Solicitors Regulation Authority v David Fenton Wingate Steven Edward Evans
| Jurisdiction | England & Wales |
| Judge | Mr Justice Holman |
| Judgment Date | 21 December 2016 |
| Neutral Citation | [2016] EWHC 3455 (Admin) |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 21 December 2016 |
| Docket Number | CO/2221/2016 |
[2016] EWHC 3455 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
THE ADMINISTRATIVE COURT
Royal Courts of Justice
Strand
London WC2A 2LL
Mr Justice Holman
CO/2221/2016
and
Mr Richard Coleman QC (instructed by Russell Cooke LLP) appeared on behalf of the Appellants
Mr G Treverton-Jones QC (instructed by WE Solicitors) appeared on behalf of the Respondents
(As Approved by the Judge)
Introduction and the essential facts
This is a statutory appeal from a decision of the Solicitors Disciplinary Tribunal to the High Court pursuant to section 49 of the Solicitors Act 1974. By section 49(2) such an appeal shall lie at the instance of, among others, the applicant. The applicants in this case were the Solicitors Regulation Authority (the SRA) who are now the appellants. They contend that the tribunal wrongly failed to find that a number of serious allegations had been proved against the two respondent solicitors. Section 49(4) provides that the High Court shall have power to make such order on an appeal under section 49 as it may think fit.
This is, in the language of the criminal law, a prosecutor's appeal against acquittals. Such appeals by the SRA are rare. I was told that since 2012 there have only been two such appeals (and a small part of a third), and none at all recently before that.
At the outset of the hearing, there was some discussion as to whether an appeal by the SRA of this kind, i.e. an appeal against an acquittal which involved serious allegations including that of dishonesty, should be heard by a Divisional Court of two judges. The recent previous ones all have been. Both leading counsel indicated that they had expected that this one would be. That being so, I would suggest that in future if either party to a prosecutor's appeal of this kind considers that it requires to be heard by a Divisional Court, they should draw that to the attention of the listing office as soon as possible so that the court can consider the level of listing.
So far as concerns the present case, I was strongly urged by Mr Gregory Treverton-Jones QC, who appears on behalf of both respondents, that I should not adjourn it, but should now hear it, as his clients could not afford the costs of any adjournment. Mr Richard Coleman QC on behalf of the SRA took a relatively neutral position. In those circumstances, notwithstanding the gravity, I decided to hear this appeal alone.
The hearing before the tribunal lasted five days between 7 to 11 December 2015. They deliberated during the fifth day and announced their decisions on that day. Their written judgment is dated 31 March 2016. It extends to 421 paragraphs and 117 closely typed pages. It is publicly available online under case number 11354-2015. I will not repeat the considerable detail in it. The gravamen of the case can be stated relatively shortly.
The respondents are the only two partners in a small firm called WE Solicitors LLP (the firm) practising out of a single office in Greater Manchester. They employ a staff of six, two of whom are solicitors, plus themselves. They specialise in personal injury litigation, much of which is conducted on a conditional fee basis.
In 2012 the firm was clearly struggling financially. They owed £937,000 to HBOS bank, who were pressing hard for repayment of the whole loan, and whose monthly rate of repayments was due, in any event, to rise in September 2012 to a level which the firm had no hope of paying.
Within the firm, the First Respondent, Mr David Wingate, concentrated on management and finance, and the Second Respondent, Mr Steven Evans, concentrated on the current litigation workload.
After failing to secure replacement funding from other "mainstream" lenders such as other banks, Mr Wingate learned of a fund, which I can call the Axiom Fund or Axiom, which appeared to specialise in lending to fund the costs of litigation. The Axiom Fund appears to have been managed at the material time by an investment manager called Tangerine Investment Management Limited (TIM).
Mr Wingate made contact with the Axiom Fund in June 2012. Mr Wingate (but not Mr Evans) had meetings in the period June to August 2012 with a man referred to as Mr H, who appears to have been a representative of TIM who did have authority to negotiate a loan from Axiom, and with Mr Richard Barnett. Mr Barnett was a solicitor who had his own firm and was at the material time a member of the Council of the Law Society. He was described as a panel manager for Axiom and appears also to have had authority to negotiate loans. He has since been struck off.
