UK: Lack Of Integrity

Two judges in the Administrative Court have recently reached conflicting decisions on the issue of whether integrity is synonymous with dishonesty and so cast doubt on the legal test to be applied by regulators in considering allegations of lack of integrity. The requirement to act with integrity is a feature of most professional codes of conduct but few contain much, if any, guidance on what this means. The concept has, however, been considered by the courts in the context of appeals from regulatory decisions over recent years and various principles set out.

Background

The early cases arise from the Financial Services and Markets Tribunal in a number of matters involving financial advisers.  The starting point is Hoodless & Blackwell v FSA (2003) which described the test as follows:  "In our view "integrity" connotes moral soundness, rectitude and steady adherence to an ethical code. A person lacks integrity if unable to appreciate the distinction between what is honest or dishonest by ordinary standards".  This was, therefore, a purely objective test and differed from the dishonesty test, which in the regulatory context, required both that the conduct in question is dishonest by the standards of reasonable and honest people and that the respondent must have realised that his or her conduct was dishonest by those standards (the Twinsectra test).

The Hoodless definition was adopted by the Tribunal in subsequent cases. However, at the same time many also cautioned against attempting to formulate a comprehensive test for integrity, which was described in Vukelic v FSA (2009) as "a concept elusive to define in a vacuum but still readily recognisable by those with specialist knowledge and/or experience in a particular market".

A similar approach has been adopted in cases before the Administrative Court involving solicitors. For example, In SRA v Chan (2015) Lord Justice Davis shied away from defining integrity, stating "In my view, it serves no purpose to expatiate on its meaning. Want of integrity is capable of being identified as present or not, as the case may be, by an informed tribunal or court by reference to the facts of a particular case".

That sentiment was approved in Scott v SRA (2016), where Lady Justice Sharpe found in any event that the appellant lacked integrity on either the Chan or the Hoodless approaches and also confirmed that a lack of integrity and dishonesty are not synonymous terms.

The position appeared, therefore, to be reasonably settled. However, two contrasting judgments in recent months concerning allegations of lack of integrity in solicitors' cases have created uncertainty as to the correct test to be applied.

Deirdre Newell Austin v SRA (2017)

Ms Newell-Austin was the former sole principal of Austin Law. In early 2013, she wanted to cease practice but could not afford the run-off cover. She took on 2 new partners, one solicitor and one Registered Foreign Lawyer, who were recruited in highly unorthodox circumstances, and applied for permission to practise as a partnership. She also employed a number of non-admitted members of staff, to whom she effectively ceded control of the practice.

Shortly after, it came to light that the firm had acted for the purported seller in a fraudulent conveyancing transaction. One of the intended new partners was arrested and interviewed by the police in connection with the transaction and, although he was not charged with any offence, Ms Newell-Austin excluded him from the office from that point. She did not, however, inform the SRA, who was still dealing with the partnership application.

The partnership was granted authorisation on 26 June 2013. One week later, Ms Newell-Austin resigned from the practice.

Three days after Ms Newell-Austin's resignation, the SRA was alerted to concerns about a conveyancing transaction undertaken by the firm, following which it intervened in the practice. It soon came to light that the firm had been involved in a number of fraudulent conveyancing transactions between April and July 2013.

The SRA successfully prosecuted the three partners, who were all struck off.

As far as Ms Newell-Austin was concerned, the SDT alleged that she had acted without integrity in relation to two of the allegations against her, namely:

  1. that she had permitted or acquiesced in the firm's involvement in the fraudulent conveyancing transactions; and
  2. that she had failed to carry out her role in the conduct and supervision of the firm effectively and, in particular, had failed to supervise the non-admitted members of staff and had allowed improper withdrawals from client account.

She was also alleged to have acted dishonestly in relation to the first allegation, but not the second.

The SDT found that Ms Newell Austin had acted without integrity in relation to both of these allegations. However, while her actions fell woefully short of what she ought to have done, she was not found to have acted dishonestly because the SDT was not satisfied beyond reasonable doubt that reasonable and ordinary people operating ordinary standards would find her actions to have been dishonest. The objective limb of the Twinsectra test was therefore not satisfied.

Ms Newell-Austin appealed against the SDT findings that she had lacked integrity. She claimed that the Tribunal had applied the wrong test by failing to give proper consideration to her intentional state of mind. She also suggested that the finding that she had failed to act with integrity was inconsistent with the finding that her conduct did not amount to objective dishonesty.

