Newell-Austin v SRA [2017] EWHC 411 (Admin)

Posted by James Danks on

Commentary

Considering the number of charges not proved due to the second limb of Twinsectra, it is almost inevitable that a 'lack of integrity' will become a phrase of increasing use. Regulators will view it as an attractive, practical and proportionate opportunity to swerve the potentially significant evidential difficulty that is inherent with matters of dishonesty.

Ms Newell-Austin appealed against the decision of the SDT that she be struck off the roll and ordered to pay £85,000 having found her to have acted dishonestly and without integrity.

Whilst a conclusive meaning and test for dishonesty remains tantalisingly out of sight, Morris J has now at least provided some long-needed clarity as to what acting without integrity actually means and could possibly signal a review of Regulator's prosecuting strategy to take advantage of this new guidance.

Facts

The Appellant was the sole principal of her Firm and had the intention to cease practice but was unable to afford the run-off insurance associated with this process. She therefore brought in Ms NA and Mr RA as partners.

The circumstances surrounding the Appellant and Ms NA meeting were peculiar – they met for the first time in a café at a train station and a Partnership Application for all three was submitted to the SRA the next day. At this point, Mr RA had only been working at the Firm for just over a month.

Part of the Partnership Application form requested confirmation as to whether any of the partners were facing any criminal charges. The box marked 'No' was ticked on the form, which included a declaration stating "The SRA will be notified as soon as any information provided in this application has changed".

Over the following months, significant correspondence was entered into between the Firm and the SRA, specifically in regards to the management experience that Ms NA and Mr RA had and what their responsibilities at the Firm would involve.

During this period, Mr RA was arrested, interviewed and bailed in respect of a fraudulent mortgage transaction in which the Firm had acted for the vendors. No charges were brought against Mr RA and the Appellant, whilst aware of his arrest, said she had no reason to suspect him of any wrongdoing. Nevertheless, Mr RA did not return to the Firm.

The Appellant confirmed to the SRA that the Firm had been involved in a fraud and requested details on how to file a Summary of Events with the SRA. This was provided to her but no Summary was ever provided. What was provided by the Appellant was an answer to the SRA query regarding the management experience and responsibilities of Mr RA (and Ms NA). The Appellant confirmed that Mr RA would only have minimal management responsibilities because of his lack of experience, but would continue to undertake casework and supervision. The Appellant omitted to tell the SRA that Mr RA was no longer attending the office, nor that he had been arrested.

The partnership was subsequently approved with the Appellant resigning from her position less than a week after this approval. Shortly after this, the Firm was intervened by the SRA in order to investigate a number of fraudulent transactions. Allegations were made against the Appellant following this intervention.

The Appellant was brought before the SDT to face a number of charges, including those of dishonesty and acting without integrity.

In summary, the SDT found that by ceding control and acquiescing to the Firm's involvement in fraudulent transactions the Appellant, whilst not dishonest, was acting without integrity. The Tribunal did however find the Appellant to be dishonest in her correspondence with the SRA, specifically her failure to give full disclosure to the SRA regarding Mr RA, which would have inevitably had a detrimental effect on the Partnership Application.

The Appeal

The Appellant argued, amongst other grounds, that the SDT had erred in failing to consider her subjective state of mind when determining whether she had acted without integrity. In effect, the Appellant stated that there needed to be a test analogous to Twinsectra.

Having considered the approach taken in Hoodless and Blackwell v FSA [2003] FSMT 007 and recent cases regarding integrity, including in particular Scott v SRA [2016] EWHC 1256 (Admin) and SRA v Chan [2015] EWHC 2569 (Admin), Morris J provided a filtered consideration of the three main principles of integrity:

  • Integrity connotes moral soundness, rectitude and steady adherence to an ethical code;
  • An informed Tribunal is best placed to determine whether a respondent has a lack of integrity;
  • Lacking integrity and dishonesty are not synonymous. A registrant is quite capable of lacking integrity whilst not being dishonest.

Morris J also held that the previous case law on this area (as to whether there was a subjective element to lacking integrity) remained correct and there was no need for it to be established that the registrant must have known they were acting without integrity.

It necessarily follows that the Appellant's grounds that relied on this interpretation of integrity were refused. Similarly, the finding of her dishonesty was maintained – even though there was no explicit duty on the Appellant to notify the SRA of Mr RA's arrest, her decision to withhold this information and the real reason for his absence from the office, was a deceitful act.

About the Author

James is a Senior Associate in our Professional Regulatory team, he has a decade of experience in advising regulators and respondents to disciplinary proceedings.

James Danks
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