The Court of Appeal has thrown out a challenge from a closed firm which argued it had been treated unfairly. London firm Neumans had its appeal dismissed against a High Court decision last summer approving intervention by the Solicitors Regulation Authority, which effectively shut the firm down.
In Neumans LLP v The Solicitors Regulation Authority, Lord Justice Patten said it was not possible to say the intervention was disproportionate or that the regulator acted irrationally.
Neumans, which had 36 fee earners and seven support staff, had been operating for 11 years but was closed in July after an excoriating report from Master Egan QC, who was asked to carry out a formal investigation in 2012 into a £2.9m costs bill produced by the firm and its equity partner Nabeel Sheikh. Egan said there was clear evidence of fraud, including a claim for 2,783 hours of Crown court preparation that was false, and ’dishonest opportunism’ in claiming £300,000 for a noting brief.
The SRA imposed the harshest sanction after concluding that Sheikh’s actions created a risk to the public and that he was still an influential presence in the firm, despite resigning as a member.
Neumans appealed on the grounds that Mr Justice Newey, sitting in the High Court, did not apply the rules of natural justice and that the SRA had failed to give adequate notice of its case and the chance to respond.
But Patten LJ said there was nothing in the suggestion that Neumans did not have adequate notice. The court heard the SRA had served Sarwa Sabir, Sheikh’s wife and fellow equity partner, with notice requiring her to provide an explanation of the invoice issue and her involvement.
The firm submitted a report rejecting the six principle conclusions of Master Egan but the SRA proceeded with intervention on the basis of reason to suspect dishonesty and rule breaches. Its adjudication panel opted not to intervene into Sabir, giving her the ‘benefit of some considerable doubts that we have about her evidence’.
Sabir was denied the chance to make representations in person as the panel said it had sufficient written evidence, and intervention followed.
Patten LJ said: ’By the time the decision to intervene was made, the appellant had been given ample opportunity to formulate and present its case on what safeguards would be adequate to ensure the proper functioning of the firm free of Mr Sheikh and it failed to do so.’
Patten noted that the High Court was not satisfied the practice of Neumans could be kept separate from Sheikh. ’Mr Sheikh clearly ran the firm prior to the intervention and was acknowledged by Ms Sabir to be the “rainmaker” in terms of introducing clients and new work,’ said Patten. ’The doubts as to Ms Sabir’s ability to limit the influence of her husband remain.’