Law Firm Owner Faces Suspension For Failing To Keep Accounts For Four Years

What Happened In The Case?

On 24th May 2022 news emerged of a solicitor and legal firm owner who has been suspended from her position as a solicitor for six months.

Why Was The Solicitor Suspended?

The respective law firm appeared to be operating successfully since 2017. However, in 2021 the industry regulator, the Solicitors Regulation Authorityinvestigated the firm after seemingly becoming suspicious about how it operated. The SRA interviewed the owner and during which she made some inexplicable admissions. She failed to:

• keep accounts up-to-date
• wilfully choosing not to communicate with colleagues that no accounts had been kept and
• get an accountants report compiled

What Did The Evidence Show?

When the SRA reviewed the accounts they raised questions about an estimated £230,000 withdrawal adjustment and the owner could not satisfactorily answer.

For nearly three years the solicitor had also overlooked the regulatory requirement to keep adequate records in the form of an accurate cashbook for just short of 200 transactions which appeared on the evidence to equate to in excess of one million pounds. The regulator commented that the account information was so inadequate for investigative purposes that it was not clearly visible if the provider actually had the correct sums it claimed to be making.

When the SRA investigated further it found that the shortcomings were deeper than first thought. An example concerned the firm’s tax position. Evidence appeared to show the firm’s National Insurance Contributions hadbeen in arrears to the tune of nearly £25,000 for around six months. When the position was reviewed deeper in terms of the Income Tax and VAT position of the firm, the SRA found, somewhat alarmingly, that the last recorded VAT payment the practice had made was in July 2019.

What Explanation Did The Lawyer Offer?

The only explanation the solicitor provided for not employing a person to help balance the books was that she ‘could not get straight’ and chose not to bring in another person. Giving a snapshot of the trouble faced, the solicitor enlightened the regulator that as time proceeded, the greater the struggle became and the situation worsened.

Was This The End Of The Matter?

A client submitted a complaint to the Ombudsman over the administration of a deceased client’s estate which had been delayed. The complaint concerned the slow progress made on the solicitor’s part. The lawyer had committed to the Ombudsman to:

• apologise in written form to the client over the slow progress
• and
• get certain activities completed within a relatively short time.

However, in a seeming breach of the commitment made to the regulator sixteen weeks later the lawyer had provided no such written apology and the respective administration of the estate had not moved forward any further.

By way of punishment the lawyer:

• has been suspended from practice for six months
• was ordered to pay £15,000 in costs
• has been given indefinite limitations upon her practising certificate and
• faces a lengthy ban from being involved in the ownership, management or operation of a law firm.

Key Takeaways

Anybody contemplating running a legal services provider should pay attention to this case. Lawyers need to be:

• ensuring they keep an up-to-date set of accounts
• communicating with internal stakeholders to ensure that they are aware of the firm’s financial situation
• staying on top of their workload to avoid delays and complaints
• complying with any Ombudsman orders
• communicating with clients, offering apology and addressing issues and
• transparent over their tax positions and keeping their payments up-to-date.

This will not avert disaster but lawyers will be in a seemingly better position if adopting this strategy.

ASSESSING FIRMS

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THE ARTICLE WAS WRITTEN USING THE FOLLOWING SOURCES

[1] Solicitors Regulation Authority v Rebecca Jayne Hawksley – 3 May 2022 – Case Number 12298-2022 – Solicitors Disciplinary Tribunal - 12298.2022.Hawksley.pdf (solicitorstribunal.org.uk)

[2] Hyde, John – I f**cked up’ – Solicitor suspended for accounting failures – Law Society Gazette - 24 May 2022 - ‘I f**cked up’: Solicitor suspended for accounting failures | News | Law Gazette

[3] Principle 2 of the Solicitors Regulation Authority Principles

[4] Principle 4 of the Solicitors Regulation Authority Principles

[5] Principle 5 of the Solicitors Regulation Authority Principles

[6] Principle 6 of the Solicitors Regulation Authority Principles

[7] Principle 7 of the Solicitors Regulation Authority Principles

[8] Principle 8 of the Solicitors Regulation Authority Principles

[9] Rule 1.2(d) Solicitors Account Rules

[10] Rule 7.1 Solicitors Account Rules

[11] Rule 29 Solicitors Account Rules

[12] Rule 8.5 of the Solicitors Regulation Authority Authorisation Rules 2011

[13] Paragraph 8.1 Code of Conduct for Firms 2019