Beresford & Anor v The Solicitors Regulation Authority & Anor

Solicitors act improperly where they deduct success fees from compensation under a low-risk, court-supervised claims scheme without clearly explaining that the opposing party will pay the solicitors’ fees. A solicitor must also address a related agreement affecting the client where, in the course of the retainer, the solicitor knows or ought to know that the agreement is questionable and potentially adverse to the client. Referral payments calculated by reference to the value or success of claims are impermissible commissions when unrelated to genuine services. Claims under the relevant schemes constituted contentious business because they arose from stayed court proceedings and remained subject to court supervision. Serious and cumulative professional misconduct may justify striking off and an undiscounted costs order.

The appellants, partners in a solicitors’ firm, appealed under section 49(1)(b) of the Solicitors Act 1974 against findings of the Solicitors Disciplinary Tribunal. The Tribunal had found breaches of the Solicitors Practice Rules 1990 involving success fees, conflicts of interest, inadequate costs advice, referral arrangements, contingency fees and fee sharing. It ordered that both appellants be struck off and pay the regulator’s costs.

The appeals concerned whether the Tribunal had made adequate factual findings, whether the claims handling agreements involved contentious business, whether payments to the introducers were genuine service fees or referral commissions, whether the appellants had acted dishonestly, and whether the full costs order was justified.

1. Appeals dismissed. The Tribunal’s findings of serious professional misconduct and its orders striking the appellants from the Roll were upheld.
2. The appellants’ success-fee arrangements for non-UDM clients were improper. The claims were low-risk, the DTI paid substantial fixed fees, and the clients were not properly told of that arrangement. The appellants themselves accepted UDM work without charging client success fees. In those circumstances, requiring vulnerable miners to pay success fees from compensation was unconscionable and contrary to SPR rules 1 and 8. The wording of paragraph 14 of schedule 17 to the COPD CHA reinforced the conclusion that the DTI payments were intended to be the total sums payable to the representatives.
3. The appellants were in conflicts of interest. They had a financial interest in maintaining the flow of UDM work while their clients had an interest in being told that deductions payable to Vendside were questionable. The scope of a solicitor’s duty depends on the retainer and the client’s circumstances. An inexperienced client may reasonably expect a broader scope of advice, particularly where the solicitor becomes aware of a risk or potentially unenforceable obligation.
4. The payments to UDM, Vendside and Walker & Co were referral fees, not payments for genuine marketing, administration or vetting services. Their calculation by reference to the compensation recovered, and their payment on successful completion, showed that they were commissions. The documents describing them otherwise formed a sham arrangement. The appellants knowingly assented to that arrangement and intended, if necessary, to mislead the regulator, Tribunal or court.
5. The claims were contentious business for SPR rule 8. They arose from proceedings begun before the court, the claimants were treated as plaintiffs in those proceedings, and the stayed litigation remained under court supervision. The same conclusion determined the SPR rule 9 issue. The referral arrangements and contingent payments therefore breached those rules.
6. The Tribunal was entitled to find that inadequate costs information given to UDM clients amounted to unbefitting conduct. Its factual findings and reasons were sufficiently clear. The Tribunal was also entitled to make an undiscounted costs order: the misconduct was cumulative, grave, extensive and concerned thousands of vulnerable clients.

• Solicitors Disciplinary Tribunal: found multiple breaches of the Solicitors Practice Rules 1990 and conduct unbefitting a solicitor; ordered that both appellants be struck off and pay the regulator’s costs.
• High Court (Administrative Court): dismissed the appeals and upheld the Tribunal’s disciplinary and costs orders.