SDT: Nothing more Mr Adams’ partners could have done
A managing partner who used staff pension contributions to prop up his firm has been struck off, but his two equity partners were cleared of misconduct.
Guy Andrew Adams admitted he had acted dishonestly in holding back £57,000 meant for Scottish Widows after the firm faced cash-flow problems in 2019 due to a slowdown in conveyancing work.
But the Solicitors Disciplinary Tribunal (SDT) held that Bhavani Rajaya Laxmi Hogarty and Maeve Teresa Vickery could not have done more once they discovered what had happened – and that to remove him from his post would have damaged the firm.
Mr Adams, who qualified in 1989, became managing partner of three-office Somerset firm Pardoes in 2016 and was also the compliance officer for finance and administration.
A statement of agreed facts and outcome, approved by the SDT, said he misused money meant for Scottish Widows for 11 months up to July 2020 – £35,500 of employees’ contributions and £21,500 in firm contributions. Staff were only told in October 2020, a couple of months after the Pension Regulator issued a formal unpaid contribution notice.
The firm entered into a repayment plan and made up the shortfall by September 2021. Mr Adams admitted his conduct was dishonest and that he did not consult his partners.
He accepted he should have informed the Solicitors Regulation Authority (SRA) and/or the Pensions Regulator (TPR) about the missed payments, but said he had been advised he did not need to tell the SRA, especially as he had read the two regulators shared information. The Pension Regulator took no further action against Pardoes.
He admitted too that he should have reported to the SRA that the firm was in financial difficulties, but said he did not believe at the time that the problems were sufficient to require that.
He also admitted allowing disbursements from the Legal Aid Agency to be retained in the office account beyond 14 days of receipt, resulting in a shortfall of £7,737 on client account.
Mr Adams said he was unaware of this until the SRA investigation alerted him to it. The firm’s accountants had not raised it with him – he signed off daily reconciliations and they did not show any deficit – and he could not explain why it happened. He rectified the issue as soon as he was aware of it.
In mitigation, Mr Adams said that, when he took over as managing partner, the firm had lost its clinical negligence department, which had generated “very significant” fee income, and the firm faced other financial pressures as a result of Covid.
“It had nonetheless to meet all its overheads and the role of managing partner became one of daily financial planning and forecasting to ensure it met all its liabilities for loans and salaries.
“[He] had the considerable burden of this for a long period of time. There were occasions when he did not take his drawings from the firm. Everyone else was paid.”
He always intended to make good any deficiency “and indeed through hard work he succeeded in doing so”. No one had lost financially.
The SDT agreed that Mr Adams be struck off. He was ordered to pay costs of £6,000 because of his limited financial means. He has retired from practice.
Ms Hogarty qualified in 1991 and Ms Vickery – who was the firm’s compliance officer for legal practice at the time – in 2000.
Both said they had no knowledge of the financial situation that led to the decision not to make the pension payments.
The allegation was that they had ‘allowed’ or ‘caused’ the misuse of the pension contributions and the SDT held there was “no evidence” that they “actively permitted Mr Adams” to do what he did.
“In contrast, the evidence showed that once [they] had become aware of the pension arrears issue in September 2019, they had taken all the appropriate steps available to them to solve the pension issue such as informing the affected employees of the issue, pressurising Mr Adams to solve the issue, referring the matter to the TPR, agreeing on a payment plan with the TPR and otherwise ensuring that the pension arrears were brought up to date.”
The tribunal also accepted that they did not know the pension contributions continued to be misused after September 2019.
The SDT concluded that the SRA “had not shown what else the [solicitors] could reasonably have been expected to do”.
“The tribunal further accepted [their] evidence that removing Mr Adams from his position as managing partner and COFA at the time would have had a devastating effect on the firm’s ability to fix the pension issue, particularly as the firm was already suffering from financial difficulties and the Covid pandemic also created further uncertainties.
“Mr Adams had, prior to the emergence of the pension issue, successfully managed the firm’s financial and administrative issues for a substantial period of more than 10 years, whilst [Ms Hogarty and Ms Vickery] did not have any experience of managing the firm’s financial matters.
“[They] were not aware of the full scale of Mr Adams’ conduct in September 2019 and given his previous track record there was no reason in their minds not to trust Mr Adams with resolving the issue.”
The pair admitted technical breaches of the accounts rules on a strict liability basis over the disbursements, even though they were not aware of them.
But the SDT rejected allegations that they did not ensure the firm had effective systems and controls in place, finding the SRA had failed to prove that the systems were inadequate and how the pair could or should have improved them.
The SDT assessed Ms Hogarty and Ms Vickery’s level of culpability as “very low”; there was no evidence of harm caused by the admitted breaches, which had not lasted long either.
They had “long and otherwise unblemished” careers and strong character references, and it would be “unfair or disproportionate” to impose a sanction on them.
The tribunal also rejected the SRA’s application for £13,350 in costs against them, making no order as to costs.
Leave a Comment