Reform the Solicitors Compensation Fund, says lawyer
SRA acknowledges further review of system needed to better serve the public
The Solicitors Compensation Fund (SCF) must do more to help victims of dishonest solicitors recover losses, a solicitor has argued.
Chris Bishop, managing partner at Manchester-based law firm Slater Heelis, has criticised the current system for failing consumers and called for a new approach to the SCF to maintain public trust in the profession.
'In a nutshell, victims get redress for an honest mistake but may be worse off if a solicitor is dishonest,' said Bishop. 'More effort must be put into educating the public about the SCF as an option for clients who have concerns about solicitor malpractice.'
Bishop argued that either the timeline to lodge an application with the SCF needs to be extended beyond the current 12-month timeframe, or alternatively the fund should 'exercise discretion in a reasonable manner because we all know that cases with insurers can drag on for years'.
Bishop is currently acting for three women whose homes were remortgaged for £80,000, £94,000, and £135,000 outside instructions in October 2009 by a sole practitioner conveyancer, subsequently struck off and without assets.
According to Slater Heelis, which began taking instructions from the clients in 2011, the property investment firm crashed, and in 2014, after the solicitor was jailed for dishonesty for money laundering in an unrelated matter in 2013, professional indemnity insurance underwriters refused to pay out.
After the insurer's decision, the three women consulted the SCF, which rejected their grant applications as their claims had been lodged long after the prescribed 12-month deadline. The decision is being appealed.
Slater Heelis claims its clients reported the solicitor to the Solicitors Regulation Authority (SRA) and Legal Complaints Service on 18 January 2010, three months after the problems came to light, but were not made aware of the SCF's existence by the regulator.
Bishop warned that the case could lead to solicitors both lodging a civil claim with the insurer and an application with the SCF simultaneously.
'This could flood the system yet the SCF would simply place investigations on hold pending the outcome of the civil case.'
Lynn Halfpenny, 61, lost £80,000 because of the fraudulent solicitor's actions.
'I always believed that if a solicitor did something wrong then somehow my rights and my money would be protected as a result of the highly regulated environment the profession operates under,' she said.
'I've lost my life savings at a time when I should be retiring. I'm not alone. There are other people in the same boat as me who have lost all the equity in their home as a result of this solicitor's actions,' she continued.
'I suspect this is just the tip of the iceberg. When a solicitor has let you down, the insurance company deploys a loophole so it need not indemnify, and if the SCF refuses to help, what chance has the average person got? Who do they turn to?'
In response, a spokesperson for the SRA said: 'The vast majority of claims that fall under the compensation fund are as a result of interventions. When we close down a firm to protect clients' interests, we are proactive in letting all those affected know of the process for claiming.'
The SRA said it was working with the Legal Ombudsman and Citizens Advice to ensure there was 'clarity around the process' for making a claim but acknowledged that more work needed to be done.
'We are planning to improve our application forms to speed up processing and support us to help people more quickly. Yet we know there is still more to do,' the regulator continued.
'As part of our Looking to the Future consultation, we are looking into how we can make sure consumers have the right information easily available on the whole package of protections available to them.'
Under the scheme's rules, claimants only have 12 months from when they first knew of the loss - or likelihood of loss - to submit their application to the SCF but the SRA may extend this period in certain circumstances.
The regulator said it only needed 'notice that a claim is coming' within the 12-month period and did not require full details at that time.
'We can be flexible in our approach if there is a good reason why an individual did not let us know within 12 months about a potential compensation claim,' said the spokesperson.
'Next year, we plan to review our approach to how we manage the compensation fund. We will be interested to hear all views on how we can improve our approach, so that we can make sure we are running it as effectively as possible in the public interest.'