Unsecured loan: money repaid out of lease proceeds
A solicitor has been sanctioned over the potential conflict of interest of acting where he stood to financially benefit from the proceeds of the transaction he was dealing with while working at a leading London law firm.
Allan Hudson, who was a consultant solicitor at Howard Kennedy between 2012 and 2014, was rebuked and fined £1,500 under a regulatory settlement agreement with the Solicitors Regulation Authority (SRA) that means he will not face a disciplinary tribunal.
The SRA said that Mr Hudson loaned his long-standing clients Mr and Mrs B £30,000, to be repaid when they remortgaged their home.
Mrs B then asked Mr Hudson to act for Mr B’s parents, Mr and Mrs A, in the sale of their property. He took instructions from Mrs B in relation to the sale.
Following the sale, Mr and Mrs A leased an annexe at Mr and Mrs B’s home, paying a lump sum from the proceeds of their sale for the lease. Mr Hudson acted for Mr and Mrs B in relation to the grant of the lease.
Before completion of the sale, Mr Hudson asked Mrs B if the loan could be repaid from the premium being paid for the grant of the lease. Mrs B agreed and provided Mr Hudson with a letter of authority which was signed by Mrs A, but not Mr A.
The agreement recounted: “Mr Hudson did not verify the authority with Mr and Mrs A. It now appears that Mrs A did not fully understand the purpose of the letter of authority when she signed it and has difficulty in remembering what happened at the time.”
Mr Hudson advised Mrs B that Mr and Mrs A should seek independent legal advice in relation to the grant of the lease on at least two occasions, but did not tell them directly; they did not seek such advice.
The solicitor admitted acting where he stood to financially benefit from the proceeds of the transaction he was dealing with, meaning there was a significant risk that his own interests would conflict with those of his clients, Mr and Mrs A.
He also admitted that, by advising Mr and Mrs A on the sale and Mr and Mrs B on the lease, he acted for two clients where their interests conflicted or where there was a significant risk of conflict.
He further admitted not taking sufficient steps, first to ensure that Mrs B had authority to provide instructions on behalf of Mr and Mrs A, second to advise Mr and Mrs A to seek independent legal advice on the lease, and third to ensure that Mr and Mrs A consented to the use of their money to repay the loan.
In mitigation, Mr Hudson said Mrs B was a longstanding client “whom he trusted enough to personally lend her £30,000 on an unsecured basis”, and that he did not consider Mr and Mrs A to be vulnerable clients because he trusted Mrs B was safeguarding their interests.
He had also accepted that Mrs B had authority to provide him with instructions, on behalf of Mr and Mrs A.
The SRA said the sanctions were appropriate because Mr Hudson’s actions had, or had the potential, to cause “loss or significant inconvenience” and he had failed to recognise his regulatory obligations.
Meanwhile, the regulator has also banned two non-lawyers from working in the solicitors’ profession without its permission.
Varun Krishnakumar was an IT worker at City firm Fieldfisher who was convicted last year of sexually assaulting a colleague at its Christmas party in 2015.
He was ordered to be placed on the barring list by the Disclosure and Barring Service, pay a victim surcharge of £100 and register with the police under section 92 of the Sexual Offence Act 2003 for 10 years.
A spokesman for Fieldfisher said he was employed by the firm on a fixed-term basis between 19 October and 7 December 2015.
According to a report of his trial in the London Evening Standard, Krishnakumar grabbed the woman in the women’s bathroom, forced her towards a cubicle and started pulling at her clothes. She was saved when a colleague came into the lavatories and heard the struggle.
Stephen Straw, meanwhile, was a business development manager at Gloucester firm Equilaw for two months last year before being dismissed for gross misconduct.
According to the SRA, Mr Straw has been convicted of two sets of offences, the first in 2009 and the second in 2016, both involving dishonesty and fraud. He is also subject to a Financial Services Authority (FSA) final notice, which prohibits his employment at any FSA-regulated body or exempt professional body.
The FSA notice, which dates back to 2010, said the 2009 conviction came after he lost insurer Scottish Provident £70,000 in commissions by submitting fraudulent life insurance applications over a period of almost three years. He was sentenced to 48 weeks imprisonment, suspended for 24 months on a condition of 250 hours of unpaid work.
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