Patel v Solicitors Regulation Authority

A solicitor must not use a client account as a banking facility. Payments into or out of it must relate to an underlying legal or recognised professional transaction, or to a service forming part of the solicitor’s normal regulated activities. Purely administrative custody and transfer of funds is insufficient. The prohibition is not confined to preventing money laundering. It also protects client money and prevents solicitors from lending the trust and reputation of the profession to commercial arrangements unrelated to professional work.

The appellant, a solicitor, appealed under section 49 of the Solicitors Act 1974 against a decision of the Solicitors Disciplinary Tribunal. The Tribunal had fined him £7,500 and ordered him to pay £20,000 in costs after finding that he had permitted his client account to receive and transfer funds connected with vehicle-import transactions involving B and M, where there was no underlying legal transaction.

The appellant accepted that he had checked invoices and related documents, but argued that this amounted to an underlying transaction or lawful custodial service. He also challenged the Tribunal’s approach to professional misconduct, the fine and the costs order. The central issue was whether the use of the account fell within the principle stated in Wood and Burdett and reflected in rule 14.5 of the SRA Accounts Rules 2011.

1. Appeal dismissed. The Tribunal was entitled to treat the principle in Wood and Burdett as a ground of decision, independently of any breach of a specific rule or allegation that the conduct damaged professional reputation.
2. The principle is that a solicitor’s client account exists to protect money held in connection with professional work undertaken for a client. It is not a proper part of a solicitor’s everyday practice to operate a banking facility for third parties, whether clients or not. The principle is broader than the particular concern about money laundering which formed part of its background.
3. Rule 14.5 of the SRA Accounts Rules 2011 fairly crystallised that principle. Its reference to instructions relating to an underlying transaction means professional instructions in the context of accepted solicitor services. The relevant transaction must therefore be legal or otherwise form part of recognised professional services. The alternative limb concerning services forming part of normal regulated activities does not permit an unrelated banking facility.
4. Recognised professional services may include activities of an administrative character, such as conveyancing or acting as an executor, because of their established association with legal practice. The appellant’s role in checking documents and transferring vehicle-purchase funds was different. It was purely administrative, involved no legal work for the relevant parties, and did not arise from an underlying legal transaction. It therefore breached the governing principle and the prohibition on providing banking facilities.
5. The Tribunal’s findings were not arbitrary. Professional misconduct may include conduct regarded as improper by professional consensus, particularly where allowing it would undermine public confidence. The court would not interfere with the Tribunal’s fine or costs order, there being no error of principle or other sufficient ground.

• Solicitors Disciplinary Tribunal: found the allegation proved in relation to the B and M transactions, fined the appellant £7,500 and ordered £20,000 in costs.
• High Court (Administrative Court): dismissed the appeal under section 49 of the Solicitors Act 1974 and upheld the Tribunal’s decision, fine and costs order.