A solicitor cleared of three allegations related to borrowing from the Axiom legal fund has nevertheless been ordered to pay the costs of investigating him.
The Solicitors Disciplinary Tribunal found charges against Jason Libby could not be proved, after his firm had accepted £456,108 in funding from the ultimately doomed fund in 2012.
But the tribunal said it had ‘some sympathy’ with the Solicitors Regulation Authority’s assertion that Libby, who ran Devon firm Drake Legal Limited, ‘had brought proceedings on himself’.
It ordered him to pay both the investigation costs and half the costs of July’s four-day hearing – a total of £46,577. Libby had already spent £60,000 on defence costs since the SRA started investigating him four years ago.
‘Although the allegations had not been proved to the required standard that was not to say [his] conduct was entirely blameless,’ said the tribunal.
The regulator alleged it had been improper to take out the financing deal as Libby knew or was reckless to the fact his firm had not complied with the terms of a litigation funding agreement.
The SRA also alleged he had no intention to repay the money in time, misused funds, failed to do background checks on investment managers and placed his firm at risk.
The tribunal heard Libby, a solicitor for almost 15 years, ‘shut his eyes and ears to the obvious’ about how the fund, which attracted more than £100m from investors to finance legal cases and has led to a string of strike-offs for some of those solicitors involved, was being run.
Libby said he had sought finance to expand his practice, and at the time he was offered the terms he already had 100 cases in the pipeline.
The terms of the agreement restricted the use of money to disbursements in respect of a claim, and any advances were required to be repaid within 12 months. Drake ultimately borrowed £456,108 and was liable to repay £716,400 plus interest.
Libby admitted to the tribunal he was not a ‘textbook solicitor’ but insisted he had found no ‘red flags’ to suggest anything untoward with Axiom or its investment managers.
He regarded the funding arrangement as a viable proposition and was confident he could make a success of the arrangement.
Had he known the fund was going to crash, he added, he would not have signed the agreement. He confirmed to the tribunal he is in the process of repaying a total of £215,000, of which he had paid up to £140,000.
The tribunal found Libby could have taken greater care to ensure he was not in breach of the agreement, but that this carelessness was not deliberate. He had set a ‘realistic’ timeframe for repaying the loan and the tribunal was not satisfied he knew or was reckless to the fact the money was being used for other purposes than agreed.
‘[Libby] believed, albeit erroneously, that he was complying with the LFA,’ added the tribunal.
Libby was cleared of having known or been aware of any fraudulent activity, and it was accepted he would not have entered an agreement if he perceived there to be a risk of fraud.
‘While there had certainly been errors and examples of carelessness, the tribunal did not find that individually or cumulatively they amounted to a lack of integrity,’ the SDT judgment said.
The tribunal was not satisfied this was an ‘obviously dubious transaction’ or that Libby had ‘closed his eyes and ears’.
Two further allegations, relating to failing to pay money into a client account and failing to run his firm effectively, were also found not proved.
Libby’s lawyers said the second of these charges had the ‘unmistakable hallmark of a sweep-up, catch-all allegation in case the other allegations should fail’.