The devastating fallout from the Axiom Fund scandal has taken its biggest scalp yet, with four solicitors from one firm struck off, fines levied of £250,000 and costs payable likely to match that figure.
The Solicitors Disciplinary Tribunal imposed the ultimate sanctions against solicitors Richard Emmett, Louise Emmett, Matthew Stokes and Mary Hunter. Non-solicitors David Rae and Dale Stephenson were banned from working in the profession and ordered to pay fines of £200,000 and £50,000 respectively.
The prosecution – one of the biggest ever brought in relation to improper use of the litigation financing Axiom Fund – related to the running of Preston firm Emmetts Solicitors, which subsequently changed its name to Ashton Fox before going into administration in 2013.
The tribunal heard that all six respondents received money from the Cayman Islands fund that had been intended to pay for case disbursements. Richard and Louise Emmett were paid almost £2m either directly or through companies in which they had an interest.
Once the Emmetts sold their share in the business, Stokes and Hunter each received £300,000, while companies owned by Rae, who effectively acted as the firm’s chief executive, received almost £600,000. Stephenson was paid almost £55,000 for consultancy work.
The tribunal heard that from May 2010 to October 2012 the firm received 71 payments from the fund coming to almost £30m. The fund also lent around £6m to another firm, ATM Solicitors, prior to its purchase by Emmetts for £3m. The tribunal found that the Emmetts failed to carry out proper due diligence prior to this purchase and, along with Stokes and Hunter, embroiled their firm in a ‘pattern of excessive and reckless borrowing’. They also allowed the non-solicitors to exert an inappropriate level of control over management of the firm.
In considering sanction, the tribunal said Richard Emmett may have initially borrowed the money to increase clients’ access to justice, but he was ‘beguiled’ by the opportunity presented and then sought an exit that ensured he would get out with as much money as possible. Damage to the reputation of the profession was ‘catastrophic’ and individual investors in the fund had lost between £15,000 and £250,000. Louise Emmett was said to be less ‘proactive’ in the misconduct but the harm caused was just as damaging.
Stokes became a director at the end of 2011 once some loan agreements were in place, and the tribunal accepted that he may not have planned to find himself in this situation. However, his motivation in receiving the money was ‘clearly personal financial gain’ and he signed a further loan agreement to make matters even worse. Hunter, who admitted misconduct, was found, like Stokes, to have breached a position of trust for financial gain.
The four solicitors must share the payment of Solicitors Regulation Authority costs, which are subject to detailed assessment but were initially set at £252,000.