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IN THE MATTER OF THE SOLICITORS ACT 1974 Case No. 10726-2011
BETWEEN: SOLICITORS REGULATION AUTHORITY and ANDREW JONATHAN CROSSLEY ______________________________________________ Before: Mr J N Barnecutt (in the chair) Mr R Nicholas Mrs L McMahon-Hathway Respondent Applicant
Date of Hearing: 16th January 2012 ______________________________________________ Appearances Peter Steel, Solicitor, Capsticks Solicitors LLP, 1 St George’s Road, Wimbledon, London SW19 4DR for the Applicant. The Respondent appeared in person
2 Allegations 1. The allegations against the Respondent were that:-
Contained in a Rule 5 Statement dated 11 March 2011 1.1 In breach of Rule 1.03 of the Solicitors Code of Conduct 2007 ("the SCC") allowed his independence to be compromised; In breach of Rule 1.04 of the SCC the Respondent acted contrary to the best interests of his clients; In breach of Rule 1.06 of the SCC, the Respondent acted in a way that was likely to diminish the trust of the public places in him or in the legal profession; In breach of Rule 2.04(1) of the SCC, the Respondent entered into arrangements to receive contingency fees for work done in prosecuting or defending contentious proceedings before the Courts of England and Wales except as permitted by statute or the common law; In breach of Rule 3.01 of the SCC, the Respondent acted where there was a conflict of interest in circumstances not permitted under the Rules, in particular because there was a conflict or significant risk that the Respondent's interests were in conflict with those of his clients and; In breach of Rule 10.01 of the SCC, the Respondent used his position as a solicitor to take or attempt to take unfair advantage of other persons, being recipients of letters of claim either for his own benefit or the benefit of his clients; [Withdrawn]
Contained in a Rule 7 Statement dated 3 November 2011 1.8 In breach of Rule 1.06 and 5.01 (1) (g) of the Solicitors’ Code of Conduct 2007 (“the SCC”) he failed to take adequate steps to ensure that appropriate technical and organisational safeguards were in place at his firm to protect against the accidental loss of personal data and documents.
Documents 2. The Tribunal reviewed all the documents submitted by the Applicant and the Respondent which included:
Applicant: • • • • • Application dated 11 March 2011; Rule 5 Statement dated 11 March 2011 and Exhibit PS1; Rule 7 Statement dated 3 November 2011 and Exhibit PS2; Statement of IMR dated 20 July 2011; Statement of GC dated 18 June 2011;
3 • • • •
Statement of APS dated 30 June 2011; Statement of CES dated 1 August 2011; Supplemental bundle including expert report from Primary Key Associates Ltd dated 30 August 2011; Applicant’s written opening submissions; Statement of Costs dated 12 January 2012.
Respondent: • • • • Respondent’s trial bundle; Respondent’s statements and testimonials bundle; Respondent’s opening synopsis; Letters to DF dated 8 October 2010, 11 November 2010 and 22 November 2010.
Preliminary Matter 1 3. Mr Steel, on behalf of the Applicant, made an application under Rule 11 (6) of the Solicitors (Disciplinary Proceedings) Rules 2007 to withdraw allegation 1.7 against the Respondent with the consent of the Tribunal. He told the Tribunal that in light of further evidence that had been supplied by the Respondent, the Applicant accepted that the letters describing the Respondent’s client MCAT as a “copyright protection society” and as the exclusive territorial licensee of rights granted by the copyright owner, although misleading, were not deliberately so and could not fairly be described as a breach of the Code. In addition, Mr Steel told the Tribunal that it had become clear from documents that were not in the Applicant’s possession at the time that the Rule 5 Statement was drafted that the Respondent’s client MCAT did not intend to bring further claims and MCAT’s new campaign of letter writing using a company known as G Ltd had been abandoned. This meant that the information contained within the Respondent’s witness statement dated 24 January 2011 had been accurate as he understood it at the time. The Applicant had felt it right to withdraw the allegation against the Respondent as soon as the further evidence had become available. The Tribunal consented to the withdrawal of allegation 1.7 against the Respondent.
Preliminary Matter 2 6. The Tribunal was told by Mr Steel that the Respondent had now made admissions in relation to all of the remaining allegations save for allegation 1.8 which remained to be determined by the Tribunal. This had been confirmed by the Respondent in his opening synopsis.
Factual Background 7. The Respondent was born on 7 September 1963 and admitted as a solicitor in 1991. His name remained on the Roll of Solicitors. From February 2006, he practised on his own account under the style of ACS:Law ("the firm"). The firm subsequently closed in or about February 2011.
4 Allegations 1.1-1.6 8. In or around 11 May 2009, the Applicant became aware from articles appearing on the internet that the firm was acting in a number of proposed claims against members of the public who were accused of having breached copyright by unlawfully sharing copyrighted material in the form of either music, films or video games via the internet. The Applicant had been investigating the conduct of another firm of solicitors ("Firm A") arising out of essentially the same activities. The Applicant commenced an investigation at the firm on 11 June 2009 which resulted in the preparation of a Casework Investigations and Operations Report dated 6 May 2010. ("the Report”).
P2P File Sharing 10. When an individual decided that he or she wished to access or obtain a computer game, film or such other material, he or she could acquire the item by purchasing it from a retail outlet, or by legally downloading it on the internet or by accessing the item illegally through a file sharing website, also known as a Peer to Peer (“P2P”) website. At all material times there were two main P2P websites which were EMule (or EDonkey) and BitTorrent.
IP Addresses and Tracking Illegal File Sharing 12. Whenever an individual gained access to the internet from a computer, he or she would do so via an internet protocol (“IP”) address. An IP address was usually a 12 digit number and IP addresses were "dynamic" and changed from time to time. If an individual, a household, houses or blocks of flats had computers in them with wireless access to the internet, it was possible for persons who were not the holders of a particular IP address to gain access to the internet through the IP address of a particular individual and to use such access to upload material. It was also possible for a malicious third party to assume control of an individual's computer using a "Trojan virus". Between 2006 and 2009 Firm A had developed and pursued a scheme for recovering compensation on behalf of copyright holders whose copyright works had been shared in breach of copyright via the internet. The process involved the obtaining of a Norwich Pharmacal order from the Court requiring an Internet Service Provider ("ISP") to divulge the name and address of a person whose IP address appeared to have been used for the downloading of a computer game or other material subject to copyright, in breach of copyright, and/or the uploading of such a game or other material on to a P2P website.
Transfer of the claims to ACS: Law 15. Firm A transferred the work relating to four of its clients to the Respondent under an Agreement dated 3 April 2009. The Agreement stated amongst other things:-
• • • • •
The handover date for transfer of the work would be 1 May 2009; The file sharing team would continue working at Firm A during the transitional phase until the process was "bedded down" at the firm; Firm A relinquished any claim for payment of fees or work in progress in respect of the cases following the "handover date"; All cases for Firm A's existing clients (T, DP, RP and T2) would be transferred to the firm from the "handover date"; The firm was permitted to use template letters, precedent paragraphs and other related intellectual property that Firm A had created as part of the business; Firm A would retain conduct of any existing litigation cases. In relation to the 13 or so litigation cases about to be issued, these could be transferred to the firm with the approval of the clients; Firm A gave no "warranties, indemnities or other assurances" in relation to the "accuracy, content, fitness for purpose or otherwise" of the intellectual property developed by firm A for the business. The agreement stated "Should you be in any doubt in relation to this, we recommend that you form your own view (and if necessary, take your own independent legal advice)” Firm A would send a letter to each existing recipient of one of their letters of claim confirming that they were handing the case over to the firm; there were an estimated 450 "live" cases at that point; and The Transfer of Undertakings (Protection of Employment) Regulations 2006 applied to the existing Firm A members of staff dealing with the file sharing work.
The four clients of Firm A who transferred their instructions to the Respondent to pursue claims on their behalf were: • • • • TII (“T”); DPGzSDMM (“DP”); RP SP. Z.O.O (“RP”); T SP. Z.O.O (“T2”).
After taking over the conduct of the scheme from Firm A in May 2009, the Respondent obtained two further clients namely:
6 • • MCAT; and YP
These six clients were referred to as “the clients” by the Applicant. 17. The Respondent used four companies to provide material to him from the monitoring of internet addresses. The four companies were L AG (“L”), DS GmbH (“D”), NG3 S (“NG”) and E. These companies accessed P2P sites and, acting as fictitious users (or peers), pretended that they wished to access copyrighted material. The companies used their software to make connections with individuals who indicated that they had data (or part of it) available to be downloaded onto the companies’ computers. The companies would then register the download and compare it with the original material in order to see whether it was copyrighted. The company L provided the Respondent with the data of alleged infringers in relation to the clients T, RP and T2. The company D provided the Respondent with data of alleged infringers relating to the client DP, the company NG provided the data about alleged infringers relating to the client MCAT and the company E provided the data in respect of potential claims by the client YP. On 13 May 2009, the Respondent wrote to the Applicant to confirm that; • • • He had taken over and issued 1,700 Letters of Claim on behalf of RP, T and T2; He was also retained by DP and would be issuing a further 5,200 Letters of Claim; His firm would be making new applications to Court for orders for disclosure of IP address owner details in respect of further identified alleged copyright infringements; The firm would not be assuming conduct of the files where there were ongoing legal actions; The firm had "received the computer management systems operated by the clients to enable us to properly and adequately manage this work and the accounting system that was created specifically for this work has also been passed to my firm”; and The firm had inherited staff from Firm A under the TUPE Regulations.
