Honorary Secretary’s Report - Autumn 2022

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Honorary Secretary’s report Autumn 2022

My last report was Spring 2022 since when we have had the successful annual conference at Carden Park together with the Annual General Meeting. Firstly, I can report on the AGM which took place on the second day of the conference. The AGM has its formal business, being a report by the Chair, Joanna Connolly, a report by me as Honorary Secretary and a report by Kem as Treasurer. Also, the election or re-election of executive committee members and most importantly an exchange of questions and answers and views with members in the meeting.

The remaining business of the elections of Exec. committee members, including the election of three new members, was followed by a lively question-and-answer session with membership present in the room.

A huge amount of effort and work was put into that conference, and it is being followed up by a top table event on 11 November to be widely advertised in this edition. Booking is available on Eventbrite. Similarly, preparations for next year’s summer conference are underway. All this takes up a huge amount of time and effort for our executive committee and staff. Please acknowledge that, by coming to the conferences which are attended by the heads and representatives of all the major legal organisations to which we, as solicitors, are connected. Also please come to support as organisations sponsor our conferences.

The Queen is dead. Long live the King These words may seem impersonal when we have lost such a cherished and dedicated

monarch, but they are the essence of our constitution, which after evolving over many hundreds of years, now provides for a seamless transfer of monarchical authority from one individual to the next without the need to raise any questions or to have a vote.

Despite talk of abdication – never by the Queen – and missing a generation – never by Charles – the reality is now upon us, and how well the transfer has worked even with a transfer of Prime Minister almost at the same time.

Having said that let us give thanks for the long life and service of Queen Elizabeth II.

Postscript 19th October Perhaps the light of recent events the procedure for the transfer of Prime Minister could be looked at to improve it next time!

Solicitors Indemnity Fund. At the time of drafting this report on the 15th of September the up-to-date position is that the SRA have acknowledged that the Fund must be continued to protect the public. At the beginning of August, the SRA issued a discussion paper putting forward three potential proposals. The continuance of SIF Ltd; the continuance of the Fund run in house by the SRA; the continuance of the fund as a discretionary fund in line with the compensation fund.

The SPG have been against the compensation fund option because solicitors cannot be sure that the money that they put into the fund will protect them if it is subject to discretionary payments on the lines of the compensation fund payments. The SPG preferred option is the continuance of SIF Ltd based on the indemnity by the Law Society on behalf of its members. This is on the basis that that arrangement has worked well and has the confidence of the profession.

The SRA appear not to like that option because they take the view that SIF Ltd is costing a great deal of money to run to provide a small amount of protection to members of the profession and to public. They have published a news release on 14 September stating

“We have decided that existing solicitors’

indemnity fund arrangements, as operated by the solicitor’s indemnity will be replaced with our own indemnity arrangements from September 2023.

The decision to introduce SRA run indemnity arrangements which will maintain consumer protection for post six-year negligence as a regulatory arrangement – with the same level of coverage as the SIF – follows the Board’s in-depth consideration of the evidence and feedback from extensive consultation and engagement, research, expert advice, and insight”

In addition, the Chair states: “This approach will provide that important protection for those who need it, whilst giving us clear oversight of how the indemnity operates, enabling us to run the scheme efficiently and realise potential cost savings.”

The SPG’s concern is firstly that there should no longer be excessive costs because one of the extra costs of the SIF Ltd was to provide reserves required by a standard insurance company. In the future reserves will be replaced by the indemnity been given by the profession. In addition, during the time that these consultations have taken place, amongst warnings of a reduction in the monies available in the fund, the accounts of SIF Ltd have not shown any significant variation.

Indeed, with the lack of need to make provision for reserves by buying reinsurance and with the potential increase in interest rates our financial experts consider it is unlikely that it will be necessary to call on the profession for support for the fund in the immediate future.

The operation of the fund through SIF Ltd is established and can be economised by the control that the SRA and the Law Society have over that company through their shareholding of it. It is a separate legal entity whose duty is to make settlement of claims on behalf of the profession.

The operation of the fund by the SRA in-house requires a new set of rules to be set up and a dialogue over the transfer of the funds from SIF Ltd to the new indemnity system and the ring fencing of those funds within the SRA.

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In addition, questions have been raised as to whether it is right for a regulatory body, passing judgement, as it now does, on its members, to also be administering a scheme to which those members are entitled for their own indemnity and whether that will pose a conflict-of-interest which may have to be resolved by Chinese walls.

A further consultation will be produced by the SRA on the arrangements and rules for the SRA run indemnity. The SPG will be asking that this consultation considers the prospect of the scheme continuing to be run by SIF Ltd or any other independent organisation on the same basis as SIF Ltd to avoid any such conflict.

All the relevant players will be at the top table event on 11 November for you to raise any questions on this subject and many other subjects.

Postscript. 19th October. Since drafting the above we have received the consultation paper issued by the SRA for the next stage of the process. This ignores any further discussion of who will be running the fund and makes it clear that the SRA will run it.

The Law Society effectively agree with this course of action subject to stringent safeguards being written into the new rules which will have to be drafted to transfer the administration of the fund from Solicitors Indemnity Ltd to the SRA together with the substantial £30 million fund in that company.

The SRA argument is that this will be more costeffective and will enable the SRA to get a handle on the background to the claims which they say they can’t do through the operation by Solicitors Indemnity Fund Ltd.

I personally think the principle of independent management of the Fund, which was paid for by solicitors before the inception of the SRA and is being indemnified in the future by solicitors and I believe is the wish of my solicitors, is the overriding factor which should be considered now that a decision has been made to continue the cover. However, in this we are not supported by the Professional Indemnity Committee of the Law Society, and the Executive Committee of the SPG will be discussing whether there is any point in taking this argument further, even

though the SRA are looking to engage with our financial experts who contributed to the response to the first consultation.

The second recent consultation sets out draft rules by which the SRA will control the Fund together with the standard regulatory and equality impact assessment upon which views and comments are sought. This leaves no further room for comment on whether the SRA should be managing the fund. I believe people who responded to the recent discussion paper were keen for independent operation of the Fund.

The response to the consultation is required after Christmas so there is plenty of time to consider this response. The main thing is that the fund will continue but in such a way that the SRA will be able to decide in the future whether it will continue on an indemnity basis or whether there should be a further consultation on potential proposals to administrator it in similar terms as the compensation fund.

Clive Sutton, Honorary Secretary.

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