SOLICITORS DISCIPLINARY TRIBUNAL. IN THE MATTER OF THE SOLICITORS ACT 1974 Case No and. Before:

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1 SOLICITORS DISCIPLINARY TRIBUNAL IN THE MATTER OF THE SOLICITORS ACT 1974 Case No BETWEEN: SOLICITORS REGULATION AUTHORITY Applicant and ARIF UMERJI BARBER YASIN BAGAS First Respondent Second Respondent Before: Ms J. Devonish (in the chair) Mr J. Evans Mr M. R. Hallam Date of Hearing: 27 February 2 March 2018 Appearances Benjamin Tankel, counsel of 39 Essex Chambers, 81 Chancery Lane, London, WC2A 1DD instructed by John Tippett-Cooper, solicitor, of Capsticks Solicitors LLP, 1 St George s Road, Wimbledon, London SW19 4DR for the Applicant. Gregory Treverton-Jones QC of 39 Essex Street, 81 Chancery Lane, London, WC2A 1DD instructed by Barber & Co Solicitors, Barber House, 164 Deepdale Road, Preston, PR1 6PY for the First Respondent. Jonathan Greensmith, solicitor of Keystone Law, 48 Chancery Lane, London WC2A 1JF for the Second Respondent. JUDGMENT

2 2 Allegations 1. The allegations against the First Respondent on behalf of the Solicitors Regulation Authority ( SRA ) were that, while acting as the Sole Principal of Barber & Co ( the Firm ), he: 1.1 Failed to maintain properly written up accounts to show dealings with client money and in doing so breached any or all of Rules 29.1 and/or 29.2 of the SRA Accounts Rules 2011 ( SAR ); 1.2 Failed to maintain properly written up accounts to show dealings with office money relating to client matters and in doing so breached any or all of SAR 29.1 and 29.4 and Principle 8 of the SRA Principles 2011 ( the Principles); 1.3 Caused or allowed the retention of office money in the Firm s client account and in doing so breached any or all of SAR Rule 14.2 and Principles 8 and 10 of the Principles; 1.4 In respect of the facts and matters sets out at above, failed to remedy the breaches of the SARs promptly on discovery and in doing so breached any or all of Rule 7.1 and 7.2 of the SARs and Principles 8 and 10 of the Principles; 1.5 Caused or allowed practice accounts to be prepared which did not accurately record the financial position of the Firm during the Firm s financial year in breach of Principle 8 of the Principles and failed to achieve Outcome 7.4 of the Solicitors Code of Conduct 2011 ( the SCC ); 1.6 Withdrawn. 1.7 Failed to obtain consent from clients to deductions from damages received by the Firm on behalf of the client or provide sufficient information to clients in respect of such deductions and therefore breached any or all of Principles 4, 5 and 8 of the Principles and failed to achieve any or all of Outcomes 9.2, 9.3 and 9.4 of the SCC. 2. The allegations against both the First and Second Respondents on behalf of the SRA were that they: 2.1 Caused or allowed deductions to be made to the compensation due to clients without a proper basis for doing so and/or without providing adequate information to clients about the deduction and in doing so breached any or all of Principles 4, 5 and 8 of the Principles and failed to achieve any or all of Outcomes 9.2, 9.3 and 9.4 of the SCC. 2.2 Failed adequately to supervise unqualified fee-earners in personal injury claims and in doing so allowed the creation of false medical reports and other documents, in breach of Principles 6, 8 and 10 of the Principles and failed to achieve any or all of SCC Outcomes 7.3, 7.4 and The additional allegations against both the First and Second Respondents on behalf of the SRA were that they:

3 3 3.1 Failed to undertake proper investigations into the serious concerns that were brought to their attention as a result of the legal proceedings involving Mellor Hargreaves ( MH ) and the NFU about the Firm s client file involving Mr PD, in breach of Principles 8 and 10 of the Principles. 3.2 Failed to provide reasonable cooperation and assistance to the parties and the court in civil legal proceedings involving Mr PD and the NFU, in breach of Principles 1, 2 and 6 of the Principles. 4. The additional allegations against the First Respondent on behalf of the SRA were that he: 4.1 Failed to notify Mrs IJ, Mr GH and Mr WR of the risk either that fraudulent claims had been advanced on their behalf or that damages in legitimate claims brought on their behalf had been misappropriated, in breach of Principles 2, 4 and 6 of the Principles. 4.2 Failed to notify other firms and/or defendant insurers of the risk that they had paid profit costs to the Firm in relation to claims that were either wholly fraudulent or were based on fraudulent medical reports, in breach of Principles 2 and 6 of the Principles. Documents 5. The Tribunal reviewed all the documents submitted by the parties, which included: Notice of Application dated 30 March 2017 Rule 5 Statement and Exhibit DWRP 1 dated 30 March 2017 Rule 7 Statement and Exhibit JHT1 dated 26 January 2018 First and Second Respondents Answer to the Rule 5 Statement dated 9 May 2017 Applicant s Reply to the First and Second Respondents Answer dated 22 May 2017 First Respondent s witness statement dated 5 February 2018 and supplementary witness statement dated 15 February 2018 Second Respondent s witness statement dated 19 January 2018 Applicant s Schedule of Costs dated 20 February 2018 Applicant s skeleton argument dated 22 February 2018 First Respondent s skeleton argument dated 22 February 2018 Preliminary Matter 6. Mr Tankel applied to withdraw allegation 1.6. The First Respondent had admitted allegation 1.7; that admission went to the core of the alleged conduct. Allegation 1.6 did not add to the Applicant s case, and was unlikely to affect sanction in the event that it was found proved. Mr Treverton-Jones QC submitted that allegation 1.6 had been the subject of correspondence between the parties, and should never have been brought. Mr Treverton-Jones QC supported the Applicant s application and agreed that in the event the Tribunal found that matter proved, it was unlikely to affect sanction.

4 4 7. The Tribunal considered that in the circumstances, it was contrary to the interests of justice for allegation 1.6 to be pursued and accordingly granted the application for its withdrawal. Factual Background 8. The First Respondent was born in 1967 and was admitted to the Roll in September At the relevant time he practised as a Recognised Sole Practitioner and Sole Principal at the Firm. He held a current practising certificate. 9. The Second Respondent was born in 1982 and was admitted to the Roll in May He held a current practising certificate. At the material time, he was practising as an assistant at the Firm from 15 May 2009 to 21 October In May 2013, the Second Respondent entered into a fee-sharing agreement with the Firm by which it was agreed that the Second Respondent would share the fees generated through work done for clients he introduced to the Firm. 10. An investigation was undertaken by Lesley Horton, SRA Investigation Officer, ( the FIO ) commencing on 9 March 2016 resulting in a report dated 26 June 2016 ( the FI Report ). The FI Report was disclosed to the Respondents during the course of the investigation and was attached to Explanation with Warning ( EWW ) letters dated 19 July The investigation arose due to concerns about the conduct of personal injury work. Witnesses 11. The following witnesses provided statements and gave oral evidence: Lesley Horton Forensic Investigation Officer Arif Barber the First Respondent Yasin Bagas the Second Respondent 12. The written and oral evidence of the witnesses is quoted or summarised in the Findings of Fact and Law below. The evidence referred to will be that which was relevant to the findings of the Tribunal, and to facts or issues in dispute between the parties. For the avoidance of doubt, the Tribunal read all of the documents in the case and made notes of the oral evidence. The absence of any reference to particular evidence should not be taken as an indication that the Tribunal did not read, hear or consider that evidence. Findings of Fact and Law 13. The Applicant was required to prove the allegations beyond reasonable doubt. The Tribunal had due regard to the Respondent s rights to a fair trial and to respect for their private and family lives under Articles 6 and 8 of the European Convention for the Protection of Human Rights and Fundamental Freedoms. 14. Allegation 1.1 the First Respondent failed to maintain properly written up accounts to show dealings with client money and in doing so breached any or all of Rules 29.1 and/or 29.2 of the SAR.

