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Response of the Westminster and Holborn Law Society (“WHLS”) to the Solicitors Regulation Authority (“SRA”) Consultation “Protecting users of legal services – prioritising payments from the SRA Compensation Fund” About us Comprising around 10,000 admitted solicitors and many more legal professionals, the WHLS constituency stretches from the south side of Oxford Street across the old Metropolitan Borough of Holborn to the City of London boundary. Many of its members are from within this area although membership is not restricted to those within it. Its sub committees enable the Society to comment on legal developments. The Professional Matters Sub-Committee, concentrates on matters such as regulation of solicitors, matters affecting their practice, etc. Objects of the SRA Compensation Fund (“the Fund”) and the Consultation’s Proposed Changes to them Section 2.2 of the current SRA Compensation Fund Rules defines the “primary objects” of the Fund as being: 1. “to replace money which a defaulting practitioner or a defaulting practitioner's employee or manager has misappropriated or otherwise failed to account for; [‘the First Object’] and 2. to relieve losses arising from the civil liability on the part of a defaulting practitioner or a defaulting practitioner's employee or manager who in accordance with the SRA Indemnity Insurance Rules should have had, but did not have, in place a policy of qualifying insurance [‘the Second Object’].” As the Law Society’s website explains, the Fund provides “a safety net for risks that professional indemnity insurance is unable to cover”. Whilst the First Object only enables grants to be made in limited circumstances (misappropriation or failure to account for money), the Second Object enables grants to be made in any case where a practitioner has incurred civil liability that
would have been covered under the Minimum Terms of an SRAapproved Professional Indemnity Insurance (“PII”) policy. That is not limited to liability to clients. The Consultation proposes to maintain the First and Second Objects but in practice amends them and largely waters both of them down in significant ways. We draw attention to the following: i. “An applicant may only apply for a grant out of the Fund if the loss referred to in rule 3.2 relates to services provided: (a) by the defaulting practitioner for the applicant; or (b) to, or as, a trustee where the applicant is a beneficiary of the estate or trust.” We refer to this as ‘the Client Restriction’. ii. “No grant will be made under rule 3.3 where due to the insolvency or cessation of the insurer the defaulting practitioner's policy of qualifying insurance has been disclaimed or otherwise ceases.” We refer to this as the ‘Insurance Failure exclusion’. Preliminary Comments We responded to the SRA’s previous consultation on proposed reform of both the solicitors’ profession’s PII and Fund arrangements. We welcome the SRA’s decision not to proceed with the substantive PII proposals (of which we had been very critical). We acknowledge that the SRA’s current proposals on the Fund are in some respects an improvement on those in its previous consultation (reflecting a welcome acknowledgment of points made in the responses it received). Nonetheless, the proposals in the current Consultation raise two fundamental issues: Continued on next page
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