A SOLICITOR has been fined £50,000 for the 'reckless' way she ran her business.

Saimina Jan Virmani, founder of Joseph Frasier Solicitors in Blackburn breached the terms of a £1.6million funding agreement in an effort to save her business from going under.

A disciplinary hearing heard Ms Virmani wrongly used part of the money to clear a £68,000 HMRC debt, as well as funding general overheads and paying for a new case management system.

The Solicitors Regulation Authority told the hearing Ms Virmani had 'failed to maintain the trust the public placed in her' as well as 'failing to run the business effectively with proper governance and sound financial and risk management'.

The hearing heard the allegations arose from Ms Virmani's decision in July 2012 to sign a Litigation Funding Agreement with the Axiom Fund.

The fund, which had been established in the Cayman Islands, was set up to provide litigation funding to law firms in England and Wales.

Litigation funding is where a third party provides money to enable costly legal cases to proceed.

Solicitors often obtain all or part of the financing to cover its legal costs from a private commercial funder, who has no direct interest in the proceedings.

The cost of the proceedings are then recouped from the losing party.

The hearing heard the SRA's evidence related to misconduct between May 2012 and October 2012.

The authority alleged Ms Virmani had not done adequate checks on the Axiom Fund, its founder Tim Scholes or its investment manager Tangerine Investment Management Ltd before signing the agreement.

By spending the cash on other than on 'specific litigation cases', the tribunal heard Ms Virmani had breached the terms of the loan agreement.

The tribunal was told that in May 2012 Joseph Frasier Solicitors, based at The Beehive, was audited by Baker Tilly, which revealed the firm was making losses, it had liabilities in excess of £160,000 and was insolvent.

The practice, which was named legal firm of the year in the Red Rose Business Awards in 2015, also had debts to its landlord and HMRC and the auditors had described its business model as 'unsustainable'.

But both parties agreed to proceed with the agreement and Joseph Frasier Solicitors received the first instalment of £813,660 from the Axiom Fund on August 2, 2012.

The tribunal heard the second instalment of £458,400 was received on August 16, 2012 as well as a third instalment of £332,240 on October 31, 2012.

The Axiom Fund had also agreed to make available a £5million loan facility to Joseph Frasier Solicitors.

The total amount borrowed by Ms Virmani's firm was more than £2.5million.

By November 2012, the hearing heard the Axiom fund had hit financial difficulty.

On February 26, 2013, Joseph Frasier Solicitors received a letter from the Axiom Funds receivers demanding repayment of nearly £2million plus interest.

In December 5, 2013, they sent a further letter stating the total sum due was £2.7million.

It was not revealed in the tribunal summary document if the money was ever repaid.

After considering the evidence the tribunal found Ms Virmani caused or permitted Joseph Frasier Solicitors to use £1.6million received from the Axiom Funds where it was inappropriate for her to do so.

The tribunal also found she knew it was reckless the firm had not complied with the terms of the litigation funding agreement and Ms Virmani had been advised by the firm's solicitor that the agreement was inadequate and or defective.

Ms Virmani's defence case statement said: "The respondent's essential case is that she is a thoroughly decent and hardworking solicitor, who borrowed money from Axiom in the belief that this was an ordinary and bona fide financing operation for the firm, and that the agreement by which she borrowed the funds was an ordinary and bona fide commercial transaction, permitting her to se the borrowed funds for general practice purposes."

Fining Ms Virmani £50,000, the chairman of the tribunal, said: "In failing to behave in a way that maintained the trust that the public placed in her and the provision of legal services the respondent had inevitably harmed the reputation of the profession.

"In not adhering to the terms of the litigation funding agreement it was reasonable foreseeable that harm would be caused by her misconduct."

Ms Virmani, who had faced no previous disciplinary action, was also ordered to pay costs of £60,000.