A solicitor who used disbursements owed to third parties to prop up his own ailing business has been struck off the roll.
David Johnson, admitted in 2002 and sole director of Bolton firm Johnson Law Ltd, admitted receiving payments for settled personal injury cases but failing to pay sums owed for work on the claims. This continued for almost seven years until the firm closed in January 2018 and went into administration.
Johnson was made bankrupt later that year, and administrators subsequently reported concerns to the SRA that the firm had failed to pay a significant amount in third party disbursements.
The Solicitors Disciplinary Tribunal heard that the potential sum owed to third party creditors could be more than £790,000. ATE insurers, medical reporting agencies and barristers chambers are all among those who were not paid disbursements owed to them.
There was no evidence available prior to the date of administration that the SRA had been notified by the firm of any financial difficulties it had in paying disbursements. There was also an absence of accurate accounting records for the six months before the firm closed, meaning Johnson could not show where monies had been used.
Johnson made an agreed outcome with the SRA in which he admitted failing to pay disbursements and failing to repay a loan following an undertaking. He also admitted that his conduct had been dishonest.
In non-agreed mitigation, the solicitor said he made attempt to address the monies owed to creditors but these failed. He submitted it was never his intention to permanently deprive the creditors payments of monies due.
He accepted that the mitigation did not amount to the exceptional circumstances that would prevent him being struck off, but he asked the tribunal to take into account his previous unblemished record and co-operation with the SRA.
The tribunal said money intended for third parties was used to support the cash flow of the business, adding that Johnson ‘knew that failure to pay creditors and the use of money allocated to those creditors to otherwise support the running of the firm was dishonest’. He was struck off and ordered to pay £7,500 costs.