Law firm directors who acted for clients investing in doomed off-plan apartment developments have been fined five-figure sums.
Siu Yung Alan Ma and Daniel Cheung, formerly with now-defunct London firm Maxwell Alves, were found by the Solicitors Disciplinary Tribunal to have failed to provide adequate advice to clients and warn them of the investment risks.
In just over a year, the firm acted on behalf of 42 investors wishing to purchase apartments, receiving and paying out around £3.6m in deposits and being paid £35,000 in costs.
The developer went into administration after 40% of funds received had been spent on what was described as sales and marketing commissions. An initial administrator’s report suggests that the 320 investors will lose most of their outlay.
The tribunal also heard that Cheung sent a so-called ‘frustration letter’ to clients, threatening them with legal proceedings if they brought a complaint to the Legal Ombudsman. Cheung admitted sending the letters, and accepted that they could be perceived as intimidating, but he submitted that he had quickly taken legal advice and sent second letters to put matters right.
On this issue the tribunal found him to be genuine and sincere, saying Cheung found himself out of his depth in a difficult situation.
The solicitors submitted that they were themselves deceived by the developer as the scheme had not been financially viable from the start.
The tribunal concluded that Ma, a solicitor for 20 years, had failed ‘to go the extra mile’ for his clients and had missed the bigger picture on what was happening. He had been taking Scottish law exams and setting up an office in Hong Kong and ‘taken his eye off the ball and had abdicated his supervisory duties to staff who were less experienced’.
Cheung, admitted in 2010, was found to lack the experience of his colleague, but he shared the responsibility of ensuring proper advice was given to clients.
Both solicitors were fined £17,500 and each ordered to pay £22,000 costs.
Another unnamed firm of solicitors, which acted for the seller and who failed to transfer funds to the buyer, has since been shut down by the Solicitors Regulation Authroity and referred to the tribunal.