Richards v The Law Society (Solicitors' Regulation Authority)

A solicitor must remain alert to conflicts between personal interests and a client’s interests. Where the solicitor promotes a transaction benefiting the solicitor or the solicitor’s family, the solicitor must ensure that the client receives genuinely independent advice appropriate to the transaction.

There is no universal duty to give unsolicited advice on the commercial wisdom of every transaction. The duty depends on the facts and may arise where the solicitor assumes responsibility for advising on financial advantages, or where the circumstances plainly require specialist financial advice. A client’s willingness to proceed does not discharge that obligation. The court will not determine an academic issue about the standard of proof in disciplinary proceedings where it cannot affect the result.

The claimant, a solicitor, appealed against findings by the Solicitors’ Disciplinary Tribunal that he had used his position to take unfair advantage of an elderly client and had acted despite a conflict between his interests, his family’s interests and the client’s interests.

The claimant had promoted and arranged an equity-release transaction under which his children acquired the client’s equity in a property. A licensed conveyancer later advised on the conveyancing aspects, but was not qualified to provide financial advice. The Tribunal imposed fines totalling £10,000. The central issues were whether the solicitor-client and fiduciary relationships continued during the relevant period, whether independent financial advice was required, whether the allegations had been fairly notified, whether the findings were established, and whether the penalties were excessive.

1. Appeal dismissed. The Tribunal’s findings and penalties were upheld. The penalty was not obviously wrong or disproportionate.
2. There was a solicitor-client relationship from October 1998 until at least 10 December 1998, and a fiduciary relationship continued thereafter. The claimant negotiated and drafted the transaction for his own and his family’s benefit while acting in relation to the client’s affairs. This created an obvious conflict of interest.
3. There is no absolute rule requiring a solicitor to advise a client on the commercial wisdom of every transaction. The obligation is fact-sensitive. It arose here because the client sought the solicitor’s views about an equity-release proposal, the solicitor suggested a transaction with his own children as more advantageous, and the circumstances made the need for independent financial advice obvious.
4. The solicitor was obliged to ensure that the client obtained independent and sufficiently broad advice. Conveyancing advice from the licensed conveyancer did not satisfy that obligation because the transaction required consideration of alternative methods of raising money, the effect of the continuing mortgage, care costs, benefits, tax, investment and the client’s future options.
5. The fact that the client understood the transaction and wished to proceed did not absolve the solicitor. Nor did evidence that the transaction broadly resembled contemporary commercial equity-release arrangements, since the first mortgage was not redeemed and the client remained liable for its repayments.
6. The financial-advice issue had been fairly notified despite its absence from the original Rule 4(2) statement. The standard-of-proof issue was academic on the facts and was not determined. The court also rejected the challenges based on character, the Conveyancing Handbook and the alleged absence of expert evidence.

The first allegation was made out because the transaction was advantageous to the solicitor’s children and may not have been in the client’s best interests. The second allegation was admitted on appeal.

The judgment records an appeal to the Administrative Court from findings and penalties imposed by the Solicitors’ Disciplinary Tribunal following hearings on 26 and 27 June 2008. The appeal was dismissed.