Regulating a reluctant profession: Holding solicitors to account

Abstract

Solicitors are often placed in a position of trust where they hold money on behalf of their clients. Instances of the misuse of clients’ money have been a recurring feature in the history of the legal profession in England and Wales. Yet the legal establishment was slow to impose the same standards of accountability on its members which had long been expected of other members of society and continued to prevaricate many years after the need for financial regulations had been demonstrated through a series of scandals. This paper provides a detailed review of the evolution of basic accounting regulations governing the legal profession.

Keywords:

• Legal profession
• Regulation
• Accountability
• Clients’ money
• Solicitors’ Accounts Rules

Notes

1 The ‘ring-fencing’ of client money to protect it from the claims of the bank where a solicitor is overdrawn at that same bank was effected by Section 8 of the Solicitors Act 1933, now Section 85 of the Solicitors Act 1974. The requirement (currently in Rule 14(3) of the Solicitors Accounts Rules 1998) to have the word ‘client’ in the title of the account effectively protects money in the account from the claims of other creditors of the solicitor.

2 For example, Ingram, Harrison and Ingram of Lincoln’s Inn failed with liabilities of £380,000 (The Accountant, December 16, 1899, p. 1208).

3 One of the most active of a group of dissident London practitioners according to Kirk (1976, p. 43, fn 53).

4 The Law Society was effectively overseeing the conduct of practising solicitors on behalf of the state. For this ‘monitoring’ activity, the Incorporated Law Societies of England and Ireland together received an annual government grant which in 1900 amounted to £3000 (The Accountant, May 12, 1900, p. 448).

5 Under sections 4–7 of the Solicitors Act 1933, exemptions from the rules were available to those who filled ‘official’ positions such as public officers, clerks to county councils, those employed as officers of local authorities and the solicitor of the City of London. Such exemptions continue under Rule 5 of the Solicitors Accounts Rules 1998.

6 In fact, the term ‘agreed fee’ remained undefined until the 1998 SAR were passed establishing the criteria that an agreed fee was one that could not be increased nor one that was dependent on the outcome of the matter in which the solicitor was engaged (see Rule 19(5) SAR 1998).

7 These are now in Part C of the Solicitors Accounts Rules 1998.

8 These principles are now found in Part F of the Solicitors Accounts Rules 1998. Appendix 4 to the current Rules contains the accountants’ checklist and Appendix 5 the accountants’ report form.

9 The compensation fund is now administered under Section 36 of the Solicitors Act 1974.

10 It must also be said that solicitors’ accounts present a high-risk area for accountants (see Accountancy, August, 1995, p. 18; MacGregor, 1996, p. 129; Pickering & Gibbens, 1995), against which not even the most eminent are protected (see Law Society v. KPMG Peat Marwick. (2000). Professional Negligence, 16(1), 47–56).