The ACS: Law Process 19. The system operated by the firm was similar to that operated by Firm A between 2006 and 1 May 2009. The Respondent entered into agreements with the clients whereby he would share the sums recovered by writing letters of claim to alleged infringers in varying percentages with them and with the monitoring companies.
7 20. The firm would obtain a Norwich Pharmacal Order to require ISP's to disclose to the firm the name and address of customers who had been allocated the IP addresses that the monitoring companies L/D/NG/E had identified as used in the P2P file sharing. Once in possession of the names and addresses of alleged infringers, the firm would prepare and send Letters of Claim. The documentation and evidence provided to an alleged infringer Mrs B consisted of:• • • • • 22. A Letter of Claim dated 8 June 2009 demanding that Mrs B pay compensation of £500; A statement report detailing, amongst other things, the name of the ISP and the IP address; A copy of the relevant section of a spreadsheet sent to the ISP in relation to Mrs B's IP address and the spreadsheet received in return; A document requiring Mrs B to give an undertaking; A payment form.
During an investigation visit to the firm on 11 June 2009, the Respondent confirmed that while, for the first two months of operation, he and his staff had relied on the expertise and business model prepared by Firm A, he had made stylistic changes to some of the letters that Firm A had prepared, amending them, for instance, to remove the reference to an administration fee of £10 where alleged infringers offered to pay by instalments.
The Clients RP 23. The client RP claimed that it owned the copyright in a computer game called "TW”. The client had previously instructed Firm A. In common with the other clients, RP had received the following correspondence from the firm at the outset of the retainer: • • • A letter entitled "File Sharing – An Overview" A retainer letter for non- contentious work A retainer letter for contentious work incorporating a collective conditional fee agreement ("CCFA")
The only exception to this was the client DP who did not apparently receive the letter entitled "File Sharing - An Overview". 24. During an inspection visit on 11 June 2009, the Respondent confirmed that the letters sent to the original four clients (RP, T, DP and T2) had been prepared by Firm A. The retainer letters for the firm's new clients (MCAT and YP) had been prepared by TT
8 who was a paralegal in the firm. effectively the same. The File Sharing-An Overview letter 25. The letter entitled "File Sharing - An Overview" described the procedure for obtaining names and addresses from ISPs and for sending Letters of Claim under the heading "Non- Contentious Work". The letter stated that a Court Order was required to compel the ISPs to disclose the names and addresses of alleged infringers. The obtaining of the Norwich Pharmacal Order was described as contentious work which would be covered by the "Contentious Retainer". The letter also set out that monies collected from infringers would be shared out in accordance with the "revenue sharing agreement". The clients would be invoiced for the firm's professional fees equivalent to the share of the proceeds due to the firm under the “revenue sharing agreement”. The letter also explained the various types of contentious work involved in the proceedings, which were described further in the contentious retainer letter. The letters sent to each of the clients were
The non-contentious retainer letter 27. The non-contentious retainer letter for RP (as for the other Clients) described the noncontentious work required for the scheme. This included: • • • • Analysing the intellectual property rights in the copyrighted works and confirming the ownership of those rights; Obtaining an expert's report from forensic IT experts to identify the ISP and IP addresses for each uploader; Preparing a letter to each ISP to request involuntary disclosure of the identity of each uploader in question; and Preparation of a Letter of Claim to each uploader identified together with contractual undertakings. The letter specifically excluded the work necessary to obtain a Norwich Pharmacal Order and the issuing of court proceedings against any uploader.
The letter also indicated that the firm would receive a percentage of the net recoveries, defined as: “… the amount of damages and costs claimed in each Letter of Claim (see below) and recovered from each uploader to whom a letter of claim is sent, less: 1. applicable disbursements... including a court fee (currently £70) in respect of the Norwich Pharmacal application obtained against all ISP’s (in other words only one court order should be necessary in respect of one batch or "phase" of data sent to us by your company on any one occasion);
9 2. each ISPs reasonable administrative and legal costs of complying with the Norwich Pharmacal Order...” RP would be required to pay a one-off payment for set-up costs of £2,500. The firm would account to its client for net recoveries “quarterly by phase of data (ie. any one data drop by L ("Phase")) to commence after a minimum of £10,000 of Net Recoveries is available for distribution.” 29. In addition, the letter also agreed the amount of costs and damages that would be claimed in the Letter of Claim to each infringer. In the RP letter, £600 was to be claimed in respect of films or games and £500 in respect of a musical work. The letter indicated that the "business model" adopted by the firm would only be effective if a minimum number of 2,500 unique IP addresses were obtained and it reserved the right of the firm not to issue Letters of Claim if the number of unique IP addresses obtained was beneath that figure. The letter also contained an agreement by RP that a minimum of 5 and up to 100 test cases per annum could be brought in the form of taking proceedings against alleged infringers. It stated: "This should have the effect of substantially increasing the recovery rate of payment in any Phase and is therefore an important part of the process". 31. The letter set out the share of the net recoveries between each of the parties. In the case of RP, the client was to receive 25% of the net recoveries, the firm was to receive 42% and the monitoring firm was to receive 33%. The letter also referred to the preparation of Letters of Claim and the bringing of test cases. During an interview with the IO on 16 February 2010, the Respondent was asked to comment as to whether his non-contentious retainer letter which referred to fees being paid as a percentage of the "net recoveries" was compliant with section 58 of the Courts and Legal Services Act 1990. This section referred to Conditional Fee Agreements (CFAs) and stated that a CFA was an “Agreement with a person providing advocacy or litigation services which provides for his fees and expenses or any part of them to be payable only in specified circumstances”. Section 119 of the same Act referred to “litigation services” as “any services which it would be reasonable to expect a person who is exercising or contemplating exercising a right to conduct litigation in relation to any proceedings or contemplated proceedings to provide”. The Respondent indicated that he did not consider that the non-contentious retainer letters were unenforceable CFAs as the costs/damages figure was a "compromise" that his clients were willing to accept in order to settle the claim. In a letter to the Applicant dated 11 August 2009, the Respondent stated: "Our client's offer of compromise is not a precise calculation (although the ISP charges have been calculated quite precisely, based on the administrative and legal costs levied upon us by the ISP in question). We are of the firm opinion that damages and costs are likely to be much greater than the sum offered in the compromise if the matter proceeds to court and our client succeeds in its claim. It is nevertheless the sum that our client has instructed us to settle its claim early in order to avoid legal proceedings".
The Respondent's letter explained that the figure claimed against each uploader in the Letter of Claim included a combination of factors, namely damages, out-of-pocket expenses and legal costs including damages for claims for the lost sales of the client's copyrighted work. The letter confirmed the amount of damages related to the uploading of the work and making it available to "potentially thousands of people".
The contentious work retainer letter 35. The contentious retainer letter which was signed by RP on 1 May 2009 contained the following features which were common to the contentious retainer letters sent to all the clients: • • • • • • • • • • obtaining a disclosure order from the court to compel ISPs to release the names and addresses; challenging any order for costs made against ISPs; commencing proceedings against file sharers, including the issuing of proceedings in an amount determined by the Respondent; preparing applications for and obtaining default judgments; drafting and filing defences to any counterclaims made by Defendants; drafting and filing consent orders to withdraw the claim; attending court on applications for summary judgments; preparing for and attending hearings in relation to an enquiry as to damages; preparing papers for enforcement of damages and/or costs including instructing a bailiff; “In rare cases, preparing for and attending a trial. We do not presently anticipate (but cannot guarantee) that more than 1- 2 cases would go to trial in a sample of about 100 test cases, so the risk is low" and appealing any decision made by the court against the Claimant arising from the claim made against an infringer.
The letter also included the CCFA, which in the case of RP set out the firm's hourly rate at Schedule 1 and at Schedule 2 explained: "The pursuit of claims for infringement of copyright against file sharers is a novel innovation in litigation and is not established in the English Courts." The success fee was expressed in the agreement to be:
"eighty percent (80%) of the Basic Charges, should the matter be successfully concluded without the need for a final trial. If the matter is not concluded more than 3 months prior to the final trial, then the Success Fee shall thereafter be one hundred per cent (100%)”. For the client YP, the letter expressed the success fee as 75% of the Basic Charges if the matter was concluded without the need for a trial. 37. As at 28 April 2010, the Respondent reported that he had recovered and paid out the following amounts on behalf of RP:Name of Client Money Recovered £34,866.90 Paid to Client Paid to Monitoring Company £4,645.28 Paid to Firm
RP T 38.