5 The FI Report stated that the Firm s books of accounts contained inadequate records and were not in compliance with the Accounts Rules. The First Respondent as Sole Principal at the Firm was responsible for the Firm maintaining accurate accounts in compliance with the SAR. The Firm employed a Compliance Officer for Finance and Administration (COFA), JD The FIO reviewed a number of client ledgers and noted mistakes and/or inaccuracies. Four matters were exemplified: On the JT matter the Firm client ledger showed a balance of 1,000 on 14 January 2016, but after two cheques in the total sum of 1,100 were sent out, the Firm s client ledger incorrectly showed a nil balance despite the correct balance being minus 100. In the interview on 17 May 2016, JD accepted that the overdrawn ledger amounted to a breach of the SAR. On the OP matter the Firm s ledger recorded 7, as being received in costs and disbursements on 2 June However, the client file showed that the amount received was actually 6, This discrepancy appeared to have been as a result of a hearing fee in the sum of 545 being refunded to the Firm on 29 May 2015; The JO matter showed a balance of nil, whereas the correct balance was a debit of 60. On the HD matter, as at 25 September 2015, the ledger showed that was held in the client account. The ledger showed that 2, was then received into the client bank account on 27 April However, the balance was recorded at 2, and did not appear to take into account the existing balance of Following two payments from the client bank account totalling the sum of 2,162.00, the balance incorrectly showed as nil. It was not clear what happened to the sum of In interview on 17 May 2016, JD explained that that money had been paid out of the client bank account The exemplified matters showed that the First Respondent had failed to comply with his obligation to maintain properly written up accounts to show dealings with client money pursuant to Rules 29.1 and 29.2 of the SARs The First Respondent admitted allegation The Tribunal found allegation 1.1 proved beyond reasonable doubt on the facts, evidence and the First Respondent s admission. 15. Allegation 1.2 the First Respondent failed to maintain properly written up accounts to show dealings with office money relating to client matters and in doing so breached any or all of SAR 29.1 and 29.4 and Principle 8 of the Principles The FI Report detailed that the Firm routinely failed to maintain the office side of client ledgers. The client ledgers that appeared for the exemplified matters above all showed examples of where the Firm did not post bills to the ledgers or show when

6 6 funds had been transferred from the client to the office bank account in payment of costs. During the interview on 17 May 2016, in respect of ensuring that all dealings were shown on the office side of the ledger, JD explained that the Firm was not in the practice of doing it and that there was no excuse or reason. The First Respondent acknowledged that it needs to be done As the Principal of the Firm, the First Respondent was responsible for ensuring that all employees of the Firm complied with the SAR. In failing to ensure that the office side of client ledgers were properly maintained, the First Respondent had breached Rule 29.1 and 29.4 of the SARs. He had also failed to run the business effectively or to carry out his role in the business effectively and in accordance with proper governance and sound financial and risk management principles in breach of Principle The First Respondent admitted allegation The Tribunal found allegation 1.2 proved beyond reasonable doubt on the facts, evidence and the First Respondent s admission. 16. Allegation The First Respondent caused or allowed the retention of office money in the Firm s client account and in doing so breached any or all of SAR Rule 14.2 and Principles 8 and 10 of the Principles The FI Report identified that office money had been retained in client account in breach of the Accounts Rules. A sum of 128, was held in client account and referred to as unpresented cheques. JD confirmed that the unpresented cheques were office money that was being retained in the client bank account. JD further explained that the First Respondent likes to keep money in the client bank account to help with cashflow a sort of savings account. In his meeting with the FIO of 9 March 2016, the First Respondent explained that he intended to buy a property and had been accumulating money in client account for that purpose. When he was informed by the FIO that this was in breach of the Accounts Rules, the First Respondent explained that he was due to meet with his bank manager on 14 March 2016 and would seek to transfer the funds to an office account The First Respondent admitted allegation The Tribunal found allegation 1.3 proved beyond reasonable doubt on the facts, evidence and the First Respondent s admission. 17. Allegation In respect of the facts and matters sets out at above, the First Respondent failed to remedy the breaches of the SARs promptly on discovery and in doing so breached any or all of Rule 7.1 and 7.2 of the SARs and Principles 8 and 10 of the Principles As a result of a previous visit by the SRA in 2010, a letter had been sent to the First Respondent which advised him that the Firm did not record costs or disbursements on the office side of client ledgers, and that this was in breach of the Solicitors Accounts Rules The exemplified matters demonstrated that appropriate remedial steps had not been undertaken by the Firm since this issue was

7 7 first raised in Given the First Respondent s knowledge of the breaches in 2010, and their continuance in 2016, the First Respondent failed to comply with Rule 7.1 and 7.2 of the SARs in that he failed to promptly remedy the breaches The issue of retention of office monies in client account was again discussed with the First Respondent on 17 May It became clear during the interview that the First Respondent had not completed the transfer of the funds out of the client account. The First Respondent later informed the SRA that the office monies had been transferred out of the client account by 6 June In failing to transfer the funds until 2 months after he was aware that the retention of office monies in client account was in breach of the Accounts Rules, the Respondent failed to promptly remedy the breaches Further, he had failed to run his business effectively, and had also failed to protect client money and assets The First Respondent admitted allegation The Tribunal found allegation 1.4 proved beyond reasonable doubt on the facts, evidence and the First Respondent s admission. 18. Allegation 1.5 the First Respondent caused or allowed practice accounts to be prepared which did not accurately record the financial position of the Firm during the Firm s financial year in breach of Principle 8 of the Principles and failed to achieve Outcome 7.4 of the SCC JD accepted that the Firm s accounting systems needed improvement, and that the Firm did not maintain management accounts or cash-flow forecasts. The First Respondent provided a copy of the Firm s unaudited accounts to 31 December Those accounts had been approved by him with an endorsement which stated: I approve the financial information which comprises the Profit and Loss Account, Balance Sheet and the related notes. I acknowledge my responsibility for the financial information, including the appropriateness of the accounting basis as set out in note 1, and for providing [RC] with all information and explanations necessary for its compilation However, in interview on 17 May 2016, the First Respondent confirmed that: the figure in respect of the Firm s current liabilities was incorrect; the figure given for his drawings in the same financial period was also incorrect; he was unable to say what his drawings were in 2014; he was in discussion with the accountants about the practice accounts and he also did not agree with the balance sheet that described the 2013 position; and

8 8 he only had a rough idea of the Firm s financial position and it was not operating at a loss Accordingly, the First Respondent admitted to a number of mistakes in the Firm s unaudited accounts despite previously having signed those accounts to confirm that he approved the financial information contained therein. During the interview on 17 May 2016, the First Respondent indicated that the inaccuracies in the Firm s accounts were the fault of his old accountants and that the Firm had instructed new accountants and all our books are being looked into because I want it to be absolutely right It was submitted that the First Respondent caused or allowed practice accounts to be prepared which did not accurately record the financial position of the Firm during the Firm s financial year , in that the practice accounts showed incorrect figures for the Firm s liabilities and the First Respondent s drawings and in doing so breached Principle 8 of the Principles. He had failed to run the Firm effectively and in accordance with proper governance and sound financial and risk management principles, with a demonstrable failure to maintain systems and controls for monitoring the financial stability of the Firm. He also failed to achieve Outcome 7.4 of the SCC The First Respondent admitted allegation 1.5 in respect of the Firm s financial year running from January to December The Tribunal found allegation 1.5 proved beyond reasonable doubt on the facts, evidence and the First Respondent s admission. 19. Allegation 1.7 the First Respondent failed to obtain consent from clients to deductions from damages received by the Firm on behalf of the client or provide sufficient information to clients in respect of such deductions and therefore breached any or all of Principles 4, 5 and 8 of the Principles and failed to achieve any or all of Outcomes 9.2, 9.3 and 9.4 of the SCC The FI Report identified that the Firm had entered into an arrangement with AL, an authorised claims management company, which offered credit hire (amongst other things) to persons involved in road traffic collisions. JF Matter 19.2 JF instructed the Firm to act in her personal injury claim following a road traffic collision. She entered into an agreement with a company in respect of the storage and recovery of her vehicle, and on 23 March 2014, she entered into a Conditional Fee Agreement ( CFA ) with the Firm On 21 November 2014, the third party insurer offered to settle the claim in respect of general damages in the sum of 2, On 1 December 2014, the Firm sent a letter to JF dated which stated: We...confirm the third party insurance company have made an offer in respect of your general damages in the sum of 1, This is a reasonable offer. This was 25% lower than that amount that had actually been offered.

9 JF authorised acceptance of the offer of 1, A cheque in the sum of 2, was received by the Firm on 27 January On 30 January 2015, a cheque in the sum of 1, was sent to JF. The remainder sum of was paid to the claims management company Mr Tankel submitted that there was no evidence on the file that JF had given consent for a deduction to be made from her damages, nor been informed of the full amount of the settlement offer, nor been informed of the deduction and to whom the deduction had been passed Similarly in the matter of SA there was a deduction to SA s compensation payment that was sent to AC, when there was no evidence on the client file that SA had given consent for a deduction to be made from her damages, nor been informed of the full amount the settlement offer, nor been informed of the deduction and to whom the deduction had been passed In respect of the above matters, in his letter of 19 July 2016, the First Respondent stated that their standard authority document was inadequate and that he fully appreciated the importance of transparency to client Mr Tankel submitted that in (a) failing to obtain consent for deductions to be made from SA s and JF s damages; (b) failing to inform SA and JF of the full amount of the settlement offer made to them; and (c) failing to inform SA and JF of the deduction and to whom the deduction had been passed, the First Respondent had breached Principles 4, 5 and 8 of the Principles and Outcomes 9.2, 9.3 and 9.4 of the SCC The First Respondent admitted that he had failed to inform SA and JF of the full amount of the settlement offer made to them. He denied that he had failed to obtain consent for the deductions or failed to inform SA and JF of the deduction and to whom the deduction had been passed. In his oral evidence the First Respondent explained that the client would be aware of any deduction from the outset. When asked how the client would know the full amount he stated Are there no phone calls? He further explained that in 99.9% of cases the authority to deduct would be provided by a client during a telephone call. Mr Tankel referred the First Respondent to his interview of May 2016 at which time he had stated that the authority for the deduction was derived from the contract signed by the client. When asked whether the full amount of the award of damages was discussed with the client during a telephone call, the First Respondent replied I can t say if it was or not The Tribunal found the admitted element of allegation 1.7 proved beyond reasonable doubt. As regards the disputed elements, the Tribunal noted that the First Respondent had been unable to provide any evidence that SA and JF had consented to the deductions or had been informed that the deduction had been paid to a claims management company. The documentary evidence clearly demonstrated that JF was only told of the net amount. There were no telephone attendance notes showing that the full amount and any deduction had been discussed in either case. The First Respondent s answers in that regard had been vague and had contradicted his previous account. The Tribunal found beyond reasonable doubt that the First Respondent had failed to obtain consent for the deductions and had failed to inform SA and JF of the deduction and to whom the deduction had been passed.

