A solicitor has been fined for arranging 47 loans between clients – one of which was his own late mother’s estate – totalling almost £1.8m, many of which were made without written agreement or security.
Fining Nigel Christopher Brothers £15,000, the Solicitors Disciplinary Tribunal (SDT) heard that all the loans, created over a period of five years, were repaid.
Mr Brothers, admitted in 1983, was one of two partners at NC Brothers & Co in Reading, which specialised in immigration and conveyancing, which closed last May. He was also the COLP and COFA.
According to a qualified accountant’s report for the financial year 2018-19, there were “a number of client-to-client transfers which represented private loans between clients”.
The accountant said these loans would be a breach of the accounts rules “unless expressly authorised in writing by both clients in advance of the transactions”.
The Solicitors Regulation Authority (SRA) launched an investigation, which found that NC Brothers & Co had “facilitated a number of loans between clients” where there was no written agreement.
In an agreed outcome with Mr Brothers, approved by the tribunal, the SRA said that, apart from one payment made directly to borrowers, all the loans were made by inter-ledger transfers.
Four client matters were involved and there were 47 loans, 32 of which were made without prior written agreement. To correct overdrawn ledger balances, 47 inter-client ledger transfers were made, totalling £53,200.
The total value of the loans was £1.8m, of which £775,000 was undocumented. There was no “centralised record”.
A client referred to as PD granted Mr Brothers power of attorney in 2012, advising in 2019 that he did so in order that the solicitor could “invest my money and lend it to clients of his firm on such terms as in his discretion he considered appropriate”.
The SRA said that 46 inter-ledger transfers were made from PD’s account to other clients of the firm totalling £961,600. Of these transfers, 32 represented loans and the rest transfers to correct overdrawn client ledgers. Only 10 of the loans were documented.
PD stated in a letter in 2019 that he was “aware that there is not a written agreement in respect of every payment/loan”, but he did not “have a problem with that since bookkeeping should take care of these problems”.
Mr Brothers was one of the executors of his late mother’s estate, along with his three siblings.
The SRA said he made 32 transfers from the estate to correct other, overdrawn client ledgers and six undocumented loans. The value of the loans was £75,800. Again there were no written agreements.
In a further case, Mr Brothers borrowed £42,500 from a client in 2014, which he repaid a few months later. This was followed by another loan of £20,000 and a smaller one of only £1,000.
The solicitor admitted causing or allowing both private loans to clients from money held on behalf of other clients and inter-ledger transfers between clients, breaching the accounts rules and SRA principles.
In the case of PD, he admitted accepting and holding client funds for the purpose of making investments, and in doing so using the account as a banking facility.
In mitigation, Mr Brothers said no client had complained or suffered a loss. He did carry out a risk assessment before making the loans, which was why security was put in place for a number of them.
“He was of the opinion that security was no necessary for the other loans as the clients to whom the money was being lent were of good standing and had sufficient assets to enable them to repay the loans.”
In relation to his mother’s estate, the solicitor said his siblings received their shares and that he had kept his in the client account. “He believes he was entitled to draw upon this or deal with this money without any approval or consent from his siblings and co-executors.”
The SRA said the actions were planned, involved “significant sums of money” and occurred over a period of five years. However, all the loans had been repaid and Mr Brothers had made full admissions.
He was fined £15,000 and ordered to pay costs of £30,000. Conditions were imposed on his practising certificate for an indefinite period, preventing him from being a law firm owner or manager, a COLP or COFA, holding client money or being a signatory on client account.