Lawyer used company client account to manage family finances
A veteran lawyer has been fined for managing her family’s finances through her company’s client account for 18 years and using it “as an overdraft facility for her family”.
Robyn Lynch was also found to have allowed her business to hold nearly £540,000 in residual balances.
The Solicitors Disciplinary Tribunal (SDT) approved a settlement between Ms Lynch and the Solicitors Regulation Authority (SRA), saying that even if she put clients’ funds at risk for the benefit of her family members, “there was no no actual loss to customers and the fault was unintentional”.
All customer account shortfalls were corrected soon after they were discovered, he added.
Ms Lynch qualified in New Zealand in 1970 and requalified in England and Wales 12 years later. She runs the South London firm Kenwright & Lynch, which specializes in estates and disposals.
An SRA investigation found that between 2001 and 2019 she used the client account as a banking institution for various family members, which she said were disbursements from a family trust for which she was the settlor and sole trustee, and members of his family. beneficiaries.
Although the case is spread over separate records, she said they were all related to the same trust and initially argued that it was part of a lawyer’s normal regulated activities.
The SRA did not accept this. “The arrangement was very informal and flexible,” the agreed outcome reads. “It is not part of a lawyer’s normal role to administer a family’s finances in the informal and ad hoc manner that this respondent has done.
“While technically it was part of a lawyer’s normal regulated activities to administer a family’s finances in this manner, it would still be against the spirit of the principle. It is not open to lawyers to seek to circumvent this principle in this way.
The regulator described the trust as ‘informal and unconventional’ – it was unclear how the trust came into existence, as there was no trust deed or anything to identify the property that was the subject of the trust, the powers of the trustee, the objects of the trust or the beneficiaries.
“The respondent had full discretion as to how the trust funds were to be distributed and to whom. Funds flowed in all directions: from the trust to the beneficiaries; beneficiaries to the trust; from one beneficiary to another; and trust to third parties…
“It remains unclear for the [SRA] why many of these funds had to flow through a lawyer’s client account.
The SRA found it ‘dubious’ whether there was a legally enforceable trust.
It was also ‘remarkable’ that none of Ms Lynch’s work as trustee was billed or billed, and that there was no deposit, client attention letter or written instructions.
He concluded: “The arrangements in this case amounted to little more than the informal administration of a family’s estate…A lawyer asked to use his client account to administer such an arrangement would and should refuse the instruction.”
Individual records comprising the Family Trusts case have repeatedly been uncovered, the SRA said. Some of the shortages were significant, the largest being £35,000, and often lasted several weeks.
“Shortages must have been funded elsewhere, i.e. funds from other clients in the client account. In effect, the Respondent used the Client’s account as an overdraft facility for her family, repeatedly borrowing funds from other Clients. »
This showed the danger of mixing informal family business and client funds in the client account, the SRA said, although no client lost money as all shortages were reimbursed.
As of February 2019, the company held £538,000 in residual balances for 1,143 customers dating back to 2003. Fourteen were over £5,000, with the largest reaching almost £93,000.
There was no evidence that the company had contacted affected customers or beneficiaries about the remaining balances, but Ms Lynch took steps to remedy the situation following the SRA’s investigation.
By way of mitigation, Ms Lynch said she ‘honestly believed, at the time, that she had the right to act as she did’ – her accountants never told her otherwise. There were, she added, no allegations of lack of integrity or dishonesty.
The SDT accepted the proposal to impose a £15,000 fine on him.