Partner and firm fined for not recognising ‘own interest’ conflict

SDT: Serious misconduct

A partner and law firm failed to spot a restrictive covenant on a purchase and then did not tell its developer client, continuing instead to act for him when litigation over it ensued.

North London firm Hodders Law admitted to the Solicitors Disciplinary Tribunal (SDT) that it did not have adequate systems in place to identify ‘own interest’ conflicts.

The tribunal approved an agreement reached by Hodders and partner James Tompkins, who qualified in 1993, with the Solicitors Regulation Authority (SRA), to fine them.

The firm had acted for ‘Client A’, a property developer, for about 15 years in over 150 matters.

In 2016, it worked on his acquisition of a residential property; however, the firm failed to notice that it was subject a restrictive covenant, potentially affecting the scope for development.

In January 2017, Client A contacted Hodders after receiving a letter from solicitors for two neighbours. Mr Tompkins assumed conduct of the matter and realised what had happened, but neither he nor the firm told the client.

Instead, he simply told Client A that the restrictive covenant was likely to be binding and there was a “significant risk” of an injunction being granted to prevent the works.

In April 2017, after proceedings were issued, Mr Tompkins advised Client A that “to cease work would be the safest and cheapest option”. He notified the firm’s indemnity insurer the same day.

Nonetheless, the day after, he sent Client A a client-care letter to act in the litigation for a fixed fee of £5,000.

The following day, an interim injunction was granted and the litigation subsequently settled, with Mr Tompkins continuing to act.

Client A sued Hodders later that year and the case settled. The agreement noted: “The claim included the costs payable both to the firm and the neighbours, and costs incurred as a result of delays to and changes to the works, including architects’ fees and building costs.

“The firm accepted that it did not identify the potential conflict or take steps to secure that Client A was advised to seek independent advice, and further accepted that it did not have systems in place to identify or responds to ‘own interest’ conflicts.”

In mitigation, Mr Tompkins argued that his actions were based “upon a genuine desire to assist Client A, a longstanding client whom he knew personally and was seriously unwell at the time, rather than protect himself or his firm”.

He claimed there was no attempt to hide the mistake and that “Client A was aware both of the issue and its consequence”.

Mr Tompkins said: “Given the urgency of the situation that arose, Client A’s position and medical condition, as well as the long-term relationship with him and his family, [he] genuinely felt that he and his firm were in the best position to represent Client A in the dispute…

“Whilst that desire may have been misplaced it was nonetheless genuinely held.”

The SRA stressed that the inclusion of the mitigation in the agreement did not mean it accepted the points raised, but they could be used by the tribunal to assess whether the proposed outcomes represented a proportionate resolution.

The regulator said that fines – £5,000 for Mr Tompkins and £11,000 for Hodders, 0.4% of its turnover – were “a sufficient sanction to mark the seriousness of the misconduct and to protect the public and reputation of the profession”.

The SDT agreed with the sums, describing Mr Tompkins’ misconduct as “moderately serious” and the firm’s as “more serious”.

The pair also agreed to pay costs of £17,400.

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