10 10 Accordingly, the Tribunal found allegation 1.7 proved beyond reasonable doubt in its entirety. 20. Allegation The First and Second Respondents caused or allowed deductions to be made to the compensation due to clients without a proper basis for doing so and/or without providing adequate information to clients about the deduction and in doing so breached any or all of Principles 4, 5 and 8 of the Principles and failed to achieve any or all of Outcomes 9.2, 9.3 and 9.4 of the SCC Mr Tankel submitted that in two matters, the First and the Second Respondents were responsible for making deductions from the damages awarded to their clients without a proper basis for doing so and without providing adequate information to the clients about the deductions. ZI Matter 20.2 ZI instructed the Firm to act in his personal injury claim and entered into a CFA with the Firm on 24 April The CFA detailed that the Firm could levy a success fee which is set at... 25% (of the Firm s basic charges) where the claim concludes before a trial commenced and was capped at 25% of the general damages and pecuniary loss. The statement for special damages calculated special damages totalling 7, On 12 October 2015, ZI was informed of a Part 36 offer in the sum of 4,500, which he accepted. The telephone attendance noted recorded: Advised client DBA/CFA 25% and PI valued 2,800-3, Client advised he has paid physiotherapy charges already directly. Client agreed and so breakdown is as follows storage hire - 1,680...PI to client Of the 4, damages cheque received to settle ZI s claim, (and after the settlement of some disbursements) ZI received the sum of 1, The Firm took 700 from ZI s damages as its success fee. The basis for the calculation of the fee of 700 was, it was submitted, unclear. In interview on 17 May 2016, the First Respondent was unable to explain how the deduction in ZI s case had been calculated. OP Matter 20.5 OP instructed the Firm to act in his personal injury claim and entered into a CFA with the Firm on 8 May The third party insurer made a global offer to settle the claim in the sum of 9, This was recorded on a telephone attendance note, which also set out, in respect of OP s general damages: DBA & PI - client aware his PI was valued at 4,000 but he wishes for some of it to go towards hire/storage. Agreed 3,600 for PI. DBA 900. Client happy The third party insurer sent a cheque for 9, dated 19 May According to the client ledger, OP was paid 2, for his general damages on 27 May Once disbursements and special damages costs had been paid out, the sum remaining

11 11 was 900. This was paid out to the Second Respondent and into the Firm s office bank account The Firm wrote to the third party insurer on 12 May 2015 detailing their costs. The letter stated that the Firm s fixed costs before application of a success fee and VAT, were the sum of 2, Despite the fact that the Firm s CFA stated that the success fee was set at 25% of the Firm s basic charges if the claim concluded before trial, the Firm deducted the total of 900 as a success fee, which equated to 33.9% of the Firm s basic charges In his letter of 14 September 2016, the Second Respondent explained that the deduction in the ZI matter was in the sum of 700 as the third party solicitors had not provided a breakdown of their offer in the sum of 4,500 in general damages and the calculation of the client s personal injuries amounted to the sum of 2,800, of which 25% was deducted in accordance with the CFA. As regards the OP matter, the Second Respondent stated that the deduction of 900 was based on the calculation of OP s personal injury damages being valued at 3,600 and was therefore in accordance with the CFA Under the CFA, basic charges were chargeable on hourly rates. However, there was no calculation of the hourly rate charges, and the Firm charged costs at a fixed fee. When calculating the success fee, the Respondents had simply taken 25% of general damages with no consideration, or calculation of its basic charges. In failing to properly and clearly calculate the success fee, and in deducting the success fee in those circumstances, the Respondents caused or allowed deductions to be made to the compensation due to OP and ZI without a proper basis for doing so and without providing adequate information about the deductions and therefore they breached Principles 4, 5 and 8 of the Principles and Outcomes 9.2, 9.3 and 9.4 of the SCC In his oral evidence, the Second Respondent accepted that in calculating the success fee, the Firm did not examine the basic charges, but calculated the success fee in accordance with the 25% cap on general damages. He explained that when the CFA was first introduced, cases were billed at hourly rates. When the regime changed, and cases were charged at fixed rates, the deductions were explained to clients an initial telephone call. Mr Tankel put to the Second Respondent that this was not explained in his response to the EWW letter. The Second Respondent explained that this was because the allegation in the EWW letter was different to the allegation he now faced. Whilst there was no written explanation of the calculation provided to the clients, the charges were explained at the outset. Further, once an offer had been received and accepted, the breakdown of the charges, including the success fee, was explained to the client, who would then authorise the deductions. This was demonstrated in the telephone attendance notes. Furthermore, in calculating the success fees in this way, the clients paid less than they would otherwise have been liable to pay if the fee was calculated using basic charges. The Second Respondent confirmed that neither OP nor ZI were cases referred from a case management company; they were both personal referrals and had contacted the Firm directly Mr Greensmith submitted that it was for the Tribunal to determine whether the success fee had been charged on a proper basis. There was no question that they had agreed to the deduction of a success fee in principle; they had signed the CFA. The

12 12 costs information was explained to the clients at the outset, and the contemporaneous telephone notes detailed that the clients agreed to or were fine with the amount of the success fee to be deducted. If there was any doubt as to the calculation of the amount, that imperfection was remedied with the express consent of the clients to the deduction. That express consent provided a proper basis for the deduction. Further, the breakdown of the deductions and costs gave the clients adequate information. Mr Greensmith submitted that it was highly unusual for a solicitor to be charged with professional misconduct for charging clients less than the clients were actually liable to pay. As regards the alleged principle breaches, in charging clients less than their contractual obligations, the Second Respondent had clearly acted in their best interests and provided a proper standard of service. The basis of the allegation of a breach of Principle 8 had not been explained by the Applicant, and was not relevant to the Second Respondent, who was an employee. As regards Outcomes 9.2 and 9.4, OP and ZI were personal referrals and thus those outcomes were not applicable. As regards Outcome 9.3, the clients were in a position to make informed decisions about how to pursue their matters, and thus there was no failure to achieve that outcome. Accordingly, allegation 2.1 ought to be dismissed In his defence, the First Respondent accepted and supported the explanations given by the Second Respondent. Mr Treverton-Jones QC submitted that had the Firm adopted a strict contractual approach to the calculation of the success fee, the clients would have paid a higher deduction than was in fact the case. The First Respondent had been accused of professional misconduct for undercharging. It was clear from the documents that the matters had been properly discussed with the clients and they had agreed to the deductions made. The First Respondent s defence relied, in part, on the evidence of the Second Respondent; if that was accepted, then the case against both Respondents was answered. It was submitted that not only was the evidence of the Second Respondent true, but it was impressive The Tribunal found that the deductions taken from the clients damages by way of a success fee were lower than they were contractually bound to pay. The clients were not disadvantaged; it was evidently in their interests to pay less than they ought. The telephone attendance note in relation to OP detailed that he had been informed of all of the deductions, including the amount for the success fee, and that he authorised those deductions. The Tribunal was satisfied that OP had provided his consent to the deduction. Indeed, it was not the Applicant s case that OP had not been informed of the amount of the success fee. The Tribunal found that the telephone attendance note in relation to ZI was less clear. Whilst a number of deductions were detailed, the 700 success fee was not expressly noted. Instead the noted read: Advised client DBA/CFA 25% and PI valued 2,800-3,000. The 700 was 25% of the lower figure. The Tribunal could not be sure to the required standard that ZI was not informed of the amount to be deducted by way of the Firm s success fee. The Tribunal noted that neither client had complained about the deductions made. The Tribunal determined that both clients had provided with a breakdown of the deductions, (although in the case of ZI, it was not expressly evident that he had consented to the deduction of 700), and had consented to those deductions. The Tribunal found that given the clients consent, and given that the amounts charged were lower than was contractually allowed, the deductions were made on a proper basis. Whilst it would have been better for the Firm to provide this information to the

