SDT: Solicitor should have known DBA was unlawful in family cases
A solicitor who entered into a damages-based agreement (DBA) with a family law client and pursued her for costs under it has been fined £10,000 by the Solicitors Disciplinary Tribunal (SDT).
The SDT said that, although the client ultimately suffered no financial loss, Peter Ejokwoye Otto should have known DBAs in family law cases were prohibited by statute.
Mr Otto was born in 1959 and admitted in 2003. He was sole principal of Peter Otto & Co Solicitors in South London, which he established in 2007.
The tribunal said the relationship between Mr Otto and ‘Client A’ had “unreconcilably broken down” and “their evidence, and the manner in which they gave that evidence clearly showed the level of acrimony and mistrust”.
The solicitor said that, at the time she instructed him to challenge a consent order on the basis of non-disclosure of assets by her ex-husband, Client A did not have sufficient funds to proceed.
“Whilst he was reluctant to act, he considered that she was the victim of fraud and was in need of legal advice and assistance. He eventually agreed to act for her on the basis that he would only require her to pay costs at the successful conclusion of the case.”
The solicitor denied that the agreement amounted to a DBA, but various of his letters explicitly referred to it being one and that Client A would pay 15% of any sum awarded.
The action was successful and Client A was awarded a lump sum payment of £769,000 plus costs of nearly £200,000 – the latter remained outstanding, however.
Mr Otto later sought payment from Client A of the 15% and warned that, without an offer to settle the fees, debt recovery solicitors would be instructed.
He later offered to forego the money if other outstanding fees were paid, but the SDT said he “could not forgo an amount to which he was not entitled”.
Although it accepted that Mr Otto had made a “genuine error”, the SDT said he “ought to have known what funding arrangements he could enter into with his client”.
The solicitor had also facilitated three loans to Client A totalling £60,000 from another client, Client B.
He argued that he was not acting for Client A in this instance: he had introduced the parties and left them to reach agreement, and only then drafted the loan documentation and acted as a conduit for the monies.
Merely introducing parties who then enter into an arrangement did not amount to facilitation, the SDT said, but Mr Otto had gone “much further”.
It did not accept that Client A was not a client for the purposes of the loan and so Mr Otto was under a duty to advise her.
“The tribunal considered that at no point did the respondent tell Client A that he was not representing her as regards the loan, nor, as was agreed, did he tell her to seek legal advice.”
He later acted for Client B in seeking recovery of the loans when there was a “clear conflict of interest”, the tribunal said. In doing so, he acted with a lack of integrity.
In mitigation, counsel for Mr Otto said he had undertaken a “vast amount of work over a number of years and had achieved good results for Client A” – he had found and traced assets to her advantage and obtained court orders to secure them.
Ultimately Client A did not pay the 15%, nor did she repay the loans or any interest.
The tribunal found that Mr Otto’s misconduct had not caused financial harm but it had caused harm to Client A in that she would have considered she was liable to pay money the solicitor was not entitled to, and that he would take enforcement action against her.
The SDT said the misconduct was not serious enough for Mr Otto’s right to practise to be restricted. He was fined £10,000 and ordered to pay £29,000 in costs.
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