."
"6(4) Within 8 days of the service of a notice under sub paragraph (3), the person on whom it is served ... on giving not less than 48 hours notice in writing to the Society ... may apply to the High Court for an order directing the Society to withdraw the notice.
(5) If the court makes such an order, it shall have power also to make such other order with respect to the matter as it shall think fit."
In this case the Law Society, in circumstances which I will describe more fully later, served on Miss Sheikh a notice under paragraph 6(3), and she applied under paragraph 6(4) to the High Court for an order directing the Society to withdraw the notice and to make such ot4er order as the court may think fit. It is pursuant to that application that the matter has come before me. There are essentially similar provisions in paragraph 9, and they also have been implemented, by the Law Society in the first instance and by Miss Sheikh in response, in a similar way.
i) There is an important point made by Sedley J, sitting as a member of the Court of Appeal in Giles v Law Society (supra), that the Law Society's own view that the circumstances merited intervention is a relevant factor for the court to consider:
"[It] is by common consent a matter for the court's judgment (I prefer not to use the word discretion in this context) whether it should direct withdrawal - a judgment which may be significantly, though not conclusively, affected by the Law Society's own view of the facts, since the view taken by the professional body charged with the regulation of solicitors' practices is in itself a relevant evidential factor to which the judge not only can but must have regard."
However, in this case the factor which Sedley J mentions carries less weight with me than it normally would, because, whereas in most normal cases the reasons which have caused the Law Society to consider that the practice ought to be intervened upon are plain for all to see, in this case they are not. I shall return to this theme at several points in this judgment.
ii) The circumstance which causes the power' of intervention to arise under Schedule 1 paragraph 1(1)(a) is only that there should be reason to suspect dishonesty: suspicion is enough, and it is not necessary for the Law Society at the initial stage, or for the judge at the later stage, of applications under paragraphs 6(4) and 9(8) to find positively that there has been dishonesty on the part of the solicitor.
The Solicitors Accounts Rules
(b) keep other people's money separate from money belonging to the solicitor or the practice;
(c) keep other people's money safe in a bank or building society account identifiable as a client account;
(f) establish and maintain proper accounting systems, and proper internal controls over those systems, to ensure compliance with the rules;
(g) keep proper accounting records to show accurately the position with regard to the money held for each client and each controlled trust;
(h) account for interest on other people's money in accordance with the rules.
"19(2) A solicitor who properly requires payment of his or her fees from money held for the client or controlled trust in a client account must first give or send a bill of costs, or other written notification of the costs incurred, to the client or the. paying party.
(3) Once the solicitor has complied with paragraph (2) above, the money earmarked for costs becomes office money and must· be transferred out of the client account within 14 days."
These two sub-rules create a limited and temporary exception to the underlying principle that a solicitor must not allow his or her own money to become mixed up with client money or controlled trust money: when a bill for fees is delivered part of the money in the client hank account ceases to be client money or controlled trust money and becomes office money (i.e. money which belongs to the solicitor), but the amount concerned must be transferred out of the client bank account (typically by being transferred to the practice's office bank account) within 14 days.
i) . The Law Society maintain that the power of intervention arose both under paragraph 1(1)(a) (suspicion of dishonesty) and paragraph 1(1)(c) (breaches of the Solicitors Accounts Rules) of Schedule I to the Act. However, Mr Malek, while maintaining that there had been many breaches of the Solicitors Accounts Rules, fairly accepted that, if that was all that there was and there was no suspicion of dishonesty, an intervention would not be justified. I agree with that. The Law Society has other disciplinary sanctions and procedures available to it, and it would be disproportionate to impose the drastic sanction of intervention (amounting to confiscation of the practice) on a solicitor who commits honest breaches of the Solicitors Accounts Rules. There is a general point here. It identifies a difference between cases within paragraph 1(1)(a) of Schedule I to the Solicitors Act (reason to suspect dishonesty) and cases within paragraph 1 (I )( c) (breaches of the Solicitors Accounts Rules). If there is reason to suspect a solicitor of dishonesty in connection with his or her practice, although an intervention does not automatically follow and the Panel or (on a case like this one) the judge still has a second stage question to consider of whether the solicitor should be intervened upon (see Neuberger J in Dooley v The Law Society (15 September 2000, approved in Holder v The Law Society [2003] I WLR 1059 at 1065, paragraph 15), an intervention is likely. If, on the other hand, there are breaches of the Solicitors Accounts Rules, but not dishonest breaches, an intervention ought, I suggest, to be unusual. I would expect the Law Society to look to other regulatory or disciplinary powers (of which it has several) for other methods of improving the solicitor's compliance with the Rules.
ii) An underlying theme of some of Mr Treverton-Jones' submissions for Miss Sheikh was, I feel, that in a busy solicitors' practice (particularly one which is somewhat under-resourced in terms of staff) it is unrealistic to suppose that there will not be breaches of the Solicitors Accounts Rules from time to time, and that I should not assume that Miss Sheikh's practice was exceptionally bad in its level of compliance. In his closing submissions he wrote: 'Again and again in this case, one has been tempted to ask how much worse Ashley & Co is than many other firms of solicitors, and whether the Law Society is expecting unrealistically high standards of purity from solicitors'. (In the context 'purity' was referring to compliance with the details of the Solicitors Accounts Rules, not with honesty in its general sense.) Mr Shaw, who is a senior employee of the Law Society in the role of Investigation Accountant and who was the Society's principal witness, accepted that he had at one stage. said to Miss Sheikh's bookkeeper, Mr Sampat, that he had seen a lot of firms worse than Ashley & Co, with the solicitor still being in business. I have much sympathy with what Mr Treverton-Jones says about this aspect of the case. The rules themselves recognise that breaches may occur: rule 7(1) provides that any breaches must be remedied promptly upon discovery. When, also in his written closing submissions, he referred at one point to 'the unrealistic level of accounting perfection advocated by the Law Society in the present case', his words struck a chord with me. I will add that, although there was. no specific evidence about it, the impression which I have gleaned anecdotally over the years (not just in connection with this case) is that there are very few solicitors' firms which do not slip up in one respect or other over the Solicitors Accounts Rules from time to time.
