Law firm owners suspended for accounts breaches dating back to 1980s

SDT: Firm stopped accountants’ reports as costs-cutting measure

The veteran husband and wife owners of a Midlands law firm have been suspended for manifest incompetence after allowing dormant client balances to build up over decades.

However, the Solicitors Disciplinary Tribunal (SDT) ruled that the costs against Andrew and Janet Stevenson should be reduced from almost £24,000 to zero, on the grounds that once their firm had been wound up, “there would be no money left over”.

The SDT heard that Mr Stevenson, suspended for 18 months, was admitted as a solicitor in 1979. Mrs Stevenson, suspended for six months, was admitted in 1976. They co-owned Prime & Co in Rugby, with Mr Stevenson acting as COLP and COFA.

The Solicitors Regulation Authority (SRA) launched an investigation in August 2021, which found the firm was holding £121,270 in client funds that had been dormant for more than 12 months – in one matter, the last transaction dated back to 1984.

Mrs Stevenson, who took over the law firm’s bookkeeping in 2020, said she was “surprised by the old balances, having become aware of them since taking over the books”.

Mr Stevenson said he was “aware that there were dormant client ledgers”, but he was also “surprised that the last movement dates on some of them went back to the 1980s”.

He told the SRA that the issue had not been addressed “due to ‘overwork, lack of time, endless hours fighting CustoMrs and Excise or HMRC…’.”

The firm’s last accountant’s report was signed off in June 2014. Mr Stevenson told the SRA that because of the “financial problems created by HMRC, made worse by the economic recession”, it was “necessary to pare overheads to the minimum”.

He went on: “One of the overheads I pared in 2014 was the payment of accountants to prepare annual accountants’ reports.

“Mrs Stevenson kept at an eagle eye on the client account ledger, carrying out the monthly reconciliations required by the rules, and I knew that she would never allow anything untoward.

“Although we were both aware of the financial problems, I fear that I rather bullied her into the decision not to obtain accountants’ reports. The cost-cutting measures were intended only to be short term but, in the event, they lasted longer than I would have wished.”

Mrs Stevenson “acknowledged that she should have insisted that an accountant’s report was prepared”.

The solicitors admitted causing or permitting the improper retention of money in client account, and Mr Stevenson admitted acting with a lack of integrity in doing this.

The Stevensons also admitted failing to notify clients that their money had been retained. In doing both of these things, they accepted their conduct was manifestly incompetent.

They admitted failing to obtain an accountant’s report for the firm between 2014 and 2020, failing to remedy breaches of the accounts rules and failing to report those breaches to the SRA. They also admitted failing to tell the SRA, for a period starting in 2014, that the firm was in financial difficulty.

Mr Stevenson was fined £1,000 by a previous SDT in 2006 for failing to provide a proper standard of work, reply to correspondence and honour an undertaking. However, the SDT “attached little weight to this” as the origins of the misconduct in the present case pre-dated that.

Both solicitors had shown remorse and insight, the SDT said. Mr Stevenson “had made full, open and frank admissions at an early stage and had taken full responsibility. He was in the process of making good the breaches and was winding his firm down in a responsible and orderly manner”.

Although Mr Stevenson had suggested that he had bullied his wife, “she had not agreed”.

The SDT said it had not heard any evidence of loss to individual clients but Mr Stevenson’s misconduct was “aggravated by the fact that it continued over a period of time and was, to an extent, deliberate, calculated and repeated”.

Mrs Stevenson had been manifestly incompetent, like her husband, but had not acted without integrity, so the period of her suspension was reduced.

The SDT said there was no order for costs it could make against either of them which had “a realistic prospect of being paid within a reasonable timeframe,” so it made no order for costs.

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