“Manifestly incompetent” solicitor suspended over running of firm

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Accounts: Solicitor abrogated responsibility

A sole practitioner who was dismissed as a consultant after selling their firm has been suspended for three months by the Solicitors Disciplinary Tribunal (SDT).

The anonymous solicitor, ‘AM’, accepted that they had been “manifestly incompetent” in allowing serious breaches of the accounts rules to go uncorrected, having “abrogated responsibility for resolving issues to a member of staff”.

Neither the SDT ruling, nor the statement of agreed facts and indicated outcome it approved, explained why the solicitor’s identity had been redacted.

The Solicitors Regulation Authority (SRA) said AM, admitted in 1978, was sole owner, manager and compliance officer of a law firm until its sale in 2021 to an alternative business structure that was established to serve as a successor practice.

All staff, including AM, moved to the new firm and AM said they had intended to work there for two years ahead of retirement. But their employment “was terminated shortly after the sale”.

The solicitor was found to have failed to keep the law firm’s accounting records up-to-date – not showing its dealings with client and office money, or undertaking reconciliations – between 2015 and 2022.

AM failed to remedy issues identified by reporting accountants between 2015 and 2021, did not ensure client money was kept separate from the firm’s own money between 2018 and 2021, and failed to deliver qualified accountant’s reports to the SRA in 2019 and 2020.

These reports – only received by the SRA after AM had sold the firm in 2021 – showed client-side debit balances, office-side credit balances, residual client balances and the widespread use of suspense accounts.

A list of the client-side debit balances as at 31 December 2018 totalling £2m contained explanations which were either ‘Don’t know’ or referred to items being posted to incorrect ledgers. AM told the SRA that they had “no idea” how these had arisen.

AM also allowed transfers from client to office account without billing or notifying clients, or made transfers in excess of the notification of costs.

In September 2020, AM signed a sale and purchase agreement for the firm’s sale to an alternative business structure that included clauses which “they ought to have known they could not fulfil”, and also failed to inform clients about the sale.

AM denied only three of the many allegations – all relating to acting with a lack of integrity. Having reviewed the evidence, considered medical evidence and “in the light of the proposed sanction” of suspension, the SRA withdrew them.

In mitigation not endorsed by the SRA, AM said he relied on the office bookkeeper to ensure that accounts were up-to-date.

“Following the bookkeeper’s untimely death in 2018 the respondent was keen to rectify matters and the new bookkeeper began the process of rectifying the issues but that process was delayed by the Covid 19 pandemic. The respondent was also unaware that accountant’s reports had not been submitted on time.

“The respondent also found it difficult to ensure invoices were prepared and sent to clients during the pandemic due to the furlough of staff and as the retained secretary fell behind.

“The respondent maintains that they did not deduct money from client account for any sums, due to the work done, that they were not entitled to.”

AM complained he was dismissed “without warning”, leaving him “powerless to prevent the purchaser from stealing client money”, but he immediately “raised concerns” by contacting the SRA.

Approving the indicated outcome, the tribunal said AM was “an experienced solicitor” and while their conduct was “inadvertent, they were responsible for that conduct”.

Only one client had suffered loss as a result of the misconduct.

The SDT considered there was a need to protect the public and the reputation of the profession from future harm “but that such protection did not necessitate AM being indefinitely suspended from practise or being struck off the roll”.

It agreed that AM should be suspended for three months and that any return to practice should be subject to conditions preventing them from being a sole practitioner or compliance officer, holding client money or being a signatory on client account.

AM was also ordered to pay costs of £23,000.