Shares: Solicitor was careless
A consultant solicitor who “inadvertently” became caught up in a client’s act of “deception” of the Takeover Panel while he was away on his honeymoon has been fined £3,000.
The Solicitors Disciplinary Tribunal (SDT) said Colin Neil Maltby had “acted carelessly” by misleading the panel about the date on which a client’s promissory note was signed, but “had not gained anything financially”.
The SDT said the incident arose during an investigation by the Executive of the Panel on Takeovers and Mergers into Mr Maltby’s client ‘AM’ and the latter’s business associate, ‘JG’.
Mr Maltby “knew, or ought to have known” that the promissory note could not have been signed by JG in July 2013 because he had not “personally prepared and drafted” it until March 2015.
“Whilst he had known the Executive was interested in the transaction, he had not taken the care that he should have done, simply because he was keen to bring the matter to a close quickly.”
As a result, Mr Maltby, who was working as a consultant solicitor for On Demand Lawyers in south-east London, had received a private censure from the Takeover Panel.
“There had been a degree of deception by AM and JG which led to the respondent inadvertently becoming caught up in their deception without really knowing their true intentions.”
The SDT went on: “This was a single isolated incident in a long unblemished career and had taken place at a time when the respondent was away from the office on his honeymoon.
“He had been careless in dealing with one particular email and had already suffered some repercussions as a result.”
Mr Maltby was born in 1965 and admitted in 2002, and was investigated by the Solicitors Regulation Authority (SRA) after the panel reported issuing him with the censure.
The Executive said Mr Maltby’s conduct fell “well short of the standards required” by the city code on takeovers and mergers.
Mr Maltby acted for AM and his family trusts. The Takeover Panel hearings committee ruled in December 2016 that AM and JG had provided “false information” to the Executive, attempting to deceive it into believing that a purchase of shares in ‘H Investments’ had been made on behalf of JG as beneficiary.
This was because AM would have held more than 30% of H Investments and thus obliged to offer to buy the rest of its shares.
The committee said a “purported arrangement” in which JG undertook through a promissory note to pay for the shares as and when he came into the funds to do so was a “fabrication”.
The committee found that the 2013 agreement “had been invented in or around 2015” and the promissory note drafted by Mr Maltby had been “constructed by AM and JG retrospectively”.
On 21 April 2015, the Executive asked AM about the share purchase and AM told it about the purported 2013 agreement. The following day, Mr Maltby sent the Executive an email, attaching a copy of the promissory note “which represented that the arrangement was instigated on 17 July 2013”.
On 27 April, the Executive emailed Mr Maltby with further queries relating to its investigation into AM. By this time the solicitor was on his honeymoon and there was a “large time difference”.
He emailed JG, who told him he had signed the promissory note on 17 July 2013 and attached a copy. The following day Mr Maltby emailed the Executive, stating: “I’m currently on holiday for two weeks but have heard from [JG] that he signed the promissory note on 17 July 2013.”
Mr Maltby said he sent the email at 8.19am “from the balcony of his room while waiting for his wife to come out of the bathroom so that they could go down to breakfast”.
The solicitor said he was trying not to use his phone during the honeymoon, and he was “not conscious of events” when he sent the email.
He rectified the error six months later, when he informed the Executive of when he had drafted the promissory note.
The SDT found that Mr Maltby had “misled or acquiesced in the misleading of” the Takeover Panel. In doing so, he lacked integrity, but did not act dishonestly or recklessly.
He had learned a “salutary lesson” and the risk of repetition was low.
The solicitor was fined £3,000 and ordered to pay costs of £6,100.
The Takeover Panel ordered that AM and JG be ‘cold-shouldered’ – not allowing regulated companies to deal with them on any transaction concerned with the code – for six and two years respectively. Its most serious sanction, there have only been three other such orders since 1968.