13 13 clients in writing, it was plain from the attendance notes that the clients were provided with adequate information so as to allow them to make informed decisions In light of those findings, and whilst it was not necessary for the Tribunal to consider whether there had been a breach of the Principles or a failure to achieve the Outcomes alleged, the Tribunal found that the Respondents conduct was not such that it breached Principles 4, 5 and 8. It was evident that they had, at all times, acted in the best interests of ZI and OP and had provided them with a proper standard of service. Whilst the calculation of the success fee was different to that detailed in the CFA, this did not amount to a breach of Principle 8. Outcomes 9.2, and 9.4 were not relevant as the matters were personal referrals. Having found that the clients had been provided with adequate information, there was no failure to achieve Outcome Accordingly, the Tribunal found that the Applicant had failed to prove allegation 2.1 beyond reasonable doubt and thus dismissed that allegation against both Respondents. 21. Allegation 2.2 The First and Second Respondents failed adequately to supervise unqualified fee-earners in personal injury claims and in doing so allowed the creation of false medical reports and other documents, in breach of Principles 6, 8 and 10 of the Principles and failed to achieve any or all of SCC Outcomes 7.3, 7.4 and During the investigation, the FIO identified a number of serious concerns about cases that were referred to the Firm by a claims management company whose trading name was Imperium Claims. The company was established on 16 January IA and SN (both unadmitted) were recorded as previous Designated Members of the company before their respective resignations from that role. Both were employed at the Firm. IA was originally an employee of the Firm from 2001 until around 4 years later. He re-joined the Firm in SN joined at some point before Both left the Firm at a similar time in The Firm entered into an agreement with Imperium Claims on 18 February The First Respondent confirmed that Imperium was introduced to the Firm by IA. PD Matter 21.3 It appeared that this matter was fraudulently advanced by IA and SN when PD had not instructed the Firm. Mr Tankel made it clear that it was no part of the Applicant s case that either Respondent was directly implicated in the fraud perpetuated by IA and SN The file showed that a letter was sent to a company called Physio Link on 17 January 2012 asking for the arrangement of a medico-legal expert to examine PD. Physio Link shared the same business address as Imperium Claims A medico-legal report purportedly produced by Dr Patel appeared on the file and stated that PD was examined on 2 April The report detailed PD s injuries and determined that, on the balance of probabilities, his injuries were caused by the road traffic accident that he was said to have been involved in.

14 A letter was sent to the Firm from NFU, the third party insurer, on 18 May 2012 offering the settlement sum of 1,250 following receipt of medical evidence submitted by the Firm. A letter dated 1 June 2012 addressed to PD appeared on the file outlining NFU s offer and advising him to accept the offer. Also on the file was a letter of the same date to NFU advising that PD had accepted the offer. In a letter dated 17 July 2012, NFU stated that a claim had been received from another Firm for PD and they would not be paying the agreed settlement figure The SRA received information from both Browne Jacobson solicitors ( BJ ), who were instructed by NFU and MH who were instructed by PD in December 2011 that suggested that the Firm s file for PD was fabricated BJ s letter dated 22 October 2015 explained, amongst other things that following the offer, IA chased NFU for payment of the settlement sum but these monies were withheld after a further Claim Notification Form was received from MH on behalf of PD on 17 January In a witness statement, PD confirmed that he had never instructed the Firm. In her witness statement, Dr Patel confirmed that the report had not been written by her, that she could not recollect examining PD, and that she had never received instructions from Physio Link MH wrote to the Firm on 6 December 2012 stating that PD had instructed them and that he had advised them that he had no knowledge of the Firm or that the Firm had claimed to have been instructed by him and that he has only attended the medical appointment we arranged. The Firm responded on 24 January 2013 confirming that PD did attend a medical appointment with [Dr Patel] and the Firm had closed its file due to lack of instructions from [PD]. The Firm sent a copy of its electronic file to MH on 29 April MH continued to send letters requesting more information from the Firm, including a request to interview the First Respondent, which the Firm refused in a letter dated 23 April Other Imperium Claims The FIO identified a number of similar serious concerns in other files referred to the Firm by Imperium. These files were the client matters involving GH, WR and IJ. In each case, the Firm s file showed that cheques were paid in compensation for damages to each client. After the concerns about cases referred by Imperium were raised by the SRA, the Firm contacted the insurance companies who paid out these cheques and each insurer confirmed that the recipient bank account was in the name of Med-Legal Services LLP. The Companies House records showed that Med-Legal Services LLP was a company of which IA and SN were formerly directors until 25 August 2010 and 15 October 2015 respectively. The Companies House record showed that they were replaced by HA and SNA. The First Respondent explained that these were family members of IA s and SN s families The GH matter was conducted by IA and SN, and was referred by Imperium. Physio-Link purportedly instructed Dr Hamid to prepare a medico-legal report, and a report appeared on the GH file. In an dated 6 April 2016, Dr Hamid confirmed

15 15 that he did not undertake an examination of GH and had never worked with Physio-Link The third party insurer paid the Firm a cheque in the sum of 1,250 addressed to GH to pay for his alleged personal injury, 1, towards the Firm s costs and 350 for the cost of the medical report. Following enquiries, the third party insurer confirmed that the damages cheque in the name of GH was paid into an account in the name of Med-Legal Services LLP. WR Client Matter The WR matter was conducted by IA. The claim involved the apparent instruction of Dr Patel through a referral by Physio-Link, however, as outlined above in respect of PD, Dr Patel has confirmed that she had never worked with Physio-Link The third party insurer paid the sum of 2,500 by cheque in WR s name in respect of his general damages under cover of a letter dated 23 May 2012 and a letter appeared on the file that was purportedly sent to WR attaching the cheque. Following enquiries, the third party insurer confirmed that the cheque made payable to WH had been paid into an account held by Med-Legal Services LLP. IJ Client File IJ was referred to the Firm by Imperium. A medical report appeared on the file purportedly prepared by Dr Hamid that stated that IJ was examined by him on 28 October 2011 after being instructed through Physio Link. As detailed above, Dr Hamid denied ever having contact with Physio Link The third party insurer paid out settlement monies in the sum of 2,000 for general damages in respect of IJ s claim, and a cheque in IJ s name was sent to the Firm on 2 February IJ was contacted by the SRA and confirmed in a letter received by the SRA on 10 June 2016 that she had never been examined by Dr Hamid, had not signed the authority that accepted the offer and had not received any compensation in respect of the claim It seemed that, in respect of all the client files detailed above, monies that were intended to be compensation payments for damages or payments for disbursements were paid into bank accounts that were managed by companies linked to IA and SN. The Respondents both accepted that IA and SN appeared to have acted improperly and profited from these arrangements. Supervision of IA and SN The First Respondent was the Principal of the Firm and had overall responsibility for supervision at the Firm, including supervision of the Second Respondent. While employed at the Firm, IA and SN were not qualified solicitors and were described as paralegals in the Firm s standard client care correspondence.

16 In respect of the supervision arrangements at the Firm, the First Respondent explained in his letter to the SRA dated 14 September 2016 and his statement dated 5 February 2018 that: The Firm had a thorough system of supervision that was appropriate to the seniority and experience of the employees who were being supervised. No system of supervision would prevent a deliberate fraud being perpetrated by experienced and trusted employees, and both of the individuals in question were experienced and trusted. There was an open door policy where all staff members were encouraged to discuss any of their cases with their immediate supervisor for any assistance. The incoming post was monitored and opened by senior members of staff who raised any pressing concerns with the file handler. Files were reviewed for each department once a month by the First Respondent and prior to that by the Second Respondent. As part of the audit process he would receive a full file list with status reports. On the basis of the information contained therein, one-to-one meetings were arranged with fee earners. The Second Respondent sat in the same open plan space as fee earners and sat opposite IA when he worked at the Firm In his letter of 14 September 2016, the Second Respondent explained: During the period where Imperium files were being handled by the Firm, the Firm had file reviews in place which meant that 2 4 files would be reviewed every month by the First Respondent or the Second Respondent. All incoming post was opened and checked by JD or in his absence, by himself. Incoming faxes, letters and s were distributed to departmental supervisors. There were both departmental meetings at which technical problems and procedures were discussed. There were one-to-one meetings where live files were discussed with fee-earners. There were regular independent file reviews and audits every month. The open plan nature of the office meant that there was open access for advice/consultation with the Principal or a Supervisor when help was needed.

