Solicitor used firm’s client account to administer family finances

SDT: Firm had huge residual balances

A veteran solicitor has been fined for administering her family’s finances through her firm’s client account over 18 years and using it “as an overdraft facility for her family”.

Robyn Lynch was also found to have allowed her firm to hold nearly £540,000 in residual balances.

The Solicitors Disciplinary Tribunal (SDT) approved an agreed outcome between Ms Lynch and the Solicitors Regulation Authority (SRA), saying that though she put client funds at risk for the benefit of her family members, “there was no actual loss to any clients and the misconduct was not deliberate”.

All shortfalls on client account were remedied within a short time of their discovery, it added.

Ms Lynch qualified in New Zealand in 1970 and requalified in England and Wales 12 years later. She runs South London firm Kenwright & Lynch, which specialises in probate and conveyancing.

An SRA investigation found that, between 2001 and 2019, she used the client account as a banking facility for various family members, which she said represented disbursements from a family trust in respect of which she was settlor and sole trustee, and members of her family the beneficiaries.

Though the matter was divided across separate ledgers, she said they were all related to the same trust and initially argued that this formed part of a solicitor’s normal regulated activities.

The SRA did not accept this. “The arrangement was a highly informal and flexible one,” the agreed outcome said. “It is no part of a solicitor’s normal role to administer a family’s finances in the informal and ad hoc manner that this respondent did.

“Even if it were, technically, part of a solicitor’s normal regulated activities to administer a family’s finances in this way, it would nevertheless offend against the spirit of the principle. It is not open to solicitors to seek to circumvent that principle in this way.”

The regulator described the trust as “informal and unconventional” – it was unclear how the trust first came into being, while there was no trust deed or anything to identify the property which was the subject of the trust, the trustee’s powers, the objects of the trust or the beneficiaries.

“The respondent had complete discretion as to how trust funds should be distributed, and to whom. Funds were paid in every direction: from the trust to beneficiaries; from beneficiaries to the trust; from one beneficiary to another; and from the trust to third parties…

“It remains unclear to the [SRA] why many of these funds needed to pass through a solicitor’s client account at all.”

The SRA found it “doubtful” that there was a legally enforceable trust at all.

It was also “notable” that none of the Ms Lynch’s work as trustee was charged or invoiced, and there was no retainer, client-care letter or written instructions.

It concluded: “The arrangements in this case amounted to little more than the informal administration of a family’s wealth… A solicitor asked to use their client account for administering such an arrangement would and should refuse the instruction.”

Individual files comprising the family trust matter were repeatedly overdrawn, the SRA went on. Some of the shortages were substantial, the largest being £35,000, and often lasted for several weeks.

“The shortages must have been funded from elsewhere, i.e. other clients’ funds in client account. In effect, the respondent used the client account as an overdraft facility for her family, repeatedly borrowing other clients’ funds.”

This showed the danger of mixing informal family affairs and client funds in the client account, the SRA said, although no clients lost any money as all the shortages were repaid.

As of February 2019, the firm held £538,000 in residual balances for 1,143 clients dating back to 2003. Fourteen were more than £5,000, with the largest nearly £93,000.

There was no evidence that the firm had contacted the relevant clients or beneficiaries about the residual balances, but Ms Lynch took steps to remedy the situation as a result of the SRA investigation.

In mitigation, Ms Lynch said she “genuinely believed, at the time, that she was entitled to act as she did” – her reporting accountants never told her otherwise. There was, she added, no allegation of lack of integrity or dishonesty.

The SDT agreed with the proposal to fine her £15,000.

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