The client T was said to be the copyright holder for a computer game called "DP 3D”. The retainer letters were signed by the client on the 1 May 2009. The non-contentious retainer letter for T set out the share of the net recoveries between the parties as 25% to T, 42% to the firm and 33% to the monitoring company. The costs and damages agreed with T were £600 for films and games and £500 for music. As at 28 April 2010, the amounts recovered and paid out on behalf of T were as follows:Name of Client Money Recovered £68,127.47 Paid to Client Paid to Monitoring Company £10,881.48 Paid to Firm
T T2 40.
The client T2 was said to be the copyright holder for the game called "C of J”. The client care and retainer letters appeared to have been signed by the client on or about 5 May 2009. The non-contentious retainer letter set out the share of the net recoveries between each of the parties as 33% to T2, 42% to the firm and 25% to the monitoring company. The amount of costs and damages that were to be claimed was agreed at £600 for films and games and £500 for music files. As at 28 April 2010, the amounts recovered and paid out on behalf of each of the clients was as follows:Name of Client Money Recovered £22,474.85 Paid to Client Paid to Monitoring Company £590.00 Paid to Firm
DP 42. The client DP claimed that it had acquired a number of "rights owners" whose products had been violated by file sharing systems. The work involved included films, music and pornography. On or about 4 May 2009, DP entered into a retainer with the firm as recorded in letters dated 1 May 2009. The share of the net recoveries for each of the parties was 50% to DP, 37.5% to the firm and 12.5% to the monitoring company. The non-contentious retainer letter in fact expressed the share due to the firm as 50% of the net recovery of which 12.5% would be paid to DP. The amount of costs and damages claimed on behalf of DP was agreed in the sum of £700 for films and games and £500 for music files. As at 28 April 2010, the amounts recovered and paid on behalf of DP were as follows:Name of Client Money Paid to Client Paid to Monitoring Paid to Firm Recovered Company D MCAT 44. The company MCAT was owned and operated by an existing client of the Respondent named LB. The Respondent explained to the Applicant during interview on 16 February 2010 that he had approached Mr B to propose a scheme whereby copyright owners that Mr B knew could avail themselves of the Respondent's business model in seeking compensation in copyright claims. The Respondent explained to the Applicant that Mr B in effect signed up copyright owners and his firm MCAT would then pursue alleged infringers on their behalf and distribute proceeds to the copyright holders thereafter. The retainer letters with MCAT were dated 1 August 2009. The agreed split of the net recoveries between the parties was 35% to MCAT, 52.5% to the firm and 12.5% to the monitoring company. The amount of costs and damages that it was agreed should be claimed was £400 for films and the same amount for music files. During interview on 16 February 2010, the Respondent was asked how he arrived at this figure for costs and damages. He responded: "It is under instructions from the client. There was again a lot of thought gone into that and in fact we have actually sent I think what is 100 or so letters out so far. We have got actually about 2500 letters. We have been instructed to reduce the amount to… it was £540 and we have been instructed to £495. I think there are two reasons for that. This is on the client's instruction". 47. The Respondent also stated: "… the client wants to bring the figure below £500 because he believes there is a psychological barrier at £500 that prevents people from paying so he is £346,607.90 £151,625.86 £45,060.21 £131,048.38
13 trying to optimise revenue on settlement on the basis that it can get below £500 and it's his prerogative to agree to whatever he wants to agree". YP 48. The various retainer letters and CFA were dated 16 October 2009 and the client signed his agreement to the non-contentious and contentious retainers on or about 9 November 2009. The non-contentious retainer letter indicated the split of the net recoveries between each of the parties would be 40% to YP, 45% to the firm and 15% to the monitoring company. The non-contentious retainer letter agreed the amount of costs and damages to be claimed on behalf of YP as £400 for films and £350 for music files. As at 30 June 2010, the firm had paid YP, AE and MR £29,718.86 as damages as a result of the letters of claim issued on the client’s behalf.
Public concerns and conduct 49. The letters of claim sent by the firm produced a reaction from a number of recipients. As at 9 August 2010, the Applicant had received a total of 511 complaints about the Respondent and his firm from individuals who had received a letter of claim alleging breach of copyright. The consumer organisation Which? forwarded a number of complaints to the Applicant. The complaints in general denied the allegation of uploading the copyrighted material. From figures provided by the Respondent, as at 30 June 2010, the recoveries made by the Respondent in his firm as a result of the letter writing on behalf of his clients were: (1) (2) 20,323 letters were sent out; The firm made a total recovery of £936,570.72 out of which the Respondent's firm received £341,078.92 and Out of the total number of claims there were 1457 alleged infringers who had agreed to pay costs or damages in full and 518 infringers who had agreed to pay costs and/or damages in part.
On 5 January 2011, the Respondent notified the Applicant that he was no longer producing such letters but he was continuing to act in a number of court actions against alleged copyright infringers.
Advice of Counsel 52. Firm A had obtained an opinion from Counsel A M dated 30 June 2008. A copy of this opinion had been provided to the Respondent as he himself sent it to the Applicant under cover of a letter dated 11 August 2009. Counsel had provided the following advice: (1) that L might be guilty of an offence under the Computer Misuse Act 1990;
14 (2) that the mere use by a third party of an unsecured wireless router could not fix the holder of the IP address with liability for copyright infringement; that an alternative claim against the IP address holder in negligence was "extremely poor to hopeless, saving cases where, exceptionally, a Defendant admits letting someone else use his computer/internet access in circumstances where it is obvious or very likely that he will use it to infringe. However likely a scenario is that?"
The Respondent suggested in his documents entitled "Response to letter of report by SRA dated 28 May 2010" that he did not accept what he called the "wireless defence". He stated: "The wireless defence is no longer acceptable and cases are no longer dropped for this reason. Every submission is considered, triaged and actioned upon, including dropping cases where necessary. Case law has developed that places the holder of an internet connection under a greater personal responsibility than a year ago"
Examples of claims against particular individuals Mr F 54. In a letter dated 8 June 2009, the Respondent made a claim for breach of copyright on behalf of his client DP against Mr F relating to alleged unlawful uploading of the film “YHTG”. The Respondent sent a pack of materials with the letter dated 8 June 2009 namely: (1) (2) (3) Statement report; Extract from a spreadsheet sent to Mr F's ISP; Extract from a spreadsheet received back from British Telecommunications plc; A document entitled "Undertakings"; Payment forms.
The letter referred to a copy of an order made by Chief Master Weingarten dated 12 November 2008 which it was said could be found on the Respondent's website. The Letter of Claim stated: "Based on the evidence supplied to us, your internet connection has been used to make the Work available on P2P network (s) in infringement of our client's copyright and in breach of Sections 16 and 20 of the Act 1. Where our client's Work has been copied onto the hard drive of the personal (or office) computer used to make the Work available on P2P networks, there will also have been a breach of the provisions of Sections 16 (1)(a) and 17 of the Act. Our client's
The Copyright Designs and Patents Act 1998
15 evidence shows you are responsible for committing one or more of these infringements, either directly or by your authorising (inadvertently or otherwise) third parties to do the same". 56. The letter included an "offer to settle" whereby Mr F was to pay compensation of £500 and sign a written undertaking promising not to upload, download, make available or otherwise share the Work or permit others to do so using his or any other internet connection and to delete any copies of the work resident on his computer's hard drive or saved to disk. The letter described how the settlement figure was established but did not show any figures. The letter included a section entitled "Next Steps - Payment and Undertakings" which set out the means by which Mr F could settle the claim. After this section was a paragraph entitled "Next Steps - Commencing Proceedings" which stated that if neither the payment nor written undertakings were received within the specified time period of 21 days then: "…we are instructed to commence proceedings against you, subject to receiving any submissions you may wish to make to us. If it becomes necessary to issue proceedings against you, our client will be seeking as a minimum from you an interim payment on account of damages and will request the Court to determine the level of total damages and costs which may be awarded against you and which will reflect the increased costs of taking proceedings, together with damages that fully reflect our client's loss". 58. The letter indicated that it: "… complies with the Code of Practice for Pre-Action Conduct in Intellectual Property Disputes (January 2004), a copy of which is available on our website". The next section of the letter contained a recommendation that legal advice should be sought and stated that: "… any response from you (must) be in writing". 59. The letter of claim enclosed a document entitled "Notes on Evidence" which included a section entitled "Forensic Computer Analyst's Report" which stated amongst other things: "Because of data protection law, the ISP will normally require us to apply to the Court for a so-called Norwich Pharmacal (or disclosure) order. Full evidence of the nature of our claim against you is provided to the Court, which is then invited to order your ISP to disclose your contact details. This enables us to write to you. On the dates set out in the Letter of Claim, such an order was made against your ISP, pursuant to which your ISP provided your name and address some weeks later and we were then able to write to you". The court had not been provided with details of the claim against Mr F or anyone else. The court had been provided with evidence that there had been an infringement of copyright and that the ISP would know the identity of the person whose IP address
16 had been identified by the monitoring company in relation to the infringement (the monitoring company in Mr F's case being D). 60. In section 3 of the Notes of Evidence under the heading "Evidence of Copyright Infringement", the Respondent stated: "It is irrelevant for the purposes of our client's evidence how the Work came to be resident on the computer connected to the IP address in question at the time of upload and/or making it available on a P2P network. Prior to making the Work available on P2P networks, it may have been copied from a CD or DVD ROM (or other medium) or indeed downloaded from either a bone fide website or obtained through file-sharing on a P2P website, either by you or a third party using your internet connection. What our client's evidence shows is that the Work was made available from an internet connection registered to your name on a certain date and time". 61. Mr F responded in a recorded delivery letter dated 25 June 2009 to the effect that his household contained a number of computer users, none of whom had any knowledge of the alleged claim. He sent a copy of the letter from the Respondent together with his reply to the “Office for the Supervision of Solicitors” under cover of a letter dated 29 June 2009 in which he commented: “As you will see the letter is most frightening, threatening and intimidating and on first perusing this I thought it was a scam". 62. Mr F received a further letter from the Respondent dated 2 September 2009. The letter stated amongst other things: (a) "To date, we have received neither payment nor any response from you". "… unless we receive payment from you… Within seven days from the date of receipt by you of this letter in compromise of our client's claim in the sum originally requested, you are at real and immediate risk of proceedings being issued against you without further reference or recourse to you". "You will recollect that the initial compromise claimed was £500.00. If it becomes necessary to issue proceedings against you, we shall be applying for judgment and shall seek an award of damages in an amount to be determined by the Court, together with an order for an immediate interim payment of £1,000.00".
