Interpreting SRA Principles

When considering the correct interpretation of the Solicitors Regulation Authority Principles 2011, the Court of Appeal agreed with the Divisional Court in Leigh Day[1]when they rejected the suggestion that there was a set standard of seriousness or culpability for the purposes of assessing a breach of the core Principles in SDT proceedings; that it was a question of fact and degree in each case, and whether the default in question was sufficiently serious and culpable would depend on the particular core Principle in issue: Dentons UK and Middle East LLP v Solicitors Regulation Authority Ltd [2026] EWCA Civ 508 Bean VP, Baker, Zacaroli LJJ

Some of the Principles inherently involved seriousness and culpability, the most obvious of which was Principle 2, which required solicitors and firms to act with integrity. Close to this was Principle 6, requiring solicitors and firms to behave in a way that maintained public trust.

The present appeal concerned the correct interpretation of Principle 7 of the SRA Principles: “7. You must comply with your legal and regulatory obligations and deal with  your regulators and ombudsmen in an open, timely and cooperative manner” and Outcome 7.5 of the SRA Code of Conduct 2011: “You must achieve these outcomes: … O(7.5) you comply with legislation applicable to your business, including anti-money laundering and data protection legislation.”

What was their correct interpretation for the purposes of establishing, in disciplinary proceedings against a solicitors’ firm, any breach of the Money Laundering Regulations 2007 to give rise to a breach of Principle 7 and Outcome 7.5, and was the Solicitors Disciplinary Tribunal entitled to consider the seriousness of the breach of the Money Laundering Regulations 2007 (MLRs)?

Their Lordships described a finding by Lang J in the first appeal as “the grammatical interpretation.” Her Ladyship held that there was, following Leigh Day and Beckwith[2] no universal requirement that to establish a breach of the Principles the relevant behaviour must be “serious, culpable and reprehensible”, but that “such requirements only arise where they are inherent in the rule in question.” However, she went on to accept the SRA’s submission from Paul Ozin KC that the natural and ordinary meaning of the words in Principle 7 was that legal and regulatory obligations must be complied with, and that there would be a breach of Principle 7 (and Outcome 7.5) if they were not.

The Court of Appeal rejected the grammatical interpretation of Principle 7 for two reasons: (a) the very substantial departure which it would represent from the common law definition or description of misconduct by a solicitor; (b) the inconsistency of such an interpretation with the SRA’s own Procedural Rules and with section 28(3) of the Legal Services Act 2007.

A classic and much cited decision of the court was In re a Solicitor [1972] 1 WLR 869 where Lord Denning said that in his opinion negligence in a solicitor may amount to professional misconduct if it were inexcusable and such as to be regarded as deplorable by his fellows in the profession.”  Lord Denning went on to use the word “reprehensible” twice to describe the conduct of the appellant solicitor. The adjectives “inexcusable”, “deplorable” and “reprehensible” were in effect being treated as interchangeable.

What their Lordships derived from the case was that at common law mere negligence was not enough; there had to be an element of seriousness calling for professional censure.

It would be very surprising if, after the SRA had replaced the Law Society as de facto regulator of the solicitors’ profession, the inclusion of Principle 7 in the 10 Principles was intended to bring about a radical expansion in the scope of the disciplinary regime.

There was no dispute that the common law concept of misconduct by a solicitor was as described by Lord Denning MR in the 1972 case already cited: that was to say, a considerable level of seriousness was required. If that position were to be changed, whether in 2007 or 2011, the court would have expected it to be much more clearly signposted.

Indeed, a radical expansion in the scope of the disciplinary regime to include breaches of any legal or regulatory requirement, with no regard to seriousness, would have been inconsistent with s28(3)(a) of the Legal Services Act 2007 which instructed approved regulators to have regard to “the principles under which regulatory activities should be transparent, accountable, proportionate, consistent and targeted only at cases in which action is needed.”

In Leigh Day the Divisional Court held that if an allegation of breach of the Principle 5 duty to provide a proper service to the client was to be pursued before a tribunal, then it ordinarily needed to have some inherent seriousness and culpability.

