On 17th January 2023, the industry regulator, the Bar Standards Board decided to hand down an order imposing a ban on a barrister preventing him from continuing to practise after evidence emerged
Law Firm Owner Used Client Money As Private Personal Overdraft For Two Decades
In late May 2022, the Solicitors Disciplinary Tribunal handed down a large fine to a senior solicitor with over half a century of experience. She had undertaken personal responsibility for managing the finances of the firm for just under two decades.
Why Did The Solicitor’s Disciplinary Tribunal Impose Such Sanctions?
All appeared fine with the accounts until the industry regulator, the Solicitors Regulation Authority noticed some discrepancies. Due to these observations, the regulator launched an investigation into the conduct of the solicitor and discovered that monies held in the client’s account had appeared to have been used to make up shortfalls in her private finances.
Was There A Reasonable Explanation?
The lawyer submitted that the outgoings related to a trust for which she had been appointed trustee on behalf of some beneficiaries who happened to be her family members. She claimed she held a reasonable belief that her behaviour had been permitted due to her perception that the activities were of a type expected of solicitors.
However, the claims were given short sharp shrift by the SDT. On objectively reviewing the evidence it found that the senior solicitor should not have been operating the firm’s finances in this way due to, the:
- relaxed nature of the relationship subsisting between herself and the trust
- informality and
- apparent flexibility of the arrangement.
The Solicitors Regulation Authority appears to have applied a business reality approach which considers the level of understanding of the senior solicitor. It found that the property comprising the trust was owned by the majority of her relatives and in essence boiled down to a less than formal relationship whereby the senior solicitor was dealing with the finances in an ‘ad hoc’ fashion. The claim by the senior solicitor that her behaviour in administering the trust was part of the normal day-to-day activities of a solicitor was met with disapproval and condemnation by the Solicitors Disciplinary Authority. It described her actions as breaching the principle that law firms should not be operating as banks and should not under any circumstances be treating the client account as a private bank account.
Why Did The Solicitors Disciplinary Tribunal Adopt Such A Perceptively Hard-Line Stance?
The reason why the matter was so serious was that it was not an isolated incident. It transpired that the senior solicitor had seemingly been using the money held in the client’s account to rectify financial shortfalls for an extraordinary eighteen years. The Solicitors Disciplinary Tribunal was damning of the extent of the solicitor’s conduct. The SDT summed the behaviour up by describing it as the equivalent of the solicitor using client money as a personal overdraft facility because the lawyer had permitted her relatives to borrow monies from the client’s account on just over ten separate occasions.
As a punishment to the senior solicitor and a deterrent to others contemplating such behaviour the Solicitors Disciplinary Tribunal handed down a hefty fine of £15,000 and ordered the lawyer to pay £20,000 in costs to the Regulator.
What Can Other Lawyers Learn From This Debacle?
Lawyers or anyone aspiring to a career in the profession need to be very cautious, wary and alert whenever they find themselves receiving instructions of this nature. The Solicitors Disciplinary Tribunal warned legal professionals facing this situation in no uncertain terms to decline instructions. Lawyers should not be operating the firm or department as they would a bank or using the client account as a bank account under any circumstances.
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THE ARTICLE WAS WRITTEN USING THE FOLLOWING SOURCES
 Hyde, J – Veteran solicitor fined for running family finances through firm – Law Society Gazette - 27 May 2022 - Reform criminal appeal process to cut miscarriages of justice / Justice and Home Affairs / Policy Commissions / Labour Policymaking
 Solicitors Regulation Authority – Robyn Moira Lynch - https://www.sra.org.uk/consumers/solicitor-check/114991/
 Solicitors Regulation Authority – Improper use of client account as banking facility – 25 November 2019 - Prisoners Have the Right to Access Court Records in Their Cases (reason.com)
 Fuglers LLP v SRA  EWHC 179 (Admin)
 Patel, Premji Naram Patel v Solicitors Regulation Authority  EWHC 3373 (Admin)
 Zambia (Attorney General of Zambia v Meer Care and Desai  EWCA Civ 1007
 Rule 3.3 Solicitors Regulation Authority – Account Rules
 Principle 1 Solicitors Code of Conduct
 Principle 2 Solicitors Code of Conduct
 Principle 3 Solicitors Code of Conduct
 Principle 4 Solicitors Code of Conduct
 Principle 5 Solicitors Code of Conduct
 Financial Services and Markets Act 2000
 Section 127 Insolvency Act 1986
 Money Laundering, Terrorist Financing and Transfer of Funds (Information on the payer) Regulations 2017