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PI lawyer used disbursement cash to prop up firm

SDT: Solicitor had no training on accounts rules

The owner of a personal injury firm has been struck off after retaining nearly £500,000 in disbursements to keep his firm afloat after it was badly hit by the LASPO reforms.

Alan Joseph Fitzpatrick was reported to the Solicitors Regulation Authority (SRA) by trade union firm Thompsons, which discovered during purchase negotiations last year that his Salford firm, Rowley Dickinson, was breaking the rules.

Mr Fitzpatrick, who qualified in 1981, told the SRA that LASPO had cut his income “by probably two thirds”, creating a cash flow problem.

He started delaying payments for medical reports, costs drafting and counsel in 2014 as a way “to keep the firm afloat”. He used the money to pay staff and directors’ salaries, as well as himself as £2,500 a month as repayment of his loan account, along with VAT, tax and rent.

He insisted that he always intended to pay the outstanding sums eventually.

Simpson Millar completed the purchase of Rowley Dickinson’s personal injury practice in January this year and in April Rowley Dickinson closed.

Thompsons first raised its concerns with Mr Fitzpartick a year earlier, and he ended up reporting himself to the SRA on the same day as Thompsons.

In an agreement with the regulator approved by the Solicitors Disciplinary Tribunal, the solicitor said the firm’s bank had cut its overdraft from £220,000 to £95,000, and he did not realise that delaying the payment of disbursements was a breach of the rules.

Mr Fitzpatrick failed to check the rules or seek the advice of his accountants, admitting that he had never had any training in the accounts rules in nearly 40 years of practice.

He expected the money from Thompsons would allow him to pay his creditors.

The SRA established that by June 2019 there were unpaid professional disbursements totalling £485,200, made up of 951 cheques from October 2013 to June 2019, ranging from £25 to £9,420.

The firm wrote letters to service providers and signed cheques, but they were kept in a filing cabinet rather than being sent out. When the firm decided to pay disbursements, the cheques were cancelled and payments made by BACS.

The solicitor replaced £106,000 of the shortage on client account in November 2019, with the rest paid by January this year after he received £372,000 from Simpson Millar.

Mr Fitzpatrick admitted acting recklessly and without integrity, and that from 2014 he failed to inform the SRA that his firm was in serious financial difficulties.

The regulator said “no reasonable solicitor in the respondent’s position and experience would have allowed his practice to build up such a high level of debt in the light of the high risk of insolvency”.

In mitigation, Mr Fitzpatrick said there was no dishonesty on his part and no intention to avoid paying for disbursements.

The solicitor, who said he had no intention of practising again anyway, was struck off and ordered to pay £20,600 in costs.

We reported last month that the firm’s COFA, Philip John Kelly, was banned from working for law firms [1] because of his role in what happened.