26 ... I will have to come to particular alleged breaches of the rules at later stages in this judgment, but I will round off the more general observations which 1 am making here by suggesting that breaches may be of various kinds, of which I. will mention four. First, at one extreme one may have a case, like Preedy and Okoronkwo v The Law Society (supra), in which the solicitor makes no attempt to comply with the rules at all. In that case there was not even a separate client bank account. Second, one may have a case where there is a client bank account, and the ledgers are maintained more or less as required, but the solicitor, well knowing that the rules prohibit it except on conditions with which he or she cannot comply, simply takes money from client
. account to meet private expenditure or (to take a common example) to repay or reduce the office overdraft. The solicitor may find himself or herself in financial straits and, believing that it may be just a temporary problem, takes money from client account in knowing breach of the rules hoping to put things right later when his or her fortunes turn for the better. Several past cases have been of that nature. Third, one may have a case where the solicitor does not maintain the accounts and ledgers in the way that the rules require because he or she does not interpret them as requiring it. Fourth one may have a case where there is a detailed non-compliance resulting from an error or an oversight. No doubt there are intermediate cases. All breaches are wrong: the rules are there to be understood correctly and to be observed, but obviously cases of the third and fourth types which I have mentioned, though regrettable, are not realistically to be equated with cases of the first and second types.
The facts
28. The evidence and the many documents which are before the court give me the impression that she conducted a busy and varied practice. Possibly the practice has tended to be too busy, because I also have the impression that the practice has been under-resourced in terms of staff. Miss Sheikh herself is the only qualified person in the practice. She is assisted on accounting matters (including, significantly for this case, maintaining the accounts and ledgers required by the Solicitors Accounts Rules) by an experienced but unqualified part-time bookkeeper, Mr Sampat. In addition she· has employed secretaries. If I have understood the evidence correctly, in much of 2004 and the early part of2005 (until the intervention) she had two secretaries, one of whom worked in the mornings and the other in the afternoons. In one of her witness statements she explains about personal problems which one of the secretaries has been having, problems which have diminished the usefulness· of the secretary to. the practice. Further, because most of the practice's work is litigation Miss Sheikh is out of the office for a large part of many working days. It does seem that some things have been going wrong in the practice. I· am in no position to diagnose what they are:. I have no personal experience of working in a solicitor's office like that of Ashley & Co (or indeed any solicitor's office), nor am I any sort of business consultant. However, I think that, if this case and other Law Society processes which are or may come to be in progress end with Miss Sheikh back in charge of the practice, she will have to give some thought to whether she can improve the staffing and administrative arrangements. I appreciate that changes in those areas have costs implications. But there is a limit to how much that Miss Sheikh can do herself, and I suspect that that limit had been reached before the time of the intervention.
29. The Law Society has statutory powers to conduct investigations into solicitors' practices. On 16 February 2004 Mr Calvert, the Head of Forensic Investigations at the Law Society~ wrote to Miss Sheikh stating that the books of Ashley & Co were to be investigated, and that officers of the Society ·would be attending at the office of the firm for that purpose. The letter said that it was not the policy of the Society's Compliance Board to authorise staff to disclose the reasons for inspections. Miss Sheikh was not told the reason for the inspection of her firm, nor have 1 been told.
32. Two different departments within the Compliance Directorate of the Law Society were involved in the inspection and investigation phase. One is known as Forensic Investigations, which was particularly concerned with matters arising in connection with the Solicitors Accounts Rules. In the later stages of the inspection and investigation phase the· officer of that department who conducted the inspection was Mr Shaw. The other department is known as Multiple Complaints Investigation. Several. officers or employees wit1¥n that department were involved .. One, Miss Kirsten Patrick, was involved at all stages. She was t4e writer of the letters to which 1 referred in the previous paragraph (the ones which asked numerous detailed questions but to which Miss Sheikh did not reply). She, like Mr Shaw, was a witness in the trial. (I have already mentioned one point in her evidence: see paragraph 30 above.)
"The office's recommendation, as at the date of preparation of this Report, is that it. is not necessary to intervene, on the basis that the public will be adequately protected by the imposition of stringent immediate conditions on Miss Sheikh's practising certificate. However, the matter is finely balanced ... "
Thus the recommendation was that action should be taken, but not in the form of an intervention.
"1. The Panel were satisfied that grounds for intervention existed under paragraph l(I)(a)(i) of Part I of Schedule 1 Solicitors Act 1974 (as amended), namely that the Panel were satisfied that they had reason to suspect dishonesty on the part of Ms Anal Sheikh practising as Ashley & Co at 47-49 Blackbird Hill, London NW9 8RS in connection with her practice as a solicitor.
2. The Panel were also satisfied that grounds for intervention existed under paragraph 1 (1 )( c) of Part I of Schedule 1 Solicitors Act 1974 (as amended) namely that Ms Anal Sheikh failed to comply with the Solicitors Accounts Rules.
3. The Panel balanced the need to exercise powers of intervention in order to protect the public and the serious consequences of intervention for a solicitor. The Panel were satisfied that it was necessary to exercise powers of intervention in this case in view of the nature of the matters identified in the Forensic Investigations Report dated 22 November 2004.
4. The Panel were further" satisfied that it was necessary to exercise powers of intervention in order to protect the public.
5. The Panel RESOLVED to intervene into Anal Sheikh's practice at Ashley & Co of 47-49 Blackbird Hill, London, NW9 8RS."
A number of other consequential or associated resolutions, which I do not need to set out verbatim, were also adopted.
Uncertainty about the precise grounds for intervention; the consequences of the uncertainty for this case
49. The estimate for the length of trial was three to four days. In fact it took eight, and Mr Treverton-Jones' comment in one of the passages which I have quoted that most of the time was taken up by a long opening by Mr Malek and by lengthy cross-examination of Miss Sheikh and Mr Sampat is factually correct. In fact the trial would have taken longer had it not been the position that I could not carry on in this case after Friday 13 May: Mr Peebles' cross-examination of Mr Sampat, which at one stage I had been told would take about an hour beginning at 10.30 on 12 May but which was still going on at about 3.00 p.m.; had to be cut short in order that Mr Treverton-Jones should have some time to prepare closing submissions which were to be provided in writing by midday on the next day, with a view to short closing addresses in the afternoon. Mr Treverton-Jones was able to provide me with a valuable closing submission of 29 pages. Mr Malek (who had had much more time to prepare closing submissions) provided me with excellent closing submissions (excellent for all that I am not accepting the conclusion which they advocate). They occupied 88 pages, and I believe that if I had not been committed elsewhere in the following week so that he could have replied fully in oral form he would have needed at least another day to cover the large range of matters which he addressed in those pages.
51. I might add that I do not feel any sense of satisfaction when I contemplate the length of this judgment. It ought not to be necessary for me to deal with so many matters, and to deal with them at the length which I think to be required. I can only say in my own defence that, in my view, the manner in which the Law Society's case has been put forward (itself no doubt considerably prompted by the lack of knowledge of the Panel's reasons) has effectively impelled me to produce such a long judgment.
