Payments from the compensation fund rose by 37% in value last year as dishonest solicitors cost the profession £10.3m in total. Accounts for the 2019/20 year ending 31 October 2020, released this week, show the fund received 1,120 claims (a fall of 21%) but faced higher-value claims than in previous years.
There remained 637 open claims by October 2020 (up from 536 a year before) with a total potential value of £84.6m. In 2020, grant recoveries from solicitors found to have been dishonest were £5.3m – a 40% decrease. Recoveries are often received months or even years after the initial grant has been paid to wronged clients, so may not relate to payments made in the same financial year.
Current assets in the fund fell overall by £6m, leaving £60.7m in reserve. The balance of the fund has been deliberately increased to allow the payment of high value, exceptional claims, and the majority of those are expected to be paid out in the current year.
The fund makes discretionary grants to people who have lost money or suffered hardship as a result of the dishonesty of a solicitor or law firm owner. The SRA, which published the accounts, said the pandemic has not yet had a significant impact.
The funding and burden of the fund has been a contentious issue in recent years. Contributions from solicitors and firms have risen in some years to ward off potential spikes in high-value claims. They currently stand at £50 for individuals and £950 for firms.
The SRA was forced to abandon plans for a £500,000 cap on single claims after it became clear the Legal Services Board, the oversight regulator, would not support the change.
The LSB did formally approve other less contentious reforms of the fund earlier this week, including a charities and trusts threshold which will stop those with more than £2m in assets from making claims. The SRA says that larger charities and trusts have strong governance, are likely to be regular users of legal services, make sophisticated purchasing decisions and understand the risks involved.
The new threshold will still allow 90% of charities to make a claim for a grant. The LSB had initially said there was insufficient evidence to support the proposal but has now backed it, saying that any potential risk of detriment to the charities is ‘outweighed by the need for the [fund] to provide consistent and fair outcomes which prioritises those that are most in need’.