Fraud claims could 'cripple' fund

THE SOLICITORS Compensation Fund could face a string of crippling multi-million pound claims arising from the alleged activities of one sole practitioner.

A claim for u2.25 million and another for nearly u1 million have already landed at the door of the Law Society and it is feared that others may be waiting in the wings.

The demands came about after an alleged fraud involving former Newcastle-under-Lyme solicitor Charles Deacon.

Deacon is due to appear at Middlesex Crown Court in the autumn accused of fraud in excess of u12.9 million. The indictment includes a charge of theft from Midland firm Howes Percival of u1.4 million.

It is understood that the cash did not belong to Howes Percival but was held in a client account on its route from another firm of solicitors to Deacon. It is possible that a claim may arise from the complicated series of transactions.

A spokeswoman for the Solicitors Complaints Bureau says information about claims on the fund is “not releasable”.

But if applications are successful, solicitors' contributions could rocket, it is predicted.

The society is currently trying to fend off a u2.25 million claim from Law Debenture Trust, a firm of independent trustees appointed following the collapse of Deacon's former client Belling & Co.

The fund has also been hit by a claim of nearly u1 million from another of Deacon's former clients, represented by solicitor Arnold Rosen.

The two applications were initially thrown out, but when the claimants were granted leave to apply for judicial review, the society's adjudication and appeals committee agreed to re-examine them.

Chris Heaps, committee chair, says: “It is our policy to reconsider an application when leave for judicial review has been granted.”

He adds that the fund is discretionary and provided the committee makes a reasonable decision it cannot be forced to pay out.

The initial claim by Law Debenture was rejected by the society on the grounds that the loss of pension fund assets was “primarily the responsibility of the scheme's trustees”, but with no suggestion of any wrong-doing on their part.

But Justin Ede, litigation partner with McKenna & Co, which is acting for Law Debenture, says: “This case raises the very serious issue of the nature of the discretion which the Law Society exercises in considering claims on the compensation fund.”

Law Debenture has always blamed the solicitor for the loss and hardship which members have suffered.

Rosen, who is claiming nearly u1 million, is keen to make contact with other lawyers who represent Deacon's alleged fraud victims.

He says that the size of the claims, and the potential increase in contributions to the fund, could be tainting the society's judgment.