Steve Roberts discusses dishonest conduct by solicitors

Allegations of dishonesty made by the SRA are often the most serious that can be levelled against an individual solicitor. If proved, they will inevitably lead to the solicitor being struck off the Roll with little or no prospect of the restoration and limited ability to even work in the profession in a non-qualified role unless exceptional circumstances are found.

Types of dishonesty

Dishonesty can take many forms, but they’re not all equally obvious. Some are obvious and will be familiar to many, such as fraud, tax evasion and being involved in other criminal activities. Others may be less obvious, such as knowingly giving a client incorrect information as to the progress of a case, overcharging, not paying a train fare, making a secret profit or giving misleading information to others.

SRA investigations into dishonesty

If a report about dishonesty is made to the SRA, they are likely to investigate. A report may have been made by another solicitor, the court, a disgruntled client or former employee.

An investigation can take place in one of two ways. The SRA may send a forensic investigator to the firm who will review files and procedures within the practice in addition to the firm accounts and ledgers. At the conclusion of their visit, a forensic investigator will conduct a recorded interview. Unlike in criminal investigations, there is an obligation on a solicitor to co-operate despite any response being used as evidence against them.

Having concluded the investigation, the forensic investigator will file a Forensic Investigation Report reporting on their findings. This report will be passed to a caseworker with the SRA who will consider any possible breaches and send the solicitor an “Explanation With Warnings” (EWW) letter together with the Forensic Investigation Report asking for an explanation of conduct.

It is also possible for an investigation to be carried out without any attendance at the firm. In these circumstances, an EWW letter will be sent to the solicitor asking for an explanation of their conduct.

Responding to an EWW letter is often the most crucial stage of any disciplinary proceedings as the response will be raised at every stage of the proceedings.

The Solicitors Disciplinary Tribunal (SDT)

If the SRA feels that there is evidence of dishonesty, they will almost certainly refer the matter to the SDT.

The burden of proving a case before the SDT rests on the SRA and the standard of proof to be applied, at least for the time being, is the criminal standard, i.e. the case must be proved beyond a reasonable doubt.

Sanction where alleged dishonesty is found proved

If an allegation of dishonesty is found proved, the likely outcome is that the solicitor will be struck off unless exceptional circumstances can be shown. If a solicitor is struck off for dishonesty, it is unlikely that they will be allowed to be re-admitted to the Roll, even after a period of rehabilitation. A solicitor who is struck off will also be unable to be employed or remunerated by any other SRA authorised body, even in a non-legal capacity, without the permission of the SRA.

Intervention

Suspected dishonesty on the part of a solicitor is also a ground for the SRA to exercise their powers of intervention under schedule 1 of the Solicitors Act 1974.

The consequences of an intervention for a firm are dire for principals, solicitors and all other employees. The SRA, or their agent, will take over conduct of the practice, client and office accounts will be frozen and monies in those accounts will vest in the SRA until the intervention is finalised.

Where a practice is intervened, the principals will have their practising certificates suspended meaning that they will not be able to practise in any firm. However, it is possible for an application to be made to the SRA that a suspension be lifted. Any application is likely to need the support of a firm willing to employ the suspended principal and restrictions are likely to be imposed meaning that a suspended solicitor cannot be involved in the management of a practice or be able to control client money.

Firms and solicitors who have their practices intervened will also have to bear the costs of intervention. These are often large and it is not uncommon for costs to exceed £100k.

Ivey v Genting Casinos

Up until October 2017, the relevant test for determining dishonesty was the Ghosh test, which sets out a two stage test for dishonesty as follows:

“In determining whether the prosecution has proved that the defendant was acting dishonesty, a jury must first of all decide whether, according to the ordinary standards of reasonable and honest people, what was done was dishonest. If it was not dishonest by those standards, that is the end of the matter and the prosecution fails.

“If it was dishonest by those standards, then the jury must consider whether the defendant himself must have realised that what he was doing was by those standards dishonest… It is dishonest for a defendant to act in a way which he knows ordinary people consider to be dishonest, even if he asserts or genuinely believes that he is morally justified in acting as he did.”

On 25th October 2017, the Supreme Court handed down its judgment in the case of Ivey v Genting Casinos and suggested that the Ghosh test was inappropriate and instead explained that the following test should be applied:

"The test of dishonesty is as set out by Lord Nicholls in Royal Brunei Airlines Sdn Bhd v Tan and by Lord Hoffmann in Barlow Clowe“s: [...] When dishonesty is in question the fact-finding tribunal must first ascertain (subjectively) the actual state of the individual’s knowledge or belief as to the facts. The reasonableness or otherwise of his belief is a matter of evidence (often in practice determinative) going to whether he held the belief, but it is not an additional requirement that his belief must be reasonable; the question is whether it is genuinely held. When once his actual state of mind as to knowledgeable belief as to facts is established, the question whether his conduct was honest or dishonest is to be determined by the factfinder by applying the (objective) standards of ordinary decent people. There is no requirement that the defendant must appreciate that what he has done is, by those standards, dishonest.”

It is likely that the SDT will follow the judgment of the Supreme Court in Ivey v Genting Casinos but what effect will that have on solicitors facing allegations of dishonesty?

It is likely to be an interesting few months in the tribunal to see what approach they take to dishonesty given the comments in Ivey v Genting Casinos. The SRA appears to have already indicated their preference for the new test by reframing cases which have already been referred to the SDT.

https://www.richardnelsonllp.co.uk/service/sra-solicitors/sra-investigations/