Some general observations
That does not mean that I think that his answers on all of the questions which were put to him by Mr Peebles on aspects of the accounting system were necessarily right and that suggestions put to him by Mr Peebles to which he would not agree were wrong. He was, I would accept, a difficult witness .to cross-examine, because his answers quite often went off at a tangent and did not directly meet the question. He seemed quite to relish the opportunity to get into arguments with Mr Peebles about the true meaning of some of the provisions in the Solicitors. Accounts Rules. But in no sense was he being evasive or deceitful. All that I am saying is that Mr Sampat was a transparently honest witness in the sense that whatever he said to me, whether or not on analysis it really went to the question which had been put, was what he believed. In my opinion it simply would not have been in his nature to attempt to mislead the court, 'still less to attempt to doctor the figures in the firm's accounting records in order to conceal improper things which had been done in the past. It is worth adding that, when he and Mr Shaw, the Law Society's investigating accountant, met on one of Mr Shaw's visits to Ashley & Co's offices, he appears to have made the same impression on Mr Shaw. In Mr Shaw's evidence on one matter he said: . Well, that is what Mr Sampat told me .... I did not doubt it. Obviously from what Mr Sampat was saying, it was obvious to me, looking at certain transactions, that he was telling me the truth. '
i) We live in an age when people are much more inclined to complain about things than they used to be a generation or more ago. It would, I imagine, be a comparatively rare solicitor's practice which never had a complaint which the Law Society considered to be valid. I have mentioned earlier that when Mr Treverton-Jones asked Law Society witnesses whether there were any statistics' about these matters the answer was that there were not, or at least that the witnesses did not know of any.
ii) Prima facie I would assume that, if a complaint has been upheld by an adjudicator within the Law Society, then the complaint was justified. I have to mention, however, that Miss Sheikh (without going into the matters at length rightly, in my view, because I do not think that the subject matter of this case should be significantly affected by the outcome' of complaints, unless they raised an inference of dishonesty) - made observations about some of the upheld complaints, and that what she said did cause me to wonder whether there was room for two views about some of the complaints. For example, on a matter called Modood, where a complaint was upheld and Miss Sheikh was severely reprimanded, Miss Sheikh has produced a letter from the son of the elderly lady in relation to whose affairs the complaint had been made. The complaint had been made by a stepson of the lady. The letter is from her son, with whom' she now lives. All I will say is that the son's letter gives a very different impression from the view of the matter put forward by the stepson and accepted by the Adjudicator. Another example is a matter called Helman. Miss Sheikh gave her own account of the matter, which appears to be backed up by documents which she has produced. If her account is correct (which I appreciate is a big 'if) I find it hard to see how the complaint can. have been upheld, at least a strongly as it was. Again Miss Sheikh was severely reprimanded by an adjudicator upon a complaint by Mr Wiggs, a surveyor, that Ashley & Co had not paid his fees for professional services in connection with a case where Ashley & Co were acting for one of the parties. Miss Sheikh's explanation was that she did not believe that Mr Wiggs had done the work, and she was trying to protect the Legal Services Commission from a fraudulent claim. She may have been quite wrong about that, and if she was the complaint was rightly upheld. However, Miss Sheikh never stood personally to gain from not paying Mr Wiggs' fees: there is nothing in what she did and her reasons for doing it which has anything to do with the issues of suspected dishonesty and breaches of the Solicitors Accounts Rules which should be seen as the heart of this case.
iii) Although the complaints show that there have been clients who have been dissatisfied with Miss Sheikh's performance as a solicitor, an impressive collection of testimonials from other persons which her present solicitors have assembled shows that there are many other people who think highly of her. To give just one example from a client, a Mrs Aldous writes: 'Miss A Sheikh has represented myself and my family for more than twelve years to our complete satisfaction and I have found her honesty and integrity beyond reproach. ' There are a dozen or so letters of a similar nature from clients. One is from the Ambassador for Luxembourg, who has known her for ten years and writes warmly about her professional skills, competence and integrity. There is a letter from one of the District Judges at Willesden County Court, on behalf of himself and his colleagues. They cannot comment on the allegations against her, but 'we can say that on the many occasions you have appeared before us (and in my case that is almost 12 years). you have always pleaded your clients' cases firmly and with apparent· integrity and honesty '. There are warm, even fulsome, letters from former employees of Ashley & Co. There are two letters from barristers who have done work on Miss Sheikh's instructions. They cannot comment on the allegations, but they have no reason to suspect her professional integrity. One of the barristers says that he was surprised at the contents of some of the documents prepared by the Law Society, and surprised to read of the Law Society intervention. The other one writes: 'In litigation· I have always found Miss Sheikh to be straightforward and open in her approach, and also to be mindful of and to promote the best interests of her client. Miss Sheikh has always impressed me as a fully trustworthy and honest individual and I have never had any reason to doubt or question her personal or professional integrity.' Finally there is a letter of warm tribute from a partner in a small local firm of solicitors. He adds the comment that the closure of Ashley & Co will be a great loss to both the area and the 19cal clients.
64. I do not know what the Panel thought, but there could be force in something which Mr Treverton-Jones writes about this in his closing submissions. One of his criticisms of the Law Society is' that 'many neutral or innocent facts are. sculpted to appear suspicious'. He gives examples, of which one is the following: 'The description from the outset of 'cash shortage' to the ~um comprised in the Thirkettle bill. ; .. This is an important point. For those reading these reports the expression "cash shortage on client account" means one thing - that money has gone missing - and is usually sufficient on its own to justify a decision to intervene. In the present case, it is grossly unfair to describe the sum comprised in the Thirkettle bill as a "cash shortage" when in reality the height of the author's suspicion was that there was an overcharge. Nevertheless, this matter was the first one dealt with in the Report [the FI Report), .,. and may well have been a significant factor in the decision to intervene. '
67. Mr Shaw, in his witness statement, says that there is a difference between an interim account and an estimated account. The bill to the estate was described as 'interim account (estimated only)'. Mr Shaw seems to think that the estimation element somehow means that the bill did not count. I do not agree, but in any event to· describe the whole amount transferred as a 'minimum cash shortage on client bank account' seems to me to be thoroughly unfair. Some attempt has been made by Mr Shaw and Mr Malek to make something of the lack of detail in the bill. However, Miss Sheikh is in my view fully entitled to point out, as she did to Mr Shaw and Miss Patrick on one of their visits, that she herself, in her separate capacity as the executrix of Mr Thirkettle·' estate, was the client. In the circumstances it seems excessive to expect her, on what was only an interim bill, to inform herself of details which she already knew well as solicitor (or at least could readily ascertain).
i) I do not accept that the word 'properly' in rule 19(2) carries the connotation which Mr Shaw attaches to it. (I am not sure whether Mr Malek supported Mr Shaw in this respect, but I think that he did, in which case I do not agree with Mr Malek any more than I agree with Mr Shaw.) There is the point which I have already made: no-one could know at the time of the bill whether or not the solicitor was 'properly' requiring payment of his or her fees. But there is also the point that Mr Shaw's interpretation seems to me to convert 'properly' into 'proper' and to transfer it from the verb 'requires' to the noun 'fees'.
