In July this year, the Solicitors Disciplinary Tribunal imposed what was then a record fine of £250,000 on solicitors White & Case LLP. Only four months later the record has been doubled to £500,000, imposed on Locke Lord (UK) LLP.
In both instances the Solicitors Regulation Authority and the firms concerned used a procedure to apply to the tribunal for the disciplinary proceedings to be resolved by agreed outcome.
This procedure is now quite common and avoids the costs and uncertainty of a fully, or even partly, contested hearing when the parties agree the misconduct, the facts upon which it is based and the sanction they would like to the tribunal to impose. The sanction has to be fully justified and explained in the documents by reference to the tribunal’s Guidance Note on Sanctions. The tribunal retains the jurisdiction to refuse to approve what is placed before it.
We know that in White & Case the tribunal approved it in a reasonably straightforward manner. By contrast, for Locke Lord the path was not so smooth. The case has also led to the presiding Tribunal Chairman Andrew Spooner taking the highly unusual step of issuing a comment about the tribunal’s decision to correct the SRA’s media observations made before the judgment was issued.
On 8 November the SRA was quoted as saying that: ‘The tribunal is waking up to the importance of deterrence. We were very clear about entity regulation and that firms are accountable.’ The judgment was published on 10 November following a hearing of some duration on 6 November.
The SRA’s publicity did not seem to have been supported by the facts. (For its part, the SRA says it was unable to comment on proceedings held in private.)
True, the SRA has been clear about entity regulation, but equally the SDT has been clear for far longer about deterrence. In its Guidance Note on Sanction the Tribunal refers explicitly to one of the well known Bolton principles (Bolton v The Law Society  1 WLR 512):
'… a penalty may be visited on a solicitor … in order to punish him for what he has done and to deter any other solicitor tempted to behave in the same way …'
The tribunal knows Bolton well. It has been around for a long time and its principles are embedded in much of its business.
The Guidance Note on Sanctions also makes plain that 'the exercise of its powers and the imposition of sanctions are matters solely for determination by the tribunal'.
What the Locke Lord judgment did not tell the reader, and hence the tribunal comment, is that in the exercise of its independence it had refused to approve the sanction originally presented to it by the SRA and Locke Lord. It took the view, after a full appraisal of the facts, that it was inadequate. In light of the allegations, particularly no doubt the admission of a lack of integrity, the SDT took the view that the misconduct and the underlying facts set out in the agreed outcome warranted a much higher fine.
The agreed outcome document attached to the judgement does indeed describe an extremely serious set of circumstances in which a number of clients or investors or third parties lost substantial sums of money, with something over £21 million passing through the firm’s client account connected to dubious financial transactions with no evidence of verifiable returns to 'investors'.
It was agreed by the parties that the transactions bore the hallmarks of dubious investment schemes. These are sometimes called advance fee frauds and I have dealt with many of them. While the facts change from one case to another, the underlying method of promising high returns for investments up front does not change. Indeed, I first saw the terminology used in some of the documents described in the agreed outcome 15 to 20 years ago, and so even today sophisticated firms are getting involved in them.
The firm admitted various systemic failures and the tribunal saw them as extremely serious because of the sums of money involved, the length of time the transactions had been conducted and the failure to take opportunities to see the schemes for what they were and to stop them.
The Locke Lord judgment provides a valuable insight into the agreed outcome procedure. As a matter of practice the SRA will consider embarking on it only if the respondent is willing to make substantial admissions of both allegations and underlying facts. There may be scope for negotiation but it is quite limited. Its attraction is that it allows respondents an opportunity to create an agreed document which clearly sets out agreed facts with no extraneous material and as long as sanction has been approached sensibly using the SDT guidance, a degree of comfort as to the outcome. It also saves significant costs, and avoids SDT time being used unnecessarily.
Locke Lord demonstrates and reminds us that the SDT retains its independence and will not just approve what is placed before it. The unfortunate pre-judgment publicity from the SRA also showed us that the tribunal has long been awake to deterrence, and practitioners in that jurisdiction will know that.
David Barton is a solicitor advocate specialising in professional negligence and regulation.