A disciplinary tribunal has heavily criticised a Solicitors Regulation Authority (SRA) investigation that was so “flawed” that its investigator’s evidence disintegrated under cross-examination.
It meant that all but one relatively minor charge against Denise Davies was dismissed.
The forensic investigation officer, called ‘SC’ by the tribunal, failed to pursue reasonable lines of enquiry, including failing to check her firm’s electronic systems for evidence.
“The poor quality of the investigation and the subsequent forensic investigation report was so material that it led to a disintegration of SC’s evidence under cross-examination,” it said.
Ms Davies, who qualified in 1984, was an equity partner specialising in conveyancing in the Bedford office of Woodfines from 2009 to 2016, and was its money laundering reporting officer until February 2014.
Following a review of 18 files in respect of three clients – Client A, his wife Client B and her mother, Client C – the firm raised concerns about the extent of due diligence she had undertaken, overpayments made by two of the clients, her knowledge of Client C, and her practice regarding the release of client funds and execution of mortgage deeds.
She was dismissed in January 2017 and reported to the SRA. After SC’s report, she was accused of failing to conduct adequate due diligence on clients and transaction funds.
The SRA told the Solicitors Disciplinary Tribunal (SDT) that the transactions raised several ‘red flags’, such as all instructions coming from Client A, while Clients B and C were never met or spoken to.
Ms Davies said she had obtained a passport and utility bill in respect of Clients A and B in 2009, while there was an electronic anti-money laundering search in Client B’s maiden and married names in 2014.
These were relied on in all subsequent transactions; meanwhile, Client B had power of attorney over Client C.
Ms Davies argued that she had no basis for any suspicions or concerns regarding Client A – she did not find it unusual for Client A to speak for Client B “in light of their faith and culture” and did not consider that funding for the purchases emanated from a third party as Clients A and B were married.
She also thought the provision of excess funds were not a “risk factor” based upon her knowledge and experience of Client A.
Under cross-examination, SC – a highly experienced officer with around 300 investigations to his name – admitted that he only checked the paper files for evidence of identification checks, relying on the firm’s confirmation that there was nothing on its electronic files.
“SC accepted that he could have accessed the electronic systems himself but did not do so. He conceded that in retrospect the information provided by the firm could have been unreliable but maintained that at the material time he ‘wasn’t made aware of any fallout beyond dismissal’.”
In fact, Ms Davies was in financial dispute with the firm after her expulsion from the partnership.
The tribunal added: “He accepted, with the benefit of hindsight… that there could have been identification evidence stored somewhere other than on the matter files that he personally reviewed.”
He also agreed that, given the power of attorney, identification was not required for Client C.
He apologised to Ms Davies and the tribunal for his report being inaccurate on these points.
In relation to two of the overpayments, it emerged that the transactions had actually been completed by other lawyers to whom SC had not spoken.
The SDT made multiple criticisms of SC, finding him “thoroughly unprepared” to give evidence because of several errors he made.
“He did not acknowledge the responsibility incumbent upon him to bring fairness and independence to the investigation. The tribunal was extremely troubled by that in light of the reliance the [SRA] placed on his evidence, which appeared to unravel when tested.”
The tribunal said it was “repeatedly apparent” that SC had not sought to obtain the “best evidence” from the other lawyers or the clients. “This was exacerbated by SC’s explanation that to have done so would have been ‘a complete waste of time’…
“The tribunal was in no doubt that the electronic systems would have provided the best evidence as to documents requested and/or received.
“SC accepted and relied on the firm’s position regarding their review of the electronic systems without question, despite having been told that ‘old emails may have been deleted’.”
By contrast, the SDT found Ms Davies “a witness of truth”. It accepted that the identification checks were sufficient and that the overpayments were made because Client A would habitually at the last minute undertake a rough calculation as to the funds required to meet completion deadlines.
Payments made by Client B were not from a third party – the tribunal accepted Ms Davies’s assertion that she considered Clients A and B to be “one unit” by virtue of their marriage.
Given that the case relied on SC’s “substantially inadequate” evidence, the SDT said the allegations had not been proven.
A separate charge of releasing client funds prior to obtaining validly executed mortgage deeds was also thrown out because of SC’s errors.
The tribunal accepted Ms Davies’s evidence that she would have been very careful not to release funds without a signed mortgage deed, but in two instances the original signed copy of the deed was not found on the file by SC.
Ms Davies opened 10-15 conveyancing matters a month and these were the only two instances where the properly executed mortgage deed was absent. The tribunal said SC should have contacted the clients in question “to ascertain if/when they returned their signed deeds to the firm”.
Ms Davies did admit to a single charge of incorrectly vouching for Client C in an ‘introduction certificate’ to an estate agent, when she had not actually met her. The solicitor said this was an error of judgment aggravated by personal circumstances at the time.
The SRA alleged that Ms Davies had acted dishonestly, but the tribunal found she genuinely believed she was entitled to sign the certificate as she had known of Client C for six years.
“In that context, the tribunal concluded that by the standards of ordinary decent people her conduct was not dishonest.”
Describing it as a “one-off lapse of judgement”, it said the seriousness of this misconduct was low, but having found it lacked integrity, imposed a fine of £1,500.
The tribunal also heavily reduced the costs Ms Davies had to pay for SC’s investigation, and also found that the SRA’s solicitors, Capsticks, spent too much time on the case, ordering her to pay £21,000 in total – less than half of what the SRA claimed.