Solicitor fined for “inadvertent” use of client account as banking facility

SDT: Misconduct was at low level

A former City law firm owner has been fined by Solicitors Disciplinary Tribunal (SDT) for “inadvertent” errors in allowing his client account to be used as a banking facility.

The situation in which John Ioannou received and made payments totalling £195,000 was unusual in that his firm had agreed to hold £6.36m for a group of companies under a court order.

Mr Ioannou, 64, qualified in 1987 and was the sole principal of City firm Devereaux Solicitors from 2005 to 2019, when it closed.

The firm was acting for one of the “C family companies”. A restraint order had been served on members of the family in August 2015, because of suspicions of VAT fraud within the companies.

The following month, Devereaux Solicitors applied for an order to force Barclays to operate the C family accounts. Under a Tomlin order, £6.4m was transferred to the law firm’s client account because “the companies owned by C family had not yet been able to set up new accounts with different banks”.

The C family briefly ceased instructing Devereaux in October 2015, when the solicitor working for them left for another law firm, but they had returned by mid-November.

On instructions from a member of the family over the following months, the law firm made payments in and out of client account totalling £195,000.

The SDT said Mr Ioannou used some of the money received to pay his firm’s bills, but “he could not remember why he received the money” – he also could not recall why he had paid the money out.

The Solicitors Regulation Authority (SRA) told the tribunal that Devereaux was entitled to accept money in accordance with the court order but could only use it in accordance with valid instructions and where there was an underlying legal transaction. There were no such transactions for these payments.

The SRA accepted that there were “relatively few such transactions” and there may have been an “element of ‘inadvertence’ on Mr Ioannou’s part”. But his firm had nor relationship with the third-party companies involved in the payments.

The solicitor “admitted without demur” that he had breached SRA principles and the accounts rules in using his firm’s client account as a banking facility.

The solicitor said, in mitigation, that he had been familiar with the rules, and “he had not set out to deliberately break them”.

Instead, the breaches had been “caused inadvertently and by simple error”: there had been no dishonest intention or lack of integrity on his part, and none had been alleged.

Mr Ioannou said he should have “more rigorously investigated the transactions he had been asked to make to satisfy himself that they complied with his professional obligations”.

The solicitor added that he was presently unemployed as he had wanted to wait until the proceedings had concluded before seeking new employment within the profession, “as he wished to be open and frank with a new employer”.

The tribunal found Mr Ioannou was “fully culpable”, but “accepted that, in essence, his errors had been inadvertent”.

While no client money was lost – though there may have been “some loss of tax monies to the Revenue” – this “did not diminish the opprobrium in not respecting the sanctity of the client account”.

No breach of SRA principles was to be treated “lightly”, but the tribunal found that the level of seriousness of the misconduct was low – the misconduct did not represent a “significant” departure from the complete integrity, probity and trustworthiness expected of a solicitor.

The SDT added that “to his credit, Mr Ioannou had ceased to work in the profession until the case had been determined”.

He was fined £2,500 and ordered to pay £2,665 in costs.

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