Solicitors facing allegations at the Solicitors Disciplinary Tribunal should pay close attention to the costs claimed by the Solicitors Regulation Authority.

The starting point is to say that if you are wholly successful in defending proceedings brought by the SRA, you are unlikely to face a costs order. Oddly, you are also unlikely to recover your own legal costs. In Baxendale-Walker v The Law Society [2007] EWCA Civ 233 Laws J said that unless proceedings were ‘improperly brought’ or ‘a shambles from start to finish’ then a costs order against the SRA should not ordinarily be made. The reasoning being that the SRA must be free to discharge its responsibility as regulator.

If you are not wholly successful, that is, if any allegations are proven against you, whether admitted or not, then you can expect to face a costs order. Those costs typically consist of the SRA’s legal costs, and its internal costs of investigation.

The SRA maintains a panel of solicitors whom it instructs to act on its behalf at the SDT. A costs order will invariably include the costs of such representation, typically between £10,000 and £20,000 for mid-range offences.

Most claims for costs also include a charge for the SRA Forensic Investigator’s (FI) time, where they have been involved. FI’s are usually employees of the SRA. They go into the firm, interview the partners, consider files and where further action is considered, produce a report. In our experience, the costs claimed for the FI’s time are typically in the £15,000 to £35,000 bracket. Additionally the SRA may also seek to recover a smaller charge for handling by its casework team (generally £1,000 to £5,000).

For a number of years the SRA and its predecessors did not seek or rarely sought to recover FI costs. Since 2000 there has been an escalation in such claims and costs orders now regularly exceed fines. FI costs are claimed at an hourly rate according to the time spent and they might spend 200 hours or more investigating a firm.  Much lower in years gone by, that rate has now reached £115 per hour.

VAT is not claimed on these costs, presumably, as they are not costs actually incurred by the SRA and therefore they are not a disbursement. As FI’s are employed by the SRA presumably they are paid PAYE. If FI’s aren’t paid at the £115 per hour rate claimed in the SDT, equivalent to an annual salary of c.£185,150, it begs the question whether a profit is sought to be made by these claims?

In R v Northallerton Magistrates’ Court, ex parte Dove (1999) 163 JP 894, the court founded some sensible principles including that;

  • An order for costs should never exceed the sum which the prosecutor had actually and reasonably incurred; and
  • The purpose of the order was to compensate the prosecutor and not to punish the Defendant.

These provisions should be fairly obvious, the former merely reiterating the Indemnity Principle. However, when appearing at the SDT in August 2012, the SRA sought to argue that this case did not apply and maintained its application to recover the costs of its FI on an hourly basis, and in excess of the actual cost of the FI to the SRA. The SDT remarked that they had not come across such a challenge previously. While in its written findings the SDT did not specifically comment on the application of Northallerton, they allowed only a small proportion of the costs claimed by the SRA.

On 24th August 2012 the SDT released its first ever Guidance Note on Sanctions. Paragraph 55 of the Guidance Note now refers to the principles laid down in Northallerton, perhaps as a result of our recent challenge. Nevertheless Respondents must remain very careful to ensure that the SRA only seeks to recover the costs that it has actually incurred.