On 22 August 2012 Mr Wingate, on behalf of the firm, signed a written "Funding Agreement" between the firm and Axiom, and also signed on behalf of the firm to acknowledge receipt of the collateral "loan letter". These documents were obviously standard form documents of Axiom.
The Funding Agreement extends, with its schedules, to some 33 pages and contains very detailed provisions. Importantly, these included at clause 22 a clause headed "Entire agreement", which provides as follows:
"This Agreement and the other Finance Documents are the entire agreement between the Parties concerning the subject matter of the Finance Documents. Any prior arrangement, agreement, representation or undertaking is superseded and, except as expressly provided, each Party acknowledges that it has not relied on any arrangement, agreement, representation or understanding not expressly set out in the Finance Documents."
The agreement specified at clause 2.2 that its "Purpose" was:
"The Panel Firm shall apply the proceeds of each Loan paid to the Panel Firm out of the Facility towards payment of the Eligible Legal Expenses in relation to which the Loan was requested…"
The loan letter made clear at page 2 that:
"The proceeds of the Facility shall be used by the Panel Firm exclusively towards the agreed purpose…"
"Eligible Legal Expenses" is defined in the definition section of the Funding Agreement as meaning:
"the Legal Expenses relating to a Claim which is evidenced by an invoice…"
The language of the written Funding Agreement was, therefore, crystal clear, and was reinforced by a number of other provisions of it to which I need not specifically refer, that the purpose of the loan towards which the proceeds must be used exclusively was funding the legal expenses of individual claims. The entire agreement clause expressly superseded and excluded reliance upon any prior arrangement, agreement, representation or undertaking not set out in the finance documents.
On 29 August 2012 the firm drew down a total of £900,000 from Axiom. This was made up of a "facilitation fee" to TIM of £300,000, being 50 per cent of the amount loaned, which was aggregated as part of the loan to the firm; £27,000 as the premium for a financial guarantee policy; and £573,000 paid to the firm.
The firm applied the £573,000 as follows:
(i) paying £450,000 to HBOS on 6 September 2012 pursuant to an agreement with HBOS that they would accept that sum in full and final settlement of the debt owed to them;
(ii) paying £20,000 on 14 September 2012 as "dividends" of £10,000 each to Mr Wingate and Mr Evans;
(iii) paying £11,535 on 17 September 2012 to discharge a loan from Lease Direct which had itself been utilised to pay arrears of VAT; and
(iv) paying £27,047 on 5 October 2012 to HM Revenue and Customs.
The balance of £64,418 was used to fund the firm's general office expenses, including salaries and overheads.
None of the payments under (i) to (iv) above, totalling £508,582, fell remotely within the Purpose in the Funding Agreement nor complied in any way whatsoever with any of the terms of the Funding Agreement. Although the balance may be said to have funded the making of claims, the manner in which it was simply paid into the general funds of the firm did not accord at all with the requirements of the Funding Agreement.
Further, the Funding Agreement expressly provided that the whole loan was to be repaid within 12 months, together with interest at 15 per cent. Mr Wingate accepted in evidence that he knew when he signed the written Funding Agreement that there was no prospect of the firm repaying the principal and interest within 12 months.
Mr Treverton-Jones made the point that under clause 6 of the Funding Agreement, Axiom could, "entirely at its discretion", immediately lend a loan back to the firm for a further 12 months (at the higher rate of interest of 18 per cent), but that required that the loan had first been "repaid in full" at the end of the 12 months. Mr Wingate knew that the firm had no means, and no prospect, of repaying the loan in full at that stage even for a scintilla of time.
In early 2013 Axiom went into receivership. The firm failed to repay before or on 29 August 2013 the loan and interest, which then totalled about £967,000. In November 2013 the firm entered into a settlement agreement with the receiver of Axiom in the total sum of £300,000.
Meantime, the SRA had begun an investigation into the various firms (about 10) of solicitors who had borrowed from Axiom, and also into Mr Barnett.
Mr Wingate was challenged about the use to which the firm had put the money. His case and explanation from first to last has been, in summary and in essence, that although the Funding Agreement said what it did, including the entire agreement clause, it was not, in...
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