Fuglers LLP & Ors v Solicitors Regulatory Authority

On an appeal against disciplinary sanction, the court intervenes only for legal or procedural error, inadequate reasons, or a sanction that is clearly inappropriate. The Solicitors Disciplinary Tribunal’s specialist assessment attracts considerable respect.

Providing banking facilities through a solicitor’s client account, without a sufficient connection to an underlying legal transaction or normal regulated activity, is objectionable in itself. It risks harm to the standing of the profession, even without money laundering or actual financial loss. In assessing sanction, the tribunal must assess seriousness, consider the protective and reputational purposes of discipline, and select the proportionate sanction. Seriousness includes culpability, risks created, professional harm, and mitigation.

The appellants were a solicitors’ firm and its two equity partners. The Solicitors Disciplinary Tribunal found that they had improperly allowed the firm’s client account to be used as a banking facility for Portsmouth City Football Club Ltd. About £10 million passed through the account while the club’s own banking facilities had been withdrawn following winding-up petitions.

The Tribunal imposed fines of £50,000 on the firm, £20,000 on Mr Berens, and £5,000 on Mr Fugler, together with apportioned costs. The appellants no longer challenged the misconduct findings. Under section 49 of the Solicitors Act 1974, they appealed only the sanctions and costs. They contended that the fines were disproportionate, that Mr Fugler should not have been fined, and that fining both the firm and the partners was unfair.

1. The appeal was dismissed. The court held that it could interfere with a sanction imposed by the Tribunal only for an error of law, failure to take account of relevant evidence, inadequate reasons, or a sanction that was clearly inappropriate. The Tribunal was particularly well placed to evaluate professional misconduct and the effect of sanctions on public confidence: Bolton v The Law Society [1994] 1WLR 512, Salsbury v The Law Society [2009] 1 WLR 1286, and Solicitors Regulation Authority v Anderson [2013] EWHC 4021 (Admin).

2. The proper approach to sanction comprised three stages: assess the seriousness of the misconduct; identify the purposes of disciplinary sanction; and select the sanction which best fulfils those purposes. Seriousness principally depended on culpability and harm, including harm or risk of harm to the profession’s standing, as well as aggravating and mitigating factors. The primary purposes were deterrence of other solicitors and protection of the profession’s reputation, rather than punishment of the particular solicitor.

3. The use of a client account as a banking facility was objectionable independently of money-laundering risk. Solicitors are not qualified or regulated to perform ordinary banking and commercial creditor-payment functions. The prohibition also protects against money laundering and, where insolvency is actual or threatened, against evasion of withdrawn banking facilities, preferential payment disputes, and the risk of void dispositions under section 127 of the Insolvency Act 1986.

4. The misconduct was serious. It was deliberate in the sense that the client account was knowingly used over four months for substantial day-to-day payments unconnected with particular legal transactions. The partners enabled trading after the club’s bank facilities had been withdrawn, and Mr Berens made commercial choices between unsecured creditors. Actual loss was unnecessary; the risks to creditors and to public confidence were material.

5. The total fine of £75,000 was not clearly inappropriate. It was open to the Tribunal to fine the regulated firm and to impose separate fines reflecting the partners’ differing personal responsibility. A fine of £5,000 on Mr Fugler was also permissible because he had sanctioned the course of conduct. The costs award disclosed no error of principle or other basis for appellate intervention.

• High Court (Administrative Court) — dismissed the statutory appeal against sanction and costs: [2014] EWHC 179 (Admin) .
• Solicitors Disciplinary Tribunal — on 7 January 2013 found misconduct proved, imposed fines on the firm and partners, and made an apportioned costs order.