Mishcon: Misconduct was unintentional and unwitting
Mishcon de Reya was in the news last week as its planned stock market listing was delayed and the Solicitors Disciplinary Tribunal (SDT) published the reasons for fining the London firm £25,000.
Mishcon partners voted in favour of a premium listing last September and, while no timetable had been published, the float was expected this spring.
However, it has been put on ice due to volatile market conditions, the reason given by other companies that have done the same, such as WeRock, which owns the WeTransfer file transfer service – which was to list last week in Amsterdam – and American business software company Justworks.
The underlying rationale for the float remains strong, insiders insist.
When Mishcon first announced its intention to list last April, it mentioned that it “continues to engage with the Solicitors Regulation Authority (SRA) on historic matters which it reported to the SRA”.
It is likely that the firm had to conclude these investigations to press ahead with the float and earlier this month Mishcon agreed with the SRA to pay a record fine of £232,500 over multiple breaches of anti-money laundering rules.
Meanwhile, the SDT has published its decision to fine Mishcon £25,000 for allowing its client account to be used as a banking facility.
Multiple payments totalling £5m were made between 2011 and 2013 in relation to five football transfers that then assistant solicitor Elizabeth Ellen worked on, although the SRA investigation only began in 2018 after the firm self-reported.
Ms Ellen qualified at the firm in 2007 and became a partner 2015 before leaving in 2020. She faced the same allegations but the SDT cleared her after finding that she had no power to authorise the payments; they had first to be approved by the matter partner and thereafter by what were called authorising partners.
The firm admitted its misconduct on four of the transactions and the SDT found the allegations proved on the other one.
There was, the SDT held, “no reason for the payments to have been made by the firm, and the complained-of receipts and payments amounted to the provision of a banking facility as alleged”.
The tribunal accepted that the misconduct was “unintentional and unwitting” and arose “as a result of [Mishcon’s] failure to properly monitor its own policies and procedures”.
There was no evidence of any harm caused but was aggravated by the period of time for which it continued.
“The tribunal recognised the work undertaken by the firm to ensure that there would be no repetition of such breaches. It also noted that the firm had self-reported and had co-operated throughout with the SRA.”
There was a significant battle over costs. Mishcon argued that it should not have to pay the regulator’s costs, citing in part the SRA’s decision not to prosecute the matter partner, which it said “was not sending an appropriate message to the profession”.
Further, the firm submitted that the SRA acted unreasonably and/or unfairly by bringing proceedings despite the self-report and admissions made, and attempt to reach “a consensual resolution from 2019 onwards”.
The SDT rejected this: “As a matter of policy, it could not be that the SRA should not recover its costs when it had successfully prosecuted a respondent, on the basis that the respondent had sought an alternative disposal. The SRA should not have to bear its own costs because it had rejected an alternative disposal.
“The tribunal agreed with the submissions of Mr Ramsden QC [for the SRA]; respondents should not be able to buy their way out of disciplinary proceedings, nor should the SRA be penalised when it did not consider that a case should be diverted from a hearing before the tribunal.”
It ordered that Mishcon pay £32,500, representing 50% of the SRA’s claimed costs of £75,000, less a sum reflecting a number of the matters investigated that were not pursued.
The SRA did not seek costs from Ms Ellen, but she argued for her costs on the indemnity basis.
The default position is that no costs order should be made against a regulator bringing proceedings in its regulatory capacity without good reason, such as unreasonable conduct.
Ms Ellen too highlighted the lack of action against the matter partner, but the SDT said their roles were not the same, as he was not involved in the day-to-day running of the case.
“His conduct was more akin to that of the authorising partners. It had not been suggested that each of the authorising partners should have been individually prosecuted. The prosecution of the firm adequately reflected their roles.”
Further, the SDT considered that the case against Ms Ellen was “properly brought… properly arguable and properly argued”. There was no reason to depart from the default position, it concluded.
Leave a Comment