SRA told to pay solicitor £75k in costs for failed prosecution

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SDT: Principle of res ipsa loquitar inappropriate

The Solicitors Regulation Authority (SRA) has been slapped with a £75,000 costs order after making an “essential mistake of law” in a failed prosecution of a solicitor.

The Solicitors Disciplinary Tribunal (SDT) cleared Amie Tsang of the allegation that she failed to advise hundreds of clients about the high risks inherent in investing in three property development schemes.

It said the SRA’s case against her “rested on nothing more” than extracts from Thomson Reuters’ Practical Law which post-dated the relevant transactions by several years, “unsubstantiated” suppositions that her clients, as foreigners, required greater protection merely because they were foreign, and the SRA’s warning notice on investment schemes, which again post-dated the events.

The SRA had first requested information from Ms Tsang in 2017 – her work on the developments began in 2015.

“The considerable stress to Ms Tsang, the harm to her practice and the damage to her reputation caused by the proceedings and exacerbated by the [SRA’s] delay, were highly relevant to the issue of costs,” the tribunal said.

There is no rule that costs follow the event in SDT cases. Last year, the Supreme Court upheld the principle that costs should only be awarded against the SRA in unsuccessful prosecutions where there was good reason to do so.

Ms Tsang, who qualified in 1994, was the owner of Manchester firm Amie Tsang & Co, which closed in 2018. She is currently a senior consultant at Davis Blank Furniss.

She acted for 451 buy-to-let investors based in East Asia buying properties in three ‘fractional’ property development schemes.

Nearly £28m passed through the firm’s client account but none of the developments were completed.

The SRA said it did not know how much, if any, the purchasers had been able to recover – although we reported last year on a High Court ruling that said there have been successful claims against Amie Tsang & Co arising from a fractional development.

The regulator argued that these were in many ways commercial deals and that Ms Tsang’s advice on the legal risks failed to highlight the comparatively limited legal protections available for buyers’ funds, that the charge was likely to be inadequate, and that that the charge could become even less adequate with the creation of other charges which would take priority.

The SRA did not call any witnesses and the SDT said its submissions appeared “to represent a species of res ipsa loquitur, more commonly deployed in the tort of negligence where the facts pointed blatantly in one direction”.

It went on: “The principle of res ipsa loquitar was inappropriate, in this jurisdiction, where the livelihood and reputation of respondents were at stake. Furthermore, it was, in any case, far from self-evident that the facts pointed in only one direction in support of the applicant’s allegations.”

There was also no evidence regarding the vulnerability or lack of sophistication of Ms Tsang’s clients, with the SRA relying on “stereotypical assumptions” based on the fact that they were foreigners.

“The tribunal had therefore been in no position to assess the practical impact of Ms Tsang’s advice upon her clients,” it said.

But the tribunal acknowledged that she went to Hong Kong to physically meet all of them and “explained in terms and language they would understand the issues, risks and red flags which they needed to be aware and which she also set out within her client-care documentation”. Ms Tsang was able to speak to them fluently in Cantonese.

The SRA had adduced no evidence “upon which the tribunal could conclude rationally that Ms Tsang’s clients were anything other than commercially minded investors, who wanted high returns on their investments and were prepared to take upon themselves the risks in achieving that objective and who did not want to pay a large amount in legal fees to obtain any more advice than they had received”.

The SDT found that Ms Tsang provided clients with “sufficient information… to flag the relevant risks in what was at the time a developing area of commercial activity”.

It went on: “The tribunal considered that Ms Tsang had gone as far as she was reasonably able under the terms of her retainer, for which she charged a modest fee, to set out the wider risks.

“As a matter of law, she had not been required to explain the commercial risks faced by her clients if the developments failed and she had not been required to carry out investigative tasks beyond the scope of the retainer, however, she appeared to have done her best to have set out the commercial risks for clients’ benefit.”

The SDT said it bore in mind the Court of Appeal’s ruling last year in Spire Property Development v Withers about advice ‘reasonably incidental’ to agreed work under a retainer.

In considering whether to order costs, the SDT said it was “questionable” whether the case had been properly brought.

As well as the harm to Ms Tsang personally, “it was also relevant that the [SRA] did not have a basis in law for its allegation, had called no witnesses and had relied almost entirely on extracts from Thomson Reuters Practical Law which post-dated the relevant events by many years and which were of limited relevance, as no evidence had been adduced as to which of the ranks of lender or investor referred to in Practical Law equated to Ms Tsang’s clients”.

That the SDT had certified the matter as showing a case to answer did not help the SRA. This was a decision made on the papers that there was an arguable case.

“It is a binary decision made in summary manner. The bar is low, and the tribunal expects the applicant not to bring speculative matters to it but ones in which there has been a full analysis of the underpinning law and facts.

“An essential mistake of law on the applicant’s part, as found in the present case, undermined the presumption that the case had been properly brought.”