The SRA’s supposed distinction between Principle 5 and Principle 7 took the grammatical argument to extremes. It would be illogical and anomalous that an allegation of failure to provide a proper standard of service should require inherent seriousness and culpability if it were to be brought before the SDT, whereas a failure to comply with any legal or regulatory provision, however minor, automatically amounted to a breach of Principle 7 and must be held to be such if the SRA chose to bring it before the Tribunal.

Leigh Day and Beckwith were not in conflict. In Beckwith the SDT found breaches of both Principle 2 (the requirement to act with integrity) and Principle 6 (the requirement to behave in a way that maintains the public trust) which plainly involved an evaluation of seriousness by the Tribunal. Consider also that in Wingate[3] the Court of Appeal held that for careless conduct to amount to a breach of Principle 6 it must go beyond mere negligence and constitute manifest incompetence. Mr Beckwith was saying that his actions could not be professional misconduct because they were part of his private life, not his working life. The SDT rejected that argument and the Divisional Court agreed.

The court did not consider that, on its proper interpretation, the judgment in Beckwith provided any support for the argument that an allegation of breach of the SRA Principles did not involve any inherent requirement of seriousness. On the contrary, the court referred at [17] to Rule 10 of the SRA Procedure Rules 2011 and noted that  under that Rule the SRA was permitted to make an application to the Tribunal only if it were satisfied that the allegation was sufficiently serious that the SDT was likely to make an order beyond the SRA’s own powers. They then said at [18] that “it is not for this court either to add to that approach or otherwise to reformulate the statutory scheme which has been made under the 1974 Act.”

The reference to Rule 10 of the SRA Procedure Rules 2011 made it clear that the court in Beckwith was not rejecting the concept of a threshold of seriousness. What they were saying was that there was no free-standing requirement that the Tribunal must first decide whether the conduct alleged amounts to “professional misconduct” before going on to consider the application of any of the principles set out in the Handbook.

Although neither Leigh Day nor Beckwith were binding on the Court of Appeal, their Lordship did not consider that on proper analysis there was any conflict between the two; but, if and to the extent that there was, they preferred Leigh Day.

Accordingly, they concluded that there was an inherent requirement of seriousness in considering whether a solicitor’s conduct amount to a breach of the SRA Principles or the mandatory provisions of the SRA Code. An allegation of a breach in Principle 7 could only be upheld, therefore, if the conduct (the breach of the relevant legal or regulatory obligation) was sufficiently serious.

In any case brought before the SDT the question for it was whether the conduct in question would be considered sufficiently serious by competent and reputable solicitors that it be categorised as professional misconduct.

In the instant case the Tribunal found that Mr C had failed to ask the relevant questions of Client A about his wealth or the source of his funds in order to satisfy the obligations of Regulation 14 of the MLRTs; that the failure to establish source of wealth endured throughout the retainer; and that “in failing adequately (or even reasonably) to establish source of wealth … the Firm had breached Regulation 12 as alleged.” The SDT also found that the Firm and the partners who worked on matters for Client A had all relied on Mr C to have established source of wealth at the outset of the retainer.

The court nonetheless had difficulty in understanding why this entitled the SDT to characterise the breach of the MLRs by the Firm as being “entirely inadvertent” particularly in view of the terms of paragraph 2.3(b) of the SRA Principles, unless that was in the context of applying a test which required something more than seriousness, such as reprehensible or culpable conduct.

Their Lordships upheld, although on an entirely different basis from the judge’s, that part of her order which quashed the SDT’s decision to dismiss the allegation of a breach of Principle 7. The case was remitted to a differently constituted Tribunal preserving facts made by the first SDT up to paragraph 9.377 of their decision. The question for the new SDT should be: on the basis of those findings of fact, and applying the test set out above, was the Firm in breach of Principle 7 and Outcome 7.5? If so, what sanction should be applied?

 

[1] SRA v Leigh Day & others [2018] EWHC 2726

[2] Beckwith v SRA [2020] EWHC 3231

[3] Wingate & Evans v SRA [2018] EWCA Civ 366; [2018] 1 WLR 3969