Although lawyers can generally be relied upon to act with integrity and honesty, the occasional bad apple is sadly inevitable. However, as one High Court case showed, the advantage of employing a professional to advise you on important transactions is that you will be entitled to full compensation if the worst happens.
The case concerned a highly experienced solicitor with an unblemished professional history who worked for a law firm as a consultant. In the context of what she believed was a legitimate application for a short-term business loan, she had been duped by identify fraudsters. A lender suffered a substantial loss and the firm subsequently settled its claim for £370,000. That sum was paid by the firm’s insurers who sought to recover their loss from the solicitor. Under the terms of the firm’s professional indemnity policy, however, her liability depended on proof that she had acted dishonestly.
The Court noted that, after becoming aware of the fraud and that she was likely to be subject to criticism, the solicitor, who was experiencing problems in her private life at the time, foolishly deleted various emails and forged signatures of the purported borrowers on a letter of authority. After the truth emerged, she was cautioned by the police and various findings of misconduct were made against her by the Solicitors Disciplinary Tribunal.
There was no doubt that she had failed to act with integrity and that her actions after the fraud was uncovered were thoroughly dishonest. She had exhibited a serious lack of professional care in dealing with the transaction, but the firm had not alleged that she was a knowing participant in the fraud itself. In the circumstances, the Court found that, despite her various breaches of the Money Laundering Regulations 2007, the insurers had failed to establish that their loss arose from her dishonesty.
Pemberton Greenish LLP. v Henry. Case Number: HQ14X03363