17 In his oral evidence the Second Respondent further explained that the First Respondent obtained spreadsheets from every file handler with detailed information about the files. He would also randomly walk around the office and check files. The First Respondent ran a tight ship, and was very hands on. He required regular updates and took supervision seriously. With the introduction of the COLP and COFA regime, the First Respondent employed a consultant to ensure that the Firm would be and remained compliant Mr Tankel submitted that despite IA and SN being unadmitted fee-earners, there did not appear to be any evidence of supervision or oversight in respect of the client matters involving PD, GH, WR or IJ despite the supervision arrangements described by the Respondents As regards the First Respondent, he was the Principal solicitor at the Firm with responsibility for supervising the unqualified fee-earners IA and SN. The client care letter, which in his oral evidence the First Respondent confirmed he had approved, held the First Respondent out as having overall responsibility for those matters. His failure to properly supervise IA and SN in relation to those matters and his failure to ensure that there was an adequate system of supervision in place caused or allowed false medical reports and/or other false documents to be created in those client matters and caused or allowed clients damages and disbursements to be misappropriated by companies linked to IA and SN As regards the Second Respondent, he had responsibility for supervising IA and SN. In failing to provide adequate or any supervision in respect of the PD, GH, WR and IJ matters, the Second Respondent caused or allowed false medical reports and/or other false documents to be created in those matters and caused or allowed clients damages and disbursements to be misappropriated by companies linked to IA and SN Mr Tankel submitted that those failures were a breach of Principles 6, 8 and 10 of the Principles. The supervision provided by the Respondents fell below the standards it would have expected the Firm to meet. As a minimum, there should have been a suitably competent and experienced solicitor regularly reviewing the files of IA and SN. Had there been any proper system of supervision in place, some or all of the issues highlighted in relation to the client matters would have been discovered, and the fraudulent conduct of SN and IA may well have been discovered. The only active supervision undertaken by the Respondents was the file reviews, the rest of the supervision described in their answer to the allegations and their responses to the EWW letters, was passive. It was only during the hearing that for the first time, the Second Respondent referred to the random checking of files by the First Respondent During her cross-examination by Mr Treverton-Jones QC, the FIO confirmed that given the nature of the PI work undertaken at the Firm, it was usual for this work to be carried out by non-admitted staff. The cases tended to be relatively straightforward. As regards the level of supervision, the FIO explained that the Applicant did not take a prescriptive approach, and that it was reasonable for more experienced members of staff to require less supervision. The FIO stated that regular file reviews, regular meetings, regular monitoring of work and assessments of training needs were all active ways of supervision. The fact that fee-earners sat in close

18 18 proximity to their supervisors was helpful, but did not replace the necessity for regular file reviews In his oral evidence the First Respondent stated that as the Principal, overall responsibility for supervision lay with him. He explained that supervision was an ongoing process at the Firm. He confirmed that prior to 2013, the majority of file reviews were undertaken by JD, who, whilst he was not a solicitor, was extremely experienced Mr Treverton-Jones QC submitted that it was illogical and insufficient merely to assert that the frauds perpetrated by the unadmitted former members of staff proved that the supervision at the Firm was inadequate. It was incumbent on the Applicant to specify where the First Respondent had gone wrong in circumstances where it provided no guidance as to what was required for supervision to be adequate. When the supervisory steps taken by the Firm were put to the FIO, she stated that the system in place was not unreasonable. Mr Treverton-Jones QC submitted that given her answer, the Applicant had in effect conceded that the system was reasonable, which meant that the question for the Tribunal was whether the system was followed in practice. There was no evidence that it was not. It was thus submitted that on the basis of the evidence of the Respondents and the FIO, the Applicant had failed to prove this allegation beyond reasonable doubt, and it ought to be dismissed The Second Respondent did not accept that he was a supervisor. The only supervision he undertook was as a result of his role as the COLP. He assisted in file reviews in terms of his technical expertise in relation to PI cases. Supervision was taken seriously by the Firm. It had attained Lexcel accreditation, and had recruited AT to ensure that they were ready and compliant with the COLP and COFA regime. New policies were sent to all staff, and all staff were required to return a signed copy of the policy confirming compliance. Mr Greensmith submitted that the creation of false medical reports and other documents were not caused or allowed by a failure on the part of the Second Respondent to adequately supervise unqualified fee-earners The Tribunal considered that having an open plan office was an aid to supervision. It considered the system in place at the Firm and noted that there was an active culture of regular file reviews and spot checks. The Tribunal noted that the FIO did not suggest that the system in place at the Firm was insufficient; the steps taken were described by her as not unreasonable. The Firm was Lexcel accredited and had employed AT to ensure that its systems and policies were robust. Whilst the system in place may not have been perfect, the Tribunal found that it was adequate. The Tribunal also found that the imperfections in the system were not the cause and did not allow the unadmitted members of staff to create the fraudulent medical reports and other documents Accordingly, the Tribunal did not find allegation 2.2 proved beyond reasonable doubt and dismissed that allegation as regards both Respondents. 22. Allegation 3.1 The First and Second Respondents failed to undertake proper investigations into the serious concerns that were brought to their attention as a result of the legal proceedings involving MH and the NFU about the Firm s client file involving PD, in breach of Principles 8 and 10 of the Principles.

19 The fraudulent claim in the PD matter gave rise to an application for costs against the Firm, which culminated in a judgment of HHJ Hughes QC dated 12 June The Firm received a letter dated 6 December 2012 from MH which stated: we have been acting for [PD] We have obtained medical evidence and we have issued court proceedings. We have subsequently been advised by [BJ] that they have received notification that you are instructed to act for [PD] we have taken instructions from our client who has advised us that he has no knowledge of you and that he has only attended the medical appointment we arranged MH also requested a copy of PD s signed retainer with the Firm On 24 January 2013, the Firm responded and stated: According to our computer records, this file has now been closed due to lack of instructions We can however confirm that [PD] did attend a medical appointment with [Dr Patel] on Since [PD] failed to co-operate we closed and archived out file of papers The Firm was again informed that PD claimed never to have instructed it by a letter from MH dated 19 February 2013, and by a letter from BJ dated 15 January Following a request for further information from MH, the Firm wrote to MH on 12 July 2013 confirming, amongst other things, that it had been unable to locate a paper copy of PD s file. On 11 August 2014, BJ wrote to the Firm and requested the following information: Whether PD was a client of the Firm; When he became a client; Whether the Firm had PD s express instructions to pursue and settle his claim; Whether he terminated his instructions to the Firm and when and how that was done The Firm responded in a letter dated 5 September 2014, confirming that PD became a client of the Firm on 19 September The Firm did not have his express instructions to pursue and settle his claim and hence the matter was closed. As regards the termination of his instructions, the Firm explained that those were terminated in March 2013 when PD failed to provide instructions and failed to cooperate and therefore the matter was closed On 19 May 2015, following requests by MH to interview the First Respondent (which were declined), MH reported the Firm to the SRA. The investigation was undertaken by Ms Underwood at the SRA. On 21 July 2015 Ms Underwood ed the Second Respondent in the following terms: I refer to our recent correspondence concerning the complaint made by [MH] on behalf of their client [PD].

20 20 Having considered the information you have provided alongside the complaint that [MH] made, we have decided that we will not be investigating this matter further at this time. [MH] will be notified of this outcome and our file will be closed shortly thereafter On 9 March 2016, the FIO visited the Firm and informed the First Respondent that Dr Patel s medical report was fraudulent. In September 2016, the Firm notified the SRA that a fraud had been perpetrated. On 23 November 2016, the Firm was joined in the proceedings in relation to costs. In March 2017, the First Respondent served a statement in the proceedings in which it was stated that PD had not instructed the Firm, and further, that IA and SN had prepared a fake medical report In his judgment dated 12 June 2017 in the costs proceedings between the Firm and the other parties to the PD mater, HHJ Hughes QC observed as follows: 21 By January 2013, at the latest, after [IA] and [SN] had left Barber, anyone examining the file in the light of the letter of the 6 th December 2012 from Mellor Hargreaves, would have been given serious cause for concern. It would have been apparent that Barber had obtained a medical report, negotiated settlement of the claim, and been awaiting a cheque from the NFU for the agreed damages and Barber s costs. 22. The most telling point is that never, then or later, does it appear that Barber wrote to the Claimant or tried to contact him to find out how it came about that another firm had been instructed to make a claim on his behalf in respect of the same accident. 23. Why not? How could whoever was dealing with the matter write to Mellor Hargreaves that the file had been closed due to lack of instructions? According to the letter to the NFU of the 1 st June 2012, Barber were owed almost 1,400 in costs and were out of pocket to the tune of 495 for the medical report. It is blindingly obvious that no commercial undertaking is going to write off what it is owed in such a casual fashion without good reason. 24. It is reasonable to assume that before the file was closed, the matter would have been duly considered, in the case of a large firm, by a partner or at least a fee earner, or in the case of a sole practitioner, by the proprietor of Barber himself. 25. The letter of the 24th January 2013 bears the reference of both Mr. Barber and Mr. Bagas. The letter claimed that the file had already been closed, although nowhere does there appear to be any recording of this or when it occurred, and the letter of the 5th September 2014, bearing the same reference, states that the file was only closed in March 2013.

