Solicitors Disciplinary Tribunal fails to apply proper penalty

Not a common complaint, however, on this occasion the SRA appealed the sentence to the High Court in the case of SRA v Ali Chan and Abode Solicitors Ltd [2015] EWHC 2659 (Admin).

The directors of Abode (and 1st and 2nd respondents) were solicitors who, through Abode (3rd respondent), introduced a great many of their clients to SDLT avoidance schemes. They were prosecuted before the Solicitors Disciplinary Tribunal which fined each of them £15,000 and the SRA appealed seeking further findings of facts and failures which render the respondents unfit to practice – and therefore that they should be struck off.

The respondents earned nearly £1m in commissions and referral fees for these SDLT avoidance schemes, not including their own conveyancing charges.

The schemes all involved artificial transactions, to effect legal loopholes in the relevant taxation provisions. In each case there is an intermediate transaction, or a final option transaction, which brings into effect a tax relief provision. Some of these had the benefit of advice from counsel in general terms but, despite one of these making it clear that cooperation of the lender was necessary, the lender (also a client of the solicitors) was kept in the dark.

In July 2011 counsel advised that sub-sale schemes (which accounted for 2 of the 4 structures) were open to real risk of challenge by the Revenue.

These schemes, using artificial and uncommercial structures – and which may expose purchasers to other risks – have been challenged by the Revenue and even legislated retrospectively against in some cases.

This case is the appeal of the Solicitors Disciplinary Tribunal decision to the QBD’s Divisional Court therefore is bounded by the findings of fact before the SDT and could only overturn the conclusions made by the SDT where the basis for such decisions was unsound.

What the DIvisional Court did decide was that the findings of fact set out a clear basis to find that the respondents had acted with a lack of independence and want of integrity therefore the conclusions of the SDT were unsound. Particular reference is made to the risks in the husband and wife scheme of one spouse only holding 1% of the equity; or the option scheme being a blot on the title; both of which are potentially larger than the SDLT saved.

Having reached these conclusions (and set out which allegations it considered proved) the court remitted the issue of sentence to the SDT.

A reminder to both solicitors to be cautious in effecting such schemes without giving proper and full advice (and at a minimum paying heed to the SRA Warning Notice) and also to those thinking of mitigating tax to take full and complete advice rather than off-the-shelf solutions.