DWF: Supervision failure
A partner at DWF has been fined £14,000 for wrongly approving £2.2m in payments to a developer which later went bust, leaving the firm to recompense out-of-pocket buyers.
Mark Shepherd, a partner in DWF’s London real estate team, told the Solicitors Disciplinary Tribunal (SDT) that he was “not aware” that the senior paralegal in charge of the plot sales team in the firm’s Manchester office did not have any legal qualifications.
The SDT approved a statement of agreed facts and outcome from the Solicitors Regulation Authority (SRA) in which the solicitor said it was this unnamed paralegal who had requested the incorrect payments. His failure was to check them properly.
DWF’s internal investigation did not recommend action against Mr Shepherd but made recommendations about systemic processes and training.
“The firm accepted that there was no formal or documented process which required either client partners to supervise matters referred to the plot sale team, or for the plot sale team to escalate queries to client partners or other partners.
“The firm appears to have accepted the [matter] should have been handled by Manchester-based partners who could have directly supervised [the paralegal] as opposed to the respondent who was based in London as part of the commercial real estate team and not associated with plot sale work.”
In non-agreed mitigation, Mr Shepherd said he “mistakenly” assumed that “recruitment to and employment within the plot sales team of an international law firm would include appropriate verification of qualification and experience”.
Mr Shepherd, who qualified in 2002, accepted that he “placed too much reliance on the autonomy and operation” of the team and should, in line with the findings of the internal investigation, “not have accepted the work from the client without an appropriate allocated supervisory structure in place”.
The SDT said that, as a partner, Mr Shepherd had ultimate responsibility for final sign-off of the payment authorisations and “given the very large sums of money involved” should have “exercised greater care and scrutiny” before authorising them.
“However, it was to his credit that he had self-reported the matter and made appropriate admissions.”
DWF was instructed in August 2019 to act for a special purposes vehicle connected to ‘Company A’ on the construction and sale of a number of residential units on a development. Mr Shepherd was the client partner.
The law firm drafted standard contracts to be used in the sale of long leaseholds to buyers and received deposits and instalments from the buyers’ solicitors.
Between October 2019 and November 2020, DWF released more than £2.2m in the absence of deposit warranty insurance for the deposit money or supervisor’s certificates for the work done for the instalment money, as required by the contracts.
In December 2020, it became “apparent that no or little work had been carried out on the site”, with images of the building site showing that it was “still bare land”. The paralegal alerted Mr Shepherd, who escalated it internally.
When DWF pursued Company A for repayment of the £2.2m, it was told the client had gone into administration.
DWF confirmed it had “made good the payments” with the help of its professional indemnity insurance.
Mr Shepherd admitted failing to check the conditions of the relevant contract had been met and that monies were properly due to the client before authorising the payments.
In doing so, he failed to maintain public trust in the profession or protect client money.
One of the buyers of the units, who complained to the SRA in March 2021 and represented others, said that “much angst, concern and worry has been caused”.
However Mr Shepherd “co-operated fully” from an early stage of the SRA’s investigation, “making open admissions and demonstrating insight as well as apologising for his conduct”.
DWF said it no longer conducted plot sales work.
Mr Shepherd was fined £14,168 and ordered to pay costs of £19,000.
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