The Importance of Supervision

I wrote about supervision in October 2015, but it’s still an issue – as three recent SDT cases show.


In one, Paul Smith, a Solicitor, was struck off. The pressure of work became too much and he falsified documents, misrepresented progress to clients, and paid clients ‘damages’ from his own pocket. His mitigation was that managing 170 files was simply too much, and he felt unable to tell anyone about the problems. Although he admitted that there were regular review meetings, he felt that disclosing the problems would cost his job.


In another, Gill (1) and Cain and Cochran (2), a newly qualified solicitor was hired to introduce a new work stream, contested employment law. However matters went pear-shaped with serious errors, resulting in wasted costs orders, claims being struck, and the creation of forged documents. The Tribunal took a dim view on the grounds of dishonesty, but also criticised his lack of insight and willingness to blame others for the problems: the individual had ‘learned nothing’. The firm was prosecuted for failure to supervise. The Tribunal found that its supervision was reactive and inadequate, but was impressed by belated insight, compensation paid to clients, and radically changed procedures: it awarded a fine.


In a third, Burrows and Featherstone, inadequate supervision of the firm’s trusted cashier facilitated theft from both client and office accounts over a period of nearly three years. There were allegations of lack of adequate systems and controls, and lack of supervision. Failure to remedy the shortfall promptly on discovery and failure to prioritise repayment to client account on receiving compensation from the bank were aggravating features. Both partners were fined, the COFA being fined 50% as much as the other.


Chapter 7 of the Code of Conduct has very clear duties to supervise, particularly in Outcome 7.8. These cases show that supervisory failures are treated seriously, especially if there is loss to clients. In Smith the firm was not prosecuted: it later issued a statement deploring the individual’s conduct and stating that he had had every opportunity to raise issues but that the solicitor had hidden his conduct and deceived the partners. In Gill, the firm admitted inadequate supervision – the Tribunal found that the ‘system’ was unsuitable for a newly qualified solicitor. However by showing insight, compensating clients, and changing its systems, the firm’s penalty, although serious, was not as severe as might have been.


The Burrows case shows that client money is sacrosanct and any loss of it through inadequate systems will be punished. In particular, the COFA received a heavier fine.


What Lessons can be Learned?


Firstly, no matter how able the employee, there is an absolute duty to supervise. It has to be proportionate and risk-based. Newly qualified solicitors require a great deal of monitoring and handholding. More experienced people can still make mistakes, and, as in Smith, can hide things. Firms must be adept at spotting the danger signals, such as too high a caseload. Also, insisting that everything is under control is bound to be misleading as everyone has cases that they fall out of love with, or don’t know what to do on: I have never encountered anyone who doesn’t have some sort of issue. In the case of the cashier, the judgement doesn’t clarify what happened about reconciliations, but surely frequent reconciliations would have highlighted the shortfall. The cashier took advantage of lax systems. With client money, this is serious. COFAs should perform spot reconciliations and also review individual ledgers against the file.


Supervisors should understand the subject matter: that fact that they didn’t was part of the problem in the case of Gill. Supervisors should challenge, and supervisees must appreciate that this is not an issue of being awkward but is part of a firm’s control process. An open and collegiate approach designed to encourage self-declaration is advisable, but coupled with rigorous spot-checks to flush out the worst.


Lexcel and CQS both require clear and effective supervision procedures. At Enderley Consulting, we are expert in designing routines which are thorough, but simple to apply, and from which everyone can learn. Call us today for a no-obligation consultation on 0203 873 1290 (London office) or 01743 294 863 (Midlands office).


Ed Austin



January 2017