Solicitor who misled firm about client loans and referrals struck off

SDT: Inexperience not relevant to honesty and integrity

A solicitor who actively concealed from his employer the fact that he had taken loans from clients and received referral fees from a short-term lender has been struck off.

The Solicitors Disciplinary Tribunal (SDT) found that Jack Grunhut also knowingly supplied a backdated deed of trust in support of an application for a stamp duty refund, and failed to conduct adequate due diligence on a party in a property transaction.

Mr Grunhut, who qualified in 2019, was employed as a consultant solicitor for just over a year at what is now Taylor Rose MW, and then for the next two years and two months was a consultant solicitor at Berlad Graham.

The SDT heard that, while at Berlad Graham, Mr Grunhut received four loans from clients totalling £630,000, most of which had been repaid.

However, in response to a request from the firm’s managing partner after learning about the first loan, he confirmed that he did not have any other personal or financial relationships with any other clients which he had not disclosed. In fact, he had recently entered into two of the loans.

Mr Grunhut submitted that he did not consider the term ‘financial relationships’ to include loans, an explanation the SDT said was “incapable of belief”. It also rejected his claim that he had misunderstood the question in light of others he had been asked.

The SDT said it was satisfied that Mr Grunhut “knowingly provided this false and misleading information”.

In 2020, Mr Grunhut received four payments totalling around £3,400 into his personal bank account for referring clients to a short-term lender.

Berlad Graham regularly reminded fee-earners about the rules on referrals. They were asked to notify the firm about any arrangements they had currently or previously in place, and Mr Grunhut replied to say he had none.

He told the tribunal that the clients had been unable to secure a buy-to-let mortgage so he had advised them to contact the lender. There was no ‘arrangement’ for him to be paid a referral fee but the clients had asked “as a sign of gratitude” for an invoice so that they could pay him a referral fee.

He said he had thought that, as these were informal arrangements, Solicitors Regulation Authority rules or the firm policy did not apply, although he accepted with hindsight he should have told Berlad Graham.

The SDT said tokens of appreciation “did not require an invoice to be generated” and the payments were of a sum “beyond what could reasonably be considered a token of appreciation”.

“The tribunal found on the balance of probabilities that Mr Grunhut had entered into a referral/introducer arrangement.

“It may not have been a formal arrangement set out in a written agreement, but the reality of the situation was that Mr Grunhut was receiving financial payment having introduced a client of the firm.”

Again, his unequivocal response to the firm’s enquiries was “false and misleading”.

The deed of trust issue arose while Mr Grunhut worked at Taylor Rose. He was instructed to assist with reclaiming stamp duty land tax a year after the transaction, in which he played no part, had taken place.

Mr Grunhut’s case was that he generated the deed, at his client’s request, as an aide memoire to show the client what it would have looked like and believed that the document returned to him was the original that had been signed in 2019.

He said he only intended the client to sign the authority letter he had sent and not the accompanying deed.

The SDT found this “implausible”. It explained: “If he had been asked to provide a document which would help Person A find the original, there was no need to put the date on it or the details of the parties including the addresses. He could simply have sent a blank deed of trust template.

“Mr Grunhut could have had the word ‘Draft’ added in watermark across the document to ensure no confusion with the original. It made little sense to populate the document in the way Mr Grunhut did, if he did not intend that Person A would rely on that document and sign it.”

This was reinforced by the email which attached three documents and said “please sign and return”. “As a solicitor, notwithstanding his relative inexperience, Mr Grunhut would know the importance of being clear. It would have taken no effort to have added the words ‘the letter of authority’ to that sentence.”

The SDT concluded that these actions were dishonest.

Mr Grunhut admitted a fourth charge of failing to undertake due diligence on the individual for whom a property purchase he was acting on would be held on trust and whose involvement was only disclosed some time after instruction.

In mitigation, his advocate, Jonathan Goodwin, said Mr Grunhut accepted he had made errors of judgment, for which he sincerely apologised. Mr Goodwin said Mr Grunhut had been “consumed with work” and had “acted in haste”, and submitted that the acts were momentary and isolated.

The SDT did not accept that the acts were momentary. “There were several opportunities in the email chains when Mr Grunhut could have taken a different course and he had not done so.”

His relative inexperience was relevant to the due diligence allegation but “not… to matters of honesty or integrity”.

The only appropriate sanction was a strike-off, it concluded. Mr Grunhut was also ordered to pay costs of just under £30,000.

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