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Ex-solicitor broke trust by dipping into client funds

He loaned over £370,000 to other people which was held in a trust by his law firm

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The UK’s Insolvency Service has extended a bankruptcy restriction against former solicitor John Killington from one year to 10.

As a bare trustee for the estate of one of his late clients, Mrs GP, Killington was responsible for acting in the absolute interests of the beneficiaries.

Instead, however, he used the money to make unsecured loans to other clients totalling £370,383.01 (£459,474.94, €409,553.12) between February and March 2014.

The law firm that held the trust, where Killington worked, has not been named.

Court proceedings

Killington’s conduct prompted complaints to the Solicitors Regulation Authority (SRA) which alleged, during a hearing at the Solicitors Disciplinary Tribunal (SDT), that he abused his position of trust and acted with dishonesty.

Following the SDT’s hearing, Killington was struck off as a solicitor in 2017, and was told to pay £150,000 in investigation costs.

The SRA petitioned for his bankruptcy as he was unable to pay, and a county court in Brighton granted the order in August 2018.

Usually bankruptcy restrictions are lifted after a year; but, because of the seriousness of Killington’s misconduct, the Insolvency Service’s official receiver extended the restriction for nine more years, which was accepted by the Secretary of State for Business.

A rare case but a cautionary tale

“The decision of the SDT shows that the solicitor fell way below the standards expected of any trustee, let alone a solicitor,” Paul Hewitt, partner at law firm Withers, told International Adviser.

“But what the case does demonstrate is that, in addition to the rights that any beneficiary has to go to court, solicitors themselves are also subject to strict regulation by the SRA.

“If the question is whether there needs to be some additional regulation, our view is that what is more helpful is for the profession to better inform beneficiaries of their rights to get information and to see accounts.”

Hilesh Chavda, associate at law firm Royds Withy King’s private client team, told IA that this was a rare case.

“This is unusual as law firms are highly regulated and scrutinised closely as you would rightly expect. Clearly the firm in question did not have appropriate systems in place to spot the rogue solicitor.

“Clients should be sure to engage reputable firms where they feel they have the processes in place to spot suspicious behaviour by wayward solicitors.

“It is good practice to have file reviews done periodically. Also, in terms of the use of funds, there should be an audit trail of what happened, and the solicitor should account to the client.

“We’d also recommend strongly that clients be vigilant.”

Self protection

Gregory Wheatley, partner and head of UK trust team at Buzzacott, told IA that, while this case is an unusual one, clients should always be cautious and take preventative measures.

“In most instances, this type of abuse is usually rare. However, this case shows that clients must always be careful in choosing their advisers and make sure they have more than one personal representative, and preferably from differing firms.

“For example, their solicitor and their tax adviser. Typically, a client will appoint members of their family and a legal adviser as their personal representatives/executors, but often that leaves management of the liquid assets, ie cash, in the solicitor’s client account and under the control of the solicitor.

“This is where an unscrupulous solicitor, (or any other professional acting on their own) may choose to divert the estate’s money inappropriately.

“To prevent incidents like this, I advise that individuals always open a separate bank account in the name of the executors to deal with significant cash sums, with multiple signatures required to pay money out,” he added.

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