Society: SRA should invite bids for failures’ caseloads

Let's hope this was an off-the-cuff comment. Leaving aside the fact auctioning client files is inherently unprofessional and raises all sorts of questions about confidentiality, why would it save any money? Someone would have to audit the files and value them in order to know how much they should be sold for. Would that exercise really be any cheaper than an intervention agent disposing of the files in accordance with the wishes of the clients?

Referral fees are only bad in PI claims then?

Referral fees are only bad in PI claims then? But not when a PI caseload is up for grabs.

TUPE?! Take the files, do you have to take the staff? Some you may want but others would cost money to make redundant.

This is fundimentally flawed and repugnant. The client is at liberty to instruct whom they wish, subject to undertakings on costs wherever any recoupable costs have actually been incurred by the client - that is all that the SRA or the Insolvency practitioner is entitled to!!!

Based on experience of files from solicitors that have been subject to an intervention I would not bid to take on the files and the liability.

Sounds like tickets on the Titanic after it started to sink.

I'm not sure that allowing firms to bid for work would cut the cost of interventions. There are numerous commercial factors that would need to be taken into account when taking on more work not least working capital requirements. Presumably time would be of the essence causing further risk taking by some bidding firms and the instability could ripple outwards even further.

There is however, a lack of joined up thinking when it comes to the clients, particularly legal aid clients where the choice of alternative solicitors is limited. The clients are often vulnerable, particularly if they are involved in public law proceedings and they need local help that they can readily access.

The LSC are content to transfer certificates but the SRA appear to require an undertaking to pay over all the costs ultimately due to the intervened firm. It sounds straightforward enough but it doesn't take account of the risks and investment that are inherent in taking over legal aid files which, because of the LSC payment regime impact heavily on working capital and generally require the support of the firms bankers.

Even assuming everything has been done in scope, the costs already claimed may not be allowable on assessment creating POA's for recoupement and the new firm may not be able to complete the matter within what would otherwise be reasonable cost limitations so the new firm stands to be prejudiced on costs. Invariably the files will be costed to the maximum leaving the new firm without the ability to properly manage claims.

In the meantime, if firms don't want the risk (and I'm not sure that they should for the protection of their own businesses) the clients remain unrepresented and cannot get access to justice.

The risk for firms taking on these clients needs to be removed or at least minimised or controlled to avoid further failures. If the LSC could issue a new certificate that may help. Alternatively, risk could be valued into the price that a firm was willing to pay for the work already undertaken and the matters transferred subject of course to client consent.

What’s wrong with the current intervention system is you need to be a faily full service firm to get on the panel. Why? –the is ever more specialist so a big well run well resourced PI specialist firm is ideally placed to intervene in a collapsed PI practice
They could do that at no charge to the profession (SRA) so no referral fee as they might then pick up the ongoing PI cases and do a good job on em. I say might as clients should be advised they can instruct any solicitor of choice, perhaps list of PI panel firms enclosed or summink. The current system where the intervening firm is paid by all of us (SRA) and then gets a load of work free is ludicrous
But we live in ludicrous times so I am not holding my breath for sanity to return anytime soon

Glad to see the profession is getting value for the £407,000 it paid to the Chief Executive of the Lasw Society for 2011/12 (see page 60 of the annual report "The highest paid member was the chief executive: Salary and benefits £376K Pension contributions £31K").

At the turn of this century and before an intervened firm could be transferred to another firm for nothing and in exchange that other firm would do all the intervention work for nothing. A good deal which saved the Law Society a fortune but some bright spark in the Law Society decided an obscure case on fiduciary duty of trustees meant they could no longer do this. It is time to revisit that case and decide if that bright spark was right.

The problem with Des Hudson's idea is that there is no property in clients and so a sale of clients may be impossible.

......how our representative body leads by example in demonstrating the benefits of effective communication between senior colleagues within an organisation.

I am referring to the comments made by Lucy Scott-Moncrieff on this very website just 4 days before the above article was published. The PRESIDENT of our Society categorically (and voluntarily) stated that those who had made comments about paying for files from an intervened firm were wrong. In fact, she questions where that idea has come from....from her Chief Executive perhaps ???

For those who are interested, I've posted a link to the article - Lucy has made a couple of comments in response:-

http://www.lawgazette.co.uk/news/lawyers2you-latest-victim-pi-bloodbath

I wonder what the SRA could have possibly said to the Law Society in the last 4 days that has caused such an about-turn ?????

Could one of the issues preventing a purchaser coming forward for the failed practice be that they run the risk of also taking on their claims record. If that could be ring fenced and left with the run off cover of the failed firms insurers the purchase would become more attractive and result in fewer interventions. Could the insurance industry be persuaded to adopt this approach on the basis that they will all have potential failed firms on their books as well as potentially successful firms? After all if there are no firms of solicitors left then there will be no-one to insure.

As I read the article, Mr Hudson was talking about selling files, not selling firms. In any event, you're assuming there are any bidders. As I understand it, Blakemores was trying to find a suitor, but could not do so, with the result that the intervention occurred. I get the impression that the SRA was highly relieved that Cobbetts did find someone (DWF), because it meant the SRA avoided incurring intervention costs (which it estimated at £6 million). One wonders whether, had Cobbetts been a smaller concern (with lower estimated intervention costs), the SRA would have intervened.

There is also the point that not all interventions are the same. The SRA has said that the decision to intervene in Blakemores was not based upon any suspected impropriety. But what about a case where the intervention is based upon suspected dishonesty involving (for example) repeated involvement in mortgage frauds?

It may be that a version of Mr Hudson's idea - or your suggestion of a capital adequacy requirement - will have to be considered, along with lots of other options. But it might have been advisable for Mr Hudson to think his idea through a little more fully before airing it. At the moment, this looks like a knee-jerk reaction to the risk that a significant chunk of the Compensation Fund is going to be spent on intervention costs. The first question the Society should be asking of the SRA is "right, let's see where and how you've been spending all this money on intervention costs".

I'm not convinced that it would be lawful to use the Compensation Fund to help the SRA with the costs incurred in interventions, though that seems to be what the SRA is mooting. At first glance, Rule 2.8(d) of the Compensation Fund Rules 2011 allows it, but that Rule may be inconsistent with section 36(1) of the Solicitors Act 1974, which provides that the Society "may make rules concerning the grant of compensation by the Society in respect of loss that a person has suffered, or is likely to suffer, as a result of...(c) the exercise by the Society of any of its powers under Part 2 of Schedule 1".

It is not immediately obvious why this allows a Rule which permits the SRA to take intervention costs from the Fund. Such costs are not a "loss" and, in any event, section 36(1)(c) is surely aimed at losses suffered by a third party (not by the Society or the SRA) as a result of an intervention.

If the Fund is also there to cover ABSs, it would seem even more unwise to dip into it now for the purpose of paying intervention costs: at present, it must be impossible to estimate how much of a drain on the Fund ABSs could prove to be.

Unrecovered costs of suspicion of dishonesty interventions have always come out of the compensation fund.

Anon (who posted under the above on 15.3.2013) makes a good point - namely up to 2000 and I believe a little later, an intervened in firm could be transferred to another solicitor immediately, so continuity was not lost and there was no need for The Law Society to send in solicitor agents at great expense and disruption. I'm involved with just such an issue at present. I'd much appreciate Anon contacting me asap (nigel_adams@btconect.com) with whatever further information they have, particularly with details of the case or other law which resulted in The Law Society dropping this concession.