21 If [IA] and [SN] were acting covertly and alone, I would expect anyone, on discovering the fraud committed in the name of Barber, to be outraged, concerned to investigate what had happened, and anxious to ensure that those affected by it were not further disadvantaged. 27. Unless they also had control of Barber s finances, there are indications that [IA] and [SN] could not have been acting covertly. This is because the NFU had been asked to make the settlement cheque out to Barber, and so it would have had to pass through Barber s accounts. This is a feature that, no doubt, the SRA will wish to consider. 28. What is abundantly clear, though, is that Barber have constantly stalled and obfuscated, and have failed to assist those acting for the Claimant and the Defendant to resolve the position. This has materially delayed the resolution of the claim and added significantly to the costs. Where the responsibility for this lies within Barber is unclear from Mr. Barber s statement. 29. It is no part of my task to make findings about the culpability of Mr. Barber or Mr. Bagas. That is a matter for the SRA. My task is to review the available material and to draw such inferences from it as are logical and reasonable in all the circumstances It is abundantly clear from the chronology and analysis above that the conduct of Barber substantially delayed and complicated the resolution of the compromise issue, and added significantly to the costs incurred by both the Claimant and the Defendant Mr Tankel submitted that from the letter of 24 January 2013 until March 2017, the Respondents maintained a positive case that PD had been a client of the Firm and had attended a medical examination. There was a clear conflict between what PD had told MH (namely that he had not attended any medical appointment arranged by the Firm) and the Firm s records (namely the medical report contained within the file). As to the letter of 24 January 2013, Mr Tankel submitted that it was materially incorrect. The file had not been closed when that letter was written; it was not in fact closed until March Further, there was no evidence of a want of instructions; on the contrary PD had seemingly agreed a final settlement offer The Respondents defence to this allegation was that as they were not informed that there had been a fraud or that there was any suspicion of fraud, they were under no duty to make any further investigations. They had assumed that PD had simply instructed new solicitors; this was not uncommon in the particular field of work. Mr Tankel submitted that it was either not credible that the Respondents had made that assumption, or it they did so, then it was a wholly unreasonable assumption as (a) it was inconsistent with the fact that the Firm s electronic file showed that PD had attended a medical appointment but was now saying that he had not attended any such appointment, and (b) it was inconsistent with the correspondence on the file which appeared to show that a settlement had been reached.

22 Mr Tankel highlighted a number of other warning signs that ought reasonably to have alerted the Respondents to conduct a full and proper investigation into the matter: The Firm had been unable to locate the paper file; the Firm s closed files were usually kept in archive. In his evidence the First Respondent explained that the file was searched for over a 4 day period. Mr Tankel submitted that such an extensive search was contrary to the Respondents explanations that they did not consider there to be anything unusual in relation to the matter. The client ledger was empty, even though the alleged medical examination involved a disbursement liability. The file was apparently closed despite the fact that there would have been outstanding disbursement and cost liabilities. Whilst the First Respondent explained that it had been standard practice for the Firm to write off costs and for medical agencies to write off disbursements in the event that a case was not successful, IA and SN would not have had the authority to do so. The First Respondent would have been aware of any written off amounts. The Firm had no record of any signed authorities or communication from PD Mr Tankel submitted that investigating the possible fraud would have been a matter of relative ease for the Respondents, who could have contacted Dr Patel, contacted the client (either directly or through MH) or conducted a Companies House search in relation to Imperium and Physio-Link A solicitor faced with such serious allegations, the knowledge of ongoing proceedings, an SRA investigation, warning signs including an absence of any correspondence from the client or client signatures on the file, a file that had been closed with costs and disbursements outstanding, and an empty client ledger, ought to have investigated the allegations more promptly, more thoroughly, and with greater diligence A solicitor would certainly not, especially in circumstances such as these, send letters such as that of 24 January 2013 which had no foundation in fact. Had the First and Second Respondents investigated the allegations with proper expedition and diligence, the fraud would have come to light earlier. Their failure to do so left a fraud uncovered and exposed the Firm s purported clients to risk. In support of its case, the Applicant relied upon and endorsed the comments made by HHJ Hughes QC cited above The First Respondent explained that on receipt of the letter of 6 December 2012, he discussed the matter with the Second Respondent and JD. A search for the paper file was conducted involving a number of fee earners over 3-4 days. The fact that they were unable to locate the file was not of particular concern as files do go missing. IA was contacted. He informed that there had been a lack of cooperation from the client and so the file ought to be closed. The First Respondent did not find it unusual that there were no signed authorities on the electronic system as he would have expected to see them on the paper file. Whilst the Firm had first been contacted in December 2012 and there had been ongoing correspondence, it was not until he was

23 23 informed by the FIO on 9 March 2016 that the medical report was fraudulent that he had any cause to be concerned. Thereafter the First Respondent conducted a full investigation. As regards the judgment, the First Respondent did not agree with the findings made by HHJ Hughes QC and referred to the criticisms therein as harsh Mr Treverton-Jones QC submitted that the key matter for the Tribunal to decide was when the First Respondent became under a duty to investigate the serious concerns. He could not be under any duty until he was on proper notice of the fraud. This did not occur until 9 March Whilst some time had been spent in cross-examination on the letter of 24 January 2013, the First Respondent had not been alleged to have provided false or misleading information. It was accepted that the letter was unhappily worded, however the response was reasonable given what was known at the time. In examining the correspondence sent to the Firm between December 2012 and summer 2015, there was no allegation of fraud contained in those letters, despite both MH and BJ knowing (by 2014) of the fraud. Mr Treverton-Jones QC referred the Tribunal to Ms Underwood s to the Firm dated 21 July 2015 and submitted that in considering whether the First Respondent failed to investigate the serious concerns, the Tribunal should not underestimate the import of that . The SRA had itself cleared the Firm of any misconduct in relation to the PD matter at that time it could not be professional misconduct to fail to investigate a matter that had been investigated by the regulator who had found that there was no case to answer. The contemporaneous evidence showed that it was not until 9 March 2016 that the First Respondent was aware of the fraud or the serious concerns. The FIO, in her oral evidence stated that when he was told by her of the fraudulent medical report, the Respondent was flabbergasted. Thereafter, the Respondent undertook all reasonable lines of enquiry to investigate the matter As regards the judgment of HHJ Hughes QC, Mr Treverton-Jones QC submitted that whilst the judgment should be treated with considerable respect, it was, at best, persuasive. HHJ Hughes QC was clearly unfamiliar with PI litigation at the lower end of the market. His comments in relation to costs and disbursements did not reflect the way in which these matters were actually dealt with. The Respondents had explained, and the FIO had agreed, that often costs would be written off and any medical expert fees would be waived where cases were not successfully concluded. Further, the Tribunal did not know the evidential basis on which the findings were made. The matters for the Tribunal to decide were different to those being considered by HHJ Hughes QC The Second Respondent explained that it was not unusual for incoming documents not to be scanned onto the electronic system; he kept incoming documents in his paper files. As regards a number of the documents that were seemingly located in the electronic file, the Second Respondent explained that some of the documents had been located in filing trays, and were not necessarily on the system. He accepted that the 24 January was not entirely accurate. He explained that he had anticipated that by the time the letter went out, the file would have been archived. The Second Respondent re-iterated that it was not unusual for clients to change solicitors, and there was nothing, on the face of the electronic documents, or the letters received, to cause any concern and still less to consider that there had been any fraudulent activity. On looking at the medical report, there was nothing that would have alerted the Second Respondent to the fact that it had been fraudulently produced.

24 24 The medical report stated that PD s passport had been seen as proof of identity. Had MH explained that it was in receipt of a letter from the passport office confirming that PD had never held a passport, this would have been a matter of concern and the Second Respondent would have investigated further. At no time did any of the correspondence mention that the report was fraudulent nor did it say that there were any concerns about the veracity of the report. In 2015 the matter was investigated by the SRA who took no further action. The Second Respondent took considerable comfort from that outcome Mr Greensmith submitted that it was clear that no serious concerns had been brought to the attention of the Second Respondent. He believed it to be a simple case of a client transferring to another firm of solicitors. On the face of it, the medical report was bona fides, and it was not until after he had left the Firm that the fraudulent nature of the report became known to the Firm. Mr Greensmith endorsed the submission made by Mr Treverton-Jones QC in relation to allegation The Tribunal considered the correspondence sent to the Firm in detail. It noted that at no point did MH, BJ or NFU suggest that the medical report was not legitimate, despite possessing evidence which detailed the fraudulent nature of the medical report. The Tribunal found that there was nothing in the correspondence from MH or BJ that taken singularly or together, ought to have put the Respondents on notice of the serious concerns as regards the medical report or the PD matter generally. No proper information was provided to the Respondents prior to March 2016 which ought to have caused them to investigate more fully than they did The Tribunal determined that until the First Respondent was informed that the medical report was fraudulent on 9 March 2016, there was no duty to investigate. The Tribunal found as a fact that the First Respondent was not aware of the fraudulent nature of the report until that date. His evidence and that of the FIO was fully accepted in that regard. The Tribunal noted that the SRA had investigated this matter and found that there was no case to answer in July 2015; that was an important factor to be considered when assessing the Respondents conduct. The Tribunal determined that it was unreasonable to have expected the Respondents to know or suspect that there were serious matters such as to trigger a duty to investigate, when the SRA had found that there were no issues arising. It seemed that the SRA was not aware at that time that the report was fraudulent. In the event that it was so aware, the SRA did not see that as a matter for the Firm to deal with. That was evident in the conclusion of the investigation The Tribunal considered the comments in the judgment of HHJ Hughes QC. It noted that the Respondents had not given oral evidence at the hearing. The issues to be decided in that matter were entirely different from the Tribunal s considerations. The evidential basis for the findings in the judgment were not clear as the Tribunal was not aware of all the matters considered by HHJ Hughes QC in coming to his findings. For example, it was not clear whether HHJ Hughes QC was aware that the Firm had been investigated and cleared by the SRA in relation to the PD matter. As regards the findings in relation to the Firm s failure to seek the costs of the medical report, the Tribunal accepted the evidence of the FIO who had stated that it was usual for the payment for the preparation of the medical report to be waived (depending on the contract with the report provider) in the event that the client did not win the case.

