By Ashley Young-
A Brother and sister, who are solicitors, have been banned and ordered to pay £98k in Costs after allowing over £100m pass through their firm on dubious property deals.
Patrick and Margaret Hetherington, both of whom are partners with the Hetherington Partnership based in Merseyside, received fees of almost £3m for acting on behalf of 6,792 clients buying parking spaces or storage pods from companies linked to a single entity, the Solicitors Disciplinary Tribunal heard.
The siblings, who joined the profession in 1986 and 1994 respectively, were each struck off as a result of their dishonest operations, which the Solicitors Discipline Tribunal agreed lacked integrity.
They failed to give adequate advise to their clients and put their own interest way above those of their clients, the tribunal found.
Deceptive
The schemes which was stated to ‘guarantee’ high returns to purchasers was deceptive, but led to some clients loosing thousands through their investment. These included a 77-year-old widow with Parkinson’s disease who invested £50,000 after being cold called: she lost the bulk of her savings.
Clients had been referred to the Firm by the Group First entity or entities, and in some cases the Firm’s fees were met by the Group First entity. Under these schemes, individuals invested (personally or via the use of a SIPP) in a parking space or a storage pod, within a larger premises purporting to operate as a car park or storage facility.
The SRA said the firm and the first respondent acted on behalf of individuals, purporting to carry out conveyancing work on transactions involving the acquisition of parking spaces or storage pod.
They also said schemes bore several hallmarks of dubious transactions, indicating a high level of risk to clients.
They guaranteed “high returns to purchasers against purportedly low levels of risk; promised purchasers an immediate capital growth in the value of their purchase of at least 25% due to the seller purportedly selling the units at a discounted rate so that with “guaranteed returns of 16%”.
The schemes also included contractual structures and documents which the individual purchasers would be likely to find complex and difficult to understand.
They added that it included the implied approval of major bodies, including HM Revenue and Customs (HMRC) and the Royal Institute of Chartered Surveyors (RICS)
The Schemes bore several hallmarks of dubious transactions, which indicated a high level of risk to clients, including: “guaranteeing”high returns to purchasers against purportedly low levels of risk.
They also promised purchasers an immediate capital growth in the value of their purchase of at least 25% due to the seller purportedly selling the units at a discounted rate so that with “guaranteed returns of 16%”.
They said their relationship included contractual structures and documents which the individual purchasers would be likely to find complex and difficult to understand.
The solicitors also ignored, or failed adequately to respond to, warning indicators as to the level of risk to which their clients were exposed, including.
The SDT found that the respondents therefore allowed their clients’monies to be sent to JWK beforetheir clients had acquired any security by way of an interest in or contractual entitlement to buy the assets concerned.
Mr Ramsden QC on behalf of the SRA, told the tribunal that the contractual documents were grossly unfair to clients, adding that many of the Firm’s clients were based overseas and (it was to be assumed) were not familiar with the law and contractual provisions pertaining to the Schemes
The SRA pointed out that the failure to properly advise clients continued after the Respondents became aware of clients being dissatisfied with the services provided. and the performance of the Schemes.
The contractual documents provided for guaranteed rental income (and so a return on investment) for a short duration.
The documents and marketing materials purported to offer a “buyback”facility, under which purchasers could sell their parking spaces or pods back to the Group First entity. However, the contractual provisions relating to this “buyback”rendered it highly uncertain and, effectively, unenforceable.
Transactions Agreed Were Not In Client’s Best Interest
The SRA who brought the case stated that between April 2011 and September 2017, Margeret Hetherton accepted instructions to act for purchaser clients in transactions, namely purchases of parking spaces or storage pods from companies linked to an entity named “Group First”(“the Schemes”), and, having accepted such instruction failed to give her clients adequate advice as to the proposed transactions. She was also accused of.failing to act in her clients’ best interests.
In relation to Patric Hetherington , the allegation against him was that he failed to cause the Firm to give clients adequate advice as to the proposed transactions and act in the clients’ best interests; and in doing so breached one or more of the rules. He was also accused of allowing the Firm to act in a situation giving rise to an “own interest”
Patrick and Margaret Hetherington, partners with the Hetherington Partnership based in Merseyside, received fees of almost £3m for acting on behalf of 6,792 clients buying parking spaces or storage pods from companies linked to a single entity, the Solicitors Disciplinary Tribunal heard.
The schemes purported to ‘guarantee’ high returns to purchasers, but the tribunal heard that some clients lost thousands through their investment. These included a 77-year-old widow with Parkinson’s disease who invested £50,000 after being cold called: she lost the bulk of her savings. Another client, who was disabled, invested the £200,000 he received following an accident at work, but received £35,200 in returns.
The tribunal found the allegations made against them, including dishonesty, proved in full, saying their evidence had been ‘evasive and specious’, and that their failings were more than negligent and crossed the threshold into professional misconduct.
The tribunal added that the solicitors had ‘deliberately failed to provide clients with full advice so as to preserve the income generated from the schemes’, and that if clients had properly understood the risk they were taking they would have been less likely to proceed.
It was dishonest of the pair to prefer their own interests over those of their clients, as well as to ignore the clear warnings coming from the Solicitors Regulation Authority about involvement with dubious investment schemes.
‘Their clients ought to have been given full and proper advice,’ the tribunal said. ‘That did not occur. ‘The tribunal found many of the respondents’ answers to questions to be incapable of belief, and demonstrative of their disregard for their clients’ interests.’
The tribunal added: Respondents dealt inadequately and improperly with a client complaint as to the adequacy of services provided, by (falsely) denying that they acted for the client concerned, and then by failing to rectify this on detection
Following the decision, James Ramsden QC, who acted for the SRA, said the case was one of the most important brought by the regulator in recent years as it focused on the role of solicitors as advisers in unregulated collective investment schemes.
Ramsden added: ‘The preponderance of these schemes, often linked to lucrative referral arrangements, is a trend solicitors need to be very wary of.’
Following the decision, James Ramsden QC said the case was one of the most important brought by the regulator in recent years as it focused on the role of solicitors as advisers in unregulated collective investment schemes.
Ramsden added: ‘The preponderance of these schemes, often linked to lucrative referral arrangements, is a trend solicitors need to be very wary of.’
A spokesperson for the SRA told The Eye Of Media.Com that those who lost money in the investments can at the first port of call get their money from the insurers of those who duped them.
Where any issues arise with respect to that, the said they also operate the Compensation Fund – which can potentially replace money someone loses due to solicitor dishonesty (subject to certain criteria). It is a discretionary fund judged on a case by case basis
The Spokesperson added: ”for a client to make a claim on any of the above the solicitor must generally have been directly facilitating the investment (ie have handled the money) or another example may be if there is a conflict of interests (ie they are directly benefiting from people making the investments but not declaring this – hence are not really solely acting in their clients sole interest”.