Mr F responded by recorded delivery post on 7 September 2009 and pointed out that he had replied to the first letter and that in that earlier letter had denied "… all knowledge of your accusations". He stated that if the Respondent continued to harass him he would take action under the Protection from Harassment Act 1997. The Respondent wrote again on 9 October 2009 stating:
17 "To date, we have received neither a satisfactory response, payment, nor an adequate explanation as to why you are not liable for the acts of copyright infringement alleged against you… The open offer of compromise made in our original letter to you is hereby withdrawn. We have instructions from our clients to pursue this matter against you further". The letter enclosed a Part 36 Notice offering to settle the claim against Mr F in the sum of £600.00. 65. Mr F responded by recorded delivery letter on 21 October 2009 confirming that he had no knowledge of the allegations and stating that any further letters would be forwarded to his solicitors.
Mrs B 66. In a letter dated 8 June 2009, the Respondent made a claim for breach of copyright against Mrs B on behalf of his client DP relating to alleged unlawful uploading of a video entitled “E-RL”. The Respondent enclosed or provided internet links to a pack of materials similar to those sent to Mr F. In most respects the claim against Mrs B was similar to that against Mr F. Mrs B's ISP was Tiscali UK Ltd and she was asked to pay £500.02 as compensation to DP including the ISP costs. Mrs B replied in a letter dated 11 June 2009 in which she stated that: (a) (b) (c) (d) she and her husband vehemently denied the allegation; they had never downloaded films of any description, pornographic or otherwise and would not know how to do so; they were shocked and offended by the bullying and threatening manner in which the allegation was being pursued; and she sought the withdrawal of the allegation and apology for the distress caused within 10 days;
The Respondent replied by letter dated 29 June 2009 in which he stated: "It is unfortunate that you feel that the letter was written in that tone; it was certainly not intended to have that effect. However, we are issuing a Letter of Claim to people holding an internet connection where our client's data supplier has captured information indicating an alleged infringement of copyright. Consequently, it is necessary to write a letter in a certain way outlining not only the detail of the work identified, but also the possible consequences and ultimate actions that could be taken in the event that the matter was to proceed to litigation… In the circumstances, the matter must be regarded as still live, our enquiries are continuing and you will be hearing from our file sharing team separately. On this basis, I do not think an apology would be an appropriate response. It is to be regretted that you have suffered any distress from the receipt of our letter, but I am merely acting on instructions following the receipt of specific data that relates to your IP address".
18 69. Mrs B received a letter from the Respondent which was dated 2 September 2009 and which was in the same terms as the letter to Mr F which was also dated 2 September 2009. It threatened proceedings against her in default of payment of the sum originally requested within 7 days and stated that in the event of such proceedings, an immediate interim payment of £1,000 would be sought from her. Mrs B replied on 14 September 2009 stating: (a) (b) the Respondent's letter of 2 September 2009 was inaccurate as she had replied; she noted that the Respondent had provided no evidence that she was personally responsible for the alleged infringement or had authorised anyone else to do so; she denied any breach of the relevant parts of the Copyright, Designs and Patents Act 1988 as she had never possessed the work in question, had never distributed it or authorised anyone else to distribute it; she asserted that it was impossible to link an IP address to a particular person or computer without further detailed analysis, which required a level of expertise she did not possess; she asserted that she could not be held liable for infringement occurring via her internet connection without her knowledge or permission.
The Respondent wrote again to Mrs B on 28 September 2009 and stated: "… We note the response you have given matches a template response that is available on the internet. With this in mind we are disinclined to accept at face value what you have said, as it is simply a generic response. The open offer of compromise made in our original letter to you is hereby withdrawn. We have instructions from our client to pursue this matter against you further. In absence of anything meaningful to consider from you, our client's stance will remain unaltered…" The letter enclosed a Part 36 Notice offering to settle the claim for the sum of £600.00.
Mr L 72. In a letter dated 15 April 2010, the Respondent made a claim for breach of copyright against Mr L on behalf of his client MCAT relating to alleged unlawful uploading of two videos entitled “FBGF5” and “FBGF6”. With the letter of 15 April 2010, the Respondent sent a pack of materials and/or references to such materials similar to those sent to Mr F. In most respects the claim against Mr L was similar to that against Mr F. In Mr L's case the offer was to pay compensation of £1,200 and to sign a written undertaking promising not to upload, download, make available or otherwise
19 share the Work or permit others to do so using his or any other internet connection and to delete any copies of the work resident on his computer's hard drive or saved. 73. The letter of claim sent to Mr L had been amended to indicate that the Respondent's firm could be contacted by e-mail or by telephone. Mr L tried to telephone the firm on 19 April 2010 and found that that there was a recorded message requesting a letter and stating that the firm did not deal with submissions over the telephone. The letter of claim addressed to Mr L did not provide any details of the funding arrangements with MCAT. Mr L responded by way of a letter dated 19 April 2010 in which he denied liability for the claim and stated: (a) (b) that he denied all the allegations; that the letter had failed to mention that Section 97 (1) of the Copyright Designs and Patent Act 1988 provided a defence if the Defendant did not know and had no reason to believe that copyright subsisted in the Work and it was therefore wrong to suggest that even inadvertent downloading of copyrighted material was a breach of the Act; that he required details of how the £1,200 claimed was calculated; that he required confirmation as to whether the Respondent was instructed under a conditional fee agreement and if so its date; and that he was a retired Circuit Judge and regarded the allegation and Letter of Claim as defamatory
On 20 April 2010, Mr L wrote to the Respondent at the address of the firm indicating, amongst other things, that he would offer the Respondent facilities for an inspection of the hard drive of his computer by an independent forensic computer expert to be agreed and to be limited to the allegation made and to the alleged "hit" on 22 November 2009 at 15.51.17 hours and on the basis that the Respondent's client was to pay the costs of the inspection to be costs in the case in the proposed proceedings. Mr L subsequently wrote chasing letters to the Respondent at the firm's address on 17 June, 25 August and 12 October 2010 but did not receive any response. The Respondent provided an information pack to his own employees on or about 1 June 2009. In the pack, the Respondent recognised that recipients of letters might be "… upset and/or concerned with the infringement being alleged". The notes in the pack entitled “Questions and Answers to Telephone Calls” contained the following passage: “… nor do we need to prove the exact identity of the individual who committed the infringing act. We maintain that an internet account holder is responsible for his internet connection and therefore liable for any infringing activity occurring on it. In some cases you will find that the account holder is a parent of a child who has committed the act, or a person sharing a house or flat with others who has the internet registered in their name. Some cases will
20 involve individuals who have not properly (or at all) secured their wireless networks and thus allowed (either deliberately or negligently) a person or persons known or unknown to commit the infringement. Again, we believe that these people remain responsible for the infringements that we have evidence of.” 78. During an interview with the Applicant on 16 February 2010 and in his correspondence about the matter, the Respondent denied that he had committed any breaches of duty or that he or his firm were treating those who had not themselves uploaded materials, but whose IP addresses appeared to have been so used, as being strictly liable for alleged copyright breaches.
