Lorrell v Solicitors Regulation Authority [2019] EWHC 981 (Admin)

In Lorrell v Solicitors Regulation Authority [2019] EWHC 981 (Admin), Mr Justice Martin Spencer allowed an appeal against sanction but dismissed the appeal against the findings of misconduct made by the Solicitors Disciplinary Tribunal on 5 July 2018. The Tribunal had struck Mr Lorrell off the roll and ordered him to pay costs of £35,700.

The Tribunal had found proved allegations that in May 2012 Mr Lorrell accepted instructions to act for Shoprite Limited where those instructions were in conflict with the interests of his client Ms Clutterbuck, or where there was a significant risk of such conflict, and where those instructions gave rise to a conflict with the interests of the firm or a significant risk thereof, thereby breaching Principles 3, 4 and 5 and Outcomes 3.4 and 3.5 of the Solicitors Code of Conduct 2011. The Tribunal also found that he had failed to act with integrity in breach of Principle 2.

Mr Lorrell, admitted as a solicitor in 2003, was instructed by Ms Clutterbuck in August 2011 in relation to proposed property litigation against Ms Al-Amoudi and Mr Nichol (deceased). The client care letter and conditional fee agreements of October 2011 made clear that advice on funding formed part of the retainer. In May 2012 it became necessary to secure funding and Mr Lorrell introduced Ms Clutterbuck to his longstanding client Shoprite Limited with a view to arranging a £300,000 loan secured against shares she owned in Kiloran Properties Limited, a Jersey company with a net value of approximately £1.3 million. The loan agreement, dated 20 June 2012, provided for an interest rate that worked out at 56 per cent. Clause 4.4 stated that Shoprite had retained Lorrells to advise it in respect of the loan and all aspects thereof including the drafting of the security agreement. Clause 4.5 stated that Lorrells had informed Ms Clutterbuck that they could not accept instructions from her or offer advice in respect of the loan or drafting and were acting solely for Shoprite. Clause 4.6 stated that she had been advised by Lorrells but had declined to seek independent legal advice. Shoprite were apparently longstanding clients for whom Lorrells did all their legal work.

The loan agreement was to be secured by a first priority security interest in Ms Clutterbuck’s shares in Kiloran and both the loan agreement and the execution of the security by Kiloran were needed to complete the transaction. On 20 July 2012 Ms Clutterbuck wrote to Kiloran pressing for the security agreement to be signed by 23 July so that funds could be drawn down for an urgent application on 26 July. In the letter she confirmed that she understood she risked losing the properties if she failed to repay the £300,000 plus £75,000 interest within six months. Counsel’s opinion obtained in January 2013 suggested that Ms Clutterbuck’s claim against Miss Al-Amoudi had prospects of about 66 per cent and was worth over £5 million. Shortly thereafter Ms Clutterbuck fell out with Mr Lorrell because Shoprite had not been repaid and proposed to foreclose. She terminated his retainer in April 2013. In July 2013 Shoprite instructed Lorrells to commence High Court proceedings for recovery of the loan. Ms Clutterbuck’s action against Miss Al-Amoudi was heard by Asplin J from July 2013 and judgment was handed down on 20 February 2014, disastrous for Ms Clutterbuck whose claim failed and whose evidence on important aspects was disbelieved. In September 2015 Ms Clutterbuck complained to the SRA, principally about missing money, which led to these disciplinary proceedings. In the meantime separate disciplinary proceedings had been brought relating to matters post-dating the events concerning Ms Clutterbuck, leading to a determination in August 2016 finding proved that Mr Lorrell had used or permitted the use of the client account inappropriately as a banking facility contrary to Rule 14.5 of the SRA Accounts Rules 2011 and had failed to act with integrity. He was suspended for three months and ordered to pay costs of £35,000.

