Solicitors Disciplinary Tribunal and the SRA: a line in the sand?

Following the recent order from the Solicitors Disciplinary Tribunal that the Solicitors Regulatory Authority (SRA) pay the costs of a solicitor cleared of giving bad advice, our Head of Risk & Compliance, Richard Esney, asks has a line finally been drawn?

I started working for the Solicitors Regulation Authority (SRA) in 2007. I would have made my first appearance at the Solicitors Disciplinary Tribunal (SDT) a year or two later.

Having come from a background which included magistrates court prosecution work on behalf of a Local Authority, what never ceased to amaze me about SDT was how the issue of costs was dealt with. Coming from a background where a £60 “contribution to prosecution costs” was a success, seeing Respondents at SDT being ordered to tens of thousands of pounds (and more) was genuinely an eye-opener. This was often in addition to a substantial fine, suspension or strike-off, which would have a severely limiting effect on the Respondent’s earning power.

During my time at the SRA, it was very unusual to lose a case at SDT. It was never as easy as a rubber-stamping exercise, but success rates were high, and costs orders were higher.

It seems that the Regulator is enjoying less success in recent years, and that’s probably appropriate. A robust Regulator should be taking the difficult matters to trial, not just picking the low-hanging fruit.

However, even when cases are lost at SDT the Regulator enjoys costs protections. It would be standard for there to be no order for costs, unless there was a good reason to affix the Regulator with some liability (following the principle set out in Law Society v Baxendale-Walker). That good reason needs to be more than the fact the solicitor has successfully defended the case.

This means that a Respondent could be subject to a lengthy investigation and prosecution, often spanning several years, and be completely exonerated, but would still be liable for the significant costs of defending the case. When you factor in the stress and amount of work needed to defend a case (including lost fee earning time) the financial impact of successfully defending a prosecution can be catastrophic.

More recently the SDT seem to be prepared to make the Regulator pay for their losses. In a recent case at SDT, a solicitor (Ms Tsang) was subject to an investigation which commenced in 2019. The matter was eventually heard at SDT over two days in July 2023. The Tsang Judgment was handed down on 17 August 2023.

In this case Ms Tsang was alleged to have failed to properly advise her clients as to the risks involved in various property development schemes, thereby breaching the SRA Principles and failing to achieve a number of Outcomes of the SRA Code of Conduct 2011 (as was). The SDT did not find the allegations proven.

The issue of costs then inevitably arose. Ms Tsang applied for the entirely of her costs to be paid, amounting to £79,950. Her Counsel cited the fact that not only had the case against her been found unproven, but the Regulator had made errors of law and had been slow to conclude the case. Counsel described the Regulator’s case as a “shambles from start to finish”.

In ordering the Regulator to pay costs in the sum of £74,950 (£5,000 reduction as the trial lasted two days, not the budgeted three), SDT referred to the “inordinate delay” in bringing the case and questioned the presumption that the case had been property brought.

There is well documented tension between the Regulator and the SDT, given the former’s eagerness to extend its own powers to deal with sanctions in-house. SRA fining powers were increased in 2022 but further increases are expected in light of the Economic Crime and Corporate Transparency Bill going through parliament.

In the meantime. It will be interesting to see if the case of Tsang is the start of SDT flexing their costs-ordering-muscles.

How can we help?

If you need advice on any issue relating to SRA compliance, including dealing with an SRA investigation, AML compliance or implementing robust internal systems, we can help.

Our Director of Risk & Compliance, Richard Esney, is a qualified solicitor, who worked for the SRA for 14 years, investigating a range of issues for the SRA and giving evidence at SDT on numerous occasions. If you would like to discuss an issue with Richard, please contact us.