A law firm that also owns an estate agency and acted for seller, buyer and as the seller’s agent in 14 residential conveyancing transactions has been fined over the conflict of interest this generated.
Systemic errors also led Greater Manchester firm Sleigh Son & Booth (SSB) to act for seller and buyer in eight conveyances without obtaining the clients’ consent to do so, and in nine without telling the clients.
There were also 15 transactions were SSB acted for seller and buyer without informing its lender client.
The Solicitors Regulation Authority (SRA) as prosecutor and the Solicitors Disciplinary Tribunal (SDT) both recognised that the actions of the six-partner firm over the two-year period in question were not deliberate.
The firm has tightened up its internal controls – and stopped acting for purchasers when also the seller’s agent – as a result of the problems identified.
The SDT ruling published last week was told: “[SSB] set up its estate agency to avoid the need to pay referral fees to estate agents, which had the effect of conveyancing work being carried out by unqualified paralegals [and] detrimentally affected the general level of competence brought to bear on such work. There was no intention to breach any rule of practice.”
The SDT heard that SSB had procedures in place to obtain consent when it was acting for both parties, but these failed on the eight occasions.
The firm added that whenever it did act for both sides, its fee-earners “made a careful judgement as to whether there was a significant risk of a conflict of interest and concluded that there was not. They were permitted by their professional rules to make such a judgement and did so in good faith”.
SSB made the decision on whether to inform its lender clients about acting for both sides from a contractual, rather than ethical, standpoint, the tribunal was told: where lenders stated in the Council for Mortgage Lenders’ Handbook that they required notification, SSB provided it; where it was optional, it didn’t.
The firm said it has changed its practice following the SRA’s advice.
Fining SSB £2,000, the SDT said: “There was no intent to breach the professional obligations, although as experienced solicitors the partners at [SSB] were, or should have been, aware of the risks and the importance of monitoring compliance with the system that had devised.”
The SDT recognised that the culpability was low, there was no identifiable harm to clients and that cases of acting for both sides represented just 1% of SSB’s workload. But it stressed the importance of the proper systems to manage the risk of conflict.
“Given that [SSB] had three offices, ran an estate agency and 50% of its work derived from residential conveyancing, the weaknesses in the systems of control were considered by the tribunal to be too serious for either no order or a reprimand.”
On costs, the SDT disallowed £12,000 of the £32,000 claimed by the SRA in part because the regulator had failed to engage with SSB’s initial refusal to admit the charges of acting for both seller and buyer because the way they were originally drafted indicated that the practice was totally banned.
The SRA only acknowledged that it was wrong and rewrote the charges on the eve of the hearing, which SSB then admitted, along with the other charges.
The SDT said that, had this been done earlier, “it may have obviated the need for a contested final hearing”.
The SRA has the power to fine firms up to £2,000 without needing to take them to a tribunal.
The ruling also indicated delays in the SRA’s processes. The Legal Ombudsman raised concerns about SSB with the SRA in October 2014, but the SRA only began an investigation in September 2016. The investigation culminated in a report in June 2017 before the hearing last month.