Allegation 1.8 79. On 27 September 2010, the Respondent wrote by e-mail to the Information Commissioner's Office ("the ICO") informing it: “that I have been the subject of a serious criminal attack against my website and email host. For reasons that are still unclear, my web-host was subject of (sic) an orchestrated and sophisticated attack by a pro-piracy group. As a result of this attack, I regret to inform you that a batch of e-mails received into and sent from my email account has been exposed from our web-host company and then leaked onto the internet… I can confirm that my own server, internal systems and documentation held by me were not attacked or compromised in any way. It was only emails between May and August this year and was as a result of the severe attack and breakdown of my hosting company’s security. This company is called DF, who I had a contractual relationship with at all material times.” 80. A file containing all the e-mails from the accounts of the firm was made publicly available on the internet. The e-mails contained personal and sensitive personal data relating to at least 6,000 individuals. The ICO conducted an investigation which culminated in a decision to issue a Monetary Penalty Notice ("the Notice") to the Respondent under Sections 55A and 55B of the Data Protection Act 1998. The Notice was dated 9 May 2011. The Notice described how the firm managed its data, which included data about those subject to claims for alleged infringement of copyright. Some of the correspondence from those individuals and other material held by the Respondent relating to the claims contained data concerning their sexual life, health or financial status. The Notice described how the Respondent had a contract with its web-host (DF) for internet and e-mail services which was described as a "home" web-hosting package at a cost of £5.99 per month. The Notice observed: “It is clear that this package was not intended for significant business use. Further, the "shared server" package provided by the web-host did not appear to provide any guarantees to the data controller [the Respondent] in relation to the security of the personal data…”
21 83. The Notice referred to a report commissioned by the Respondent entitled "Business Systems Review" dated 11 October 2010 and which considered the firm's IT systems and processes. The Notice concluded that the Respondent had failed to take appropriate technical and organisational measures against the accidental loss of personal data in breach of the Seventh Data Protection Principle, paragraphs 11 and 12 at Part II of Schedule 1 to the Data Protection Act 1998. The contravention was, in the view of the ICO, of a kind likely to cause substantial damage or substantial distress, given the nature of the personal and sensitive data held about individuals' financial and personal circumstances. The Notice indicated that were it not for the Respondent's representations about his limited means, a penalty of £200,000 would have been imposed. On 23 May 2011, the Applicant wrote to the Respondent seeking his explanation of the matters raised by the ICO report. The Respondent replied in a letter dated 23 June 2011 and suggested that the investigation and the fine imposed by the ICO against him and his firm were "… flawed and erroneous…" and that he was appealing the decision. He stated that the unauthorised disclosure of data held by his firm occurred as a result of reasons that were out of his control. He further asserted that his representations to the ICO achieved a reduction of the "fine" from £200,000 to £800 and that this reduction was not "… solely because of my financial predicament". The security breach itself had been as a result of what the Respondent described as a "… criminal attack by cyber terrorists…" and that "No data held by my firm was disseminated, lost, destroyed, leaked or otherwise mismanaged by me, my firm or any employee.” After the cyber attack on his business, the Respondent commissioned an unnamed independent business systems analyst to review his IT systems. The business analyst stated that: “The cyber attack launched against ACS Law was directed at your External Services ONLY and given the strength of the attack and the group responsible, it is unlikely that even the largest corporate IT, or even possibly a government agency, could have survived it without losing some data. Sadly, this is something that could happen to any business and small businesses are very vulnerable as your business IT is the same model most used. I would say that an attack of this nature on the small business is unusual and is essentially easy pickings for this type of cyber terrorist.” 86. The analyst had described the existing network environment at the firm as follows: “Therefore beyond a simple networking infrastructure, which allows "access to all and everything", the data provided and shared was without security or the use of encryption. This business environment, which includes the date of providers and manipulators, was vulnerable to attack at any part of the process of exchange.” The analyst had also commented:
22 “Until October 4 2010, ACS Law had operated as an open IT environment to the extent that, except for password protection on desktop computers and email and business related applications, no consideration has been given to any other aspects of protection. Essentially all employees had open access to all data and the receipt and transmission of emails and data was handled, in almost all cases, with no protection such as encryption.” 87. The analyst had also reported that: “… the information I have is that on, or around, the 24th September, emails were removed from the DF cPanel email service during a denial of service (DOS) attack by parties unhappy with your business activities. These emails included a lot of personal and internal emails, as well as spreadsheets of data provided to ACS law by its suppliers and passed on, through the email system you had in place, to one of your remote workers with further manipulation.” 88. The analyst had also referred to the terms and conditions of DF, the Respondent’s former web-hosting company. Under the heading “Limitation of Liability” it stated that: “You agree that DF will not be responsible for any losses that may occur where Services are accessed by third –parties through illegal or otherwise unauthorised means, including but not limited to, situations where data is accessed through the exploitation of security gaps, weaknesses or flaws (whether known or unknown to DF at the time) which may exist in the Services or in DF's equipment used to provide the Services.” The review dated 11 October 2010 made over 20 recommendations, including the installation of a firewall and access control. 89. On 4 August 2011, an authorised officer of the Solicitors Regulation Authority (“SRA”) decided to include the matter within the ongoing disciplinary proceedings against the Respondent.
Witnesses 90. None.
Findings of Fact and Law 91. The Tribunal determined all the allegations to its usual high standard of proof, that is beyond reasonable doubt. Allegation 1.1. In breach of Rule 1.03 of the Solicitors Code of Conduct 2007 ("the SCC") allowed his independence to be compromised; Allegation 1.2. In breach of Rule 1.04 of the SCC the Respondent acted contrary to the best interests of his clients;
23 Allegation 1.3. In breach of Rule 1.06 of the SCC, the Respondent acted in a way that was likely to diminish the trust of the public places in him or in the legal profession; Allegation 1.4. In breach of Rule 2.04(1) of the SCC, the Respondent entered into arrangements to receive contingency fees for work done in prosecuting or defending contentious proceedings before the Courts of England and Wales except as permitted by statute or the common law; Allegation 1.5. In breach of Rule 3.01 of the SCC, the Respondent acted where there was a conflict of interest in circumstances not permitted under the Rules, in particular because there was a conflict or significant risk that the Respondent's interests were in conflict with those of his clients; Allegation 1.6. In breach of Rule 10.01 of the SCC, the Respondent used his position as a solicitor to take or attempt to take unfair advantage of other persons, being recipients of letters of claim either for his own benefit or the benefit of his clients; 91.1 Mr Steel, on behalf of the Applicant referred the Tribunal to his written Opening Submissions in relation to these allegations. He confirmed that he relied upon these Submissions in their entirety. The allegations concerned the Respondent’s conduct in the pursuit of claims, and making demands for payment, between May 2009 and January 2011 against over 20,000 individuals whom he alleged to have used P2P networks to share copyright material belonging to six of his clients in breach of the Copyright Designs and Patent Act 1988 (“CDPA”). It was the Applicant’s case that there had been a real risk that the process carried out by the Respondent would misidentify the account holders to whom the IP addresses were allocated at the time of the alleged uploading and the Respondent ought to have taken the risk of misidentification into account when he had written to the alleged infringers. In addition, it was alleged that even if an IP address was correctly identified as the source of uploading, it did not follow that the person or entity to whom the address was registered was guilty of breaching copyright. The reasons for this were that:(1) The person to whom the IP address was registered might not have been the person actually uploading copyrighted material. Premises might have had multiple internet users, or there might have been wireless internet connections through which others might have accessed the internet, or hackers might have used the connection; Further or alternatively, uploading might not have been of the whole or a substantial part of the copyright work so that no breach of copyright actually occurred.
In order for the Respondent’s clients to establish liability against the recipients of the Letters of Claim, they needed to prove that the IP address holder had either personally downloaded or made available the whole or a substantial part of the clients’ copyright
24 material or had authorised another to do so in accordance with Sections 16 and 20 of the CDPA 1988 (emphasis added). The Letters of Claim and subsequent correspondence were designed to lead the recipient to believe that he or she was liable for copyright breach, regardless of any personal involvement in the alleged uploading or breach. Put simply, the Respondent had targeted and pursued IP address holders whose addresses were provided by the ISPs. 91.5 It was the Applicant’s case that the Letters of Claim and subsequent correspondence to the alleged infringers were misleading in a number of respects and were calculated to pressurise or intimidate the recipients into paying the settlement sum demanded regardless of whether or not they were liable for the alleged infringement(s). As a result of the letter writing campaign, the Respondent had received payments from alleged infringers totalling at least £936,000 and had received for himself at least £341,000. The Respondent’s conduct in connection with the file sharing claims had resulted in:(1) A large number of letters of response from recipients of the Letters of Claim, their legal representatives and/or MPs denying any wrongdoing and describing the distress and suffering that the Respondent’s conduct had caused them; At least thirty individuals making complaints to the consumer magazine Which? Widespread criticism on the internet with a number of forums having sections entirely devoted to the discussion of the Letters of Claim sent by the Respondent. In excess of 500 complaints that had been sent directly to the Applicant.