ii) I should not in any event be understood as accepting that, because Mr Shelley considers that £35,000 (before V AT), was too large an interim fee in the circumstances, therefore it was too large. This is no criticism of Mr Shelley. On the contrary I thought that he was a careful, impressive and fair-minded witness. For example, if his reading of files in the six probate cases which had been referred to him exhibited features of which he approved, he said so and gave credit to Miss Sheikh where he thought that it was due. In so far as his evidence identified aspects of billing techniques by Miss Sheikh which he considered to be inappropriate he was very much in his specialist field, and his evidence was helpful. However, in so far as he was asked by the Law Society to give his personal opinions on matters such as the number of hours that the work on a particular probate might have required or what hourly rates for probate work were acceptable, I doubt that he was within his true expertise. He is not a solicitor, and he gives no evidence that he has personal experience of acting in the administration of an estate. He has been a costs draftsman for the last ten years, having for many earlier years been a probation officer. In the course of one of the visits by Miss Patrick and Mr Shaw to Ashley & Co's office Miss Sheikh was asked to comment on Mr Shelley's view that the hours spent on the Thirkettle estate were more than double the number which were needed. Her reply was: 'Absolute rubbish. The matter was extremely complicated. I spent days on this. If he could do it in a lesser time he's a better lawyer than me.' She expressed herself rather sharply, but her point that Mr Shelley (who had not spoken to Miss Sheikh) was not well equipped to opine on how much work a quite substantial estate required was, in my view, well taken. Also, Mr Shelley, in support of his view of what was an acceptable hourly rate for her to charge for her time, quoted the rate which at the time was being allowed by Willesden County Court on a detailed assessment of costs payable by the losing party in litigation. I do not accept that a rate ascertained in that way is a fair measure for a solicitor's hourly rate in dealing with a quite complicated probate matter. Miss Sheikh's interim bill for the Thirkettle estate may have been high in some respects (on which I say a ' little more later), but I am unimpressed when Mr Shaw simply accepts Mr Shelley's opinion, given two years later, that it was too high, and from that proceeds to say that the interim bill for £41,125.00 somehow did not count as a bill for the purposes of rule 19(2).
i) Miss Sheikh said that she intended to charge for her time working on the Thirkettle estate at a basic rate of £200 an hour and then to add an uplift to reflect the complication and difficulty of the matter together with the comparative magnitude of the estate. Mr Shelley (in this respect being fully within his expertise) explained that, although until about 2000 it had been the practice for solicitors to charge hourly rates for their time and then to add uplifts, the generally recommended modem practice is to charge at a composite hourly rate in which the uplift element, if the matter is appropriate for one, is already included. There is no rule formally requiring this: rather it is a matter of currently accepted best practice. Miss Sheikh, having taken advice from another costs draftsman who confirmed Mr Shelley's opinion, has said that henceforth she intends to adopt the current practice.
ii) The cross-examinations of Miss Sheikh and Mr Sampat did raise doubts about how precisely they had estimated the number of hours of work which Miss Sheikh thought it appropriate to charge for on an interim basis. Detailed time records were produced, but there were some aspects of them which at least raised a possibility that the calculations might have gone wrong somewhere. There seem to have been two different print-outs flowing from the use of two different computers over some at least of the time that work was being done on the Thirkettle estate, and there must have been a possibility of confusion and of occasional double counting. One print out showed Mr Sampat as having done 15 hours of work on one day in relation to the estate. It would be very surprising indeed if that was correct. I do not think that Miss Sheikh and Mr Sampat (or at least Mr Sampat) are quite ready ,to accept that, in judging how much time ought to have been assumed for the purposes of the interim bill, some errors may have been made, but l' am ready to ,accept it as a possibility. If it has happened, however, I am convinced that it has resulted from mistakes. It does not cause me to suspect Miss Sheikh and Mr Sampat of dishonesty.
iii) In one respect I certainly agree with the Law Society that an element in Miss Sheikh's evaluation of what the interim bill should be was inappropriate. This concerns the rate at which she charged for Mr Sampat's time .. Apparently there was quite a lot of accounting and bookkeeping work to be done on the Thirkettle estate (such matters as reconciling and checking on receipts of dividends from a reasonably large investment portfolio), and Mr Sampat had . the experience to be able to do it, whereas Miss Sheikh did not. For the most part she had in mind to charge for his time at the same rate as she charged for her own time, and that intention was reflected in the estimated round number of £35,000 before VAT. I do not depreciate the value of Mr Sampat's work on those kinds of things, but I agree with the Law Society (and with Mr Shelley) that to charge for his time at the same rate as Miss Sheikh charged for hers was not justifiable. In 2002 she was a fully-qualified solicitor with 15 years post admission experience; she was a Grade A fee-earner. He was an experienced but unqualified bookkeeper. However, in my opinion this was an error of judgment on Miss Sheikh's part. I do not think that she has ever made any secret of how she intended to charge for Mr Sampat's time, and it does not cause me to suspect her of being dishonest.
The Thirkettle jewellery
Round sum transfers
"Costs transferred out of client account in accordance with rule 19(2) and (3) must be specific sums relating to the bill or other written notification of costs, and covered by the amount held for the' particular client or controlled trust. Round sum transfers on account of costs will be a breach of the rules. " (My italics)
In so far as the Law Society say that the last sentence of the note lays down a general prohibition of round sum transfers, I cannot agree. the key point is that the note is referring to round sum transfers 'on account of costs, not to round sum transfers in respect of (or simply 'of) costs. I accept Mr Treverton-Jones' submission that the note is aimed at preventing solicitors from taking money belonging to clients before the solicitors have earned it. This is, as it seems to me, consistent with rule 19(4):
"A payment on account of costs generally is client money and must be held in a client account until the solicitor has complied with paragraph (2) above."
" ... one of the reasons that Miss Sheikh gave for making round sum transfers was time constraints. She just did not have time to do the thing, to do the transfers should I say, as individual amounts. She was under tremendous time pressure and I think that is accepted."
Mr Shaw did, however, point out that the system Miss Sheikh adopted could give rise to 'problems, One was that, because the aggregate of the amounts to be transferred for all the individual matters exceeded the round sum transferred, an amount equal to the excess would have become office money by virtue of rule 19(2) but would be unlikely to be transferred out of client account within 14 days as required by rule 19(3) .. This would be a breach of rule 19(3). For a solicitor to leave his or her money in client account would, as it seems to me, be a far less serious breach than the converse (where the solicitor takes clients' money out of client account in breach of the rules), but it would be a breach nevertheless. I accept that, "and so does Miss Sheikh. Another point was that the posting of the transfers to individual client ledgers was to be done later, and in some cases a longer interval passed than Mr Shaw thought to be acceptable. There is force in this point also, and I will say more about it at the end of this section of my judgment.
