SRA: Reprimand the appropriate outcome
A senior paralegal has been rebuked by the Solicitors Regulation Authority (SRA) for wrongly requesting the release of at least £1.85m to a property developer which later went bust, leaving his law firm to repay buyers.
Shaun Sloyan, who worked in the plot sales team at DWF’s Manchester office, said he did not know that Mark Shepherd, the London-based partner responsible for authorising the payments, had not checked if monies could be paid out under the contracts of sale.
Mr Shepherd, recently fined £14,000 by the Solicitors Disciplinary Tribunal for wrongly approving the payments, had told the tribunal he did not know Mr Sloyan was not a qualified lawyer.
The SRA said DWF had to pay an indemnity insurance excess of £1.55m to repay the buyers of off-plan flats in the development, which was never built, while the firm’s insurer paid the remaining £1.1m plus interest.
In a regulatory settlement agreement with Mr Sloyan, the SRA said he worked for DWF between 2015 and mid-2021.
DWF notified the SRA in March 2021 that it had “incorrectly released buyers’ instalment and deposit monies” from its client account to a developer in breach of contractual conditions for the off-plan sale of a number of residential new-build properties, referred to as Development C.
The firm had drafted standard contracts for the sale by the developer of long leases in the residential units to buyers. Mr Sloyan, a senior paralegal in the plot sales team, had day to day conduct of the sales.
DWF was responsible for holding money from buyer’s solicitors in the form of deposits or instalments on the purchase price, which were not to be released until the seller had provided deposit warranty insurance and supervisor’s certificates completed by a surveyor.
The SRA said that a total of almost £2.6m was paid erroneously by DWF to the seller in multiple instalments, made up of £1.85m released without supervisor’s certificates and £747,000 without deposit warranty insurance.
When the solicitors for the buyer of one plot raised enquiries with Mr Sloyan about the supervisor’s certificate, he forwarded the email to a Mr Johnson, managing director of the developer, who said he could provide the information.
“lt does not appear that this information was ever provided nor that Mr Sloyan followed this up with Mr Johnson,” the SRA said.
With another buyer’s solicitor, Mr Sloyan said the certificate would follow “nearer to practical completion” and “should not hold up exchange”.
Mr Sloyan still continued to make the payment requests and Mr Shepherd continued to approve them; the partner asserted that he had no knowledge of the communications from buyers’ solicitors.
The money dependent on the insurance was paid out after Mr Johnson told Mr Shepherd in October 2019 that it was in place. It was only in February 2021 that DWF realised it was not.
lt had already transpired in December 2020 that there had been no progress in building the development. Mr Shepherd said Mr Sloyan raised the matter with him for the first time and Mr Shepherd immediately escalated it internally.
DWF carried out an internal investigation in February 2021. No disciplinary action was recommended or taken against Mr Sloyan.
The SRA said: “The firm appears to have accepted the Development C matter should have been handled by Manchester-based partners who could have directly supervised Mr Sloyan’s work as opposed to Mr Shepherd who was based in London as part of the commercial real estate team and not associated with plot sale work.
“The SRA understands that the firm no longer conducts plot sales work.”
Mr Sloyan admitted that between October 2019 and November 2020, he requested the release of at least £1.85m to the developer before the money was properly due.
In doing so he admitted failing to uphold public trust and protect client money.
The SRA said Mr Sloyan had “simply followed the process” which applied to other developments rather than checking the specific contractual position here.
“Mr Sloyan thought that Mr Shepherd (as the client partner) authorising the payments was confirmation that the payments were properly due and Mr Sloyan did not know that Mr Shepherd was not checking if monies could be paid out.”
The SRA said it considered a rebuke to be an “appropriate and proportionate outcome” because the misconduct “involved issues of moderate seriousness” and did not require a higher level of response.
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