Bryant & Anor v The Law Society

Factual and Procedural Background

This opinion concerns appeals brought by two solicitors, referred to as Appellant 1 and Appellant 2, against a decision of the Solicitors' Disciplinary Tribunal. The disciplinary proceedings related to their partnership practice in The City between September 2002 and December 2004 under the style of Company A. They faced seven charges of professional misconduct, which the tribunal found largely substantiated. The tribunal found Appellant 1 to have been dishonest and ordered him struck off the Roll of Solicitors, while Appellant 2 was found not dishonest but was suspended from practice for three years. Both appellants appealed the findings and sentences imposed.

The case involved complex factual issues and raised an important legal question concerning the test for dishonesty in disciplinary proceedings. The allegations arose from six specific transactions involving a client intermediary company ("Company B") and its chief executive ("Client Executive"). The appellants acted for these clients in transactions described as involving "financial guarantee insurance" or "alternative risk transfer" insurance, which were purportedly used to secure finance for large projects.

The Law Society issued warnings ("Blue Card" and "Yellow Card") about money laundering and banking instrument fraud, which the appellants were aware of. An investigation by the Law Society's appointed officer led to intervention in the appellants' practice and the subsequent disciplinary proceedings. The tribunal heard extensive evidence, including expert testimony, and made detailed findings on each allegation.

Legal Issues Presented

1. Whether the tribunal applied the correct legal test for dishonesty in disciplinary proceedings.
2. Whether the tribunal erred in excluding character evidence when considering dishonesty.
3. Whether the appellants were guilty of professional misconduct in relation to seven specific allegations concerning their conduct in handling client transactions and funds.
4. What the appropriate sanctions should be in light of the findings on misconduct and dishonesty.

Arguments of the Parties

Appellants' Arguments

• The tribunal applied an incorrect legal test for dishonesty, effectively applying a purely objective standard without considering whether Appellant 1 subjectively appreciated that his conduct was dishonest.
• The tribunal wrongly excluded highly favourable character references when considering the issue of dishonesty, which should have been relevant to credibility and propensity.
• They challenged the findings on each of the seven allegations, particularly disputing the extent of their knowledge and involvement in the transactions.
• Appellant 1 submitted that his misconduct, though serious, did not warrant striking off and that personal mitigation should be considered to reduce any penalty.

Respondent's Arguments

• The tribunal correctly applied the legal test for dishonesty as understood under the Twinsectra case.
• All findings of professional misconduct and dishonesty should be upheld.
• The penalties imposed were appropriate to protect the reputation of the profession and to deter similar misconduct.

Table of Precedents Cited

Court's Reasoning and Analysis

The court undertook a detailed examination of the legal test for dishonesty applied by the tribunal. It found that the tribunal relied predominantly on an objective test and failed to consider whether Appellant 1 was subjectively aware that his conduct was dishonest. The court reaffirmed that the correct test in solicitors' disciplinary proceedings is the Twinsectra test as commonly understood before the Barlow Clowes interpretation, incorporating both objective and subjective elements akin to the criminal test in R v Ghosh.

The tribunal also erred by excluding cogent and extensive character evidence that was relevant to Appellant 1's credibility and propensity for honesty. This exclusion was a significant legal error.

On the substantive allegations, the court analysed the complex factual circumstances of six sample transactions involving Company B and its clients. It found that the tribunal did not clearly establish that the transactions were fraudulent or bore the hallmarks of fraudulent investment schemes, but did correctly find them to be "dubious"—meaning they exhibited indicia of fraud or were not transactions a reasonable solicitor would properly engage in.

The court concluded that both appellants were incompetent in failing to recognize the dubious nature of the transactions and continuing to act for Company B and Client Executive beyond the point when they should have ceased to do so. However, the court rejected findings of dishonesty against Appellant 1 and found no evidence that either appellant knowingly participated in dubious transactions.

Regarding handling of client funds, the court held that arrangement fees received in the Rose Excalibur transaction were held on behalf of third parties and thus required protection, but in other transactions, the funds were held on behalf of Company B and could be used to pay costs. The court found breaches of professional undertakings and accounting rules only in limited respects, notably in the Rose Excalibur and Both Feet Films transactions.

In relation to penalty, the court emphasized the need to balance punishment and deterrence with fairness, taking into account the reduced findings of misconduct. It determined that Appellant 1's striking off should be quashed and replaced with a two-year suspension, while Appellant 2's three-year suspension was reduced to nine months, which had already been served.

On costs, the court ordered that the Law Society pay the appellants' costs of the appeal, offset against tribunal costs, but left the tribunal's costs order undisturbed.

Holding and Implications

The court's final decision is as follows:

1. The finding of dishonesty against Appellant 1 is quashed due to the tribunal's legal errors in applying the test for dishonesty and excluding character evidence.

2. The findings of professional misconduct against both appellants are upheld but to a lesser extent than originally found, specifically regarding incompetence in handling "dubious" transactions and breaches of undertakings and accounting rules in limited respects.

3. The penalty of striking off imposed on Appellant 1 is quashed and replaced with a two-year suspension, effective from the date of the original tribunal order.

4. The penalty of three years' suspension imposed on Appellant 2 is reduced to nine months, which has been served.

5. The Law Society is ordered to pay the appellants' costs of the appeal, to be set off against the tribunal hearing costs.

The implications of this decision are primarily confined to the parties. It clarifies the correct legal test for dishonesty in solicitors' disciplinary proceedings, affirming the application of a test including subjective awareness of dishonesty. It also underscores the relevance of character evidence in such proceedings. The decision does not establish new precedent beyond these points but reinforces existing authorities on professional misconduct and disciplinary sanctions.