"Q. But as for these delays and the failure to make these entries, Mr Shaw, let us look at this overall. It is right, is it not, that Miss Sheikh's firm had a pretty sound accounting system. Correct?
A. Sound? The books balanced, yes.
Q. It had transparent trails, did it not?
A. If you dug a little deeper, yes.
Q. There is no tampering with the computer records or anything like that, was there?
A I have no evidence of that, no."
These frank and fair answers from the Law Society's specialist accounting witness did not deter Mr Malek in his written closing submissions from accusing Miss Sheikh and Mr Sampat of all sorts of dishonesties in connection with the accounts, including for example 'manipulation' of the data recorded by them.
Treatment of Legal Services Commission monies in Ashley & Co's accounts
97. I will try to pick out and summarise the salient points in the helpful and informative evidence which Mr Shaw gave about this. He began by accepting that, with respect to amounts received by way of community funding, the treatment was more complex for accounting purposes "than ~at which applies to privately funded matters. 'It is, it is very difficult. Yes, it is very difficult.' Among the client ledgers which the solicitor maintained would be one for the LSC. (The solicitor's client as such is, of course, the community funded litigant, but since the funding is coming, not from the client but from the LSC, and since any recoveries of costs from the other party ought to be recouped by the LSC, there is a clear pragmatic case for there to be a client ledger in the name of the LSC.) In a case where a solicitor received, say, £1,000 from the LSC as a payment on account for an LSC-funded matter, and held the £1,000 in the office bank account (as rule 21 permitted), there would be £1,000 credited to the office side of the solicitor's client ledger in respect of the LSC. Mr Shaw continued: 'What the solicitor would normally then do would be to post the bill of costs which has effectively been rendered to the [LSC] because they have paid it. And that would be debited to the office side of the ledger, for £1,000 for instance to square up the £1,000 that is on the credit side of the ledger. So it would balance out to zero.' Mr Shaw agreed that, if the solicitor did not post such a debit to the office side of the ledger, there would be a credit balance on the office side of the ledger. He further agreed that there was nothing sinister in that. However, if I understand him correctly, he considers that the debit entry ought to be made, because without it the general principle set out in rule 32(4) would not be complied with. ('32(4) All dealings with office money relating to any client matter ... must be appropriately recorded ... on the office side of the appropriate client ledger account. ') Mr Sampat, in writing up the ledgers, did credit the equivalent of the £1,000 to the office side of the LSC client ledger, but did not make this countervailing debit entry.
Credit balances on the client side of client ledgers in dormant matters
. the client side of the ledger and all money representing them is held in the client bank account (which the solicitor cannot touch except in breach of the Solicitors Accounts Rules), there is no basis on which the solicitor can dishonestly divert the money to her own use. It would only be if the solicitor attempted to transfer the credit balances from the client side of the ledgers to the office side that something objectionable would be happening. That is precisely what Was attempted in Bultitude v The Law Society [2004] EWCA Civ 1853, and led to Mr Bultitude being struck off the Roll of Solicitors by the Solicitors Disciplinary Tribunal, a decision which was ultimately affirmed by the Court of Appeal.
Overcharging
"I am not sure I agree with that. If there is a challenge and you believe you have made a fair and proper charge to the client, I am not clear that you should not take the funds. Obviously you have to repay them if the challenge goes against you."
When the second adjudicator upheld the decision of his predecessor, so that the challenge to Miss Sheikh's charge to the estate had definitively gone against her, she did precisely what she said in her answer she would have· to do. She repaid to client account the amount which had been transferred to office account. (Or possibly she repaid the excess of the transfer over the amount properly payable according to the . remuneration certificate.)
i) . The report was balanced and fair, as also was Mr Shelley's oral evidence. Mr Shelley identified respects in which he considered that Ashley & Co's techniques for determining its bills were unsatisfactory, but he also specifically mentioned positive aspects. On his reading of the six files which were sent to . him, usually Miss Sheikh was expeditious and adopted a planned and systematic approach to dealing with assets and liabilities. Bills were issued at appropriate intervals, and there was evidence that costs were considered before billing. Generally the contents of the files appeared to be comprehensive, and contained contemporaneous records of the work done.
ii) On the other hand Mr Shelley put forward several criticisms of Miss Sheikh's billing techniques. I have mentioned earlier that she still used the technique of charging for her time at a basic rate and then adding an' uplift for care and conduct. (My summary of her bill in the matter of Burrows deceased- see, paragraph 111 above - is an illustration of this.) However, as Mr Shelley explains, that technique, though not specifically prohibited by any specific rule, has been generally superseded in the profession by charging at a composite hourly rate which reflects all aspects of the work done. Miss Sheikh has herself consulted a costs draftsman, Mr Adams, and she accepts Mr Shelley's opinion on this.
iii) A detailed criticism which Mr Shelley makes is that the print outs which give detailed information about the work done from time to time do not identify the fee earner. Mr Adams' report to Miss Sheikh says that she has changed the system now, and more recent print outs do identify the fee earner.
iv) The identity of the fee earner is relevant particularly to a point which I have mentioned earlier in connection with the Thirkettle estate. I have covered this matter earlier (see paragraph 71(iii) above), but I will briefly repeat the central points here. There was a considerable quantity of work of an accounting nature to be done on the estate, and Mr Sampat did it. He told me in evidence that Thirkettle was the only probate matter on which he had been needed to do work of that nature. In setting the amount of the interim estimated bill (£35,000 before VAT) Miss Sheikh proceeded on the basis that Mr Sampat's time should be charged for at the same rate as her own. Mr Shelley considered that that was inappropriate, and I take the same view. I hope that, on considering this judgment, Miss Sheikh will agree.
v) Another of Mr Shelley's criticisms is that on some occasions Miss Sheikh . duplicated charges as respects some letters. She charged a basic amount for each letter that she read or wrote (described by Mr Shelley as charging item rates), and in some instances she also made time charges for considering letters received or preparing letters written. Miss Sheikh in her evidence agreed that she did that in some instances. Her practice was that if a letter which she received or wrote was just a routine matter she charged only the item rate. If the letter required time and thought to be applied to it she also charged for her time. In Mr Malek's written closing submissions he says that there is nothing wrong with Miss Sheikh charging for her time on letters which required time and thought, but if she did that she should not also charge item rates for the same letters. I cannot pretend to have the knowledge or experience to say who is right on this. What Mr Malek says sounds convincing, and I note that Mr Adams says nothing about it. If he had disagreed with Mr Shelley I think it likely that he would have said so. I hope that Miss Sheikh will reflect on it . and consider whether her practice in this respect needs to be changed. I would only add that, if what she had been doing in the past was indeed inappropriate, as Mr Shelley considers, I cannot see that she was in breach of any specific rule in the Solicitors Accounts Rules, or that by not eliminating the item charges when she made time charges she gave reason to be suspected of dishonesty: she just got something wrong, or (even less than that) without realising it did not comply with best practice.
