The Solicitors Regulation Authority has been denied around £46,000 in costs after failing to stand up the most serious charges against two conveyancing solicitors.
The regulator had applied for £48,411 in costs after prosecuting two solicitors for a range of charges at the Solicitors Disciplinary Tribunal.
The charges were brought against Kim Sharon Egoh, admitted in March 1996, and Armaghan Jamal Khalique, admitted in September 1996. Both practised in partnership as solicitors at east London firm Khalique Kingsley and were directors of the firm until it closed in September 2011.
Both were alleged to have either made payments from the client account or failed to prevent such payments being made.
They were also charged with allowing or acquiescing to the firm’s client account being used as a banking facility by allowing payments and/or withdrawals unrelated to the underlying transaction.
Egoh was also charged with facilitating or acquiescing in a conveyancing transaction which ‘bore the hallmarks of fraud’, and failing to deal with the SRA in an open and cooperative manner.
But these charges failed at the SDT as the tribunal decided that Egoh had not shown a lack of integrity and was subject to the actions of a third party.
In the event, the SDT opted to fine both solicitors £2,000 each and order joint and several prosecution costs of £1,200.
Lawyers for Egoh said the original costs application was the sort of figure expected after a detailed forensic investigation of an entire firm, and any costs order even reaching half of the £48,000 figure would be disproportionate.
If the SRA had a ‘reasonable understanding of the transaction’ in question, they submitted, the matter would have been dealt with in-house at a much reduced cost.
The SRA began investigating in March 2012 following a complaint from Nationwide Building Society relating to a failure to register two charges on flats totalling £732,000. The lender had been unable to establish how funds were disbursed after having been received by the firm.
As a result of the conveyancing transaction there had been a major fraud on a subsidiary of Nationwide in which £733,000 had been lost. It was never alleged the firm was party to the fraud, but the profits of it were paid away through the firm’s bank account.
The tribunal heard that Egoh was inconsistent about how she received instructions. In total 18 disbursements were made from the firm’s client account.
Egoh, who gave evidence for a day and a half at the tribunal, said she could not categorically say who gave instructions for payments and, so far as she was concerned, everyone was happy about the disbursements being made.
The slow release of funds, she argued, was indicative she had ‘not turned a blind eye but was completely unaware of what was going on with the funds received’.
Khalique told the tribunal he was the principal with no involvement in the payments and his rules breaches were ‘technical at the lower end of the scale’.
On the charge of facilitating fraud, the SRA said the signs of potential fraud ‘should have been obvious’ to a conveyancer of Egoh’s seniority, and that her decision to turn a blind eye to so many suspicious features constituted a lack of integrity and something which diminished the reputation of the solicitor’s profession.
Egoh’s lawyers responded that while she made mistakes and was even incompetent in her approach, her wider legal knowledge was not sufficient to deal with the issues that arose in the transaction.
The tribunal concluded she was trying to get the transaction concluded as her client wished and had not acted in a way that facilitated fraud. This charge was found not proven, as was the charge of not dealing with the SRA in an open, timely and cooperative manner.
When it came to sanctions, lawyers for Egoh said hers was a firm which had tried to run itself well with Investors in People and Lexcel accreditation.
The failure to prove a breach of the core principles had left the maximum penalty of a fine of £2,000.
The tribunal said Egoh had undertaken ‘numerous transactions without difficulty or complaint or sanction’ against her. Khalique was noted to have an ‘unblemished record and was not alleged to be personally responsible for the actions in question’.
Egoh, as an experienced conveyancing solicitor, ‘should have known better’ but her integrity was not in question and the fraud or deception was perpetrated on the mortgage lender by a third party.