Regulators behaving badly?


Warning: approx. 2500 word post!

Following the BBC Scotland Lawyers behaving badly programme I thought I would have a look at what the Scottish disciplinary tribunal, the SSDT, had actually been deciding in its dishonesty cases. These are an important group of cases. Dishonesty is at the top of the misconduct pyramid, so robust handling of dishonesty matters both for public protection, and to protect the reputation of the profession. Before looking at the cases its worth making a couple of preliminary points. As we saw in the last post, straightforward dishonesty will normally merit the highest sanction of striking off – removal from the Roll of solicitors, but dishonesty can cover a fairly broad spectrum of acts, including embezzlement, forging signatures on documents (whether for financial gain or to cover up administrative mistakes or incompetence), misleading clients, and misleading the court, another lawyer or a non-client, whether at the behest of your client or otherwise. There may be degrees of culpability and specific circumstances may offer an element of mitigation. Dishonesty will also often be mixed up with other disciplinary failures, such as technical breaches of accounting rules. In short there may be a range of factors to take into account in assessing the appropriate outcome, and the tribunal has an element of discretion. We would not expect a 100% strike off rate, even for dishonesty.

The reported decisions are also, of course, only part of the story. These are the cases that are prosecuted successfully. We don’t know how many prosecutions are dismissed and on what grounds because those decision are not reported. We don’t know much about how regulators exercise their discretion to prosecute. There are various ways of dealing with possible dishonesty. Even if there is putative evidence of dishonesty, a case may not, eg, for evidential or public interest reasons, be pursued as one of dishonesty. By taking the case out of the dishonesty category, this effectively (though sometimes only marginally) reduces the seriousness of the misconduct, and opens up a greater range of disposal options to the tribunal. Something like this appears to have happened in O’Donnell (2009), where a taking of money without the client’s consent was characterised as “borrowing”. This in our view saved the respondent from a likely suspension (at the very least). I have not surveyed the entire SSDT database to look for cases where the conduct disclosed possible dishonesty in fact, but the case was not disposed of as a dishonesty case.

A final warning: the relative brevity with which the tribunal’s reasoning is often reported makes interpreting and applying these decisions more of an art than a science. This may add to the scope for reasonable disagreement.

The two cases on which the BBC focused were O’Donnell and Murray – neither is a straightforward dishonesty case, and this is part of what makes them both interesting and problematic. Each involved multiple hearings dealing with a range of misconduct.The first hearing in O’Donnell in 2008 clearly did not involve dishonesty, and culpability was reduced by what the tribunal accepted to be clear evidence of clinical depression. In the 2010 hearing the ‘borrowing’ of £60,000 from a client was, as noted, not treated as dishonesty, and the tribunal regarded the lack of complaint from the client, the fact that there was ultimately no financial loss to the client and the respondent’s continuing ill health as mitigation. Murray is factually quite tangled. Nonetheless, there appear to be two clear findings that Murray misled clients. This is dishonesty, which in my opinion would have merited striking off, or a suspension if he was lucky, in the first proceedings in 2004/05. The decisions to censure on this occasion, and subsequently to suspend rather than strike off for a further act of deception are thus somewhat surprising. But are they out of line with SSDT practice? This is where the cases analysis comes in.

The SSDT website identifies 44 decisions since 1995 in which dishonesty was proven or admitted. In 33 of those cases the respondent solicitor was struck off, leaving 11 instances (25%) in which lesser penalties were imposed, ranging from censure and fining to suspension. 25% seems a rather high level of exceptional cases, so it is worth looking at those in more detail. In four of them lengthy suspensions, of five years or more, were imposed. Suspension of such duration certainly suggests the tribunal treated the misconduct in these cases as very serious; in practice, lengthy periods of suspension may kill a solicitor’s career as effectively as a strike off. This leaves seven cases where more minor penalties were applied: Cohen (2009), Hay (2009), Donald (2008), Sheppard (2008), Kirk (2007), Malcolm (2005), and Young (2002).[i]  In two of these, Sheppard and Kirk, the solicitors’ names had already been removed from the Roll, thereby limiting the penalties available to the tribunal. Consequently there were only five cases across a 12 year period in which dishonesty was proven and strike off or suspension was clearly considered excessive by the tribunal. Four of these involved misrepresentations in which there was no element of theft or other financial impropriety by the respondent, though one, Malcolm (2005), did involve substantially misleading the client. This case, and the last, Cohen (2009) (which involved an attempted expropriation by the respondent of around £3,000 in unclaimed tenants’ deposits which had been sitting in various trust accounts for about 20 years) are, on my reading, both cases where the respondent may have been lucky to escape a period of suspension. So, aside from Murray and O’Donnell, neither of which formed part of the SSDT’s dishonesty dataset, there are two out of 44 cases where (in my judgment, FWIW) the penalty seems on the lenient side relative to current norms.