vi) When it came to the six specific probate matters which Mr Shelley was asked to consider he stated his opinion in each case that Miss Sheikh's charges were higher than he would have expected. Reasons included his opinion that the matter did not need the number of hours which Miss Sheikh had worked on it, and that her hourly rate was excessive. I am not convinced that Mr Shelley's views in these respects should carry much weight with me. I have explained why not already in paragraphs 69(ii) above with specific reference to the Thirkettle estate, which was one of the probate matters which Mr Shelley was asked to consider. I refer here to what I said there, but I will not prolong this already very long judgment further by saying it all again in relation to the other five estates as well.
vii) One point which I will make is that in one or two cases Mr Shelley has observed that Miss Sheikh, having notified her charging rate to the client at the commencement of a matter, omitted to notify the client in the course of the matter of an increase in the rate. In such cases she should not have charged for part of her work at the increased rate. Mr Adams advised her to a similar effect, with particular reference to a probate matter relating to the estate of Walter Suckling deceased. Miss Sheikh accepts this. I notice also that in her fourth witness statement she says that, in one of the matters upon which her fees were reduced under the remuneration certificate procedure (the estate' of Doris Clode deceased), the essential point of the decision was that, when she came to prepare her bill, she overlooked that she had omitted to notify the executors of an increase in her charging rates. In the circumstances she accepted the decision of the adjudicator. She adds that she asks the court to accept (as I do) 'that this was simply an administrative error on my part and there was no intention to take advantage of the client. I also accept that a procedure needs to be implemented to ensure that updated client care leaflets are sent to clients to replace obsolete ones ..
viii) One of the matters which Mr Shelley considered and on which he expressed the view that Miss Sheikh's charges were higher than he would have expected was Strupczewski deceased. Miss Sheikh was one of two executors of the estate. Her firm charged £17,000 (before VAT). I must record, however, a letter of 11 December 2000 which Miss Sheikh wrote to her co-executor, a Mr Postlethwaite. It includes the following:
"This was a sizeable estate: the, number of assets, the sheer volume ,of documentation, and the difficulty of obtaining information from some of the asset holders made it more cumbersome than would be usual, but while the estate made ' administrative demands upon me, I cannot pretend that it was legally complex. In the circumstances I do feel that the level of charge, based on recorded time, is higher than I would myself have expected. I have given the matter some thought and my reaction would be to reduce it by a percentage. I have applied a 15% reduction."
There is a reply from the co-executor praising Miss Sheikh's professionalism and thanking her warmly for the reduction in her fees. Mr Shelley was aware of the exchange of correspondence, and fairly quoted it in his report. He still assessed the charge which he would have expected as no higher than £12,655. I do not for a moment doubt the total sincerity with which he holds his views, but I have to say that this particular detail reinforces my uncertainty about how reliable his own evaluations of how much should have been charged for a matter can be assumed to be.
Accounting to clients for interest
i) The estate of Teresa Sills deceased. Interest was properly accounted for. The Law Society, always inclined to assume the worst of Miss Sheikh, presented the case to the Panel in the Fl· Report, and to me in this case, on the basis that the interest had only been accounted for after a beneficiary of the estate had specifically asked for it. The innuendo· was that, if the beneficiary had not asked for the interest, Miss Sheikh would not have paid it. That was not the correct position. It is correct that, when the beneficiary had signed a receipt for the final distribution to him of the capital sum due to him under the estate, he added in manuscript: 'Looking forward to hearing from you in due course with cheque for accrued interest of monies while held by you.' A payment of interest followed. However, contrary to the Law Society's supposition, Miss Sheikh had always been intending to pay interest. Miss Sheikh said in cross-examination that she was confident that she had sent the distribution of capital under cover of a letter which said that a payment of interest would follow. That explained the beneficiary's manuscript addition to the receipt (which had been enclosed in draft in the letter). Since the Law Society (through Russell-Cooke) were holding the file she had not been able specifically to check. The file was in fact available in. court. No-one on behalf of the Law Society disputed what Miss Sheikh had said, and I believe 1 recall her saying to me later that she had looked at the file during an adjournment and that the letter which she had described was indeed there.
ii) The estate of Walter Suckling deceased. This was the matter for which there were two files and two client ledgers. One was for the administration of the estate; the other was for the sale of a house. By reference to the administration of the estate interest of £806.63 was paid to the beneficiaries. By reference to the sale of the house interest of £123.79 had accrued and had not been paid. It appears that the failure to pay the interest was a breach of the rules, and it ought not to. have happened. But it was surely no more than a mistake. I cannot give serious credence· to a suggestion that Miss Sheikh may have dishonestly stolen £123.79 of the Suckling estate's money by deliberately failing to pay the interest which she ought to have paid.
iii) The estate of Helen Strupczewski deceased. According to the computer calculation in the client ledger just over £580 of interest had accrued. That amount was never specifically paid to the estate. Miss Sheikh's evidence was that this was the matter where she wrote to her co-executor explaining that she . was going to reduce her fees by just over £3,000 (see paragraph 114(viii) above). She said that it was because of that reduction that she did not account for a sum of interest to the estate. I can accept that she thought that that was an adequate explanation, but I do not think that it really was. It might have been if she had explained the position in full to the beneficiary, and he had agreed to what she proposed. However, she did not explain it at all. It appears to have been her unilateral decision that, because she was reducing the fees, it would be acceptable for her not to comply with the obligation to account for interest. But of course the reduction of fees did not remove the statutory obligation to account for interest. This feature also takes some of the gloss off her letter to the beneficiary, which he received so favourably.
iv) The estate of Ruth Stanton deceased. No specific amount of interest was accounted for in this case. Miss Sheikh's explanation was in principle the same as her explanation in Strupczewski deceased, although the figures are smaller. As in Strupczewski I do not think that the explanation really removes the criticism of non-compliance with the interest rules.
iv) The estate of William Beasley deceased. No interest has as yet been accounted for in this matter, but Miss Sheikh gave an explanation· that, contrary to what was said by the Law Society in the FI Report, this is still an open matter. She explained why. It had to do with the estate having to be kept in the course of administration until an infant beneficiary was of sufficient age to sign a deed relating to an asset comprised in the estate. Miss Sheikh said that the interest position would be dealt with when the estate was finally closed. I am prepared to accept her explanation on this particular matter.
