The High Court will hear an appeal by the Solicitors Regulation Authority (SRA) later this month for tougher sanctions on two West Midlands solicitors, suspended for their involvement in a collapsed Brazilian property investment scheme.
But the scheme’s liquidators have “reluctantly” decided not pursue legal action against their firm.
Ecohouse Developments went into liquidation two years ago, leaving debts to unsecured creditors of over £21m.
Michael John Davies and Clare Louise Taman, respectively the senior and managing partner of Sanders & Co in Stourbridge, were found by the Solicitors Disciplinary Tribunal (SDT) in December to have failed to act with integrity by acting for both Ecohouse and the investors in a situation where there was a conflict of interest.
Mr Davies and Ms Taman were also found to have failed to act with integrity in permitting payments into and transfers or withdrawals from the firm’s client account “which were not related to an underlying legal transaction”.
Sanders & Co, which closed last summer, operated an escrow account on behalf of Ecohouse in which it received, held and distributed money on behalf of investors. Over two and a half years it received £33.7m into the account and deducted £714,730 in fees from over 800 investors.
The tribunal accepted the solicitors’ arguments that they should not be struck off because of an “element of concealment” on the part of a third solicitor at the firm, Charles Fraser-Macnamara. All three solicitors were suspended for a year.
A spokesman for the SRA said it had launched an appeal for tougher sanctions against Mr Davies and Ms Taman on the grounds that the SDT was too lenient given the large amount of money lost to creditors. The appeal is listed for 21 June.
Meanwhile, accountants PwC said in a liquidator’s progress report on Ecohouse recently that it had decided not to take legal action against Sanders & Co.
PwC, which instructed City firm Taylor Wessing, said that in June 2016 it sought an opinion from counsel, but “within days” was notified that Sanders’ professional indemnity insurers had refused cover, and later that the law firm had itself gone into liquidation.
“Whilst the liquidation of Sanders was not entirely unexpected and did not, in itself, impact our strategy, the declinature of their insurance cover had a significant negative impact.
“We sought legal advice as to the possibility of challenging the insurer’s decision, however, we were advised that the process was very complicated, lengthy and expensive, and that the chances of success were low.”
PwC went on: “As liquidators, we had to weigh up the costs of continuing to pursue a claim against Sanders, firstly against the prospect of being able to successfully prove a claim and secondly against the likelihood of making a recovery for creditors.
“Given the lack of insurance cover to pursue and the fact that Sanders has limited assets, we reluctantly concluded that it was not in the best interest of creditors for us to pursue this matter any further.”