Managers of a former firm that failed to pass on legal aid disbursements have each been fined £2,000.

A nine-month investigation by the Solicitors Regulation Authority into east London firm Hereward & Foster found credit balances on the client account totalling £142,558.

The balances had arisen as a result of professional disbursements received into the office bank account from the Legal Services Commission (now the Legal Aid Agency) which had not been paid or transferred to the client bank account.

As a result, there were unpaid disbursement creditors, the investigation found.

In three notices posted on the SRA website, Deborah Adley, Sarah Lerner and Christopher Wilson admitted rule breaches in respect of credit balances, accounting records and failure to undertake proper reconciliations.

They each admitted making a ‘fundamental and unacceptable error’ in the mistreatment of professional disbursements.

Under a company voluntary arrangement entered into four days after the SRA investigation started in June 2013, the disbursement creditors took precedence for payments and were paid back in full.

The SRA also noted that client account reconciliation had outstanding lodgements of £18,000 and outstanding postings of £34,729. The firm had been unable to explain them.

The firm’s managers said the reconciliation process was dealt with by them due to the prolonged absence of the practice manager through illness.

As a result, they held large caseloads and faced both the pressure of client work as well as financial challenges.

Each manager was fined £2,000 and ordered to pay £10,000 in total in costs. The firm ceased practising in September 2014.

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