Letters of Claim Generally 91.7 It was the Applicant’s case that the Respondent’s duty to act in his clients’ best interests in the conduct of the file sharing claims was at all times tempered by his obligations to third parties. This included the duty set out at Rule 10.01 of the Code which prevented the Respondent from using his position to take unfair advantage of anyone, either for his own benefit or for that of his clients. The Tribunal was referred to the case of Media C.A.T Limited v Adams and Others (2011) EWPCC 6 in which HHJ Birss QC had considered the Letters of Claim written to alleged file sharers by the Respondent and had stated:“A claimant or potential claimant in a civil case is not required by law to write a mealy mouthed or apologetic letter to a potential defendant. Robust correspondence between lawyers and sophisticated parties is part of the legal process. However, letters which deal with issues of the complexity of the ones arising in this case need to be considered very carefully if they are addressed to ordinary members of the public.”
25 91.9 It was the Applicant’s case that the Letters of Claim sent by the Respondent were misleading, overbearing and drafted so as to intimidate the recipients into paying the settlement sum demanded and to provide the requested undertakings regardless of whether or not they were liable for the alleged infringement and regardless of whether or not the clients could properly claim the sum demanded.
91.10 The Letters of Claim generally began by identifying which of the clients the Respondent was acting for and then asserting that the client was a “copyright protection society” and “exclusive licensee of rights” in the work in question. The Tribunal had been asked to consider the Letter of Claim sent to Mr L on behalf of the client MCAT by way of example. In the Media C.A.T case, the Judge had indicated that this was not true of MCAT and it was the Applicant’s case that neither was this true of the Respondent’s other clients. The Judge had stated:“The claimant Media C.A.T has claimed at various stages to be (i) a copyright protection society (whose members are the owners of the copyright in the works), (ii) the exclusive territorial licensee of rights in the work and (iii) to represent the owners of copyright or exclusive licensees of that copyright. It is none of those” 91.11 It was the Applicant’s case that the Respondent had failed to reveal to the recipients of the letters that the monitoring companies would be receiving a large percentage of any payment and therefore had a financial interest in the claim. In addition, the Letters of Claim gave the misleading impression that making any part of the copyright work available, however miniscule, was a breach of Section 20 of CDPA 1988. In the Letter of Claim to Mr F for example it was stated in the section entitled “Evidence”: “Our client is in possession of evidence that on the following UK date(s) and at the following time(s), all or part of the Work was made available from the named internet protocol (or IP) addresses...” The Respondent was aware that in order to bring a successful claim, his clients needed to establish that the whole or a substantial part of the copyright work had been made available, and yet the Letters of Claim made no mention of this. The letters therefore gave the misleading impression that there was no requirement to establish that a “substantial part” of the copyrighted material had been infringed. 91.12 Many of the Letters of Claim stated that the Respondent’s client had evidence that the recipient had made the copyright available when it did not. By way of example, the Letter of Claim to Mr L stated in the section entitled “Evidence”: “Our client is in possession of evidence that on the following UK date(s) and at the following UK time(s) ... the Work was made available... specifically for the purpose of being provided to third parties...” and continued:“...Our client holds you responsible for committing these infringements...”
26 Neither MCAT nor the Respondent had evidence that the “Work” had been made available. They had a report from the monitoring company which showed that its software had captured pieces of the two pornographic videos being made available from an IP address at a particular second in time. 91.13 The Letters of Claim also gave the misleading impression that a recipient was liable for a breach of Section 16 and/or 20 of CDPA 1988 if his or her IP address was used unlawfully by a third party to make a copyright work available in circumstances where the recipients had not knowingly authorised the infringement. The Tribunal was referred to the section entitled “Unlawful Act and Consequences” in the letter to Mr L by way of example. In addition, the “Notes on Evidence” which was available on the firm’s website and to which the Letters of Claim referred in the “Evidence of Copyright Infringement” section, led readers to conclude that they would be strictly liable for the fact that their IP address had been used for the uploading of a copyrighted work even in circumstances where they had not authorised the copyright infringement. It was the Applicant’s case that the Respondent did not have any evidence as to who had made the work available. He merely had the IP address through which it was made available. If the alleged infringer lived with a number of others who also used the IP address and/or had an unsecured or poorly secured wireless network, then there were many individuals other than the alleged infringer who could have made the work available. The Respondent was aware of this, not least because he had received the advice of Counsel AM which had been given to firm A and which had addressed this very point. The Letters of Claim emphasised the severe financial consequences that recipients faced if they did not settle the claim and subsequently lost at trial. By way of example, in the Letter of Claim sent to Mr F, the Respondent had stated:“Should it be necessary to bring a claim against you for copyright infringement, the legal costs of those proceedings are likely to be substantial... This means that should you lose any action our client takes (against you) you will be liable for our client’s costs and vice versa. Costs in an action such as this can mount to several thousand pounds... The sum of money claimed is not the amount that would be claimed in the event that our client commences proceedings against you. Damages and costs are likely to be much greater than this sum...” The Respondent placed a heavy emphasis in the Letters of Claim on the financial risk that recipients would take by not paying the settlement sum. This, together with the statements about the strength of the client’s evidence was intended to pressurise and intimidate an alleged infringer into paying the settlement sum demanded regardless of whether he was liable or liable for damages. 91.16 The Letters of Claim offered the recipient “the opportunity to avoid legal action” if they provided two signed undertakings and paid compensation to the Respondent’s clients for their losses including a contribution to their costs to date. The amount of the compensation demanded was generally in the region of £500 - £600 plus ISP
27 costs. The settlement sums demanded were not based on any or any genuine assessment of the damages and costs for which recipients were liable. In interview with the IO on 16 February 2010, the Respondent had stated:“...actually I decided to take a more broad brush approach to this now and simply said “our client is prepared to compromise his claim in receipt of £540 or £495” whatever the figure is going to be, and that’s what it is and we believe the damages would be more in court, as simple as that. I don’t think we need to quantify how the compromise amount has been arrived at other than to say it’s the amount our client is prepared to settle at to avoid a claim.” 91.17 It was the Applicant’s case that the sums were arrived at:(1) (2) (3) (4) To make the scheme viable for the Respondent and his clients; To encourage recipients to settle; To act as a deterrent to future illegal file sharing; and Included a sum to cover costs which had been charged by ISPs to carry out searches for names and addresses other than those to whom Letters of Claim were sent.
