Solicitors Regulation Authority v Norman [2013] EWHC 3886 (Admin)
In the case of Solicitors Regulation Authority v Norman the High Court considered whether a sentence imposed by the Solicitors Disciplinary Tribunal (SDT) was excessively lenient.Mr Norman was the
In the case of Solicitors Regulation Authority v Norman the High Court considered whether a sentence imposed by the Solicitors Disciplinary Tribunal (SDT) was excessively lenient.
Mr Norman was the sole equity partner of a firm, Black Norman. He had employed a cashier, Mrs K, to manage the firm's accounts and his involvement with the accounts had been minimal. Rule 13 of the Solicitors Accounts Rules 1998 (SAR) requires that monies paid by the client for the purpose of funding Stamp Duty Land Tax (SDLT) are deposited in the client account for payment as they fall due. Mrs K's practice however was to transfer the monies to office account for payment from that account. However, when SDLT fell to be paid, cheques were written and held back giving the false appearance that payment had been made. In reality, there were insufficient funds in the office account to cover monies owed in SDLT and the firm was using client money to fund its cash flow.
Mr Norman was aware of the practice of paying SDLT from the office account but had not realised it was a breach of the SAR. Following Mrs K's retirement, Mr Norman employed a qualified chartered accountant as practice manager. Shortly afterwards, the accountant advised him of the problem and for a while they continued as Mrs K had done, transferring money from client to office account to pay existing SDLT liabilities. Some months later, Mr Norman used money gained from a property sale and a sum borrowed from his brother to pay all outstanding SDLT liabilities and clear the client account shortfall.
At the SDT hearing, Mr Norman admitted to some of the allegations against him, including that he had breached the SAR by retaining client money received for payment of SDLT in office account. He denied that he had acted to impair his duty of integrity and/or in a way likely to undermine the trust placed in him or the profession in breach of the Solicitors Code of Conduct 2007. He also denied that he was dishonest in retaining client money in respect of SDLT.
The SDT found that Mr Norman had shown genuine insight and, as soon as he was aware of the problem, had done whatever he could to remedy the situation as quickly as possible. It made a finding that Mr Norman had not acted dishonestly, but that his conduct was likely to have undermined public trust in him or in the profession. The SDT imposed a fine of £15,000. The SRA appealed to the High Court against the sentence imposed.
On appeal, the SRA noted the legal principle set out in Bolton v Law Society, namely that "any solicitor who is shown to have discharged his professional duties with anything less than complete integrity, probity and trustworthiness must expect severe sanctions...If a solicitor is not shown to have acted dishonestly but is shown to have fallen below the required standards of integrity, probity and trustworthiness his lapse is less serious but it remains very serious indeed in a member of a profession whose reputation depends on trust. A striking off order will not necessarily following such a case but it may well...The most fundamental purpose of sentencing...is to maintain the reputation of the solicitors' profession as one in which every member of whatever standing may be trusted to the end of the earth...The impact of mitigation is of less significance in this jurisdiction than in others." The SRA contended, amongst other things, that "in finding that his conduct was not serious enough to warrant striking off or suspension the Tribunal departed from the usual and proper application of legal principle and it is [sic] reasons for doing so were inadequately rehearsed."
The High Court rejected this argument noting that it had studied all of the papers in the case at length, including the written judgment of the Tribunal. It stated that they had no difficulty understanding the Tribunal's judgment or the reasons for its conclusions. It noted that the Tribunal had found that Mr Norman had acted in such a way as to impair his integrity, but that the mitigation in this case had been "unusually powerful". It noted that "Mr Norman took what steps were practically available to him to do the one thing which by the time he saw the full picture mattered to him more than anything: no client should remain at a loss."
The High Court rejected the SRA's contention that Mr Norman had gained personally from the breaches in that improper use of client funds had enabled the firm to survive. It stated that "a commonsense reading of "gain personally" suggests a man who deploys improperly secured funds on his own lavish lifestyle, on benefits which go to the man" and in this case "little had been further from Mr Norman's thoughts".
The Court dismissed the appeal.
Mr Norman was the sole equity partner of a firm, Black Norman. He had employed a cashier, Mrs K, to manage the firm's accounts and his involvement with the accounts had been minimal. Rule 13 of the Solicitors Accounts Rules 1998 (SAR) requires that monies paid by the client for the purpose of funding Stamp Duty Land Tax (SDLT) are deposited in the client account for payment as they fall due. Mrs K's practice however was to transfer the monies to office account for payment from that account. However, when SDLT fell to be paid, cheques were written and held back giving the false appearance that payment had been made. In reality, there were insufficient funds in the office account to cover monies owed in SDLT and the firm was using client money to fund its cash flow.
Mr Norman was aware of the practice of paying SDLT from the office account but had not realised it was a breach of the SAR. Following Mrs K's retirement, Mr Norman employed a qualified chartered accountant as practice manager. Shortly afterwards, the accountant advised him of the problem and for a while they continued as Mrs K had done, transferring money from client to office account to pay existing SDLT liabilities. Some months later, Mr Norman used money gained from a property sale and a sum borrowed from his brother to pay all outstanding SDLT liabilities and clear the client account shortfall.
At the SDT hearing, Mr Norman admitted to some of the allegations against him, including that he had breached the SAR by retaining client money received for payment of SDLT in office account. He denied that he had acted to impair his duty of integrity and/or in a way likely to undermine the trust placed in him or the profession in breach of the Solicitors Code of Conduct 2007. He also denied that he was dishonest in retaining client money in respect of SDLT.
The SDT found that Mr Norman had shown genuine insight and, as soon as he was aware of the problem, had done whatever he could to remedy the situation as quickly as possible. It made a finding that Mr Norman had not acted dishonestly, but that his conduct was likely to have undermined public trust in him or in the profession. The SDT imposed a fine of £15,000. The SRA appealed to the High Court against the sentence imposed.
On appeal, the SRA noted the legal principle set out in Bolton v Law Society, namely that "any solicitor who is shown to have discharged his professional duties with anything less than complete integrity, probity and trustworthiness must expect severe sanctions...If a solicitor is not shown to have acted dishonestly but is shown to have fallen below the required standards of integrity, probity and trustworthiness his lapse is less serious but it remains very serious indeed in a member of a profession whose reputation depends on trust. A striking off order will not necessarily following such a case but it may well...The most fundamental purpose of sentencing...is to maintain the reputation of the solicitors' profession as one in which every member of whatever standing may be trusted to the end of the earth...The impact of mitigation is of less significance in this jurisdiction than in others." The SRA contended, amongst other things, that "in finding that his conduct was not serious enough to warrant striking off or suspension the Tribunal departed from the usual and proper application of legal principle and it is [sic] reasons for doing so were inadequately rehearsed."
The High Court rejected this argument noting that it had studied all of the papers in the case at length, including the written judgment of the Tribunal. It stated that they had no difficulty understanding the Tribunal's judgment or the reasons for its conclusions. It noted that the Tribunal had found that Mr Norman had acted in such a way as to impair his integrity, but that the mitigation in this case had been "unusually powerful". It noted that "Mr Norman took what steps were practically available to him to do the one thing which by the time he saw the full picture mattered to him more than anything: no client should remain at a loss."
The High Court rejected the SRA's contention that Mr Norman had gained personally from the breaches in that improper use of client funds had enabled the firm to survive. It stated that "a commonsense reading of "gain personally" suggests a man who deploys improperly secured funds on his own lavish lifestyle, on benefits which go to the man" and in this case "little had been further from Mr Norman's thoughts".
The Court dismissed the appeal.