Missing or destroyed files
Miss Sheikh's failures to reply to Law Society letters
"Q. How on earth is a sole practitioner, working in a busy practice, ever going to be able to devote the time and trouble necessary to answer your detailed letters in the detail that you would wish? How on earth is it ever going to be done?
A. I think we all accept that solicitors are busy people ... So we are not completely averse to granting extensions of time and we will consider reasonable requests. That said, solicitors have an obligation as a matter of conduct to respond to correspondence from the Law Society .... Again we accept that solicitors are busy but we cannot not raise matters because there are numerous issues and it will take a solicitor a great deal of time to respond to us. The Law Society is under a duty to raise issues with solicitors which involve their conduct or the service they are providing to their clients. So I accept your point, I accept what you are saying, but I think that the solicitor would have to make the time to respond."
Other pre-intervention issues
Post-intervention: delivery of files to Russell-Cooke
Post-intervention: allegation that Miss Sheikh acted as a solicitor
Post-intervention: the £254,000
i) The resolution of the Panel that there should be an intervention into the practice of Ashley & Co was adopted at some time in the afternoon of Thursday 17 February 2005.
ii) After the resolution and still on 17 February the Law Society contacted three banks with which Ashley & Co had accounts: Abbey National, Lloyds TSB, and Barclays. The one which matters for the purposes of this case' is Lloyds TSB. In each case Mr Jones of the Law Society telephoned what he understood to be the appropriate office of the bank and informed· it of the intervention. Formal written notices, signed by Mr Penson, were sent to the banks by recorded delivery. I am not sure whether the written notices were actually delivered on 17 February, but the banks, and in particular Lloyds TSB, had notice of the intervention by the end of that day. The notices should have resulted in Ashley & Co's bank accounts (the client account and the office account) being frozen.
iii) At about 4.45 p.m. Mr Jones of the Law Society telephoned Ashley &.Co to speak to Miss Sheikh. He had intended to inform her of the intervention. However, Miss Sheikh was out of the office on· a professional matter, the details of which I do not know and do not need to know, which required her to be elsewhere. Mr Jones left a message for her to call him when she returned to the office.
iv) Miss Sheikh did not in fact return to the office that day.
v) Mr Jones telephoned again at about 5.45 p.m., but there was no answer.
vi) At about 6.00 p.m., still on 17 February, Mr Jones sent a fax to Ashley & Co. There was a cover page and three further pages. The three further pages gave formal notices to the firm, signed by Mr Penson, of the intervention. The lay out of the cover page could be of some relevance. It is headed 'Private and Confidential'. There are then eight lines of apparently routine matters:
"To: Anal Sheikh
Company: Ashley & Co
Fax number: 020 8200 9170
From: Ian Jones
Date: 17/0212005
Reference: INT/537-2005/U2
Total pages: 4
Subject: Intervention."
There are then three short paragraphs of text, as follows:
"Ms Sheikh
Please find enclosed letter and Notice dated 17/02/05 concerning your practice. It is important that you' immediately
read both documents.
[Information about Mr Jones' two abortive telephone calls.]
As stated in the letter I will be attending at your office together with the Law Society appointed agent, Mr John Weaver of Russell-Cooke Solicitors, on Friday 18 February 2005 at 10.30 a.m. I would be obliged if you attended at your office at the same time.
Yours sincerely"
vii) The next morning, Friday 18 February 2005, Miss Sheikh did not go to her office. She had to go to wherever she had been the previous afternoon to continue with the same professional matter.
viii) I think that the only person present at the office from the start of normal business hours was a part-time secretary, Mrs Taylor. Further, she was not the same secretary as the one who had been there when Mr Jones had telephoned the previous day. Mrs Taylor saw the fax in the fax machine, and obviously must have looked at some of it and telephoned Miss Sheikh. I say that, because a colleague of Mr Jones at the Law Society, Mr Bain, states in a witness statement that at approximately 9.45 am he received a telephone call from Mrs Taylor; she had received a fax which referred to attendance of staff of the Society at 10.30 am; Miss Sheikh was not in the office and would not be in all day. 'Further, she said she had been asked by Miss Sheikh to try and arrange for the meeting to be postponed to the following Monday'.
ix) So it appears that the first thing Mrs Taylor did when she saw the fax was to
ring Miss Sheikh. There is an issue of whether she told Miss Sheikh that the Law Society representatives were going to attend to effect an intervention. Miss Sheikh adamantly said in evidence that she did not. Mr Malek disputes this, but I accept what Miss Sheikh says for several reasons.
a) I do not think that Mrs Taylor would have read the three formal pages of the fax which followed the cover sheet.
b) On the cover sheet she would certainly have read the text of the message, and obviously did so, as Mr Bain's statement makes clear. The text of the message makes no reference to an intervention.
c) It is true that the list of items preceding the message includes 'Subject: intervention', but that item is not given any particular prominence over the others. Mrs Taylor would probably have skipped over the introductory items and concentrated on the text of the message. In any case I understand that Mrs Taylor did not have any specialist experience as being a legal secretary. It is unlikely that she would have had any idea what an intervention was.
d) I think that my view is strongly supported by what Miss Sheikh did when she spoke to Mrs Taylor. She told Mrs Taylor to telephone the Law Society, to say that she (Miss Sheikh) was out of the office all day, and to ask for the 'meeting' to be rearranged for the following Monday. If Mrs Taylor had understood what an intervention was and that the Law Society were coming at 10.30 to effect one, and if Mrs Taylor had told that to Miss Sheikh, I cannot imagine for a moment that Miss Sheikh would have said to her: 'Tell them I am' tied up out of the office today .. Can they come on Monday instead?'
e) Finally, but by no means the least point: if a solicitor tells me something in evidence I am in the habit of believing it. In Miss Sheikh's case the Law Society is not prepared to place much credit in the veracity of its own member, but I am.
f) After Mrs Taylor had spoken to Miss Sheikh she telephoned the Law Society, and spoke to Mr Bain. He told her that it was imperative that Miss Sheikh attend the meeting at her office. He mentioned that Miss Sheikh's practising certificate had been suspended, so she should not attend a meeting in the capacity of a solicitor. Mrs Taylor said that she would try to speak to Miss Sheikh again and would ring Mr Bain back.
xi) Mrs Taylor did speak to Miss Sheikh again. Something was mentioned about a practising certificate. Miss" Sheikh's evidence was that at that stage she realised that the Law Society were not coming to the office simply on another inspection visit, as its representatives had done several times in the first part of 2004. It appeared to be something more serious, and she altered her arrangements and set off to her office in Willesden.
xii) At about 10am Mrs Taylor telephoned Mr Bain and told him that Miss Sheikh was going to the office, but might not be there by 10.30, the time specified in Mr Jones' fax message.
