SDT: Actions caused significant harm
Two law firm directors who used nearly £650,000 in legal aid disbursement payments to prop up their firm, before it went bust owing other creditors a further £1.1m, have been struck off.
The Solicitors Disciplinary Tribunal (SDT) said Samantha Anne Lee and Henry Charles Adrian Syms were “reckless in the extreme” and had improperly used client money for their own benefit as well as to finance the firm, keeping it within its overdraft limit.
According to evidence from the bookkeeper at Lee Syms Ltd, based in Southampton, the directors were each paid a salary of £50,000 in the three years before the firm went into administration in November 2020.
In addition, they received a dividend of £194,800 in 2017/18, followed by a further £74,000 in 2018/19.
In an agreed statement of facts and outcome approved by the SDT, the Solicitors Regulation Authority (SRA) said that as both directors were 50% shareholders, it was assumed that there was a 50:50 dividend split.
In mitigation, Ms Lee – who qualified in 1995 and held the firm’s compliance officer roles – “accepted that she had been incredibly stupid, naïve and incompetent but had not been dishonest”.
She said the two of them “wanted to maintain the firm as a going concern in order to secure the employment of the 50 people who worked for them and to continue to provide a legal aid service to their clients despite legal aid rates being cut and the work no longer being profitable”.
Mr Syms, who qualified in 1996, said his understanding of how the law firm paid experts and others was “informed by the historical practices” developed by its previous owner. “He therefore genuinely believed that this was acceptable.”
Lee Syms was authorised in 2015, deriving from Swain & Co, where both had been directors, and it continued to trade under that name.
The firm went into administration in November 2020 and was bought in a pre-pack deal by Young & Co, a national firm which itself went into administration earlier this year.
Lee Syms Ltd owed 38 company creditors a total of over £1.1m, including £403,000 to Barclays Bank and £500,000 to HM Revenue & Customs.
This did not include almost £648,000 of disbursement money that the firm had received from the Legal Aid Agency (LAA) and not paid to third-party suppliers, such as experts and counsel.
The SRA said that, in early 2021, it received separate complaints from three medical experts instructed by the firm over unpaid work done in legal aid cases. Over £247,000 was owed to one who, following a settlement with the firm’s insurers, is now owed £114,000.
A solicitor at Pinsent Masons retained by the firm’s administrators also reported the misuse of legal aid monies to the regulator, saying it had continued from 2009 until 2020.
Ms Lee and Mr Syms admitted that between September 2015 and November 2019, they received statutory monthly payments from the LAA on settled cases, but failed to ensure that unpaid professional disbursements were paid, leaving a client account shortage of £264,000.
Though Swain & Co received a further £384,000 from the LAA thereafter, which was also not paid out, this did not comprise a client account shortage because there was no equivalent rule in the new accounts rules to treat LAA monies for disbursements as client money.
However, the pair still breached SRA rules as this change did not permit them to treat the money as belonging to the firm and to use it for their benefit and that of the firm.
The solicitors admitted also failing to remedy breaches of the accounts rules as identified in the qualified accountants’ reports they received in every year they ran the firm.
Ms Lee told the SRA that, when they took over Swain & Co in 2015, they found that it had £450,000 in unpaid professional disbursements.
They continued the practice of treating unpaid professional disbursements as office money; Ms Lee said they “knew it was a breach of the solicitors accounts rules but didn’t understand the significance of it”.
Since the directors admitted recklessness, the SRA said it would not be “proportionate” for it to press ahead with allegations of dishonesty.
The SDT said Ms Lee knew that “a substantial amount of monies” were owed and that not paying would breach the accounts rules.
The tribunal went on: “Mr Syms knew, by 2021 at the latest, that the way the firm had dealt with disbursements was improper and was a striking off issue.
“He had seen the unpaid disbursements reports at regular intervals and was aware that in excess of £600,000 was owed.”
The pair of them had “caused significant harm to both the reputation of the profession and to the third-party suppliers”.
Ms Lee and Mr Syms were struck off and ordered to pay £6,580 each in costs.
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