An accountant who “improperly distributed” more than £50,000 from a property sale has been fined £2,300 and ordered to pay costs of £9,944, reports Nick Huber.
Chartered accountant Michael Alexander retained £50,550 from the sale of a property belonging to James Pryce to settle a debt owed to him from another business acquaintance, Mr Stockall. Alexander also transferred £5,935 to Haulwise UK Limited, a business which was in financial difficulties. Pryce was managing director of Haulwise.
Pryce agreed to merge his company with another business - Stockall’s ABV Services. Partly to repay some of Haulwise’s debts, Stockall persuaded Pryce to sell him his matrimonial home.
In return, Stockall would allow Mr and Mrs Pryce to live there rent free for life and the balance of the proceeds of the sale of the house (after the deduction of the debts owned by Haulwise) would pass to the Pryces. Stockall planned to borrow money from a regular lender, secured on the property.
Before this property transaction was completed, and in order to raise funds with which to repay the Haulwise debts, the Pryces borrowed £50,000 from Alexander. The loan, dated 21 April 2005, was to be repaid in full with interest on 21 April 2006 and was secured by a charge on the property.
However, unknown to the Pryces, and before the sale of their home to Stockall, Alexander lent £30,000 to Stockall who subsequently arranged for a mortgage on the property.
Before the property was sold by the Pryce’s to Stockall, Alexander had lent the Pryces £50,000 and Stockall £30,000. However, the Pryces said that they never actually received the proceeds of the sale of their home.
The proceeds of the sale, £109,485, were transferred to Alexander at his request with the help of Stockall, the tribunal heard.
Alexander used £53,000 to repay the loan and interest owed to him by the Pryces under the loan agreement of 21 April 2005. Then, without the consent of the Pryces, he used the balance to repay the debt owed to him by Stockall (£50,550) and pay £5,935 to Haulwise UK Limited.
Alexander admitted receiving the net proceeds of sale of the property but argued that he did so lawfully and properly. Furthermore, he repaid the loans due to Pryce, Stockall and Haulwise UK.
Alexander also argued that he was entitled to repay himself the amount owing under the loan agreement.
His defence partly relied on a letter dated 20 September 2009 from “James Pryce” to “Mr Michael Alexander” which stated “In recognition of you handing over a cheque for the sum of £5,935.00 I James Pryce confirm that this is in full settlement of any outstanding interest I have in [the property]”.
He also argued that an email, dated 30 August 2005 from Pryce to his solicitors, authorised him to use the £50,550 to repay money owed him by Stockall.
“As for my recent letter with instructions for the whole amount of the result of the sale please pay the whole amount to Michael Alexanders account it is an arrangement between us and also a requirement and also he needs confirmation that this will be done asap…” Pryce wrote in the email.
The tribunal decided that the emails did not give Alexander clear authorisation to use the funds from the property in the way he did.
The tribunal also dismissed Alexander’s claim that because Pryce made no complaint for nearly two years he did not dispute the proceeds of the sale the proceeds of sale.
“It is not acceptable for a member to take receipt of significant sums of money belonging to others and, without seeking consent or dealing with the owners of that money in any meaningful way, take it upon himself to treat that money as though it were his own and use it as he saw fit, or as others (such as Stockall) saw fit,” the ICAEW tribunal concluded. “It is also unacceptable not to write to the owners of the money to explain what he had done and why.”
The case was one of the Disciplinary Orders and Regulatory Decisions published in October by the ICAEW.