Compensation paid out to clients who suffer at the hands of solicitors plummeted during the past year, the Solicitors Regulation Authority revealed today.
In the year to 31 October 2016, grants of £10.3m were made to clients whose money had been misappropriated by their solicitor. During the same period up to October 2015, the total grants were £17.9m.
The fund, managed by the Solicitors Regulation Authority, received 1,504 claims in 2016 with an average value of £106,000. In 2015, 1,174 claims had an average value of £126,000.
By the end of last year the SRA had almost 400 claims still open, valued at £42.1m, compared with 292 claims still open in 2015 at a total value of £36.8m.
The SRA said the majority of payouts from the fund were linked to interventions, when the regulator takes possession of a law firm’s files and client monies to protect clients’ interests.
In the past year the top two reasons for compensating consumers were replacing misappropriated inheritance (£4m) and replacing stolen funds that were intended for house deposits (£1m).
It was agreed last year that solicitors’ contributions to the fund would remain unchanged: individuals pay £32 a year and firms £548. The total budgeted contribution for the 2016/17 practising year was £8.5m.
Investment income increased by £228,000 to £339,000 in 2016, due to an investment in longer-term cash deposits which started in 2015 and had matured part way through the year.
The decrease in payouts created a £2.2m surplus for the year, compared with a deficit of £11.5m recorded in 2015.
The falling cost of administering the fund also contributed to this turnaround; total direct costs decreased from £8.1m to £6.8m.
Paul Philip, chief executive of the SRA, said: ‘The compensation fund is there to meet real hardship, providing valuable protection for the public when a solicitor is dishonest or does not properly account for clients’ money and there is no other means of redress. We monitor the market closely so that we can be confident that the fund can meet the demands made upon it.’
Commenting on the figures, Law Society president Robert Bourns said: ‘The vast majority of solicitors work to exceptionally high ethical and professional standards. Solicitors pay for the compensation fund so that ensures clients are compensated in the rare instances that someone falls short of our exacting standards. We hope that the near 50% drop in demand for the fund over the last year continues.’