The Solicitors Regulation Authority and legal costs

It is, of course, customary for the Solicitors Regulation Authority (SRA) to seek to obtain costs against a regulated person at the successful conclusion of a disciplinary prosecution albeit that, in recent times, there have been numerous examples of the award of costs being significantly reduced from those sought (see for example SRA v Charles Ewan). But what of the situation when the disciplinary process fails?

In the case of Seamus Andrew v Solicitors Regulation Authority (14.06.23), the Solicitors Disciplinary Tribunal (SDT) heard an appeal against a decision by the SRA to rebuke Mr Andrew for accounts rules breaches which had taken place when he was the Head of Legal Practice at a firm of solicitors. In fact, he had retired in December 2020. The detail of the facts of the case does not need recital, but there had been deficiencies in client account balances which had been caused by bookkeeping errors made by external agents. Mr Andrew had simply been ultimately responsible for the firm’s accounting procedures and had rectified the errors as soon as they were brought to his attention. The SRA had decided to use its internal powers to rebuke him for breaches of SRA Principles 2011 (then in force) 8 and 10, but had made errors in its own investigatory accounting process. Mr Andrew’s appeal to the SDT against that decision (under section 44E Solicitors Act 1974) was successful on the basis that the reasons given by the SRA adjudication panel were inadequate and that consequently this “represented a serious procedural irregularity”.  Accordingly, the decision to impose the rebuke was quashed.

The SDT also ordered that the SRA pay the total sum of £37,869.77 in legal costs. Its power to award costs is contained in paragraph 43 of The Solicitors (Disciplinary Proceedings) Rules 2019 which reads that: “(1) at any stage of the proceedings, the Tribunal may make such an order as to costs as it thinks fit, which may include an order for wasted costs”. This power derives from section 47 Solicitors Act 1974.

This case is one of a number of recent cases (see also Ring and Ahmud) where the SRA has been ordered to pay the costs of failed disciplinary action against a solicitor in spite of the decision in Competition and Markets Authority v Flynn Pharma Ltd & Ors [2020] EWCA 617 which was discussed in our earlier article on the subject. So what is the distinction?

The first point to be made is that there is a seam of authority that costs of a first instance regulatory prosecution do not ‘follow the event’ (the most recent of which is Competition and Markets Authority – see above). The test is what is ‘just and reasonable’. If a regulator has acted honestly, reasonably and on grounds that appear to be sound, the starting point is that no order for costs should be made where the prosecution fails.  It may not be just or reasonable to make an order although the financial prejudice to the regulated person is a further factor to be taken into consideration. The basis for this reasoning when applied to the SRA (now delegated responsibility for regulating the legal profession) can be traced back further.  In Baxendale-Walker [2007] EWCA 233 Sir Igor Judge (as he then was) said: “The exercise of [its] regulatory function [to supervise the proper discharge by solicitors of their professional obligations and guard the public interest] places the Law Society in a wholly different position to that of a party to ordinary civil litigation”.

Although the above points do not appear to have been argued by the SRA in Mr Andrew’s case, the ratio of the decision to award costs to him can be derived from the finding that the inadequate reasoning of the adjudication panel represented a ‘serious procedural irregularity’. Without such a finding, those successful in defeating a soundly reasoned and properly brought regulatory prosecution are likely to struggle unless they can demonstrate real financial prejudice. In reality, the practical distinction between the competing decisions in failed regulatory prosecutions can sometimes be difficult to discern.

Call us on 020 3603 6069 or email to find out how our specialist regulatory solicitors can help if you are facing Solicitors Disciplinary Tribunal proceedings or a Solicitors Regulation Authority investigation, or any other form of regulatory action.