Accounts: Solicitor would not have understood anyway
A solicitor was kept in the dark by an experienced bookkeeper about improper transfers she was making from client to office account to keep the firm afloat, a tribunal has heard.
However, the Solicitors Disciplinary Tribunal (SDT) said that Michael Thomas Barry had shown a lack of integrity when he became aware of what was happening by trusting the bookkeeper’s assurance that she would not do it again – which she broke soon after.
Mr Barry, who qualified in 1985, was sole principal of Cardiff firm Mallory & Barry, which is now closed. From 2014 he employed Rachel Taylor as the firm’s bookkeeper – she had 19 years of working previously at two well-known firms in South Wales – and she helped him rectify problems caused in 2013 by what he said was the fraud of his former business partner.
The Solicitors Regulation Authority (SRA) launched an investigation after the firm filed its accountant’s report, which said it had made significant transfers from the client to office “that did not represent valid transfers of costs, and also made significant office payments from the client bank account”.
Over the course of 13 months to June 2018, Ms Taylor made transfers worth £487,000, although ultimately Mr Barry replaced the money and no clients lost out.
The solicitor first became aware of the transfers in February 2018, when informed by his accountants, although they stressed there was no suggestion of any dishonesty.
He spoke to Ms Taylor, who he recounted had been “extremely distressed about what had happened” and promised it would not happen again.
He said he trusted her assurances, “given her experience and what she had contributed to firm”, but shortly afterwards, Ms Taylor made more transfers.
The solicitor had not made any changes to the firm’s procedures or his supervision of Ms Taylor – which he acknowledged was a mistake in hindsight – meaning he was not aware of the improper payments.
He admitted that it was “doubtful” that he would have enough knowledge of the rules to question a client bank account reconciliation in any event.
He told that tribunal that the firm had been a busy high street practice “and the only way it would work was if there was trust between colleagues”.
Mr Barry accepted that he had been manifestly incompetent by not understanding the accounts rules or preventing the transfers – and he had shown a lack of integrity by not acting after February 2018 – but he denied being reckless.
The SDT agreed. He had acted “foolishly and naively” in accepting Ms Taylor’s assurances, it said. He had made “a serious error of judgement in trusting her”.
But in doing so, Mr Barry had satisfied himself that there was no ongoing risk of further improper transfers on the part of Ms Taylor, which meant first stage of the test of recklessness set out by the House of Lords in R v G [2003] UKHL 50 was not met.
In this, Lord Bingham said: “A person acts recklessly… with respect to (i) a circumstance when he is aware of a risk that it exists or will exist; (ii) a result when he is aware of a risk that it will occur and it is, in the circumstances known to him, unreasonable to take that risk.”
Mr Barry told the tribunal that he was not currently involved in management and had no desire to return to it.
In deciding sanction, the SDT said Mr Barry’s misconduct was “principally a result of neglect and carelessness”, but there was “a clear breach of trust as he was responsible for the security of the client account”.
He had a previously unblemished career, had shown “genuine insight” and made open and frank admissions.
There was “a need to protect the public from future harm” were Mr Barry to return to management and so it imposed restrictions to prevent him being a manager or holding client money without the permission of the SRA.
Ms Taylor admitted her misconduct and apologised. The SDT said her motivation “was to keep the firm afloat”, but her wrongdoing was aggravated by the fact that it was deliberate and repeated over period of time and that she concealed her actions from her employer.
She was made subject to an order under section 43 of the Solicitors Act 1974, meaning she cannot work for a law firm without SRA permission.
Mr Barry was ordered to pay costs of £10,700 and Ms Taylor £7,100.
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