In the hearing concerning Ms Clutterbuck the Tribunal heard evidence from her and from Mr Lorrell, who represented himself. The hearing lasted from 2 to 5 June 2018. At paragraph 66.42 of its determination the Tribunal found that it was not disputed that in May 2012 Ms Clutterbuck was a client of the firm in respect of litigation and that the firm drafted the loan agreement for Shoprite. The terms at clause 4.4 were clear that the firm was retained to advise Shoprite in respect of the loan and all aspects thereof. The conditional fee agreement stated the firm’s responsibilities included giving the client the best information possible about costs and different methods of funding. The client care letter stated the firm would advise on and investigate costs of an after-the-event policy and the possibility of a funder. The Tribunal noted that Mr Lorrell in his statement said he did not act for Ms Clutterbuck in respect of the loan but also said they had read through the agreement together, she reading it in his presence, and she understood exactly what it meant. In oral evidence Mr Lorrell confirmed they had read through the loan agreement together. The Tribunal considered this an example of the extent to which the firm was involved in funding issues and noted an email from James Swead of Lorrells to Ms Clutterbuck on Friday 20 July 2012 saying he had been trying to sort out funding that day and setting out funding options. The Tribunal found that Mr Lorrell could not cherry pick among his duties and subdivide his duty to advise on funding and give her the best advice, and that funding was clearly integral to his duties to Ms Clutterbuck. The Tribunal considered that in light of the documentary evidence and Mr Lorrell’s own evidence of how he conducted the loan matter, going through it line by line with her before she signed, clauses 4.4 and 4.6 had not applied in practice. What Mr Lorrell did and the documentation were consistent with acting for Ms Clutterbuck in the round, on the litigation and the loan agreement, the latter being part of the former.

At paragraph 66.44 the Tribunal found it was satisfied that Ms Clutterbuck and Shoprite were both clients of the firm in respect of the loan and that there was a client conflict or significant risk thereof. The conflict lay in their differing interests. The loan was intended to be short-term only and to be repaid, which raised the spectre of default where the clients would be pitched against each other. This meant the clients did not have a substantially common interest and the conditions in Outcome 3.6 did not apply. There was no informed consent from either Ms Clutterbuck or Shoprite. There was no evidence that it was reasonable to act and it could not be in both clients’ best interests. Mr Lorrell could not be satisfied that the benefits outweighed the risks. The Tribunal found proved that Mr Lorrell had accepted or caused acceptance of instructions to act for Shoprite where those instructions were in conflict with Ms Clutterbuck’s interests as alleged. The Tribunal considered Mr Lorrell had breached his obligation not to allow his independence to be compromised (Principle 3), to act in the best interests of each client (Principle 4), and to behave in a way that maintains public trust (Principle 6). He had breached Outcome 3.5 and acted where there was a client conflict and the exceptions in Outcome 3.6 did not apply. The Tribunal found allegation 1.1.1 proved in respect of accepting instructions from Shoprite on the loan but did not find it proved in relation to enforcement proceedings.

In relation to allegation 1.1.2 the Tribunal noted paragraph 4.2 of the loan agreement and found this gave Mr Lorrell an interest in the loan by way of recovering fees already incurred. The litigation could not go on without the loan so the firm had an interest in it going forward. The firm also earned a fee from Shoprite for the agreement; the fact that the fee was £2,000 which Mr Lorrell deemed modest did not undermine his own client conflict. The Tribunal found allegation 1.1.2 proved in respect of accepting instructions to act for Shoprite in respect of the loan, constituting a breach of Principles 3, 4 and 6 and Outcome 3.4, but did not find it proved in respect of enforcement.

The Tribunal turned to allegation 1.5 and failure to act with integrity, referring to Wingate and Evans and subordinating client interests to the solicitor’s own financial interests. The Tribunal found Mr Lorrell had behaved in a cavalier fashion in the firm taking instructions from Shoprite regarding its loan to Ms Clutterbuck. He had preferred the interests of Shoprite over Ms Clutterbuck. He did not advise her of the risks including an interest rate of 56 per cent. There was an alternative, to pay the firm £15,000 plus VAT for immediate counsel’s fees for an imminent hearing, but no advice was given about that. There was no evidence she was advised to seek independent advice and on Mr Lorrell’s own evidence she was not. Mr Lorrell merely relied on clauses in the loan agreement stating she had been so advised. Mr Swead’s letter on the Friday before the hearing presented just two stark choices: take the loan or make a cash payment. Mr Lorrell sought out the loan arrangement and Ms Clutterbuck was encouraged to go into it. The Tribunal took no view on her allegation she was bullied but in any event Mr Lorrell allowed her to go ahead with the loan which benefitted the firm because it enabled the litigation to continue and was favourable to a longstanding client. The Tribunal considered Mr Lorrell had failed to adhere to the ethical standards required and found allegation 1.5 proved, that he had failed to act with integrity in respect of allegation 1.1.

