SDT: Partner ignored warning sign
The Solicitors Disciplinary Tribunal (SDT) has rejected an appeal from a non-lawyer partner banned by the Solicitors Regulation Authority (SRA) from being a manager of a law firm.
The SDT said Shahida Mohamed blamed fellow partner Elizabeth Gilmour for a £214,000 shortage in their firm’s client account, thinking this was “in some way exculpatory” for the non-lawyer.
“It was not. It was an abdication of responsibility,” the tribunal said. This was even though Ms Gilmour had “betrayed” her partner’s trust.
They worked at TPC Solicitors in Manchester, which became an alternative business structure in 2015 after Ms Mohamed’s work as a senior fee-earner and business development manager led to Ms Gilmour offering her a partnership.
The shortfall arose because client money to pay professional disbursements was held in the office account instead between 2014 and 2018. The problem was highlighted in two accountants’ reports, dated April 2017 and April 2018.
The SDT suspended Ms Gilmour for 18 months in 2020 after finding her “manifestly incompetent” and to have supplied incorrect information to her law firm’s indemnity insurer.
Last year, an SRA adjudicator accepted that Ms Mohamed had not become aware of the issue until the regulator became involved in June 2018 but said she ought to have known what was happening if she had been fulfilling her regulatory obligations as a manager.
She also failed to make good the shortage promptly – while Ms Mohamed and Ms Gilmour had paid £30,000 in July 2018, the rest was not replaced until that October by a new partner paying £180,000.
The adjudicator considered her unsuitable to hold compliance roles given her lack of understanding of the role and responsibilities of being a manager. He had “no confidence” that she would be able to discharge them properly.
Ms Mohamed was banned from being a law firm manager or compliance officer and ordered to pay costs of £1,350. She was not banned from being an employee.
She appealed to the SDT on the grounds of sanction only, admitting liability for the rule breaches.
The SDT said: “In essence, Ms Mohamed denied misconduct throughout on the basis that she had agreed with Ms Gilmour that Ms Gilmour would be responsible for all financial matters.
“She had rectified the cash shortage as promptly as possible (and in the circumstances in a reasonable time frame) on being made aware of its existence.”
The SDT acknowledged that Ms Mohamed did not deal with the firm’s accounts and was not the person responsible for the failure to pay suppliers.
However, the issue of the shortage had been raised in an accountants’ report in April 2017 – covering the previous 18 months – and by a further report a year later.
Ms Mohamed had ignored “the warning sign” of the first report and the adjudicator was “entitled to form the opinion that the lack of insight was serious and lengthy”.
The SDT went on: “At a fundamental level, for a small firm to function with a client account deficit of some £200,000 for several years was a very serious matter, and Ms Mohamed, as HOFA, had been responsible for ensuring the sound financial management of the firm.
“While no loss had occurred, that was because of a subsequent cash injection by a new business partner. During the years it existed there was no guarantee that the shortage on client account would be replaced.”
Noting that Ms Mohamed had not been banned from being an employee, the tribunal said the adjudicator’s conclusions on sanction were not “outside the bounds within which reasonable disagreement was possible and/or was one which no reasonable adjudicator could have reached given the intrinsic seriousness of the breaches”.
The tribunal refused Ms Mohamed’s appeal and affirmed in full the adjudicator’s decision. She was ordered to pay costs of £6,166.
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