SDT: Solicitor took “ill-considered short cuts”
A solicitor who described a property developer currently being investigated by the Serious Fraud Office as his law firm’s “best client” has been fined £45,000 for misconduct.
The Solicitors Disciplinary Tribunal (SDT) said Richard Longton’s wish to keep the client, Gavin Woodhouse, had “blinded” him to the “obvious risk of conflict” – which later “became manifest as actual risk” – in acting for both Mr Woodhouse’s companies and the purchasers of properties in his off-plan development schemes.
In August 2021, the Serious Fraud Office began investigating “suspected fraud and money laundering in relation to the conduct of business by Gavin Woodhouse and individuals and companies associated with him” arising from investment schemes between 2013 and 2019.
The announcement followed media reports about losses suffered by people who had bought properties in Mr Woodhouse’s developments.
It has also been reported that Mr Longton’s firm, the now-defunct Metis Law in Leeds, and its alleged successor firm, are facing a £55m professional negligence action over the work.
Mr Longton told the SDT he started working for Mr Woodhouse in 2016 and there was “nothing to suggest that there was anything untoward” about the developer.
“There were YouTube films which showed Mr Woodhouse with Princess Anne showing her round a proposed ski slope. The profile of the people he was working with gave no indication that he was in anyway not reputable.”
Mr Longton said that, between 2016 and 2019, Mr Woodhouse was the “best client” of Metis Law, and, as the relationship grew stronger, the solicitor became the developer’s “principal lawyer”.
Asked whether he had disclosed his professional relationship with Mr Woodhouse to any of his buyer clients, Mr Longton said he had not.
The solicitor, who qualified in 1999, worked from 2012 at Metis Law until his resignation on 24 June 2019, two days before publication of a joint ITV News/Guardian investigation into Mr Woodhouse. He had been a partner and head of commercial property.
Metis advised Mr Woodhouse on around 25 developments of care homes, student accommodation and hotels funded by individual investors purchasing single units off-plan.
Buyers paid deposits of the whole purchase price, held by the sellers’ solicitors who could release them to the developer immediately, rather than on completion.
The idea was that the individual owners would lease their units back to the developer in exchange for an annual payment over 10 years, ultimately resulting in an expected rate of return on investment of 12-24%.
The firm acted on hundreds of sales worth over £63m in all. Some of the developments failed to complete while several of the special purpose vehicles set up for each one went into administration.
The tribunal found that Mr Longton had displayed a lack of integrity and breached other SRA principles by acting in some transactions for both buyers and sellers, giving rise to risks of a conflict of interest.
He was also found to have provided banking facilities through Metis Law’s client account between 2016 and 2019 by transferring monies between Mr Woodhouse’s different companies when there were no underlying legal transactions.
John Barker, former head of the corporate team at Metis Law and a co-owner, described Mr Woodhouse as “probably the firm’s biggest client financially and the turnover related to his business was many hundreds of thousands of pounds of turnover in one year”.
The SDT said Mr Longton’s motivation was “essentially the financial advancement of the firm by having and holding on to” Mr Woodhouse and this “clouded his judgment and lead him into error”.
Mr Longton took “ill-considered short cuts to ease the transactions through (and by doing so blinded himself to the risks” of a conflict of interest, which “had been flagged up by a trainee in the firm”.
The SDT said Mr Longton had, “in a complete negation of the rules”, placed his buyer clients in a “precarious position and misapplied their monies for the benefit of the seller client”.
His self-report to the SRA was “limited in its scope” because it did not “set out in clear terms” the actual conflict of interest.
But given “the efforts he made to mitigate the financial loss to his buyer clients, his partial admissions and his subsequent good conduct”, the SDT decided that a fine of £45,000 – near the top end of the ‘very serious’ band – was a sufficient penalty.
He was ordered to pay costs of £29,600 too. The SDT revealed that, last August, it made a £7,500 wasted costs order against the Solicitors Regulation Authority because the original hearing had to be abandoned due to the non-availability of a witness.
Mr Longton’s means were not considered to be modest as he had a stated annual income of £75,000 and the potential to earn an extra £5,000 per month, along with income from rental property.
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