Law firms across England and Wales could be set for a £50 million cash boost if plans to refund contributions to the Solicitors Indemnity Fund (SIF) are approved this week.

The money represents the contributions made in 2001/2 and 2002/3, the fourth and fifth years of the planned seven-year collection of the £454 million shortfall in the SIF uncovered in 1997.



The SIF revealed a £54 million surplus last week (see [2005] Gazette, 17 February, 1). The shortfall was cleared far earlier than anticipated and the 2002/3 contribution was precautionary. With the benefit of hindsight, it has become clear that the 2001/2 contribution was also unnecessary. The last two years' contributions have been set at nil.



Though commonly referred to as a mutual, the SIF is a statutory fund, and so contributors do not have any legal entitlement to the surplus, which belongs to the Law Society. Nonetheless, a working party chaired by Deputy Vice-President Fiona Woolf will recommend to the Society's council this week that it vote to refund the contributions for those two years and that any balance should be released to Chancery Lane.


Refunds would go to firms, not individuals, although the details of how it would work are still to be decided. It is estimated that most firms that contributed in 2001/2 are still in existence, while others will have merged and should still be eligible.


SIF chairman Paul Marsh, who sat on the working party, said the profession should be proud of itself and the SIF for meeting their obligations to the public. Now this has been done, solicitors deserve to get any surplus back, he said.


Mr Marsh added that it had been 'extremely difficult' to know how best to refund the money. The recommendation combines 'logic, fairness and common sense', he argued.


A paper before the council says this is a 'sensible compromise'. The working party considered the argument that there should be no refund and the money be used, for example, to offset firms' indemnity insurance premiums or reduce the Continued on practising certificate fee.


However, it felt 'there are strong moral arguments for seeking to return the surplus to contributors where they can be identified with reasonable precision, and where the administrative costs and risks of doing so are not disproportionate'.