“Clyde & Co fined £500,000 after admitting due diligence failure” —

• “Top-50 firm Clyde & Co has been fined half a million pounds after admitting failing to carry out due diligence on a corporate client for more than four years.”
• “The firm’s former partner Edward Henry Mills-Webb was also fined £11,900 by the Solicitors Disciplinary Tribunal after admitting that he ‘materially contributed’ to the failure to check more than a dozen transactions as required by anti-money laundering regulations. There was no evidence that the client or its principals were involved in money laundering or financial crime.”
• “It is the second sanction levied on Clyde & Co in the past seven years. The international firm was previously fined £50,000 and three partners £10,000 each for accounting failures and breaches of AML rules.”
• “The tribunal heard earlier this week that both Clyde and Mills-Webb admitted that they should have obtained more complete documents for the former client, a shipping company incorporated in Liberia. The only documents obtained when the client was taken on in 2014 were six years old, and the firm and Mills-Webb accepted that they should have done more to understand the nature and structure of the business.”
• “Clyde blamed Mills-Webb for failing to identify what due diligence was required when the client was taken on and for failing to pay attention to emails from the firm’s business acceptance unit about steps that needed to be taken.”
• “For Clyde, Ben Hubble KC said: ‘The firm apologises for and very much regrets its failings. The firm has acknowledged the need to, and has worked to, strengthen its systems and processes.’”
• “Matter opening forms must now be signed off by the relevant fee-earner, who must expressly confirm that the information on the form is correct. Clyde said it had also increased the level of scrutiny that it applies to work classed as high risk.”
• “Helen Evans KC, for shipping expert Mills-Webb, said her client had not been ‘acting blindly and in a vacuum’ and believed his team had checked the client’s status.”
• “Mills-Webb accepted he had been ‘too detached’ from the due diligence process but stressed that his misconduct was an error and inadvertent, she said. Evans added: ‘He has done nothing inappropriate and always submitted there should be shared responsibility.’”
• “In a statement, the firm said it ‘sincerely regrets any compliance failings’ which it identified in 2018. It said: ‘Having reported the issue to the SRA, we fully assisted with its investigation and have sought to learn appropriate lessons.”
• “‘Under the firm’s current leadership, we have significantly enhanced our risk management and regulatory compliance. We hold ourselves to the highest professional and ethical standards and take responsibility for ensuring we meet them. This SDT determination is a reminder that regulatory compliance and risk management requires continuous, diligent attention.’”

“Conflicts of Interest under Conditional Fee Agreements” —

• “Two recent cases reveal that conflicts of interest can arise at the settlement stage of a claim, particularly where a Conditional Fee Agreement (‘CFA’) applies. This reiterates the age-old lesson that solicitors must not prioritise their own interest (or the interests of one client at the expense of another) otherwise they risk incurring liability for negligence and breach of fiduciary duty, as well as possible regulatory exposure.”
• “In Forster v Reynolds Porter Chamberlain [2023] EWHC 1150 (Ch) the High Court found that the duties solicitors owed to the client, even when acting under a CFA agreed on a ‘no win no fee’ basis, remain unaltered.”
• “RPC acted for the client in litigation and following an agreed settlement with the opponent. Under the terms of the CFA all sums recovered from the opponent were payable to RPC and counsel in priority to the client. The client also had the benefit of an after the event (ATE) insurance policy, which covered repayment of a loan to fund expert fees, which was recommended by RPC.”
• “The Court held that RPC had a clear conflict of interest in advising the client to borrow money and then advising and acting for the lender in preventing the client from enforcing the settlement. RPC could not properly have advised or acted for borrower and lender without the informed consent of both.”
• “It was found that RPC was in breach of its duty to the client when it declined to act on her instructions to enforce the settlement. Whilst RPC had a greater financial interest in successful enforcement than the client did, as a consequence of the CFA, that did not entitle RPC to decide what to do. As a result of the enormous costs incurred on the client’s claim and the modest settlement in her favour, there was an intractable conflict of interest and duty on RPC once the opponent defaulted.”
• “In Michael Partridge Suzette Partridge v Healys LLP [2023] EWHC 2340 (KB) , a professional negligence action against the Defendant firm of solicitors, one of several allegations raised by the Claimants was that Healys had put themselves in a position of conflict under the terms of the CFA they were engaged under by advising the Claimants to settle at a mediation.”
• “The specifics of the conflict, or why the advice was not in the Claimants’ best interest was not pleaded nor was there a pleading that the advice to accept the offer was negligent. Healys applied to strike out the claim on the basis the pleaded claim had no real prospect of success.”
• “The Court held that in the absence of any pleaded allegation that the advice at mediation was negligent, simply giving non-negligent advice that led to a termination of the retainer was not an actionable conflict. Rather, it was a situation expressly provided for in the CFA agreement.”