In mitigation Mr Lorrell submitted his actions had been taken after discussion with another experienced lawyer, the benefit to the firm had been minimal (£2,000 for drafting), Ms Clutterbuck would have gone ahead with the loan and the firm would have received the fees had she received independent legal advice so this was not a case of deliberate misconduct to obtain a windfall, he had made a judgement call which had been wrong but it was not misconduct over a period, no vulnerable person had been involved, and there had been no attempt at concealment. In its decision on sanction the Tribunal found that despite mitigation Mr Lorrell had caused harm in that the client entered into a loan with a punitive rate of interest without advice and ended up in default. It found he had displayed a cavalier attitude in relation to the effect on the client of his behaviour, which was an aggravating factor as was the fact he had acted in this way over a period. He ought reasonably to have known he was in material breach of his obligations to protect the public and the reputation of the profession. The Tribunal considered there were no relevant mitigating factors. Mr Lorrell’s actions had been a classic example of a solicitor departing from the complete integrity, probity and trustworthiness expected with commensurate harm to the profession’s reputation, and he had acted in this way on more than one occasion as the previous tribunal experience showed. Despite that experience he had not displayed any insight into his misconduct at this hearing. His demeanour towards the Tribunal was as cavalier as that towards his client. He viewed the findings as a difference of opinion with the Tribunal preferring its judgement to his. It had been suggested he was incompetent but the Tribunal disagreed; he was competent as a lawyer but disregarded the interests of his client as he saw fit.

The Tribunal found the matter too serious for no order, reprimand or fine. There was no indication that restrictions or further suspension would prevent Mr Lorrell, currently practising as a barrister, from acting in the same way again if he decided to return to practise as a solicitor. Dealing with client or own client conflict was an important part of a solicitor’s role and vital to protecting clients whether vulnerable or sophisticated; any client needed to be fully and properly advised on their options; this client had been operating under the pressure of costly and complex litigation with imminent deadlines. The Tribunal determined that for the protection of the public and the reputation of the profession Mr Lorrell must be struck off. He was also ordered to pay costs of £35,700.

The Notice of Appeal was filed 21 days out of time but Martin Spencer J granted an extension, satisfied that the serious illness of Mr Lorrell’s father at a critical time had impeded his ability to deal with the appeal, particularly as he had represented himself before the Tribunal. There was no suggestion of prejudice to the Respondent. The Judge was compellingly convinced Mr Lorrell had a genuine and justifiable reason for failing to comply with the time limit. The Judge emphasised that had he considered Mr Lorrell’s approach to the appeal was in the same category as his approach to the original hearing (where with a hearing starting 12 December 2017 he had arranged to return from holiday on a flight which when delayed meant he could not appear before late afternoon with the loss of one day) he would not have countenanced relief from sanction.

There were five grounds of appeal. Grounds 1 and 2 related to sanction. Grounds 3, 4 and 5 related to findings of misconduct. Ground 3 alleged irrationality in making contradictory findings regarding information provided. Mr O’Sullivan contrasted paragraph 66.42, which referred to Mr Swead’s email setting out two funding options (to get Kiloran to sign documentation over the weekend so the Shoprite loan could be drawn down or otherwise provide £18,000 to the firm), with paragraph 66.48, which stated there was an alternative to pay the firm to cover immediate needs only, £15,000 plus VAT for counsel’s fees for an imminent hearing, but no advice was given about that. Martin Spencer J held it was clear that in paragraph 66.48 the Tribunal was referring not to failure to give advice about the existence of the option of paying £18,000 but the merits of that option as opposed to drawing down the loan. On that basis there was no contradiction and no merit in the argument.

Ground 4 alleged error of law in interpretation of the loan agreement, submitting it was no part of the retainer to provide advice on litigation funding. Mr O’Sullivan submitted there was no express retainer in respect of advice as to risks of a loan or other agreement to obtain funds, nor should such a retainer be implied. Ms Clutterbuck was sophisticated and well-versed in legal transactions, particularly involving finance and property, having been engaged in the business of acquiring, refurbishing, letting, selling and financing development of properties in central London since 1985. She was used to dealing with complex legal matters of high value. Whilst Mr Lorrell was acting in the main action he was not, on the face of the loan agreement, acting for her in respect of the loan and it was enough to

Council for the Regulation of Health Care Professionals v General Medical Council and Ruscillo [2005] 1 WLR 717
Newfield v Law Society [2005] EWHC 765
The Law Society v Salsbury [2008] EWCA Civ 1285, [2009] 1 WLR 1286
Bolton v The Law Society [1994] 1 WLR 512
Wingate & Evans v Solicitors Regulation Agency [2018] EWCA Civ 366, [2018] 1 WLR 3969

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