Taymouth Castle: Missing money
A solicitor has been jailed for 14 months after being found guilty on four counts of contempt of court for breaching undertakings given to the court about missing client money.
Stephen Jones qualified in 1986 and for more than 20 years provided international legal and tax planning services through London law firm Jirehouse.
Jirehouse acted for American property developer Discovery Land Company on its planned $14m (£11.5m) acquisition of historic Taymouth Castle, where Queen Victoria and Prince Albert stayed on their honeymoon.
It wired the money to the client account of Jirehouse Trustees, one of three law firms using the Jirehouse name. All three were shut down by the Solicitors Regulation Authority in May this year.
The money was meant to stay there until the deal completed. In his ruling last week after a three-day hearing, Mr Justice Zacaroli said Discovery only recently found out – as a result of disclosure made pursuant to orders made by Mr Justice Nugee in March which led to the committal application – that Mr Jones actually lent the money immediately upon receipt to two borrowers, whose identities were still unknown and who have not repaid it.
Further, Jirehouse placed a charge on the castle in favour of a lender as security for a loan facility, from which £4.9m was drawn down.
“Completion of the transaction was due to take place in December 2018,” the judge recounted. “Come December, however, Jirehouse had a problem, because it did not have the money it was supposed to have in order to pay the seller.
“There began, therefore, an elaborate series of excuses from Mr Jones.” These included raising compliance concerns, making a suspicious activity report to the National Crime Agency (which cleared the transaction), and seeking an indemnity and release from Discovery.
Relying on the supposed compliance issue, on the day before completion, Jirehouse requested that Discovery provide a further $9.3m in order to complete the transaction and said that, once the compliance checks had been completed, it would repay the money within two working days.
This money, called the “surplus funds” by the judge, has also not been returned, however.
In March, Mr Jones gave four undertakings to Nugee J to return the surplus and loan money, and explain what had happened to them, including the identity of the two borrowers, in aid of a freezing order. He admitted within 48 hours that he would not be able to return the money, however.
Zacaroli J found to the criminal standard that the solicitor had given the undertakings to return the money when he knew it was “impossible” to comply with them. He was handed five-month sentences for each contempt, saying they would have been longer but for the quick admission of his inability to comply.
There was an “obvious inference” from the series of excuses given by Mr Jones that he could not return the funds because he knew they had already been removed.
Further, he knew the information he had to provide under the other two undertakings, and was in continuing breach of them. He received a 14-month sentence for each.
“If Mr Jones knew the money was not where it should have been, then it beggars belief that he did not know what had happened to it,” the judge said.
In the sentencing ruling, he added: “Disclosure obligations in aid of a freezing injunction are of the greatest importance to enable a claimant and the court to police the injunction and enforce it against third parties.
“That is particularly so where the injunction is in aid of a proprietary claim and the claimant is seeking to discover what has happened to money which should have been held for it but has been dissipated.”
The sentences are to run concurrently.
Zacaroli J said: “The failure to comply with undertakings… is exacerbated when it comes from an officer of the court. The court places great store in being able to trust and expect the highest standards of conduct from an officer of the court…
“It gives me no pleasure at all to send a man of previously good character to prison. But I am bound to consider sentence in light of the established principles and I cannot avoid the conclusion that Mr Jones has brought these consequences on himself. It is to his credit to an extent that he accepts this and does not seek to blame any others.”
During last week’s trial, Mr Jones provided the identities of the borrowers on a without prejudice basis, and that any future use would only be for the purposes of the existing proceedings, rather than pursuing an action against any third parties.
Zacaroli J concluded that this was insufficient to purge Mr Jones’s contempt.
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