This doesn’t of course mean that everything is necessarily hunky dory in the world of professional discipline. A growing body of academic work on lawyer deviance has highlighted a number of common concerns across a range of jurisdictions.

Firstly, traditional discipline systems seem to create disincentives to complain/inflict relatively high rates of attrition on client complaints. There is some evidence that separating responsibility for complaints from the representative body has generally increased both the number of initial client complaints, and the number that make it to disciplinary tribunals (see the data summarised by Rick Abel, Lawyers in the Dock, Oxford, 2008, 503-5). The creation in 2008 of the Scottish Legal Complaints Commission (SLCC) as a single gateway for complainants has certainly given the Scottish system an element of independence. Complaints about unsatisfactory service are dealt with by the SLCC separately from the Law Society of Scotland, but that still leaves the Law Society responsible for professional misconduct investigations, whereas in England and Wales that function is now undertaken by the SRA. To that extent, then, there is a greater degree of formal independence in England and Wales. How much difference that actually makes is moot, and we are not going to find the answer by looking at tribunal decisions: we would need to know much more about how investigations are conducted and the ways in which decisions to prosecute are made.

Secondly, there is some concern that prosecutors tend to focus on what are called ‘high reward/low risk’ cases for the regulator, ie, cases that involve demonstrable reputational harm – dishonesty, deceit, mishandling of client accounts – or a history of disciplinary infringements/lack of governability (eg failures to communicate with or cooperate with the regulators). The lack of risk in pursuing such cases may be increased by a tendency also to target lower status or marginal practitioners – particularly solo and small firm practitioners. Cases involving powerful actors or more morally ambiguous behaviour appear correspondingly less likely to be prosecuted (see, eg, Leslie Levin, ‘The ethical world of solo and small firm practitioners’ (2004) 41 Houston Law Review 309; Alice Woolley, ‘Regulation in practice: The ‘ethical economy’ of lawyer regulation in Canada and a case study in lawyer deviance’ (2012) 15 Legal Ethics 241. Note also the ongoing independent case review being undertaken for the SRA by Professor Gus John to examine evidence of disproportionality and discrimination in the disciplinary process – http://www.sra.org.uk/sra/equality-diversity/reports/independent-comparative-case-review.page). The Scottish dishonesty cases certainly fit that pattern with a preponderance of small firm and sole practitioners among the ranks of those prosecuted.[ii] That said, arguments about disproportionality should not detract from the fact that, as Rick Abel pithily concludes: “the harms… of solo and small firm practitioners are real – and the victims are even more disadvantaged and vulnerable than the perpetrators” (Lawyers in the Dock, p.506).  At the same time, who complains and why, and who is prosecuted and why, remain interesting, and potentially morally loaded questions that have been under-researched.

Thirdly, comparative work also points to a tendency among tribunals to hand out relatively light ‘symbolic’ sanctions, particularly for first offences.This may be seen by the tribunals as justifiable because the majority of lawyers do not actually re-offend. O’Donnell (2008) might be looked at as just such a case of symbolic sanctioning; there was no dishonesty involved; there was evidence of ill health in mitigation, and the respondent had taken steps to address his problems, though even so, by English standards, a fine of £500 would be exceptionally low. The continuing leniency in the second hearing (2010) seems harder to justify. It has been argued that a more aggressive approach than has been the norm may be needed in dealing with repeat and recalcitrant offenders if the public protection objectives of the discipline system are to be properly met (Leslie Levin, ‘Misbehaving lawyers: Cross-country comparisons’ (2012) 15 Legal Ethics 357).