25 25 Whilst providers were nominally entitled to their fee, the FIO believed that it was typical that the fee would be waived if the case was lost. The Tribunal also noted that whilst HHJ Hughes QC suggested that the First Respondent was implicated in the fraud, it was no part of the SRA s case that either Respondent knew of, or were involved, in any fraudulent activity The Tribunal found that once the serious concerns were made known to the First Respondent, such that he was under a duty to investigate, appropriate investigations were undertaken with proper diligence and expedition For the reasons stated above, the Tribunal did not find that MH, BJ or the NFU had brought serious concerns to the attention of the Respondents triggering a duty for them to undertake proper investigations. Accordingly, the Tribunal did not find that allegation 3.1 had been substantiated and dismissed that allegation against both Respondents. 23. Allegation Failed to provide reasonable cooperation and assistance to the parties and the court in civil legal proceedings involving Mr PD and the NFU, in breach of Principles 1, 2 and 6 of the Principles Mr Tankel submitted that the Respondents approach to the PD matter entailed a failure to co-operate with the parties and the Court in the subsequent proceedings. That failure resulted in, amongst other things, increased costs and unnecessary hearings. In addition to the matters set out at allegation 3.1 above: The Firm, having notified the SRA on 14 September 2016 of the fraud, failed to notify the parties or the Court of the same until 3 March It was submitted that this delay was unreasonable and unwarranted. The delegation by the First Respondent of the conduct of this litigation to an unadmitted member of staff was demonstrative of the First Respondent s failure to fully and properly engage in the Court process. Given the correspondence between the Firm and MH, BJ and the NFU, there were numerous opportunities for the Respondents to engage more fully with the other parties and the Court. The Respondents did not avail themselves of any of these opportunities until the Firm was facing the prospect of a wasted costs order. As officers of the Supreme Court, the Respondents were under a duty to cooperate fully with the Court and the parties. As a result of the Respondents failure to cooperate, costs were exponentially increased and Court time was wasted. Mr Tankel submitted that a solicitor faced with such serious allegations, in the knowledge that the matters in issue were having an impact on ongoing proceedings, and who had been given so many opportunities to explain relevant matters, ought to have investigated the allegations more promptly, more thoroughly, and with greater diligence. A solicitor would not wait six and a half months between notifying the SRA of the fraud and notifying the other parties and the Court. Had the First Respondent and (for as long as he was at the firm) the Second Respondent investigated the allegations with proper expedition and diligence, the fraud would have come to light earlier. The failure to do so wasted Court time and legal costs. It was the Applicant s case that this was a breach of Principles 1, 2 and 6 of the Principles.

26 Mr Treverton-Jones QC submitted that this allegation raised two important questions: What duty was owed by the Respondents to MH and BJ and when did that arise; and What duty was owed by the Respondents to the Court and when did that arise In answer to both questions, it was submitted that there was no professional duty on a solicitor to provide voluntary assistance to parties to litigation in respect of which that solicitor was not involved. Thus the allegation could only be made in respect of the First Respondent s acts or omissions after the Firm had been joined in the proceedings. Accordingly, the First Respondent s duty to the Court and the parties did not arise until 23 November Mr Treverton-Jones QC referred the Tribunal to the chronology contained in the judgment of HHJ Hughes QC. He noted that there was no allegation levelled at the First Respondent of his breaching his duty to the Court after he had been joined to the proceedings. This allegation, it was submitted, was hopeless Mr Greensmith echoed Mr Treverton-Jones QC s submissions as regards when the duty arose. He reminded the Tribunal that at the time the Firm was joined in the proceedings, the Second Respondent was no longer employed by the Firm The Tribunal considered that whilst there may be a professional courtesy to assist the Court at all times, there was no duty on the Respondents to assist the Court or the parties until such time as the Firm was joined to the proceedings, or if it represented a party in the proceedings. The Tribunal noted that the Applicant had been unable to point to any Rule or authority which suggested that the duty was any wider than this The Tribunal found that once the Firm was joined, there was no evidence that the Respondents had failed in their duty to either the Court or the parties. It had filed its evidence in accordance with the Court s directions (albeit slightly late). As regards the First Respondent declining to be interviewed by MH, no criticism could, or ought to be made of him in that regard; he was under no duty to subject himself to an interview with the solicitors who represented his former client (as he believed him to be at that time). His refusal of an interview was not an example of his failure to comply with his duty to any party The Tribunal determined that the Applicant had failed to substantiate allegation 3.2 beyond reasonable doubt and accordingly dismissed that allegation in relation to both Respondents. 24. Allegation 4.1 the First Respondent failed to notify Mrs IJ, Mr GH and Mr WR of the risk either that fraudulent claims had been advanced on their behalf or that damages in legitimate claims brought on their behalf had been misappropriated, in breach of Principles 2, 4 and 6 of the Principles The First Respondent had written to every client referred to the Firm by Imperium Claims in the following terms:

27 27 We write in relation to your personal injury claim which was pursued through our offices. As a routine exercise we are auditing our files and we would be grateful if you could kindly confirm the amount you received for your compensation and the month/year received The letter made no mention of the concern that a fraudulent claim might have been brought on any individual s behalf, or that if their claim was legitimate then all or part of their damages award may have been misappropriated by a third party. No further letters were written to IJ notwithstanding the certainty that either a fraudulent claim had been brought on her behalf or that her legitimate damages award had been misappropriated by third parties. Neither were any further letters written to GH or WR notwithstanding the strong evidence that the same thing may have happened in their cases Mr Tankel submitted that the First Respondent was clearly on notice of at least the possibility that damages awards had been misappropriated in that (a) the SRA obtained evidence that they were misappropriated in the IJ matter; and (b) the payments in all three cases were made to companies associated with known fraudsters rather than directly to the clients. In those circumstances, whether or not the First Respondent could know for certain that the claims were fraudulent, whether or not the money trail had been followed, and whether or not the police had completed their enquiries, the First Respondent ought to have written to IJ, GH and WR clearly explaining the background and notifying them of the risk of misappropriation. The letters they were sent fell considerably short of meeting that standard. In failing to properly notify IJ, GH and WR, the First Respondent had breached Principles 2, 4 and 6 of the Principles The First Respondent accepted in his oral evidence that it was certain that there had been a fraud in the IJ matter and that there was almost certainly a fraud in the GH and WR matters, and that there was a high risk that the monies received on behalf of those clients had not been paid onto them. The First Respondent s enquiries showed that the monies paid on behalf of the clients had been paid to companies associated with IA and SN. As regards the wording of the letters, he had taken a balanced approach and did not want to frighten the clients. The First Respondent accepted that, with hindsight, he could have sent a different letter to IJ, GH and WR, as opposed to the letter detailed above Mr Treverton-Jones QC submitted that it was accepted that the letter sent could have been more informative, however this was a question of judgment and fell well below the bar for professional misconduct, and certainly did not show that the First Respondent had acted without integrity The Tribunal considered that the letter sent did not sufficiently advise IJ, GH and WR of the risk that fraudulent claims had been advanced in their names or that their awards may have been misappropriated, particularly in circumstances where the First Respondent knew, or had good reason to believe, that a fraud had been perpetrated. Accordingly, the Tribunal found that the First Respondent had failed to notify of the risk of fraud or misappropriation of damages. The Tribunal found that in