xiii) In fact Miss Sheikh got to her office a little before 10.30. She read the whole of the fax, and that (on her account) was when she realised that she was being intervened upon. Broadly I accept her account in this respect. She must have been wondering on the way to her office what was going to happen, and the possibility of the extreme event - an intervention - may have crossed her mind. But I accept that she did not know about it until she got to the office and saw the complete fax. To an extent her lack of awareness of what might happen was her own fault. I have described in paragraph 37 above how she never even opened the parcel which had arrived at the office on 24 December 2004 and which contained, among other things, the" Law Society's letter of 23 December. If she had opened the parcel and read that letter it would have put her clearly on notice that an intervention was a possibility.
xiv) To complete my account on this aspect of the matter, at about 10.30 the Law Society's intervention team, including Mr Jones and Mr Weaver arrived, and the intervention was formally effected at that stage.
i) A client of Ashley & Co was a Mr Dogan. For some time he had been involved in an intended property development transaction, which was to be undertaken through a company called Red River UK Ltd (Red River). The project had been running into financial difficulties, and at some stage it had been agreed between Mr Dogan and Miss Sheikh that she would take an interest in the development and would raise some money to contribute to the project in some form. To say that that had been 'agreed' may not be quite right. 'Arranged' might be a better word, connoting that the project and Miss Sheikh's involvement in it were going ahead, but the legal details were still to be finalised.
ii) At some time Miss Sheikh's mother acquired a 25% shareholding in Red' River. I imagine that Miss Sheikh could have had this holding herself, but chose for family reasons that her mother should own it.
iii) In or about December 2004 Miss Sheikh applied for a mortgage loan on the
security of her house, with a view to raising money which could be made available on some legal basis or other to Red River for investment in the development project.
iv) On 17 February 2005 the mortgage was completed. 17 February was the date on which the Panel resolved to intervene in Miss Sheikh's practice, but of course she' knew nothing about that at the time. The mortgage loan was £254,000, and the money arrived at Ashley & Co at about 1 pm on the 17th• There was a question of where it should be placed in the first instance. Miss Sheikh says in a witness statement that she intended it to be paid into the client bank account at Lloyds TSB; she would post the receipt to the credit of the Red River ledger. I suspect that there was an element of jumping 'the gun in the intention to pay the money into the client bank account straight away: although the money was certainly intended for Red River at some stage and probably sooner rather than later, it seems unlikely that the basis on which it was to become Red River's money had been settled by 17 February. (Was it to be a loan? If so on what terms as to interest and repayment? Was it to be a share subscription? If so, for what kinds of shares and for how many of them? Was it to be partly one and partly the other? If so, in what proportions? I have no reason to doubt that Miss Sheikh and Mr Dogan would have sorted all those kinds of things out, but as far as I can ascertain they had not yet sorted them out on 17 February.) I suspect that on 17 February the money belonged to Miss· Sheikh personally, in which case it could have been paid into her personal bank account for the time being. If that had happened the problems which I am explaining here would not have arisen.
v) However all of that may be, Miss Sheikh's intention was that the money should be paid into Ashley & Co's client account, and she thought that that was what one of her two secretaries would do.
vi) This is where the first error in Mr Treverton-Jones' comedy of errors occurred. The secretary paid the £254,000, not into Ashley & Co's client account at Lloyds TSB, but into its office account.
vii) I have already mentioned the next event. As a result of the Panel's resolution to intervene in the practice of Ashley & Co, Mr Jones of the Law Society notified the banks, including Lloyds TSB, of the intervention on the afternoon of 17 February. That should have frozen both the client account and the office account.
viii) The next morning Miss Sheikh, while out of the office, received the two telephone calls from Mrs Taylor, informing her that representatives of the Law Society were coming to the office. From the second call it was clear that it . was something more serious than just another inspection visit. I am sure that Miss Sheikh's mind must have turned, among other things, to the £254,000. She believed that it was in the firm's client account at the bank, and no doubt she wished it had not been. She obviously decided that the money should be got out of the client account as soon as possible, and before the Law Society arrived.
ix) Either in the second telephone conversation with Mrs Taylor or in a third
conversation which must have followed almost immediately Miss Sheikh told Mrs Taylor to instruct the bank to transfer the £254,000 out of the client account. This is another of the errors: the money was not in the client account. 1'suppose that Mrs Taylor (who I believe was the secretary who had paid the £254,000 into the office account the previous day) might have noticed Miss Sheikh's mistake and corrected it.. But she did not.
x) At this point Miss Sheikh did something for which she has been denounced time and time again by Mr Malek in this case. The bank would need a signed instruction, and she told Mrs Taylor to prepare one, to sign it 'A Sheikh', and to sent it to the bank straight away.
xi) Mrs Taylor did that. At this point another of the errors arose. The bank should
have refused to accept the instruction. The accounts were frozen. However, the bank failed to realise that that was the case, and transferred £254,000 out of the client account. If I have the facts correctly, it was paid into Miss Sheikh's personal account at Barclays Bank. Incidentally, it appears likely to me that there was a second error by the bank. Even if Ashley & Co "s bank accounts had not been frozen the bank should surely have questioned an instruction which would cause the firm's client account to become overdrawn. Nevertheless, the bank did act on the instruction which was sent or relayed to it by Mrs Taylor.
xii) The result so far was that the client account was heavily overdrawn, which should never happen; that the office account was heavily in credit; that £254,000 had been added to the balance in Miss Sheikh's personal account at Barclays; and that Lloyds TSB had made a transfer of £254,000 which it ought not to have made.
xiii) I may be wrong, but I do not think that it emerged in the course of 18 February that any of that had happened, but it did emerge in the next week. There was a flurry of activity before it was resolved. Ll9yds TSB, which had plainly been itself at fault, commenced an action against Miss Sheikh personally and obtained a without notice freezing order against her. For a time Miss Sheikh caused the money to be transferred to an account of her mother's at another branch of Barclays. There was talk of Miss Sheikh commencing a negligence claim against Lloyds TSB (and possibly there were some initial steps going a little further than just talk).
xiv) Quite soon, however, there was an agreed settlement of the claim commenced by Lloyds TSB against Miss Sheikh (the claim in which the without notice freezing injunction had· been obtained against her), and the £254,000 was returned to Lloyds TSB. I may be wrong, but I believe that the bank placed the money in the client account, and that Russell-Cooke (as intervention agents with responsibility for Ashley & Co's practice) regarded it as belonging to Red River.
xv) Again I may be wrong in detail, but I think that Red River has now withdrawn the balance of the £254,000 from Ashley & Co (or Russell-Cooke in its capacity as the intervention agent in Ashley & Co). I say 'the balance of the £254,000', rather than just the £254,000, because I am informed that the Law Society has taken some £50,000 of it for or towards its costs of the intervention, which under a provision of the Solicitors Act are payable by the intervened upon solicitor.
Conclusion