The Law Society has expressed its ‘dismay’ at the decision by Co-operative Financial Services to cut 3,600 sole practitioners from its conveyancing panel.

The Society said that the Co-op has jeopardised its ethical image by threatening consumer choice and putting solicitors’ livelihoods at risk. Access to justice in small towns and rural areas could be severely damaged as local law firms are wiped off the map, Chancery Lane said.

CFS comprises a number of businesses including Co-operative Insurance and Co-operative Bank, which itself comprises smile and Britannia. In September, CFS gave sole practitioners one month’s notice of their removal from the Britannia conveyancing panel.

The Society said it is not convinced by CFS’s argument that insurance difficulties were the driver for their decision. Law Society president Robert Heslett said: ‘We consider this decision belies CFS's claim that they are committed to leading the way on ethical and community matters. CFS say that "Britannia already has a commitment to social responsibility and both companies see this as a great opportunity to create a strong organisation, founded on long-standing values of trust and ethical behaviour", yet this move could well contribute to putting several thousand solicitors’ livelihoods and the livelihoods of their employees at risk.’

Robert de Coninck, of Alsager-based De Coninck Solicitors, has been on Britannia's conveyancing panel for 25 years. He said the move will deprive clients of using a solicitor of their choice. ‘The vast majority of sole practitioners rely heavily on conveyancing,’ he said. ‘In my case, it’s something like 75% or 85% of my business and of course, if the major building society in your town decides not to use you, you're going to be very badly affected.

‘This absolutely could put people at risk of going under. The housing market has fallen drastically over the past 18 months, so anyone who relies on conveyancing is already suffering. This could be the final straw.’

The Law Society said: ‘The disappointing announcement follows discussions between the Law Society and CFS, as well as representatives from the law societies of Scotland and Northern Ireland, to try and find a solution with regards to retaining the panel of sole practitioners, who had previously acted for Britannia or Platform Home Loans prior to their recent merger with CFS.

‘Following a meeting on 8 September, the Law Society had hoped that CFS would reconsider their decision. In an effort to develop the dialogue which had begun, the Law Society sought more information from CFS about the basis for their decision. However, CFS proved unwilling to provide the Law Society with answers to the questions.

‘The original basis they gave for their decision was that they were no longer able to obtain fraud insurance on commercially acceptable terms that would cover sole practitioner firms. Subsequently they have stated, in what many may regard as self-serving, that their decision was also driven by what they described as serious concerns on their part about the operation of the Solicitors Compensation Fund.

‘However, the reassurances they seek about the Compensation Fund are completely unrealistic. It is also understood that CFS object to their claims being subject to contributory negligence.

‘In effect, they want the Compensation Fund to offer the same coverage as professional indemnity insurance. This ignores the fact that the Compensation Fund is a limited fund of last resort which must be operated in accordance with statutory discretions and policies. Furthermore, the coverage offered by the Compensation Fund is not a new thing. It has hardly changed for over 15 years. In addition decisions about the Compensation Fund are now taken by the Solicitors Regulation Authority and not the Law Society.

‘Since the Scottish and Northern Irish Compensation Funds operate on much the same basis as ours, we very much doubt that either of their law societies will prove to be willing or able to offer CFS the reassurances they seek. We are glad for their sake that their deadlines have been extended by another two weeks or so. But come two weeks we sadly believe their sole practitioners will be in the same position as ours.

‘We still do not think it is too late. CFS has not consulted in advance, refused to answer reasonable questions, has not considered alternatives or the consequences of their decision on small businesses. Once again, we call on CFS to do the responsible thing and reconsider their decision.’

Mike Fairbairn, CFS Director of Risk, commented:

'Throughout this process the interests of our customers and members has continued to be our main priority. We have explored with all the respective Law Societies a number of self-insurance routes linked to their own existing compensation schemes. We have studied these options, with our own expert legal opinion, and we believe that Scotland may, pending further discussions, provide the appropriate levels of reassurance we require. The Law Society of Northern Ireland is considering its requirements to determine what reassurances it can provide in the circumstances. This has led us to extend their deadline to 21 October. Unfortunately we do not believe from the conversations that have taken place with the Law Society representing England and Wales that such reassurances will be forthcoming. We are, in effect, being asked to assume risks in relation to sole practitioner fraud that should properly lie with the profession itself.

We fully understand the disappointment this will cause amongst the English and Welsh law society and their sole practitioner members, but our duty rests clearly with our members and it is with their interests in mind, that this decision has been taken.'