28 28 failing so to do, the First Respondent had failed to act in his clients best interests. If the claims were fraudulently made, and those clients later chose to legitimately pursue those claims, they may have found themselves in a similar position to PD. In order to protect those clients interests, the First Respondent ought to have provided much more information to them. Accordingly, the Tribunal found beyond reasonable doubt that the First Respondent had breached Principle 4. The Tribunal determined that in failing to protect their interests and provide them with sufficient information, the First Respondent had diminished the trust the public placed in him as a solicitor and in the provision of legal services. Members of the public would expect a solicitor to inform them where there was a high risk that a fraud had been perpetrated in their name, or that their damages had been misappropriated. The Tribunal found beyond reasonable doubt that the First Respondent had breached Principle 6. The Tribunal did not consider that the First Respondent had acted without integrity. Whilst the letter should have been more informative as regards IJ, GH and WR, there was nothing to suggest that the First Respondent had failed to adhere to ethical professional standards. Accordingly, the Tribunal found allegation 4.1 proved beyond reasonable doubt, save that it did not find that there had been a breach of Principle Allegation 4.2 the First Respondent failed to notify other firms and/or defendant insurers of the risk that they had paid profit costs to the Firm in relation to claims that were either wholly fraudulent or were based on fraudulent medical reports, in breach of Principles 2 and 6 of the Principles The First Respondent was on notice of the high risk that the claims had been brought fraudulently, or that damages had been misappropriated. In a letter dated 16 March 2017 the First Respondent stated that he had calculated the profit costs recovered from defendants insurers in the IJ, GH and WR matters. Those funds were being kept to one side pending the outcome of the investigation Mr Tankel submitted that as the First Respondent was on notice of potentially fraudulent claims brought through his Firm, he ought properly to notify the defendant insurers in question of what appeared to have occurred. It was not sufficient to set aside a contingency provision without doing more. In particular, the onus was on the Firm to take the necessary steps to ascertain whether the profit costs it had received were ill-gotten. The First Respondent undoubtedly knew that the medical reports relied upon in the claims were fraudulent; as such, at least part of the claim (and the profit costs consequent thereon) were not legitimate. In failing to notify other firms and/or defendant insurers of the risk that the profit costs paid to the Firm related to claims that were either wholly fraudulent, or were based on fraudulent medical reports, the First Respondent had breached Principles 2 and 6 of the Principles Mr Treverton Jones QC submitted that there was evidence that the First Respondent had written to at least one of the defendant insurers, explaining the risk of fraud. In putting aside the profit costs received, the First Respondent had acted in a reasonable manner. It was also reasonable for him to retain the payments made until the conclusion of the investigation The Tribunal considered the correspondence sent to the insurers on the WR matter. In an dated 25 July 2016, the Firm requested the information about the encashment of the cheque that had been raised in the client s name. The Firm was

29 29 asked to confirm the nature and purpose of your enquiry and whether the police are involved. In response to that request the Firm stated: We can confirm this information is required due to an ongoing internal investigation, we have reasons (sic) to believe the cheque for compensation may have not actually reached the Claimant. For this reason we require your assistance in providing the information requested as we believe this will be sufficient evidence to pursue the matter further if required In a further it was explained that the Firm was assisting the SRA with its enquiries, and that: It has been brought to our attention that the cheque may have unfortunately never reached [WR] as one of our ex consultant (sic) [IA] and his accomplice [SN] may have cleared the cheque and misappropriated the money for their own financial gain and that IA may have cashed the cheque made payable to the client into his own account thereby committing fraud The Tribunal noted that whilst the correspondence explained that a potential fraud had been committed, the impression the correspondence gave, was that the damages had possibly been misappropriated. There was no information provided about the potential fraudulent nature of the claim itself, in circumstances where the First Respondent knew that the medical reports on which the claim was based was fraudulent, and there was a high risk that the claim itself was fraudulent. The Tribunal found beyond reasonable doubt that the First Respondent had failed to notify third party insurers of the risk that profit costs paid to the Firm related to claims that were wholly or in part fraudulent. In failing so to do, he had diminished the trust the public placed in him and in the provision of legal services in breach of Principle The Tribunal did not consider that the First Respondent had acted without integrity. Whilst the communications with third party insurers should have more clearly stated the position in relation to the claims, there was nothing to suggest that the First Respondent had failed to adhere to ethical professional standards. Accordingly, the Tribunal found allegation 4.2 proved beyond reasonable doubt, save that it did not find that there had been a breach of Principle 2. Previous Disciplinary Matters 26. None. Mitigation 27. Mr Treverton-Jones QC submitted that the First Respondent accepted the administrative failings identified in allegations and 1.7. The Firm had spent significant sums in trying to remedy those matters, such that it had employed the services of AT to assist in compliance. It was clear the First Respondent took his regulatory responsibilities seriously, and wanted to ensure that, going forward, the Firm had the correct policies and procedures in place to ensure compliance. The First Respondent offered his apologies to the Tribunal and the Applicant for the admitted and substantiated matters. He accepted the Tribunal s findings and the criticisms that could be levelled as regards the admitted and proven allegations.

30 He had already paid a high price as a result of the proceedings before the Tribunal and the County Court, as he had suffered significant reputational damage. The conditions imposed on his practising certificate meant that he had had to restructure the business and he no longer had any beneficial interest in the company that he had founded. He had recruited a chartered accountant who was also a solicitor and was now the owner of the Firm. As a result of the PD matter, his PII insurance had increased substantially and he had been forced to take out additional borrowing. He had also found it more difficult to retain staff and had had to abandon his development plans for the Firm. 29. Mr Treverton-Jones QC submitted that the accounts rules breaches were not the most serious and had all been remedied. The nature and seriousness of the First Respondent s misconduct was such that the appropriate sanction was a moderate financial penalty. Sanction 30. The Tribunal had regard to the Guidance Note on Sanctions (December 2016). The Tribunal s overriding objective, when considering sanction, was the need to maintain public confidence in the integrity of the profession. In determining sanction, it was the Tribunal s role to assess the seriousness of the proven misconduct and to impose a sanction that was fair and proportionate in all the circumstances. 31. The Tribunal determined that the accounts rules breaches were as a result of inappropriate systems employed by the First Respondent which did not ensure compliance with the accounts rules. The proven matters arose as a result of the failure by the Respondent to provide sufficient information. His misconduct was not motivated by financial greed or personal gain, but was caused by the First Respondent s failure to make appropriate plans and ensure that appropriate systems were in place. As the Sole Principal of the Firm, the Respondent was responsible for ensuring that matters were properly taken in hand; he failed to do so. He was an experienced solicitor, who had been in practice for over 20 years and had set up his practice in His misconduct, in failing to provide his clients and third party insurers with sufficient information had harmed the reputation of the profession. 32. His misconduct in relation to the accounts rules was aggravated by the period of time over which it occurred; he had been informed in 2010 of the need to maintain the office side of client ledgers but had failed to do so, such that in 2016 they were still not being maintained. 33. The Tribunal noted that whilst the First Respondent had failed to properly inform insurers of the position with the claims, he had ring-fenced the profit costs received; that was to his credit. He had also taken steps to ensure that the Firm would be compliant with the accounts rules going forward by recruiting appropriate staff and introducing policies and procedures of which all staff were aware. He had demonstrated significant insight into his conduct and had been full and frank with the SRA. 34. The Tribunal determined that the First Respondent s conduct was too serious for it to make no order or impose a reprimand; the First Respondent had breached core Principles and had diminished the trust the public placed in him and in the provision

31 31 of legal services. The Tribunal did not consider that the First Respondent s conduct was so serious that the protection of the public and the reputation of the profession required him to be removed from practice or that his ability to practice should be restricted. The appropriate sanction in this matter was a financial penalty. The Tribunal considered that the First Respondent s conduct was at the lower end of its Indicative Fine Band 3, and that the appropriate sanction was a fine in the sum of 8, Costs 35. Mr Tankel submitted that all the allegations had been properly brought. The judgment of HHJ Hughes QC had posed genuine regulatory questions for the Respondents to answer. Many of those answers came, for the first time, during the Respondents cross-examination. Given the amount of work undertaken in the preparation and prosecution of this matter, the costs of 49, were modest. 36. Mr Treverton-Jones QC submitted that the First Respondent had incurred substantial costs in defending the proceedings. The most serious allegations he faced had been dismissed and his defence of the proceedings had been substantially successful. That success ought to ameliorate any costs order the Tribunal made. It was accepted that the First Respondent should pay some costs, however those costs should be restricted to the admitted and proven matters. Mr Treverton-Jones QC submitted that the matter merited a modest and moderate costs order. 37. Mr Greensmith submitted that whilst he had been acquitted of all allegations, the Second Respondent made no application for costs against the SRA. 38. The Tribunal agreed that the allegations against the Respondents had been properly brought. The Second Respondent had successfully defended all allegations. In the circumstances the Tribunal determined that the appropriate costs order was that there be no order for costs as regards the Second Respondent. 39. The Tribunal noted that the First Respondent had successfully defended a number of the allegations that he faced. The Tribunal determined that whilst the quantum claimed by the Applicant was fair and proportionate, it was neither fair nor proportionate for the First Respondent to pay the entirety of those costs given (a) some of those costs related to the prosecution of the Second Respondent and (b) the First Respondent had successfully defended a number of the allegations. Taking all the circumstances into account, the Tribunal determined that the sum of 25, was both fair and proportionate. Statement of Full Order 40. The Tribunal Ordered that the Respondent, ARIF UMERJI BARBER, solicitor, do pay a fine of 8,000.00, such penalty to be forfeit to Her Majesty the Queen, and it further Ordered that he do pay the costs of and incidental to this application and enquiry fixed in the sum of 25,

32