Solicitor struck off over conflict between litigation and funder clients

Funding: Short-term loan kept litigation going

UPDATE: On appeal, the High Court reduced the strike-off to a two-year suspension. Read about the decision here.

A solicitor who sought to keep a longstanding client happy at the expense of another, when one provided the other with a loan to pursue High Court litigation, has been struck off.

Mark Harvey Lorrell’s action were “a classic example of a solicitor departing from the complete integrity, probity and trustworthiness expected of a solicitor”, the Solicitors Disciplinary Tribunal (SDT) ruled.

Mr Lorrell was first called to the Bar in 1999 before being admitted as a solicitor in 2003. At the time, he was managing partner of City law firm Lorrells, which had four partners and 30-40 employees.

The firm was wound up in 2015 by way of a creditors’ voluntary liquidation and the SDT said Mr Lorrell was now practising as a barrister.

In 2011, Mr Lorrell was instructed by a ‘Ms C’ under a conditional fee agreement (CFA) to act for her as claimant in a £3m High Court claim for fraudulent misrepresentation, deceit and breach of trust arising out of property dealings. It was ultimately unsuccessful, although he stopped acting before it reached court.

In the summer of 2012, he facilitated longstanding client ‘S Ltd’ lending Ms C £300,000 on a short-term basis to help her continue the case, at an interest rate of 56%.

The loan agreement stated that Mr Lorrell was not acting for Ms C on it, while he said the retainer with S Ltd was strictly limited to drafting the agreement on terms agreed between the clients.

Mr Lorrell argued that there was no conflict of interest as the clients had a common interest in Ms C winning the case.

He did admit to reading through the loan agreement with Ms C and that finding funding fell within his retainer.

The SDT said the solicitor “could not cherry pick among his duties to the client and subdivide the duty to advise on funding litigation and to give her the best advice [as the CFA said he would]”.

The clauses in the loan agreement about not acting for Ms C on it “had not applied in practice”, it continued, and Mr Lorrell had acted for her “in the round” – the loan agreement was part of the litigation.

The SDT also considered that it was “inconceivable” that the retainer with S Ltd was as limited as Mr Lorrell had claimed: “It was not credible that a document was drafted without any advice being given upon it and the terms of the loan agreement did not support that position.”

It went to find there was a conflict or significant risk of conflict between the two clients.

“That conflict lay in their different interests,” the SDT said. “The interests of Ms C were to obtain funding to take her litigation forward and win it. S Ltd wished to lend at a profit and be repaid.”

S Ltd was not a conventional litigation funder and did not want to get more involved in the case – the loan was not dependent on it succeeding: “The loan was clearly intended to be short-term only and to be repaid, which raised the spectre of default where the clients would be pitched against each other.”

There was also no informed consent from either client for Lorrells to act for the other.

Further, the tribunal said, Mr Lorrell had an interest himself in the loan as it would allow him to recover fees and also for the litigation to continue.

He had, it concluded, acted in a “cavalier fashion” and preferred the interests of S Ltd over those of Ms C. “He did not advise her of the risks she was taking by the loan; she exposed herself to an interest rate of 56%.”

There was an alternative – to pay the firm £15,000 to cover counsel’s fees for an imminent hearing – but Mr Lorrell did not advise about this; nor did he advise her to seek independent advice about the loan. He “merely relied on the clauses in the loan agreement that said she had been so advised”.

Mr Lorrell’s conduct displayed a lack of integrity, the SDT concluded.

It also found him guilty of various accounts rule breaches in relation to the loan monies, including paying the firm’s fees from them without sending Ms C a bill.

He was suspended from practice for three months by a previous tribunal in 2016, when he admitted providing banking facilities through his client account and was found to have lacked integrity.

The SDT said that was another case where Mr Lorrell was very close to a client and had not exercised “balanced judgement”. It rejected the Solicitors Regulation Authority’s suggestion that he was incompetent, but said: “He was competent as a lawyer but disregarded the interests of his client if he saw fit.”

Deciding to strike him off, the SDT said there was no indication that a further suspension would prevent Mr Lorrell from acting in the same way again if he decided to return to practise as a solicitor.

“For the protection of the public and the reputation of the profession, [Mr Lorrell] must be struck off.”

He was also ordered to pay costs of £35,700.

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