Where credit's due

One of the most routine and innocuous acts a solicitor can undertake is to transfer payment for his or her fees from the client account to the office account. This is regulated by rules 19(2) and 22(3)(b) of the Solicitors Accounts Rules 1998, yet numerous solicitors get the process wrong, leading to serious consequences in terms of professional conduct.

Rule 22(3)(b) states that office money may only be withdrawn from a client account when it is properly required for payment of the solicitor's costs under rule 19(2) and (3).

Rule 19(2) states that a solicitor who properly requires payment of his or her fees from money held for the client or controlled trust in a client account must first give or send a bill of costs, or other written notification of the costs incurred, to the client or the paying party.

Avoiding problems

Difficulties often arise because solicitors misunderstand the rules (see table below).

In most cases, no bill is sent to the client prior to the transfer taking place, and there is often no justification to support the billing (i.e. work in progress '“ WIP).

Obvious as it may seem, a bill must be sent to the client. The rules require only that the bill is sent, not that its delivery be proved. Any form of sending is acceptable so: post, DX, email or fax will suffice for this purpose. Alternatively, rule (19(2)) speaks of the sending of 'other written notification of the costs incurred' which could amount to an estimate in one's terms of business or subsequently. However, if relying on this, bear in mind that a central register of such 'written notifications' will be required (rule 32(8)).

Is there any justification for the billing? Investigating officers are often concerned that solicitors may have engaged in 'mopping up' small, stale balances and the crucial point to establish is that there was unbilled WIP at the time the bill was sent.

The biggest danger in these situations is that the officers may form the impression that the approach to the suspect billing was dishonest which, if proved, may lead to being struck off.

A quick way of beginning to rebut suspicions of dishonesty is to repay the money wrongfully transferred. As soon as the problem is drawn to your attention, repay the sums in question to the client's account. Prompt remedy of the breach will gain much credit. This is also expressly approved under the rules (see rule 7). Promptly correcting means repayment within a maximum of 48 hours of the breach being drawn to your attention.

On the SRA's radar

The Forensic Investigation Unit (FIU) of the SRA make unannounced visits, or visits with only seven or 14 days' notice, to solicitors' offices, where they will spend days (sometimes visits will be interspersed by months of apparent inactivity) trawling through files and ledgers, checking, among other things, the level of compliance with the Solicitors Accounts Rules.

Such visits are typically initiated by a letter explaining the date of the intended visit and enclosing a very long schedule of information to be provided by the solicitor.

The first step in managing this process effectively is, of course, to be co-operative, but if some things are not immediately available, such as the bank mandate with authorised signatures, explain that the document or documents have been requested and will be provided as soon as possible. Provide the investigating officer with a copy of your letter requesting the documents in question.

The SRA never explains the reason for its visit because they do not wish suspect solicitors to hide evidence or exacerbate wrongful conduct.

The visit leads to an interview, akin to a police interview. So bear in mind that if questions are put, the answers to which are not immediately available, ask for more time. The officers are invariably helpful and will understand that points of detail from some time ago cannot always be remembered clearly.

If in doubt seek advice before the visit takes place.