Costs in Regulatory Proceedings: Solicitors’ Regulatory Authority v Tsang [2024] EWHC 1150 (KB) (Admin)
The courts has consistently maintained that in order to ensure that Regulators maintain their statutory obligation to protect the public, costs should not simply be awarded against them unless specific circumstances apply. In the recent judgment of Solicitors’ Regulatory Authority v Tsang Eyre J reviewed the relevant authorities and once again confirmed the position.
In 2017 the SRA served production notices on Ms Tsang in relation to concerns they were looking into in respect of advice she had given to property clients between 2015 and 2016. After significant delay the SRA did not commence its formal investigation until 2019 and it was not until April 2021 that Ms Tsang was advised that the SRA was recommending that the matter should be referred to a Tribunal. The case was finally referred to the Tribunal in July 2022, some 5 years after the SRA’s request for documents and almost 7 years after Ms Tsang was instructed in the work which formed the subject of the allegations.
The hearing lasted two days and involved legal argument only. Neither the SRA nor Ms Tsang called any evidence. The allegations were dismissed, and the Tribunal awarded costs in excess of £75,000 in favour of Ms Tsang. In making this decision the Tribunal set out that it had considered the relevant Sanctions Guidance which referred to the well-known judgment in Baxendale-Walker v The Law Society [2007] EWCA Civ 233. This confirmed that Regulators are in a different position to parties to commercial litigation and
“Unless a complaint was improperly brought or, for example, had proceeded as a “shambles from start to finish”, when the Law Society was discharging its responsibilities as a regulator of the profession, an order for costs should not ordinarily be made against it on the basis that costs followed the event”.
The SRA appealed the issue of costs. In rejecting this appeal Eyre J made the following important observations:
- The question of whether the Tribunal applied the law correctly in awarding costs to Ms Tsang is a question of law and therefore no deference to the Tribunal needs to be exercised by the Administrative Court;
- The question of whether the factors identified by the Tribunal were capable in law of being a good reason (or combining to form a good reason) for imposing a costs order, as per Baxendale-Walker, is a matter of law with no scope for deference.
- If the factors were capable in law of being a good reason, the question of whether they were in fact present in the case and whether they amounted to a good reason for making a costs order against the SRA were matters of evaluation by a specialist tribunal. It follows that Bawa-Garba restrictions on interfering with such an evaluation apply.
Eyre J found that the Tribunal had applied the correct test and had correctly started from a presumption that cost orders are not ordinarily made against Regulators. However, the Tribunal concluded that the inordinate delay coupled with the fact that there was no proper legal basis for the allegations being brought allowed a costs order to be made.
Eyre J agreed that procedural failings on the part of the Regulator can amount to good reason for making a costs order. This can include delay where the delay is attributable to the actions of the Regulator and goes substantially beyond the delay inherent in the proper investigation and determination of a case.
The Administrative Court also unequivocally concluded that proceedings which are brought on a fundamentally misconceived understanding of the law can properly justify the imposition of a costs order. This can be the case even where they are brought in good faith and where the Regulator has different understanding of the law to that ultimately adopted by the Tribunal.
Finally, and importantly, the Court dismissed the submission made on behalf of the SRA that because the allegations had been considered in the “filtering” process pursuant to Rule 13 of the Solicitors (Disciplinary Proceedings) Rules 2019 and were certified for consideration at a hearing by a solicitor, the SRA should not have a costs order made against it.
Whilst this case does not change the law in respect of awards for costs against Regulators, it provides significant insight into the interpretation of the principles in Baxendale- Walker which is now some 17 years old.
Categories: Newsletters
