Put an end to size discrimination
16 January 1996
Paul Pharaoh may be right to point out that the change in culture urged by the president includes the fulfilment of client expectations (The Lawyer, 9 December). The inference has to be that if clients entrust money to a solicitor and that solicitor steals, then the Compensation Fund exists to ensure its replacement.
Widows and orphans, I believe, gain compensation of moderate sums without difficulty. However, when it comes to business men who have lost fairly large sums then the doctrine becomes a search for negligence on the part of the client and an argument that he should not have parted with his money to a sole practitioner.
At a meeting in November, Mr Pharaoh stated categorically that placement of large funds with a sole practitioner should not be regarded as an act of negligence on the part of a claimant as to disentitle them. This appears to reverse a policy hitherto operated for some time.
Mr Pharaoh has the least attractive post in the whole of the profession; the chairmanship of the Appeals and Adjudication Committee at the Solicitors Complaints Bureau. The least I can do is demonstrate my support for a decent man but, who, like his predecessors, may find the need to compromise will generate criticism.
He deserves all our support. The fact he has mine is not apparent only because of the political considerations of the Compensation Fund.
As a result of a scandal the Law Society brought in a voluntary scheme in order to compensate the victims of default and dishonesty where there were no innocent partners to seek indemnification from insurers.
As long as the sums involved were felt to be affordable to a prosperous profession the Compensation Fund worked. The recession has brought a decline in prosperity and the revelation that more solicitors were abusing the client account than had been realised.
Once a claim is made on the Compensation Fund the dishonesty of the solicitor is ignored. Instead, council members say the claimant should never have invested in such an absurd scheme.
In one case involving dishonest losses of £15 million the fund has refused payment in all cases save one where questions were raised in Parliament and the claimants hired a PR office to lobby its cause.
Once the discretion is applied restrictively depending on the sum claimed it ceases to operate upon principles.
Mr Pharaoh and I are at one in understanding the feelings of resentment within the profession about payment of £1,000 annually to a fund that partners will never draw upon.
Yet I do no conveyancing work and I still pay a premium to the indemnity fund that pays out more than half of my premium to those who do conveyancing work badly. However, I do not complain.
Sole practitioners as a class have been alienated from the rest of the profession by the way that the Law Society Council has operated the Compensation Fund.
Sole practitioners in their hundreds have written to me over the last four years about discrimination by lending institutions against them.
Much as I welcome Mr Pharaoh to the post I cannot accept any assertion that there has been no discrimination by the Solicitors Complaints Bureau between sole practitioners and multi-partner firms.
My question to Mr Pharaoh must be: if sole control of a single individual presents a risk to the public then would it be more straight-forward to warn the public never to deal with sole practitioners or publically declare a limit to liability for sole practitioners?
The Law Society has got that message across to the building societies without any public declaration. Few will now retain a sole practitioner. All around the world lawyers handle large sums but in England if they do their clients must take out insurance.
I ask Mr Pharaoh, was this contemplated by the directive on harmonisation of practice in Europe signed by 12 Bar Associations and inter alia the society in December 1994?
The restoration of confidence in the complaints bureau and adjudication committee which handle the compensation depends largely upon him. I look forward to acknowledging the change.
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