Mr Justice Morris reviewed the authorities and concluded as follows:

  1. The following principles can be derived from the cases regarding the meaning of lack of integrity:

    • Integrity connotes moral soundness, rectitude and steady adherence to an ethical code.
    • No purpose is served by seeking to expatiate on the meaning of the term. Lack of integrity is capable of being identified as present or not by an informed tribunal by reference to the facts of a particular case.
    • Lack of integrity and dishonesty are not synonymous. A person may lack integrity even though not established as being dishonest.
  2. The legal test for dishonesty in SDT proceedings is the combined test in Twinsectra: namely the conduct must be found to be dishonest by the standards of reasonable and honest people and the respondent must have realised that by those standards his or her conduct was dishonest. By contrast, the test for lack of integrity is purely objective and there is no requirement that the respondent must subjectively realise that his or her conduct lacks integrity. This is consistent with the passage in Hoodless (approved by Scott) stating that "a person lacks integrity if unable to appreciate the distinction between what is honest or dishonest by ordinary standards". It is inherent in that analysis that there is no requirement that the person himself must have an appreciation of the lack of integrity.
  3. However, a person's state of knowledge or intention in relation to the underlying conduct is a relevant consideration in assessing whether he or she lacked integrity. At one end of the scale, there can be no lack of integrity if a person is not aware of the relevant conduct. At the other extreme, actual knowledge and recklessness, in the sense of being aware that the conduct posed a risk and consciously taking it, will be highly likely to give rise to a finding of lack of integrity. However, lack of integrity does not necessarily involve risk taking and there is no requirement of any recklessness.

It appeared, therefore, that the approach to be taken on cases involving lack of integrity had been confirmed and that no doubt remained that this was a purely objective test.  This potentially left the door open to the SRA to rely on allegations of lack of integrity instead of (or in addition to) dishonesty in order to circumvent the obvious difficulties in proving the subjective element of the dishonesty test. While a finding of a lack of integrity does not carry with it the near inevitability of striking off, it is still open to the SDT to strike off in serious cases involving lack of integrity and, therefore, this approach would ultimately be likely to improve the SDT's chances of securing that outcome in appropriate cases. Therefore, the pursuit of allegations of a lack of integrity rather than dishonesty, which already appeared to be finding favour with the SRA in recent times, seemed likely to continue.

John Michael Malins v SRA (2017)

However, doubt has now been cast on this in the judgment of Mr Justice Mostyn handed down subsequently in the John Michael Malins case.

Mr Malins acted for the claimant in a building dispute.  He obtained an ATE policy for his client but failed to serve the appropriate notice on the defendant's solicitors, as a result of which the premium would not be recoverable from the defendant.

On discovering his error, Mr Malins created a backdated notice of funding and a covering letter, which he sent to the defendant's solicitors and then relied on and/or allowed others in his firm to rely on in seeking to recover the ATE premium from the defendant in settlement negotiations.

The SRA alleged before the SDT that Mr Malins had acted dishonestly regarding the deployment of the documents but not in their creation, in relation to which he was accused of acting without integrity but not dishonestly. The SDT found Mr Malins guilty of all the charges and struck him off the Roll. His appeal against those findings was successful.

In contrast with the earlier decisions, Mr Justice Mostyn found that:

  1. Dishonesty and lack of integrity are the same; and
  2. Both require to be proven to the same standard, including the subjective element.

He concluded that the approval by Sharp LJ in Scott of the Hoodless definition meant that the legal and dictionary definitions of the words honesty and integrity are aligned and synonymous. This explained why the SRA principles do not additionally require a solicitor to act with honesty:  because it is the same thing as integrity. Mostyn J also found that want of integrity and dishonesty must be proved to the same standard.

Behind this decision appears to have been a concern that the SRA might, by relying on lack of integrity rather than dishonesty, avoid the strict requirements regarding both pleading and proving dishonesty. Thus, he stated that if an objective test were to be applied, "the SRA could side-step the requirement of proving the subjective element of dishonesty in any case by the simple expedient of charging the same facts as want of integrity". 

Comment

So where does this leave us on understanding the meaning of "integrity" in the context of disciplinary matters?

We understand that an application to appeal the Malins judgement has been filed. In the meantime, faced with these two contradictory decisions in judgments handed down approximately one month apart, there must be uncertainty as to how the SDT will approach allegations of lack of integrity  and which of these two approaches will be preferred.

There may well also be implications in terms of how the SRA will frame its allegations. If the Malins decision is preferred, it will no longer be open to it to take the easier route of alleging lack of integrity rather than dishonesty and, given the alignment of these two concepts, the concept of "lack of integrity" would appear to have no real relevance in disciplinary proceedings. In those circumstances, it is possible that the SRA will look for some other approach to try to find a way around the difficulty of proving dishonesty.

Lack Of Integrity

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions