SRA makes £3m payment to help clients of Wolstenholmes
Thursday 14 January 2010 by Catherine Baksi
The Solicitors Regulation Authority has made a payment of £3m to help clients whose conveyancing transactions have been left in limbo by the closure of Cheshire firm Wolstenholmes.
The money has come from the Compensation Fund, which is administered by the SRA and funded by the profession. The SRA was unable to comment on whether or how the money might be clawed back.
In addition, the Law Society has teamed up with the Manchester Law Society to set up a scheme to assist conveyancing clients whose property transactions have been affected by the SRA intervention into the firm in December.
They have assembled a pool of Manchester-based firms who will be available to take on the work and complete transactions to reduce further delays.
The SRA stepped in and suspended the practising certificates of five solicitors at the firm following allegations of dishonesty involving hundreds of thousands of pounds of clients’ money and breaches of accountancy rules. The managing partner denied any wrongdoing and it is understood that at least one of the solicitors involved is contesting the intervention. The SRA has appointed Manchester firm DWF as its agent to take custody of clients’ funds and files, and advise them of their options following the intervention.
An SRA spokesman said: ‘We are acutely aware of the inconvenience that has inevitably been caused to clients by closing this firm down. Our focus is on sorting out the files taken from Wolstenholmes and, as speedily as possible, enabling clients to instruct new solicitors. Our agent, DWF in Manchester, has 38 people dealing with phone calls, and finding and releasing files.
Comments
Compensation Fund Payments
Why has £3 million been paid out of the compensation fund, seemingly before loss has been established?
This is money contributed by solicitors. I believe that we have a reasonable expectation that loss should be established before payments are made.
If, as I suspect, payments are being made out of the compensation fund before actual loss has been established, then this would seem to be being done to avoid adverse publicity.
If the Legal Services Act 2007 had provided for receivership, then such payments would not have had to be made. The SRA would simply have taken over administration of the practise.
The Law Society had input into the Legal Services Bill and did not think to ask for receivership powers.
The SRA should ask for them now.
compensation fund payments
Wolstenholmes have in excess of £130.000 of ours frozen in their bank account by the SRA, we have not got the keys to the property and we have just paid our first repayment on the mortgage so don't give any crap about loss being established.
I suspect that the reason the
I suspect that the reason the release of money has occurred is because the client account for Wolstenholmes has been frozen pending investigation. Hopefully there will be sufficient money in the client account to pay the Compensation Fund back once the account is unfrozen.
WTF were the SRA doing?
As a client who had a very narrow escape with my sales completiion with Wolstenholmes, I have to ask why the SRA took so long to act?
My understanding is that they were aware of major concerns , geting streams of negative information from concerned lawyers and disgruntled clients, for a year
Thye simply failed to act in a timely and appropriate way
It raises the question of what the role of the SRA actually is - they seem incompetent, expensive and tardy at best
There needs to be a root and branch review of this authority , with numerous sackings, and new terms of reference which places clients' (and not solicitors' ) interests at its heart
SRA makes £3m payout
As a conveyancing solicitor, I had a transaction on with them where they were selling. I hadn't heard from them for several weeks. Nothing wrong there.
However, my clients wanted to exchange and complete virtually simultaneously, and by the end of December. At this time it was about 4 days before the Christmas break. I could not understand why they had not confirmed and tried to ask for an exchange.
There was no reason why they could not achieve this timescale, as we knew the Seller was happy. Problem was, she was having trouble getting hold of her own solicitor.
So was I. No replies to letters or calls left on the general number.
Having faxed their senior partner with no response, I Googled, and by chance saw a forum on www.moneysavingexperts.com all about the Firm. One forum person said their office had ceased trading, and that she and many other of the Firm's clients had not been told and some only by an email.
Having panicked for several minutes, I called the Law Society, who could not disclose anything but I read between the lines that the Firm was in some sort of trouble.
So, I informed the Estate Agents that their client's lawyer may have problems and suggested she go straight into another firm that very same day and have the new lawyer call me.
The Seller did just this, and the new lawyer called to say they would do what they could. I said if they ratified the previous protocol forms and solicitor replies (hardly any) then we were safe to exchange and complete - I already had the protocol forms. I emailed them a copy of the selling contract and the Transfer and they got signed up.
The deal happened. No loss to the Seller. Had we exchanged, I think we would have similarly coped.
The SRA and Solicitors
Anonymous 11:12.
I presume you are in work or that you used to work.
I also presume that an articulate person like you was or is probably a person with management responsibilities, eg you own your own business.
One day you go into work and find out that one of your employees has stolen £20,000.00 from a customer.
You telephone the Police and they come round and arrest your employee. They then decide that you should no longer be in business because of what your employee has done (bear in mind that this is before your employee is convicted). They take your firm and all its customers and distribute the customers to your rivals. They decide that some of the customers might like to come and buy things off Police plc and so they invite those customers to do so.
They stay at your business until your customers have been distributed to them and your rivals and all stock has been accounted for.
They refuse to send out bills for work done whilst you had the business. They also refuse to allow you monies to pay the VAT liability on bills you might send out yourself (and which may not be paid). They then sack all your other employees and you have to pay their redundancy. You have to pay all the firm’s bills.
Then six months later the Police send you a bill for the work they did in confiscating your firm. New bills arrive every month, until the final bill amounts to £250,000.00.
You go to court and find that the Police have always won and never lost (except once but the higher courts changed that). You are ordered to pay the coiurt costs for challenging the Police. Then the statutory demand arrives. Soon, you are bankrupted and you lose your house. You are on benefits. Your wife has left you. You are homeless because the trustee in bankruptcy has taken your home.
You are on a park bench reading a newspaper. The article says the Police only support employers and never help customers.
You find an internet café and go on the web and read a posting such as yours.
Substitute the words SRA and their agents for the word Police and you have the way that the SRA and their agents act in interventions.
I cannot agree that the SRA act only in the interests of solicitors.
Incorrect website given by anoymous above
The website should read www.moneysavingexpert.com
Fantastic website.Join up it all free and very informative
Anonymous on Fri, 15/01/2010 - 02:46
The picture you paint is, of course, dreadful
If the SRA really does act like that , then all the more reason for a root and branch review of its functions and personnel.
My point here is that the SRA were aware of repeated, numerous complaints from lawyers and clients, for a year. It wasn't a single criminal act like the single theft you describe in your vingette.
I suspect Wolstenholmes operated on a very poor business model (charging ridiculously low fees, trying to get most work done by poorly- trained and poorly-supported paralegals, relying on high interest rates (and thus coming a cropper when interest rates fell to almost nothing) to produce income from aggregated millions of clients monies in holding accounts, together with probable shady dealings by senior partners/managers)
If the SRA cannot act appropriately in such circumstances, what is the point in its existence?
I further believe that the SRA is arbitrary and inconsistent in its approach to law firms. A flick through the cases in this Gazette will show that it can and does come down heavily when there are claims of alleged dishonesty, and yet I had dealings with a particularly slick Brighton firm of c***ish laywers in which an junior paralegal was able to fraudulently make substantial money transfers from dead people's wills, without a solicitor being a co-signatory. I raised this with the then Regulation Office, who eventually concluded their investigations but told me they could not tell me the outcome. Certainly the firm doesn't seem to have been the subject of a tribunal
I can only surmise that slick law firms with good contacts can plead speacial cases and ask for confidentiality whilst those without, or those who struggle single-handedly or are full of foreign-sounding solicitors get dragged through the mill
In any case, it doesn't fill the public with confidence that the SRA is competent or just
From reading these boards it is clear that even solicitors have great misgivings about what the SRA is and is for. It seems not to please ANY stakeholder group and thus the time seems right to have an extensive and meaningful overhaul of this expensive, incompetent and inconsistent body
Reply regarding the SRA and Solicitors
I can certainly attest to the truth of the scenario painted by Anonymous 02:49.
He or she has described the process of intervention. This is a process which was first introduced in 1941 and can be categorised as an example of wartime draconian legislation. However, it is the only example of draconian war time legislation that I know of which has actually been enhanced since the Second World War.
Intervention does not only occur into firms where the partners, principles and/or employees are suspected of dishonesty. There are also interventions into firms whose partners or principles have abandoned the firm and into firms where the partners or principles have died or been bankrupted for reasons not associated with law. There are a host of other reasons for intervention.
The judiciary has slavishly followed the SRA and before it the Law Society, in agreeing that all decisions to intervene firms are correct. The exception was a case called Sheikh but that decision was reversed on appeal. An intervened solicitor has, effectively, six days to lodge an appeal against intervention. A minute amount of time considering the issues involved. Furthermore, the intervention has cut off that solicitors source of income and there is no Legal Aid for an intervention.
Intervention is not a form of receivership and the role of the SRA and its agents, drawn from a panel of solicitors, is to distribute files and to distribute monies. Liabilities remain with the partners or principles of the intervened firm. All th employees are made redundant as a matter of course.
Whilst there is a set tariff for fees to be charged by intervening agents, the overall cost of an intervention is still enormous, often working out at an average of £1000.00 per live file. Furthermore, there is at least one incidence of non-compliance with Rule 15, on the part of an intervening agent firm (in that the firm in question failed to give the Law Society an estimate) . The Law Society did absolutely nothing about that breach.
