Trio of solicitors sanctioned for conveyancing firm misconduct

SDT: Foster exercised a high degree of control over both firms

A solicitor whose misconduct included using client money to help his firm with cash flow difficulties has been struck off, while two solicitors he hoodwinked have also been sanctioned.

Edward Richard Foster also used his law firm regulated by the Solicitors Regulation Authority (SRA) to handle work for a separate firm regulated by the Council for Licensed Conveyancers (CLC).

Robert James Newman, who was the SRA firm’s COLP, was suspended for three months, and the COFA, Rashpal Kaur, was fined £3,000 for her involvement in what happened at Kent firm County Solicitors.

The Solicitors Disciplinary Tribunal (SDT) heard that CS began trading in 2016 until the SRA shut it down on Christmas Eve 2019. Mr Foster, who qualified in 1997 was its majority shareholder and, at the time of the misconduct, its chief executive.

He currently operates through unregulated company eLawyer Services Ltd, providing unreserved legal activities.

He was also the majority shareholder in The Foster Partnership (TFP), trading as County Conveyancing and regulated by the CLC, which closed it down a few weeks before the SRA acted on CS.

The SDT found that, in three months towards the end of 2018, Mr Foster authorised eight transfers totalling £385,000 from CS’s client account.

“The available evidence, and Mr Foster’s admissions, indicated this was likely to be to overcome cash flow difficulties for the firm and to repay monies to him in respect of loans which were not recorded having been received by the firm.”

Mr Foster admitted that this was dishonest, the SDT said.

A separate allegation concerned £23m of mortgage advances received into CS’s client account between July 2017 and December 2018 and the paid on to TFP. They related to 129 transactions. The hearing focused on nine exemplified transactions accounting for £2.3m of the mortgage money received.

The SDT was told that, in matters where TFP was instructed but not on the relevant lender’s panel, the lender would instruct CS. TFP would do the work, however, and its fee-earners would sign the lender’s certificate of title (COT) in CS’s name.

This also meant that CS’s client account was used as a banking facility, as the mortgage advances were paid to TFP’s client account rather than to the sellers’ solicitors’ client accounts.

Mr Foster admitted various breaches but denied that his conduPct was dishonest, blaming errors on the part of Mr Newman.

The SDT did not accept this. Mr Foster “exercised a high degree of control over the finances and operation” of both firms, and it drew a negative inference from his refusal to explain his actions and submit to cross-examination.

His solicitor sent an email in advance of the hearing making his admissions but Mr Foster did not attend it.

The SDT decided that, though the scheme had initially been set up by Mr Newman, Mr Foster had altered it while Mr Newman was absent from the office so that TFP employees signed the COTs in CS’s name.

“Mr Newman’s evidence to the tribunal was that he had created an admittedly imperfect, and in retrospect non-compliant, system under which the firm acted for the lender, receiving mortgage funds without creating a legal file for the lender client and without informing the lender that the firm was not carrying out the conveyancing.

“This informed his admissions [about the scheme]. He maintained throughout his evidence and under cross-examination that he had no knowledge of anyone outside the firm signing the COTs.”

The SDT accepted this, describing his “unblemished” 40 years of practice as a factor relevant to the probability that he had not known about the COTs.

Mr Newman also denied that he had been dishonest. The SDT said that, “whilst ordinary, decent people would have serious concerns about the conduct, it would be regarded as ill-judged and unprofessional rather than dishonest”.

Mr Foster also admitted various accounts rule breaches and breaches of the SRA principles on maintaining public trust, having effective financial supervision and control of the firm, and protecting client money.

While Ms Kaur admitted the rule breaches, she argued that she was not culpable for breaching the principles.

She said she was advised by the previous COFA that “all she needed to do was sign off the reconciliation statements and that the experienced accounts team… would ‘do the rest’”, and that breaches such as the misuse of a suspense ledger were kept from her.

The SDT accepted this and said it had “considerable sympathy” with her. But it continued: “The COFA role is an important one and the tribunal considered that on her own case she did not discharge the obligations on her.

“That a previous COFA may have failed to identify issues and that steps had been taken on the instruction of Mr Foster to keep matters from her were relevant to mitigation, but did not absolve Ms Kaur of culpability.”

A COFA was “not entitled to accept what was provided at face value”. Ms Kaur had said she was excluded from relevant meetings and not provided with access to the firm’s banking details – but she was “obliged to take steps to ensure she had the access she required”.

As a minimum, she should have requested access to the firm’s bank statements in order to assess the reconciliations. “If such access was not given, a COFA could not undertake their role and would be obliged to resign.”

In striking off Mr Foster, the SDT noted that he had been fined £20,000 by the tribunal in 2012 for “misconduct with similar characteristics”. There were no mitigating factors in his favour.

The motivation for Mr Newman’s conduct was “benign”, it continued. “He was not seeking any personal advantage but to safeguard purchaser clients. He did not intend any harm to lender clients, and none occurred.”

But he was in a position of trust in relation to the lender clients and he had misled them, albeit inadvertently. His misconduct had caused “very significant harm” to the reputation of the profession.

“In mitigation, Mr Newman had to some extent been pressurised by Mr Foster who was in a senior position within the firm. Mr Newman’s negotiating position with him was weak. Mr Newman had not sought to hide anything, and the tribunal found his remorse and insight to be genuine.” The risk of any repetition was also “extremely low”.

Nonetheless, he had admitted that his actions had lacked integrity and the SDT said they represented “a very serious professional failing”.

A three-month suspension would “punish and deter whilst being proportionate”.

Ms Kaur’s “reliance on the actions of others and information that they presented to her” was not reasonable. A fine of £7,500 was appropriate, reduced to £3,000 due to her means.

The SDT also ordered Mr Foster to pay costs of £70,000, Mr Newman £15,000 and Ms Kaur £3,000.

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