Neumans LLP v The Law Society (The Solicitors Regulation Authority)

An application to withdraw a regulatory intervention requires the court to balance the risks of restoring the solicitor or firm to practice against the potentially serious consequences of continued intervention. The court must consider the material available at the hearing and give appropriate weight to the regulator’s professional assessment and statutory margin of discretion. Intervention powers may be exercised on reasonable suspicion and need not await certainty. Natural justice does not apply as such to the intervention process, although failure to allow a response where practicable may bear on rationality and proportionality. A former manager’s suspected dishonesty may still engage the statutory intervention power where the relevant conduct occurred while that person was a manager.

Neumans LLP applied under paragraph 6(4) of Schedule 1 to the Solicitors Act 1974 for the withdrawal of an intervention into its practice. The intervention followed allegations that Mr Sheikh, a former member and manager, had dishonestly prepared and submitted a substantial criminal costs bill and had breached professional rules. The SRA’s adjudication panel considered that there was reason to suspect dishonesty and rule breaches, and that intervention remained necessary despite Mr Sheikh’s resignation.

Neumans argued that the statutory ground did not apply to a former manager, that it had not been given a proper opportunity to respond, and that the intervention was irrational or disproportionate. The central questions were whether the decision was fundamentally flawed and, on the material before the court, whether the intervention should be withdrawn.

1. The application was dismissed. The intervention was not fundamentally flawed and should remain in force.
2. Paragraph 32(1)(d) of Schedule 2 to the Administration of Justice Act 1985 covers suspected dishonesty connected with conduct undertaken by a person while he was a manager, even if he has ceased to be a manager when the regulatory decision is made. The use of “former” elsewhere in the provision did not require a different construction.
3. The intervention scheme under the Solicitors Act 1974 and the Administration of Justice Act 1985 is designed to protect clients and the public. The rules of natural justice do not apply as such. The scheme postpones, rather than denies, an opportunity to know and challenge the case. Nevertheless, failure to permit a response where that would have been practicable could bear on rationality and proportionality.
4. The Adjudication Panel was not obliged to interview Ms Sabir personally. Neumans had received the intervention report and subsequent memorandum and had made detailed written representations. The Panel had also considered, through the material before it, the proposed changes to the firm’s management.
5. On the second-stage application, the court applied the balancing exercise identified in Sheikh v Law Society [2006] EWCA Civ 1577: the risks of reinstatement had to be weighed against the serious consequences of continued intervention. The court gave weight to the SRA’s view, the continuing uncertainty about Mr Sheikh’s influence, Neumans’ failure to distance itself from him, the continuing financial connection between them, and the lack of clear documentation for the proposed replacement management.
6. The intervention decision was rational and proportionate. The risks of withdrawal outweighed the harm caused by continuation, notwithstanding the intervention’s serious consequences.