High Court overturns SRA intervention

A recent High Court decision saw the court overturn the SRA's intervention in a regulated law firm: only the second decision of its kind in 20 years.

Background facts

Martyn Santer is a solicitor and Director of Santers Solicitors Limited which had a sizeable conveyancing practice. In September 2022, after almost 40 years of practice, Mr Santer decided to retire from practice and agreed to sell Santers Solicitors Limited to Mr Asad Sahi for the sum of £90,000, who, he understood was a registered foreign lawyer. In November 2022, after basic background checks, Mr Sahi began undertaking consultancy work for Santers Solicitors Limited to assist Mr Santer's conveyancing practice.  

However, Asad Sahi was an alias used by Yawar Ali Shah, a disbarred barrister who was convicted in July 2013 on two counts of conspiracy to defraud after misappropriating almost £3 million for four mortgage frauds and for which he served three years in prison. Mr Sahi had been involved in three law firms in which the SRA had intervened.

The Intervention

The SRA, who had previously struck off two solicitors in 2023 for fraudulently assisting Yawar Ali Shah, was quick to serve the Claimant firm, Mr Santer and Mr Shah with an intervention notice for suspected dishonesty – this came after the SRA received a report from an individual in February 2024 that Mr Sahi had allegedly misappropriated £60,000 whilst working for the Claimant company, and that Mr Sahi had a conviction of conspiracy to commit fraud. 

Schedule 1 of the Solicitors Act 1974 (the 1974 Act) sets out the circumstances in which the Law Society can and should intervene. The relevant provisions of the 1974 Act are contained at Schedule 1, Part 1, paragraphs 1(1)(a), (aa) and 6(1).  These entitle the Law Society (in practice, the SRA) to seize client money if the SRA has reason to suspect dishonesty on the part of:

• "a solicitor, or an employee of a solicitor, in connection with that solicitor's practice; or
• "on the part of a solicitor in connection with 
  • The business of any person of whom a solicitor is or was an employee, or any body of which a solicitor is or was a manager, or
  • Any business which is or was carried on by a solicitor as a sole trader…"

The SRA's investigation concluded that Mr Shah had falsified documents and made false mortgage applications whilst working at the Claimant practice. 

The SRA's conclusion that there was reason to suspect dishonesty on behalf of Mr Santer was based in part on Mr Santer having employed Mr Shah and another individual of concern, a Robert Jones. Mr Jones aka Robert Offord aka Robert John had restrictions on this practising certificate and Mr Santer allegedly failed to seek permission from the SRA before employing him. There was some suggestion that Mr Jones was engaged in fraudulent practices with Mr Shah. 

The Decision

The court had two questions to consider: first, were there grounds to suspect dishonesty on the part of Mr Santer when the intervention notice was served (if not, the SRA's intervention notice was invalid); and second, in light of all of the information available to the court, does the risk to Mr Santer and the firm outweigh the risk to the public. The court agreed with the SRA that there was enough evidence to justify a suspicion of dishonesty (albeit this transpired to be misplaced) and, as such, the initial intervention notice was not invalid. 

In relation to this second question, the court must carry out a balancing exercise between the need to protect the public from dishonest solicitors and the consequences faced by a solicitor if the intervention is allowed to continue (Dooley v The Law Society (No 1)). 

HHJ Jarman KC, sitting at the High Court, found no evidence to suspect that Mr Santer had acted dishonestly, or that he suspected that Asad Sahi aka Mr Shah was undertaking dishonest activities. The court accepted that Mr Santer carried out appropriate identity checks and was deceived by Mr Shah, as other solicitors had been previously. Mr Santer had no regulatory issues before the investigations and had an unblemished record. Further, the court accepted Mr Santer's evidence that neither he, nor his company, were involved in any of the fraudulent activities undertaken or facilitated by Mr Shah.
As a result of the intervention, Mr Santer and his practice had suffered significant reputational damage and had lost clients, some of whom were third generation clients. HHJ Jarman KC considered that the damage caused to Mr Santer was disproportionate to the small risk to the public by withdrawing the intervention, and that as Mr Shah was no longer at the practice, the risk to the public in withdrawing the notice was relatively small risk to the public. 

Comment

This judgment is a rarity. A solicitor has very rarely succeeded in overturning an intervention in their practice. However, this judgment perhaps demonstrates that the courts are alive to the fact that there is a fine line between the need to protect the public from harm, and the need to protect solicitors from the loss of their livelihoods. 

Interventions are perhaps the most draconian power available to the SRA and can have devastating effects on the reputation of the practice and its principals. This decision serves as a welcome reminder to the regulator to wield its power proportionately. 

It also highlights the risks involved in mergers and acquisitions of law firms: see our article explaining the SRA's recent warning notice on mergers, acquisitions and sales of law firms. In this case, Mr Santer had decided to sell his firm due to ill health; however, rather than a smooth transition into retirement, he has found himself the recipient of an intervention notice and became embroiled in litigation to end the intervention. The judgment records that the SRA warned in 2023 that established practices were being targeted to be purchased by fraudsters as a vehicle for fraud. Due diligence is key and the case also serves as a reminder to carry out adequate due diligence and background checks on lateral hires. 

The SRA have indicated that they intend to seek permission to appeal, so this may not be the final word.