The question of how appropriately to fund professional disciplinary proceedings remains contentious. This issue is currently at the forefront of the minds of the Accountancy and Actuarial Discipline Board (AADB), who published a consultation document in January seeking views on how disciplinary proceedings should be funded. This follows on from a significant adverse costs award arising from its investigation into Mayflower Corporation plc which took place in 2006, where the AADB was found liable for costs in the region of £1 million after allegations were found unproved against the Respondent. One can understand the AADB's concerns, and its wish to review the costs proceedings in its disciplinary scheme in light of this decision. How then should costs be dealt with in disciplinary proceedings?
In traditional civil litigation, in general terms, an award of costs follows a party's success, which leaves the situation relatively clear. However, disciplinary schemes are founded in the public interest, to ensure that professionals adhere to the standards of conduct expected of them, which distinguishes them from the discretionary nature of court litigation. A further distinguishing feature is that professionals have obligations (either contractual or statutory) imposed upon them when they become members of their professional bodies. There is a public interest in the regulation of the duties and obligations of members of such professional bodies. The fundamental question here is who should meet the costs of disciplinary proceedings, when it is alleged that these obligations have been breached?
Individual disciplinary schemes will differ on whether costs can be awarded, against which party they can be awarded, and how those costs will be calculated. In this article, we consider the question of what is the appropriate balance to be struck in this area, recognising the public interest function of professional regulators, as well as the interests and rights of the individual professional who is the subject of disciplinary proceedings. To what extent is it appropriate to ensure a level playing field between each of these interests?
The extent to which individual disciplinary schemes make provisions for costs differs substantially. In a medical context, it has historically been the case that costs will not be awarded, with the General Medical Council rules for Fitness to Practise proceedings being silent on the issue of costs.
On the other hand, certain schemes are very prescriptive when it comes to the issue of costs. For example, the disciplinary rules of the Institute of Chartered Accountants in Scotland (ICAS) make provision for a direction that the member pays the Institute a sum that shall be specified by ICAS, which will include the expenses of the investigation, the preparation for the Tribunal hearing, the hearing itself and any subsequent appeal. If an award of costs is made against the Respondent, this must be paid within 21 days. There is no provision for an award of costs against ICAS, should the Respondent be successful in defending the disciplinary case.
The Actuarial Profession takes a middle ground, in stating that the Disciplinary Tribunal Panel can make an award of costs against the Respondent or the profession, as it considers appropriate. Other schemes vary in their guidance on costs, but in general terms, costs are more readily awarded against a Respondent, with few cases of an award in a Respondent's favour when charges against them have not been ultimately upheld at a Tribunal hearing.
The current leading case which adjudicated upon this matter is that of Baxendale-Walker v Law Society (2007) EWCA Civ 233. In that case, the appellant solicitor appealed against a ruling upholding a decision of the Solicitors' Disciplinary Tribunal to suspend him from practice for three years and against an order requiring him to pay 60% of the costs incurred by the Law Society in the disciplinary proceedings. The Respondent argued that the decision to suspend him for three years was plainly excessive and the decision on costs was unjustified. The appellant's appeal was dismissed. It was held that 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 would not ordinarily be made against it on the basis that costs followed the event. The "event" was simply one factor for consideration, was not a starting point, and there was no assumption that an order for costs in favour of a solicitor who had successfully defeated an allegation of professional misconduct would automatically follow. It was emphasised that proceedings were brought in the public interest and for the maintenance of proper standards. For the Law Society to be exposed to the risk of an adverse costs order simply because properly brought proceedings were unsuccessful might have a chilling effect on the exercise of its regulatory obligations, to the public disadvantage. This decision clearly favours the regulator, when bringing a case against a Respondent in the public interest, to the detriment of the Respondent. The implications of the decision are that the Respondent will not necessarily be entitled to an award of costs even where he has been successful in refutting the charges laid.
Does this, however, create an inappropriately un-level playing field between an individual professional member and a regulator? Could it, for example, be argued that a Respondent's human rights are being breached as there is not 'equality at arms' as between the Respondent and the regulator?
Costs determinations arising in the context of professional disciplinary proceedings will usually form part of the determination of one's 'civil rights and obligations' for the purposes of Article 6 of the European Convention on Human Rights (the right to a fair trial within a reasonable timescale). Furthermore, Article 6 does guarantee the principle of equality of arms in relation to civil proceedings. The principle requires a fair balance to be struck between the parties so that each party is placed in a position such as not to be unfairly disadvantaged vis-a-vis his opponent (in this case, the regulatory body).
A Respondent has no alternative but to take part in proceedings (under the terms of their membership of their professional body, either contractual or statutory), in the knowledge that he is unlikely to be awarded his own costs because of the public interest arguments in favour of the regulator. On the other hand, the regulator faces a much lower costs risk, knowing that if successful it can recover its costs, and even if unsuccessful, it will be unlikely to pay the costs of the Respondent. The extent to which this point may arise will depend upon the scheme rules and the circumstances of the particular case. Ultimately, it is a point which may yet require to be tested by the courts weighing the requirements of fairness to the Respondent against recognition of the proper public interest functions of the regulator.
If you would like guidance on the issue of costs in regulatory proceedings, or on any aspect of your own disciplinary regime, please do not hesitate to contact Julie Matheson.