Solicitors Regulation Authority Limited v Hon-Ying Amie Tsang

When misconduct proceedings brought by the SRA are dismissed, the starting point is ordinarily no order for costs. An adverse costs order requires a good reason beyond the failure of the allegation. The SRA’s regulatory role and the risk of chilling proper enforcement remain crucial factors, but they do not create an exhaustive immunity.

A fundamentally flawed legal basis for the proceedings and procedural failings, including inordinate delay attributable to the SRA, can together constitute a good reason. Delay may be relevant to whether costs should be awarded even if it did not increase the costs incurred. The amount of any award remains a matter for the Tribunal’s broad discretion.

The SRA brought misconduct proceedings against a solicitor concerning advice allegedly omitted when acting for clients investing in fractional property development schemes. The Solicitors Disciplinary Tribunal dismissed the allegation and ordered the SRA to pay the respondent’s costs.

The SRA appealed the costs order, contending that the Tribunal had applied the wrong test, relied on irrelevant matters, failed to consider relevant matters, and awarded excessive costs. A further challenge to the recoverability of part of the costs was stayed. The central issues were the proper costs test, whether the Tribunal’s reasons justified an adverse order, and whether the quantum assessment was lawful.

1. Appeal dismissed. Grounds 1–4 failed. Directions concerning ground 5 were reserved.
2. The Tribunal had correctly understood the principles in Baxendale-Walker v Law Society [2007] EWCA Civ 233. The dismissal of an allegation does not, by itself, justify costs against the SRA. The starting point is ordinarily no order for costs, and a good reason is required to depart from it. The regulatory function of the SRA and the risk of a chilling effect are crucial factors, but the circumstances justifying an order are not confined to cases where proceedings were improperly brought or were a shambles from start to finish.
3. Procedural failings, including delay, are capable of constituting a good reason. Delay must be attributable to the SRA and substantially exceed that inherent in the proper investigation and determination of disciplinary proceedings. It may justify an adverse costs order even without increasing the receiving party’s costs.
4. Proceedings founded on a fundamentally misconceived legal basis may constitute a good reason for costs, even where the SRA acted in good faith and genuinely believed the allegation was sound. The Tribunal was entitled to find that the allegation imposed duties beyond the respondent’s retainer and was fundamentally flawed on undisputed facts.
5. The Tribunal was entitled to conclude that the combination of the fundamental legal flaw and inordinate delay justified departing from the ordinary starting point. Its error in treating harm to the respondent’s practice as relevant did not materially undermine that conclusion. The rule 13 certification and the SRA’s success in other cases were relevant mainly to good faith and did not overcome the fundamental legal defect.
6. The review was governed by CPR rule 52.21(1). Greater restraint applied to the Tribunal’s evaluative judgment, particularly given its specialist expertise. The quantum decision attracted the usual broad discretion in costs matters. The Tribunal was entitled to assess the costs in the round, accept the schedule as sufficient, and award the full reasonable and proportionate amount without identifying a date from which the proceedings became improper or isolating costs caused by delay.

• Solicitors Disciplinary Tribunal: dismissed the allegation on 11 July 2023 and, in its judgment dated 17 August 2023, ordered the SRA to pay the respondent’s costs of £74,950.
• High Court (Administrative Court): dismissed grounds 1–4 of the SRA’s appeal. Consideration of ground 5 was stayed and directions were reserved.