Confidentiality and the SRA

The recent decision in Hudson v SRA [2017] EWHC 1249 (CH) provides a stark reminder that the SRA must be alert to its duties of confidentiality when dealing with regulatory investigations.

In Hudson, the SRA failed to strike out a damages claim by a solicitor in the High Court who claimed that the SRA had breached his confidentiality.. The case involved the disclosure of documents belonging to Mr Hudson’s firm Maitland Hudson. Mr Dempsey, a former partner in the firm, sent the documents to the SRA in 2013 before he resigned from the firm as he was concerned about how the firm was being managed. The following year, the SRA sent the documents back to Mr Dempsey to help him prepare a defence to a separate claim brought against him by Mr Hudson.

The SRA accepted that it was in breach of its duties to preserve the confidentiality of the information and use it only for the purposes of the investigation but denied that Mr Hudson had suffered any loss. In rejecting the SRA’s application for summary judgment, Chief Master Marsh said that there was “a compelling reason why this element of the claim should receive a full airing at trial” because “a careful and full review of the legal principles is highly desirable”. The outcome of the final hearing is awaited with great interest.

In Hudson, the concern was to preserve the confidentiality of documents relating to management of the practice. A much more common situation involves the confidentiality of client documents. The SRA often requests firms to disclose client files for the purposes of regulatory investigations. In addition, COLPs and COFAs when self- reporting material breaches provide copies of documents from client files to the SRA as evidence.

It is important to remember that firms are bound by the same duties of confidentiality in dealing with the SRA as if a third party had requested the client file. The rule firmly remains as set out in Outcome 4.1 of the Code of Conduct namely that “you keep the affairs of clients confidential unless disclosure is required or permitted by law or the client consents”

The consent of the client to use information or documents from the file both for the purposes of a regulatory investigation or a self-report to the SRA must be obtained in advance. If it cannot be sought because, for example, of time constraints the references to the client can be anonymised in the report and then documents provided at a later date when client consent has been obtained.

There is a widespread misapprehension on the part of the profession and on the part of the SRA that the very fact that the SRA is investigating means that it has a statutory power to require delivery up of client files. A frequent response from the SRA is that it is unlikely to start an investigation into a firm for breach of Outcome 4.1 as a result of a client complaint if the documents have been provided to the SRA itself. That is a misguided approach. The SRA would be obliged to investigate the complaint regardless of its own part in the disclosure of the documents. The confidentiality belongs to the client not the law firm or the SRA. There may be a number of reasons why a client would not want the SRA to see documents from its file. As the Hudson judgment demonstrates, complete discretion is not always guaranteed.

If, for whatever reason, client consent cannot be obtained, there is a simple solution. Firms should ask the SRA to serve a Section 44B Notice requiring disclosure of the documents from the client file. A Section 44B Notice is a statutory notice under the Solicitors Act 1974 and would fall within the definition in Outcome 4.1 that “disclosure is required or permitted by law”. This protects the firm against any complaint from the client.

The SRA’s strategy of being “risk-based” means that very few of the SRA’s complaints are self-generated as they once were when the SRA used to pay regular visits to firms. Those were the days when the SRA’s approach to regulation was that “prevention was better than cure”. Now the SRA is dependent upon external complaints whether from firms about former partners or employees or vice versa; from judges; from opposing parties or solicitors to litigation in addition to the regular stream from clients and self-reports. All of these external complaints raise issues of confidentiality in relation to the investigation itself and to the presentation of evidence before the SDT. It is an important responsibility for the SRA to keep in mind.

For firms, the narrower but nonetheless important point is to pause before engaging with the SRA and consider your duties of confidentiality to your client. Dealing with the SRA can be intimidating to say the least and in a fluster or panic, the fundamental principles of the solicitor-client relationship can sometimes be overlooked.

Jayne Willetts

Director of Infolegal
Solicitor Advocate at Jayne Willetts & Co Solicitors

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