SOLICITOR—DISHONESTY—TEST FOR DISHONESTY

Queen’s Bench Division (Divisional Court)

Maurice Kay LJ and Goldring J

7 March 2007

Evidence of a solicitor’s good character, above that simply due from being on the roll of solicitors, is potentially relevant to the question of whether or not a solicitor has acted dishonestly and the Solicitors’ Disciplinary Tribunal is bound to consider such evidence.

Fenella Morris (instructed by Irwin Mitchell) for the solicitor.
Geoffrey Williams QC and Jonathan Goodwin (instructed by the Law Society) for the society.

Adrian Donkin was admitted as a solicitor in 1975. At the material time, he was practising on his own account and had not previously attracted any concern about his integrity. It was alleged that he had dishonestly misappropriated funds belonging to three clients. In each case the solicitor had withdrawn money from the client account to discharge liabilities of the practice. The transactions were all recorded in the accounts of the firm and the money was repaid each time with interest at the client account rate.

Charges of conduct unbefitting a solicitor were brought, including that:
(i) he had withdrawn money from client accounts other than as permitted by the Solicitors’ Accounts Rules 1998;
(ii) contrary to r 21 of the rules he had failed to ensure that money received from the Legal Services Commission in respect of disbursements was paid within 14 days of receipt, or transferred to a client account;
(iii) he had utilised clients’ funds for his own purpose;
(iv) he had failed to remedy breaches of the rules promptly upon discovery;
(v) he had dishonestly misappropriated clients’ funds; and
(vi) he had acted where his own interests conflicted with the interests of clients.

Before the Solicitors’ Disciplinary Tribunal, the solicitor admitted that he was guilty of conduct unbefitting a solicitor, but denied that he had acted dishonestly. The society contended that, subjectively, the solicitor had known or ought to have known that was what he was doing, but proceeded without regard. The tribunal found the solicitor guilty of dishonesty in relation to three transactions. He appealed against the finding of dishonesty.

LORD JUSTICE MAURICE KAY (GIVING THE JUDGMENT OF THE COURT):

He contended that the tribunal had misunderstood the law regarding dishonesty, despite the references to Twinsectra Ltd v Yardley [2002] UKHL 12, [2002] 2 All ER 377, and second, that the tribunal had not appreciated the relevance of the highly impressive evidence of good character which had been placed before it. It was common ground that the test of dishonesty was expressed by Lord Hutton in Twinsectra at para 27: 

“...before there can be a finding of dishonesty it must be established that the defendant’s conduct was dishonest by the ordinary standards of reasonable and honest people and that he himself realised that by those standards his conduct was dishonest.”

Counsel for the society before the tribunal  referred to Twinsectra and the two-stage objective/subjective test. He said:

“...we submit that the person knowing of the facts would consider it would be wholly wrong for a solicitor to act as Mr Donkin did, and we submit that subjectively Mr Donkin knew or ought to have known that what he was doing was wrong, but proceeded regardless.”

Counsel appearing before the court properly acknowledged that the advocate below had been misleading the tribunal by that passage. In its reasons, the tribunal did not show in terms that it was rejecting the objectivised formulation of the second stage of the test. Its reasoning gave rise to a suspicion of a finding of subjective dishonesty.

His Lordship had come to the conclusion that, at the very least, the reasons stated by the tribunal did not demonstrate a clear and consistent understanding and application of the second, subjective stage of the Twinsectra test. The question that then arose was whether or not the findings were clear findings of subjective dishonesty which survived any possible misapprehension about the precise requirements of the test. There was some force in the society’s submission to that effect. In the end, however, his Lordship did not think that the findings could be sustained, because they might have been tainted by the point raised in the second ground of appeal.

His Lordship turned to that second point, namely the issue of good character. One assumed that any solicitor on the roll was in a position to assert good character in the sense in which that expression was used in the criminal courts. In this case the evidence went much further. At the commencement of the hearing counsel for the solicitor sought to place before the tribunal a large number of references speaking of his professional and social reputation. The society did not dispute the authenticity of the material nor did it seek to prevent its deployment. The tribunal made no reference whatsoever to the cogent evidence of positive good character when setting out its findings on dishonesty.

In his Lordship’s judgment the evidence of good character was relevant to the issue of dishonesty. As in a criminal trial, however, it could not afford a defence in itself. Moreover, the weight to be attached to it was in the last resort a matter for the tribunal. In this case, the reasons stated by the tribunal did not disclose that it gave any consideration at all to that evidence in the present context. His Lordship was not satisfied from the text of the stated reasons that it played any part in its consideration of dishonesty. That was a significant legal error. Furthermore, if it had played a part, it might have impacted on the adverse findings.

The appeal would therefore be allowed and the matter remitted to the tribunal.