Firm caught up in investment scheme collapse forced to close after insurance dispute
SRA: four solicitors referred to SDT
The partners of a 41-year-old Black Country law firm have expressed their “bitter” disappointment at having to close down due to a dispute with their professional indemnity insurers.
At the same time, four lawyers from Sanders & Co are facing the Solicitors Disciplinary Tribunal over their involvement in a complex overseas investment scheme.
A notice on the firm’s website does not explicitly link the two – although local newspaper reports do – and says: “After over 41 years in Stourbridge town, Sanders & Co will cease trading on 30 June 2016, which means we cannot take on any work or continue to act for clients. This closure is directly attributable to a dispute with our professional indemnity insurers…
“The partners at Sanders & Co are bitterly disappointed at this turn of events but unfortunately do not have the resources to continue any further litigation with its insurers therefore the closure is unavoidable.”
According to the Solicitors Regulation Authority, senior partner Michael John Davies, managing partner Clare Louise Taman, Charles Valentine Fraser-Macnamara and his daughter Katherine May Fraser-Macnamara have all been referred to the tribunal.
All four face a common allegation, that they “acted or permitted Sanders & Co LLP to act for a client (E) in relation to a complex overseas investment scheme and concurrently for individuals who invested in the scheme, in a situation where there was a conflict, or a significant risk of a conflict, between (1) the interests of E; (2) the interests of each individual investor; and (3) the interests of the firm and an individual, C”.
Mr Davies and Ms Taman each face a further charge that they involved themselves and the firm in a complex overseas investment scheme that was outside their or the firm’s area of expertise and experience “where there was no legitimate need for the involvement of a firm of solicitors”.
Further, the pair are alleged to have permitted payments into and transfers or withdrawals from, the firm’s client account “which were not related to an underlying legal transaction or a service forming part of his normal regulated activities”.
The allegations are subject to a hearing before the tribunal and are as yet unproven.
According to the Stourbridge News, the allegations follow the collapse of Eco House Developments, which was behind a proposed Brazilian social housing scheme but which crashed last year and is said to owe investors at least £21m. The firm is said to have acted in the role of escrow agent.
It quoted Mr Davies as saying: “There’s no suggestion of dishonesty whatsoever, we can account for every penny. The only issue is whether or not there was a breach of a regulation in the solicitors’ account rules. There’s no reason why solicitors can’t run escrow services providing they are providing a legal service.”
He told the newspaper that he and Ms Taman had invested more than £100,000 in legal costs in trying to overturn the decision by the professional indemnity insurers and added: “One could be very emotional about it – it’s 30 years of serving the local community – we’ve always had an unblemished reputation as far as I can tell and were well-respected by the judiciary, local magistrates and our clients and for it all to end in this way – it’s really a tragedy, quite frankly.”
London firm Lucas & Co is acting for the Eco House Action Group and has submitted a letter of claim against Sanders & Co.
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