The Respondent had made no or no genuine attempt to ensure that it was properly arguable that each alleged filesharer was liable for the settlement sum claimed. 91.18 The Letters of Claim failed to provide a breakdown as to how the settlement sum was reached, despite this being a requirement of the Practice Direction on Pre-Action Conduct and despite many alleged infringers requesting a proper breakdown of damages and costs. The Letters of Claim demanded receipt of the settlement sum and undertakings within 21 days and threatened proceedings if payment and the undertakings were not received in that time. It was the Applicant’s case that 21 days was an extremely short period of time for alleged infringers to digest the large amount of technical information sent by the Respondent, investigate the allegations, take legal advice and reach a view as to whether or not to pay the sum and provide the undertakings demanded. 91.19 The Respondent’s assertion that he was instructed to commence proceedings was misleading as he did not, in fact, have instructions from the clients to commence proceedings in the event that the alleged infringers did not pay the sums or provide the undertakings demanded. The retainers with DP, RP and T2 specifically excluded the issue of proceedings. 91.20 The “Notes on Evidence” referred to in the Letters of Claim had stated that the ISP would normally require the firm to apply to the Court for a Norwich Pharmacal (or disclosure) Order and that full evidence of the nature of the claim had been provided to the Court. It was the Applicant’s case that this was misleading. The Court had not been presented with full evidence of the claim against the recipient. Instead, the Court had been given evidence that an IP address which the ISP stated had been allocated to the recipient at the relevant time had been used to upload a piece of the
28 copyright work. The Tribunal were referred to the Media C.A.T case in which the Judge had stated:“Lay members of the public will not know the intricacies of the Norwich Pharmacal jurisdiction. They will not appreciate that the court order is not based on a finding of infringement at all” 91.21 It was suggested by the Applicant that the Letters of Claim and enclosures had been drafted in a way that was likely to deter recipients from taking independent advice. Recipients had a very short amount of time to digest the Letters of Claim and enclosures and seek legal advice. This short timeframe, together with the threat that costs and damages would increase if the Respondent had to issue proceedings was likely to cause many recipients to conclude that it would be less expensive to pay the sum demanded than seek legal advice. In addition the Respondent did not give an unconditional recommendation that recipients should take legal advice. In the final section of the Letters of Claim, the Respondent had stated:“If you are in any doubt about the contents of this letter and its seriousness... then legal advice should be taken.” In addition, section 8 of the Respondent’s Notes on Evidence entitled “Use of Our Documentation” stated:“please note that the information and documents contained in this letter are the copyright of ACS:Law. Any unauthorised use, e.g. posting on websites and fora will render the persons responsible liable to ACS:Law for copyright infringement, in addition to any liability which may be owed to our client for the same. Further action, in addition to that contemplated in this letter, may result”. This statement was likely to deter recipients from showing the Letters of Claim or attachments to legal advisers for fear of receiving a further claim for breach of copyright. 91.22 It was the Applicant’s case that the Respondent’s Letters of Claim did not comply with the provisions of the Civil Procedure Rules (CPR). The Respondent had incorrectly stated that his Letters of Claim complied with the Code of Practice for PreAction Conduct in Intellectual Property Disputes (January 2004) and the Tribunal were referred to the letter to Mr L dated 15 April 2010 by way of example. In fact, there was only a draft Code in place but this had not been adopted by the Court. Instead, the Practice Direction on Pre-Action Conduct was in force and provided, amongst other things, that the Letter of Claim should provide an explanation as to how the amount of any financial loss had been calculated and refer the recipient to the Practice Direction. The Letters of Claim sent by the Respondent did neither of these things. 91.23 The Letters of Claim did not even comply with the draft Code of Practice which stated that the Letters of Claim should “give details of any funding arrangements entered into”. The Respondent did not disclose the funding arrangements with any of his clients in any of the Letters of Claim. Had the letters done so, the Respondent
29 would have been obliged to reveal that he was interested in the proceeds of the claim as he was the recipient of the largest share. Subsequent Dealings with Alleged Infringers 91.24 It was the Applicant’s case that many of the subsequent letters that the Respondent sent to alleged infringers were compiled by non admitted staff and were based on precedents/templates and ignored specific points that had been raised by individuals. In addition, the letters were said to be misleading and overbearing and calculated to intimidate the recipients into paying the settlement sum demanded regardless of their liability. The letters sent to alleged infringers frequently failed to address specific issues raised by them. For example Mr F had stated:“I was extremely anxious on receiving this further letter, and I responded to ACS:Law by way of letter dated 7 September 2009. They completely ignored my first letter to them.” 91.25 Although the Respondent’s firm had dealt with alleged infringers who telephoned in, the internal guidance to the Respondent’s staff demonstrated that there was no real intention to engage with recipients of letters who disputed the claim against them. Instead, staff were under instruction to pressure recipients into paying up regardless of their liability and even in circumstances where they clearly would not be liable. The internal guidance stated for example:“Explain in a nice gentle manner to those people whose children may have done it that they cannot hide, we will find the truth and come after them.” Fee Arrangements 91.26 It was the Applicant’s case that the Respondent had entered into unlawful and unenforceable contingency fee arrangements with his clients which provided him with a significant and in respect of every client save one the largest financial interest in every claim. The Respondent therefore had a financial interest in persuading as many alleged infringers as he could to pay the settlement sum demanded with as little investment of staff time and effort as possible. 91.27 The Applicant asserted that by entering into the “non-contentious” retainers, the Respondent had entered into unlawful contingency fee arrangements, in breach of Rule 2.04 (1) of the Code which prohibited contingency fees for work done in prosecuting or defending contentious proceedings except as permitted by statute or common law. The Tribunal were reminded that Rule 24 of the Code defined a “contingency fee” as “any sum (whether fixed, or calculated either as a percentage of the proceeds or otherwise) payable only in the event of success”. The retainers provided that the Respondent would receive a percentage of the damages and costs recovered from alleged infringers and so were contingency fee agreements. Payment of the Respondent’s fees in respect of the claim was contingent on the alleged file sharer making the payment. 91.28 The Respondent had claimed that the Applicant was wrong to assert that the retainers were an unlawful contingency fee arrangement as he contended that the retainers were
30 for non contentious business. It was the Applicant’s case that obtaining evidence from the monitoring companies, preparing, issuing and attending applications for Norwich Pharmacal applications and writing Letters of Claim was clearly work done “for the purposes of proceedings” and therefore fell within the ambit of “contentious business” as defined by the Solicitors Act 1974. Furthermore, the Respondent must have been aware himself that preparing, issuing and attending the hearings of Norwich Pharmacal applications was “contentious business” as he had included this work in his “contentious” retainers. The retainer for RP’s “non contentious” work expressly stated that it did not include preparing, issuing and attending hearings for Norwich Pharmacal applications because that work was covered by the Respondent’s “contentious” retainer. It was suggested that the Respondent was attempting to “engineer” contentious business to be non contentious in order to give the appearance of legitimacy to the large contingent fees that he was charging. 91.29 In summary, it was the Applicant’s case that due to the Respondent’s financial interest in the file sharing claims, he had allowed his independence to be compromised and had not acted in the best interests of his clients. He had not enquired into the validity of any individual claim and had not consulted his clients when problems had arisen in the way in which he was conducting claims. He had persisted in the pursuit of claims in circumstances where it had damaged or was likely to damage the reputation of his clients and where it was in his personal as opposed to his clients’ interests that the claims be maintained. 91.30 The Respondent’s actions were likely to diminish the trust which the public placed in him as a solicitor and in the legal profession. It had been incumbent upon him to deal with unrepresented members of the public in a scrupulously fair way and in particular, he should have ensured that his Letters of Claim were entirely accurate. Instead, the letters had been misleading and drafted so as to intimidate lay members of the public into paying the sum claimed regardless of whether or not they were in fact liable for the infringement alleged. The Respondent’s actions had become the subject of widespread public concern. This could be gauged by reference to the letters from a number of MPs who had complained on behalf of their constituents as well as the number of complaints that the Applicant had received about the Respondent. There had been widespread coverage of the matter in the media and representations had been made to the Applicant by the consumer organisation Which? The Respondent had an obvious self interest in recovering revenue from alleged infringers and in those circumstances there was a conflict of interest between the Respondent and his clients. 91.31 The Tribunal considered that the allegations had been substantiated against the Respondent and indeed the Respondent had admitted the allegations. 92. Allegation 1.8. In breach of Rule 1.06 and 5.01 (1) (g) of the Solicitors’ Code of Conduct 2007 (“the SCC”) he failed to take adequate steps to ensure that appropriate technical and organisational safeguards were in place at his firm to protect against the accidental loss of personal data and documents. In addition to referring the Tribunal to his written submissions, Mr Steel stated that it was clear, even on the basis of the Respondent’s own expert evidence, that fairly basic matters had not been dealt with in relation to the safekeeping of documents and assets entrusted to the firm. Mr Steel maintained that the provisions of Rule 5.01 (1) (g) of
31 the Code must include documents held electronically and he suggested that the Respondent had failed to comply with his duty resulting in the loss of sensitive personal data. In addition, the Respondent’s failure to take steps to protect the electronic data held by the firm was also likely to undermine the trust the public placed in the profession as a whole. 92.2 There was no dispute that documents containing confidential material and/or sensitive personal data had been leaked following a “Distributed Denial of Service” (“DDOS”) attack on the firm’s website by an on-line group of activists. Following the DDOS attack, the Respondent had obtained a report from an unnamed independent business systems analyst who had been critical with regard to the lack of IT security at the firm and who had made over twenty recommendations, including basic fundamental measures required in a business of this sort, such as the installation of a fire wall and access control. In addition, the ICO had imposed a monetary penalty against the Respondent for a “serious contravention” of the Data Protection Act. In his submissions to the Tribunal, the Respondent denied that the data leak had occurred through any fault of his own or through any one of his employees. He had conceded in his report to the ICO that there had been some deficiencies but in his view, these were insufficient to result in the leak of data from his offices. The Respondent emphasised to the Tribunal that prior to the data leak, he had always been very security conscious. He had chosen a secure building and had systems in place to ensure physical security at the firm as well as the security of electronic data. He told the Tribunal that the data leak had been the result of a criminal act by cyber terrorists. He stated that the group concerned had brought down the website of the Swedish government and interrupted various credit card operations. He had been another of the group’s victims. The Respondent explained that there had been a DDOS attack on his web and his mail hosting ISP who were DF. A backup of emails had been collated in the shared server allocated to the firm by DF. This had not functioned correctly and upon realising this, the Respondent’s office manager had contacted DF and requested that the back up be deleted and he would then create a separate back up. When the office manager checked, he could find no sign of the original back up and so believed that it had been deleted. In fact, an error had been made by DF and the original back up was still in their system. The Respondent stated that he could not have known that the original back up had not been deleted. There was nothing that he could have done to prevent the data leak, either in his capacity as a solicitor or as a data controller and he suggested that it could have happened to anyone. He intended to pursue a claim for negligence against DF. He did not know that the data had been in his control as he had mistakenly believed that it had been deleted by DF. There had been no client complaints and when he had learned of the data leak, he had reacted swiftly and taken all necessary steps to limit the damage. He told the Tribunal that it was unheard of for any law firm to be attacked in this way and he believed that he would have survived the attack if DF had deleted the back up data. He accepted the nature of the strict liability of the rules governing data under the Data Protection Act. However, he denied the allegation that had been made against him on the basis that the documents and
32 material that were in his control had remained intact. He expressed deep regret to the Tribunal that the data leak had occurred but stated that there was nothing that he could have done to prevent it. 92.7 In answer to a question from the Chair about the alleged inadequacy of the Respondent’s IT protection, he denied that his “home” web hosting package was unsuitable for business use. He told the Tribunal that the package offered the same level and extent of security as the business package and stated that the criticism levelled against him in this regard was misplaced. The Tribunal considered that the essential issue was whether the Respondent had taken the necessary measures to ensure security in the first place. The Respondent’s own expert had been critical of the lack of IT security at the firm. The Respondent’s failure to put in place a fire wall which was the most basic and obvious security requirement was evidence of a failure to take the steps necessary to provide adequate protection against the loss of personal data. This was particularly important given the specialist and technical area in which the Respondent was working and which was highly likely to provoke such an attack. The Respondent practised in the area of IT and should have had the knowledge and foresight for this kind of attack. The use of a “home” web hosting package (which failed in any event) was inappropriate, inadequate and put confidential data at serious risk. The terms and conditions of his contract with DF were inadequate and failed to provide appropriate technical and organisational safeguards which unfortunately resulted in a serious breach of data protection. In all the circumstances the Tribunal found the allegation substantiated against the Respondent.
