Thanet solicitor struck off and two sanctioned at disciplinary hearing over financial breaches

A Thanet solicitor has been struck off and ordered to pay costs of £70,000, while two others have been sanctioned and ordered to pay costs, following a Solicitors Disciplinary Tribunal hearing.

The hearing examined allegations against Edward Foster, formerly chief executive of County Solicitors,  Robert Newman, who was the firm’s Compliance officer for legal practice and the Compliance Officer for Finance and Administration Rashpal Kaur.

The allegations related to County Solicitors and The Foster Partnership, both firms that had been run by Mr Foster, and improper transfers of client money, mortgage procedure breaches and accounting breaches.

County Solicitors traded between 2016 until the Solicitors Regulation Authority (SRA) shut it down in December 2019. The Foster Partnership Ltd, in Broadstairs, Ramsgate, Margate and Herne Bay, was shut down in October 2019 by the Council for Licensed Conveyancers, citing breaches of its code of conduct.

Some 23 former staff  for The Foster Partnership claimed a total of £523,000 for unfair dismissal in breach of contract, failure to comply with redundancy procedures and unauthorised deductions from wages. This included £13,010.36 to Mr Foster; £31,273.29 to Mr Newman and £53,032.06 to Ms Kaur.

Allegation 1

The first allegation levelled against Mr Foster was that during the latter months of 2018 he allowed just under £385,000 of improper transfers from the firm’s client account.

The tribunal heard that transfers from clients to the office bank account had been made before bills were even raised and client ledgers could not be produced for the transactions because instructions were given either orally or by emails that were then  deleted.

Accounting staff member Sandy Carter had been instructed by Mr Foster not to inform the other directors of the transfers.

Tribunal judgement papers say: “It was alleged that Mr Foster used client monies to overcome cashflow difficulties involved in running the Firm’s business. In certain instances, monies transferred from the client account were used to discharge a debt.

“The transfers were made at times when the Firm’s account had insufficient funds to make the payment and the transfer of client monies allowed for the payment to be made. Client monies were being used by Mr Foster to ensure that the Firm was able to discharge its ongoing liabilities without the agreement of the clients and in circumstances where he knew, but the relevant clients did not, that the transfers were being made.

“In addition, client monies were also allegedly used to repay monies purportedly due to Mr Foster but not in fact paid by him into the Firm’s accounts.”

Mr Foster declined to give an explanation and the Tribunal found proved breaches of five Principles and an aggravating allegation of dishonesty. Mr Foster had admitted the breaches but denied the allegation of dishonesty.

Allegation 2

The SDT heard a second allegation that between 8 July 2017 and 19 December 2018, Mr Foster and Mr Newman “caused and/or allowed the firm, contrary to its clients’ instructions, to:

• Receive approximately £2,333,838.00 into its client account from mortgage lenders and thereafter pay out those sums to a third party;
• Failed to inform its clients that those sums were being so paid out;
• Failed to maintain client ledgers in respect of those sums;
• Failed to maintain client files in respect of those matters;
• Submitted certificates of title to lender clients, which had been signed by individuals who were not authorised to do so.

The £23m of mortgage advances related to 129 transactions with the hearing focusing on nine exemplified transactions of £2.3m involving both County Solicitors and The Foster Partnership in procedures which ‘blurred the lines.’

In an email Mr Foster denied dishonesty in regards to the mortgage allegation saying it was due to “error/incompetence” on Mr Newman’s part.

Mr Newman said it was Mr Foster who had proposed the arrangements which Mr Newman had endeavoured to implement. His evidence was that this was always intended to be a temporary arrangement, for a few months, but he accepted that it had continued longer than that. Mr Foster was a solicitor, and it was submitted on Mr Newman’s behalf that he was entitled to trust him and that he did so.

Mr Newman said  “he had made embarrassing mistakes” but had not  set out to deceive.

The tribunal found the allegation against Mr Foster proved, saying: “Given the degree of control over the finances and operation of the Firm and The Foster Partnership, the Tribunal did not find it credible that such a practise had evolved without Mr Foster’s knowledge and without him allowing it.”

The tribunal found Mr Newman had breached principles but was not guilty of the dishonesty allegation and had been unaware of the signing of title certificates by individuals outside the Firm who were not authorised to do so.

Allegation 3

A third allegation was that Mr Foster and Rashpal Kaur breached accounts rules when:

• Between April 2018 and February 2019 the firm failed to complete client account reconciliations every five weeks.
• Between approximately November 2016 to March 2019 caused and/or permitted the Firm’s suspense ledger to be used in breach of Accounts Rules.
• Between 1 June 2018 and 31 December 2018 caused and/or permitted the Firm’s client account to be used as a banking facility involving approximately £2,333,838.00

It was alleged that Ms Kaur did not perform her role as COFA as expected and required. She was alleged to have simply taken what was presented to her without going beyond it to determine its accuracy – relying on the cover sheet produced.

Ms Kaur explained in interview that the Firm’s directors did not have the power or ability to authorise financial transactions, nor did she have access to financial information that a COFA ought to have. On becoming managing partner following Mr Foster’s resignation, she put in place policies and procedures to ensure bills were posted correctly, ledgers were properly maintained, and the Firm kept proper records.

The Tribunal found proved that Mr Foster had breached principles. For Ms Kaur the Tribunal found she had not done enough to discharge the obligations of being the Firm’s COFA. She had failed to take sufficient reasonable steps to seek to satisfy herself that the Accounts Rules were being complied with and had failed to protect clients’ money, resulting in a breach of principles albeit in “difficult circumstances.”

Findings

The Tribunal found all allegations proved against Mr Foster, who did not attend the hearing, instead sending an email in advance.

It found that Mr Newman’s conduct had breached the requirement to act with integrity but an aggravating allegation of dishonesty was found not proved. Mr Newman had no knowledge that unauthorised individuals were signing certificates of title which was the focus of that allegation.

Ms Kaur was found to have breached Principles but there were no allegations that her conduct had lacked integrity or was dishonest.

Sanctions

Mr Foster has been struck off the Roll of Solicitors and ordered to pay £70,000 costs.

Mr Newman was suspended for three months and ordered to pay £15,000 costs

Ms Kaur was fined £7,500, reduced to £3,000 in view of her current means, and 3,000 costs.

Neither Mr Newman nor Ms Kaur had any previous Tribunal findings against them.

In 2012 the Tribunal had imposed a £20,000 fine on Mr Foster for breaches including allowing his firm’s client account to be used to provide banking facilities and withdrawing money from client account,

Tribunal judgement papers say at the time of the hearing last October  Mr Foster, who was admitted to the Roll of Solicitors in August 1997, was engaged by his own company, eLawyer Services Limited, an unregulated legal services company undertaking non-reserved legal activities.