A firm has been fined after referring hundreds of injured clients to a medical agency without telling them the agency was owned by one of the partners.

A Solicitors Regulation Authority notice said east London firm Freeman Harris referred 778 personal injury clients to a medical-reporting company called Holby Medical.

Ian Freeman, a partner at the firm, was the sole director and shareholder of Holby Medical, which did not receive work from any other law firm.

Clients were not informed at any point during the retainer that Holby Medical was owned by Freeman. The firm also paid the fees of Holby Medical in two matters where the firm held insufficient funds in the client bank account.

In mitigation, the firm said it had ‘inadvertently’ overlooked the need to amend the retainer documentation to cover disclosure to clients of the interest in Holby Medical, and there was no deliberate attempt to deceive clients. Once alerted to the error, the documentation was changed to state that Holby Medical was a separate business owned by partners of the firm.

The firm said it has not instructed Holby Medical on any new cases and the company is in the process of being wound down with a view to closure.

The SRA notice also stated that, following an inspection of the firm’s accounts in January 2014, it was found the partners failed to keep their books of account properly written up, and the books up to November 2013 could not be relied upon.

Postings were incorrectly made which showed disbursements had been paid, while the firm also retained office money in the client bank account for between 28 and 316 days, when the money should have been transferred out of the client account within 14 days.

At November 2013, there was a minimum cash shortage in the client bank account totalling almost £29,838, caused by incorrect payment of funds from client bank accounts to third parties and client money not being paid into client bank accounts.

The firm had also retained more than £8,800 in the office bank account for unpaid professional disbursements relating to personal injury claims.

The firm said difficulties with the books of account were caused by its former bookkeeper, who made multiple mis-postings to the client ledgers.

The minimum cash shortage was replaced in full by the partners by 28 February 2014 and the firm stressed that at no point was there a danger of any client not being paid anything that was due to them.

The SRA fined the firm £2,000 for multiple breaches of accounts rules and failure to comply with principles and outcomes. Freeman Harris was also required to pay £9,663 in costs.