Previous Disciplinary Matters 93. There had been a previous disciplinary finding against the Respondent in case number 8654/2002 which was heard on 31 October 2002. It had been ordered that the Respondent be suspended from practice for an indefinite period to commence on 31 January 2003 but should he regularise his position and file his outstanding annual accountant’s report with The Law Society by that date then the sanction imposed upon him would be that of a reprimand and not a suspension. There had been a further disciplinary finding against the Respondent in case number 9346-2205 which had been heard on 2 February 2006. The Respondent had been ordered to pay a fine of £1,000.
Mitigation 94. The Respondent told the Tribunal that he regretted his failings in relation to the data leak. He said that he had spent £20,000 to “shore up” the firm but regrettably this had been too late. He considered that the leak would have happened anyway but hoped that the Tribunal would accept his apology. He reminded the Tribunal that he had conceded liability in relation to the other allegations against him. The Tribunal were referred to a letter from Mr W who had been one of the Respondent’s clients. The Respondent stated that the contents of the letter demonstrated that he had carried out his work to the best of his ability. He had
33 worked diligently and loyally for his clients. He believed that his work had been procedurally correct and entirely legal and there had been no dishonesty on his part. The investigation by the Applicant had started three days after he had commenced the file sharing work. He had cooperated fully with the investigation throughout and had sought guidance where he could. He had taken separate specialist advice in relation to the allegation that he had harassed members of the public. He had been told that his conduct did not amount to harassment and he had relied on that advice. He still remained satisfied that he had not harassed anyone during the course of his work. 96. The Respondent accepted that the terms of his business retainer had been wrong. He was aware that his retainer had been an issue of concern to the SRA and he had taken advice on the subject. He had been reassured by the opinion that he had received which had indicated that his retainer was compliant. He referred the Tribunal to the detailed legal argument that he had submitted in relation to his business retainer by way of further mitigation. He had also sought guidance from a regulatory specialist. The Respondent told the Tribunal that he regretted the fact that he had relied on the business process of firm A. However, he had conducted his business rather differently to firm A as he had more staff and had used different processes. In particular, he wished to point out that there had been an individual response to every communication received by the firm. He said that many cases had been abandoned where third parties had provided satisfactory explanations or where there were personal or compassionate reasons to do so. He had supervised every aspect of the work and had always tried to be honest, open and clear. He accepted that the wording of some of his letters could have been improved but pointed out that he had introduced a fact sheet which had been sent out with every letter in an effort to assist the recipients with understanding the legal processes. He also referred the Tribunal to extracts from his client documentation in which he had recommended that third parties seek legal advice. He denied that the firm had accused anyone of anything. He said that letters had been sent to account holders of internet connections confirming that the firm had evidence that there had been an infringement of copyright. He had been accused of things that he had not done. The Respondent told the Tribunal that he had personally authorised the dropping of claims or the acceptance of offers. He had responded himself to letters received from MPs. He referred the Tribunal to various examples of “typical” letters that had been sent to recipients as examples of times when claims had been dropped. The firm had operated a sophisticated “triage” system to deal with correspondence. The Respondent denied that he had operated an automated process and stated that each matter had been dealt with on a case by case basis. He told the Tribunal that there had been care in what the firm had done. He had accepted the SRA’s recommendation to deal with enquires from third parties over the telephone and had operated a fully functioning call centre. He accepted that it had been his responsibility to get things right and referred the Tribunal to various instances when he had contacted the SRA to ask for specific guidance. He had not disregarded his obligations. He told the Tribunal that he would not have continued if he had known that what he was doing was wrong. He acknowledged that he had been asked in interview to consider withdrawing from the file sharing work but stated he had not been presented with any evidence to show that what he was doing was invalid.
34 99. The Respondent stated that he had suffered very significantly in personal terms due to his involvement in the file sharing work. He had lost his professional indemnity renewal insurance and had been placed in the Assigned Risks Pool. His practice had closed and he and his staff had lost their jobs. He was still subject to a bankruptcy order which he hoped to annul as he wished to enter into an Individual Voluntary Arrangement (IVA) to try to meet his liabilities. He had found it almost impossible to get work and had carried out the odd assignment. Things had not been easy for him and he was struggling to make ends meet. At the current time, his house was at risk of re-possession. His relationship had broken down as a result of the failure of his business. He had not seen his son for nearly a year. The Respondent claimed that he had been “demonised” publicly. There had been campaigns against him by the consumer organisation Which? and from various internet chat rooms. His children had been targeted through “Facebook”. He had suffered harassment and abuse which was continuing. The Respondent claimed that his work had been innovative and unique. He stated that the processes and procedures that he had used were well established in other parts of the world. He told the Tribunal that there was an enormous problem with on-line copyright infringement within the media industry. His role had been to act for his clients to try and reduce the instances of copyright breaches. He believed that his work had been valid. He accepted that he had made errors and misjudgements but stated that these had been done unknowingly. He deeply regretted the things that had gone wrong. He referred the Tribunal to various testimonials. Some of these were from clients for whom he had acted for a considerable number of years. Other testimonials were from distinguished individuals in their field. He asked the Tribunal to consider the effect that the closure of the firm and subsequent difficulties had had on him. The Tribunal were asked to note that the previous disciplinary matters had been for “technical” failures relating to the delivery of accounts which were unrelated to the present proceedings and had occurred at a time when the Respondent had been unwell.
Sanction 103. The Tribunal gave careful consideration to the matters raised by the Respondent in his mitigation and in his testimonials. It was clear that with the benefit of hindsight, the Respondent may have wished that he had never touched this work. The Tribunal gave the Respondent credit for making admissions in relation to six of the seven allegations that were outstanding against him. The Respondent had known at the time that he had taken on this work that there were outstanding concerns in relation to the type of work and the way in which it was being carried out. In addition, there were a number of factors which aggravated the gravity of the allegations against the Respondent. He had written over 20,000 letters to unrepresented members of the public. Whilst the Respondent had told the Tribunal that his firm responded to every letter sent by an individual, the Tribunal did not feel that the evidence supported this statement. Many members of the public had suffered severe stress and anxiety when they had received letters from the Respondent.
This was the Respondent’s third visit to the Tribunal. Perhaps of greater significance in relation to the protection of the public was the fact that within a few days of starting this work, the Respondent had been asked whether he was prepared to consider discontinuing the work but he had declined to do so. The Tribunal considered the full range of sanctions available. In order to adequately protect the public and due to the serious nature of the allegations against him, a penalty of suspension was merited. The Tribunal decided that the Respondent should be suspended for a period of two years and so ordered.
Costs 107 The Applicant’s claim for costs was £76,326.55. The Respondent told the Tribunal that he did not seek to challenge the amount of the costs which he considered to be moderate and reasonable and he did not object to a costs order being made. He explained that he had already provided for the costs order as a contingent liability in his bankruptcy. He told the Tribunal that the costs order would fall to be dealt with in any IVA that he managed to secure. He was hopeful that his financial situation would improve in time and he would be able to earn enough to meet his outstanding liabilities. He would leave it to the Tribunal to make such Order as it considered appropriate. The Tribunal ordered that the Respondent should pay the Applicant’s costs as claimed in the sum of £76,326.55.
Statement of Full Order 109. The Tribunal Ordered that the Respondent, Andrew Jonathan Crossley, solicitor, be suspended from practice as a solicitor for the period of two years to commence on the 16th day of January 2012 and it further Ordered that he do pay the costs of and incidental to this application and enquiry fixed in the agreed sum of £76,326.55.
Dated this 6th day of February 2012 On behalf of the Tribunal
J N Barnecutt Chairman
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