The Solicitors Disciplinary Tribunal has struck off a solicitor who borrowed £125,000 from longstanding clients to bail out his failing business and failed to mention that his wife had a prior charge over the firm’s assets.
Ordering that Michael Alexander be struck off, the tribunal found he had a professional obligation to insist his clients take independent legal advice as a prerequisite to proceeding with the loan and should have refused to proceed when they did not.
However, the SDT concluded that he had encouraged the clients not to seek independent advice.
Mr Alexander borrowed the money saying that it would fund a lucrative part of the firm involving payment protection insurance litigation, a venture which ultimately failed to yield expected profits from which he claimed he would repay the loans.
A number of allegations were made in relation to loans of £100,000 in 2008 and then £25,000 in 2009 to Mr Alexander’s firm, AWB Solicitors, trading as Alexander Bolsher Solicitors, and its successor.
In April 2009 administrators were appointed over AWB, leading to liquidation. After administration, the solicitor practised at Alexander Lawyers LLP in Chelmsford, Essex, which itself went into administration in March 2013.
The solicitor was born in 1950 and was admitted in 1973 and had long acted for a couple who had run a business and decided to sell up and retire.
He persuaded them to loan his firm £100,000 for one year, after which they would be repaid £125,000. The loan would be secured by a debenture over the firm’s assets. The couple claimed they were given an assurance by Mr Alexander that their money was “100% secure” and that they would not have made the loan otherwise.
However, they were not told of his wife’s debenture and it turned out that they were actually fifth on the list of secured creditors, with three banks also ahead of them. The SDT did not accept the solicitor’s explanation that he thought one of the banks had removed his wife’s charge.
It also accepted the couple’s evidence that the solicitor had discouraged them from seeking independence advice.
The loan was not repaid when AWB went into administration, but Mr Alexander agreed to transfer the liability for it to his new firm. In addition his clients loaned him a further £25,000, which the tribunal accepted they made in part to protect the first loan.
Though Mr Alexander was not found to have actively discouraged the couple from seeking legal advice this time, and indeed the loan agreement noted that they had been advised to and decided against, the SDT said his prior effort would have still have been in their minds. It also accepted their evidence that it was implicit that if they did not lend the money, the original loan would be at risk.
Again the solicitor’s wife had a charge and she was given priority over the clients, with the SDT rejecting Mr Alexander’s claim that this was a mistake.
The tribunal found the allegations proved and that Mr Alexander had been dishonest.
The SDT recorded that it had found “misconduct… at the highest level” and ruled that the solicitor’s “motivation was one of self-interest, primarily financial. His actions were planned and there was an element of breach of trust as he had taken advantage of client who was also at the time a personal friend.
“He had full control over the circumstances giving rise to the breaches and he was an experienced practitioner, both as a solicitor and also as a previous company secretary.”
It continued: “The respondent’s actions had been deliberate, calculated and repeated, and continued over a number of years. He had concealed the true position from [the clients] from the outset, and had persisted with the subterfuge by creating false impressions on a number of occasions.”
As well as striking off Mr Alexander, the tribunal ordered him to pay costs of £78,785.
His former clients are still owed nearly £100,000 plus interest, and the tribunal noted that Mr Alexander had accepted he had a moral obligation to repay them.
In November 2014 Mr Alexander agreed a regulatory settlement agreement under which he admitted a number of offences including a failure to disclose material information to lender clients and being involved in transactions where there was a conflict of interest, or risk of conflict, between the interests of clients.
He was fined £2,000 and paid costs of £7,500. He had continued to work as a consultant solicitor in London with conditions on his practising certificate.