The average cost of an intervention is £250,000.00 and that is payable by the partners or principle of the firm which is intervened. The chances of them recovering this money from a rogue employee are almost zero. The partners or principal will almost certainly become insolvent, not least because their liabilities, for the ongoing costs of the business, will be at least another £200,000.00, even in a small firm. If they refuse to pay, the SRA will bankrupt them. This means that they will all lose their homes. The SRA will probably allow a co-operating solicitor who has a home to enter an IVA (Individual Voluntary Arrangement). That solicitor will then either have to sell his home, to raise money to put in the IVA, or raise a mortgage on it. He or she will probably only be able to do that if he or she has access to money from their parents or spouse.
It is incorrect to say that those who have connections avoid interventions. The firms of two Law Society Council Members have been intervened in the past. At the time, those people were part of the ruling body of the profession. Both subsequently faced criminal trial and both were acquitted. One of them ended up as an insolvent chauffeur. I do not know what happened to the other.
What is true is that the large firms generally avoid intervention. Wolstenholmes is an exception. City of London firms are never intervened.
There are peculiar anomalies in relation to interventions. A person accused of a multi-million pound mortgage fraud has not been intervened, whilst a person accused of a different form of multi-million pound fraud was intervened.
Whilst an Law Society adjudication panel decides who is intervened, interventions are administered by the SRA.
The SRA Board has agreed not to interfere in individual cases. This leaves the officials of the SRA solely in charge, after an intervention is allowed.
Unlike other police bodies, these officials have no Professional Standards Department, Independent Complaints Commission or other inspectorate. Nor are they obliged to comply with the provisions of the Police and Criminal Evidence Act when undertaking investigations. Furthermore, those being investigated have no right of representation and no right to Legal Aid. Unlike common criminals the intervened solicitor can look forward to the fact of his intervention remaining on the SRA website for the span of his natural life.
It is time the LSB looked at all this and established a modern policing force for this profession with modern professional standards. They also need to provide proper Legal Aid for those accused. No Legal Defence Group is going to work until this is done.
We are long past the time when accused solicitors could be presumed to be wealthy enough to deal with intervention.
In addition, there is a real danger that the government may start using our arrangements against us. Why should they listen to our arguments about Legal Aid when we provide no Legal Aid for our own accused? Why should they listen to any complaints about the way arrested persons are dealt with, when we treat our equivalents so badly?
agreed SRA intervention is catastrophic
But in the case of Wolstenholmes, why wait for a full year and then intervene?
Surely there must be more than "all or nothing" options?
had the problems been picked up and acted on earlier, with support given to the firm, and any rogue individuals removed, the firm could have kept on in business and we wouldn't have the complete mess we have now
It shows incompetence and a lack of awareness on the part of the SRA, a body which appears to bring the legal profession into disrepute!!!!!
Incidentally I like the typos/fraudian slips/mistakes:-
"principles have abandoned and "principles have died or been bankrupted "
Unfortunately no-one in the
Unfortunately no-one in the "representative body" the Law Society has the cojones to stand up to the SRA. It just acquiesces to whatever they want whilst taking the professions money.
Why exactly is the President paid, and apart from trite articles in the Gazette, what does he do for the money?
It isn't just MPs who take money for rubber stamping!
With regard to Anonymous
With regard to Anonymous 17-01-2010 15.10,, whilst having great sympathy for the position they are in, it would be interesting to know the basis on which they chose Wolstenholmes to act.
It also proves what a blunt instrument intervention is-although supposed to be protective rather than punitive one cannot but think that if this is the result there has to be a better way of doing so.
We chose Wolstenholmes
We chose Wolstenholmes because we did not know anyone who could recommend a solicitor, but we also believed that all solicitors were supposed to be honest, reliable & well respected members of society.
I also agree that there needs to be a better way of doing things than intervention as it has been nearly 4 weks and we are no closer to getting our files sent to our new solicitor. It appears to me that the SRA are no better than the people that they are supposed to regulate !!!! Wolstenholmes
we were in the midle of an
we were in the midle of an employment case, we had the 3 moths deadline looming, but "we were not to worry", i have only just learnt the facts about the company acting on our behalf, we now look like we will miss the deadline, where does that leave us? what realy bothers me is that until we visited the office, we had no idea this was happening, the website has now ben shut, should it not have been redirected to the sra site, the phone lines are now engaged, but last week the answering machine was still on, could or rather should the sra not have mad it more clear what was happening after it happened? will the employment tribunal even consider our now late, and it looks like self completed et1?
have not come out of this thinking what a great service the sra have done, any comments?
forgot to mention all
forgot to mention all wolstenholmes emails are still being accepted by isp, why cant they be bounced back with a message from sra?? we have been emialing since return to work after christmas, must have sent 20 emails, no sign of problems, until we find office closed, and then started looking on web.
i cant believe that we had to find out in this way and so late, ok, maybe should have heard on the news or in the paper, but all this occured over christmas, how many people were away?