Dishonesty cases tend not to fit that pattern because of their perceived seriousness. A dishonesty offence is still most likely to receive a suspension or strike off, even if it is a first offence. A number of the Scottish dishonesty cases nevertheless appear to raise interesting questions in this light about prosecution policy and the ways in which the Law Society of Scotland has assessed risk in the past (with the caveat that this analysis is based purely on the reported disciplinary tribunal findings which tend not, of course, give a full picture of the circumstances behind each). In a number of these cases there are early and continuing warning signs, often of poor accounting and case/risk management practices which can be a signifier of more serious trouble ahead, especially for smaller firms. In Kay (2013) an inspection of his practice reported that there had been no proper accounts for at least the previous three years. He had also consistently failed to respond to Law Society correspondence and statutory notices between 2007 and 2009; had not responded to correspondence to Master Policy insurers, and failed to pay his insurance excess on a professional negligence claim that had been brought against him. In Ruark (2012) the respondent had been subjected to frequent inspections between 2004-07 which highlighted continuing failures to complete and record property transactions and their financing in the proper form. Ruark and Kay were ultimately struck off, but there were signs of significant problems as early as 2004; in addition to other failures already noted, Kay also had two findings of inadequate professional services made against him in 2008 and 2009 and, it appears, had not paid the compensation ordered on each occasion. These cases may be outliers, but why did it take the Law Society so long to initiate the final and decisive intervention?[iii]

The extent to which and robustness with which a prosecutor can appeal seemingly lenient tribunal decisions can act as an important corrective to outlier decisions, and may also provide the tribunal with judicial guidance on the exercise of its powers. One question worth speculating on is whether an independent regulator might be more robust in its role as prosecutor when it comes to appealing lenient outcomes. There is certainly some feeling in England and Wales in the wake of the Spence (2012, unreported) and  SRA v Davidson [2012] appeals that the SRA has become more willing to challenge SDT ‘failures’ to strike off through the courts.

Finally, there are also debates about the extent to which regulatory systems should continue to separate discipline from redress and rehabilitation. Even though tribunals see their jurisdiction at least partly in terms of public protection, this does not always extend to awarding compensation or restitution to clients for inconvenience, financial loss or other harm suffered, or to requiring lawyers to undertake rehabilitation through appropriate retraining or (eg) compulsory drug/alcohol programmes. Training or other rehabilitative orders are not an option under either the Scottish or English legislation. Similarly the tribunal In England and Wales cannot order compensation, however, in Scotland it now can, though the financial limit is relatively low (£5000 maximum). It is notable that the use of compensatory powers in the larger Australian jurisdictions has become widespread (see Linda Haller, ‘Professional discipline for incompetent lawyers? Developments in the UK and Australia’ (2010) 17 International Journal of the Legal Profession 83). It will be interesting to see how the practice develops through the SSDT in Scotland,

So what’s my conclusion? From this somewhat cursory analysis the Scottish discipline system, in its treatment of dishonesty cases, seems to share many of the strengths and weaknesses seen across other systems in the Common Law world. It does not appear that outcomes in dishonesty cases are radically out of line, though there are certainly some decisions that raise questions of principle. The number of arguably ‘lenient’ decisions, proportionately, does not seem excessive to me (I’d be interested in other’s views on that) but the time taken to initiate disciplinary proceedings in a number of cases ought, from a public protection perspective, be a matter of some concern. Does that mean the Scottish regulatory system can disregard calls for a more independent regulatory structure? If I was a serious critic of this (or any other) system, I wouldn’t make my argument by looking (just) at alleged failings at the most serious end of the continuum. The regulator’s robustness in prosecuting and appealing decisions; the resource it commits to investigation and risk management, and how the system deals with more ‘routine’ misconduct may provide far more telling indicators of its actual independence than its approach to what should be the most egregious of cases.


[i] I have excluded Miller and Morrison (2005) from this subset as Morrison was censured for her inadequate supervision of Miller, not for dishonesty. Miller, an assistant solicitor, was struck off.

[ii] The respondents in the Scottish dishonesty cases also fit the pattern seen in other studies of lawyer deviance in that they tend to be older practitioners and disproportionately male (only 4 out of the 45 respondents are female).

[iii] Though in Ruark’s case the disciplinary process would have been somewhat delayed while criminal proceedings were under consideration.

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