Hudson: give law firms option of ditching client account

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19 November 2012


Hudson: Bar scheme has “much to admire”

The Law Society is to investigate giving solicitors the choice of not having a client account as a way to reduce the cost of regulation, it has emerged.

Speaking at the Solicitors Association of Higher Court Advocates’ annual conference on Saturday, Law Society chief executive Des Hudson said the “cost and burden of regulation will have to fall” to enable solicitors to compete.

“Why did we develop client account?” he asked. “In the past client account was a phenomenally important factor in the national and international success of solicitors as men of affairs. Their ability to deal with transactions because of client account was very, very significant.

“But was that also a feature of the absence of sophisticated and economically available banking systems? If we now have effective banking systems – and I think the rise in the non-banking sector’s provision of banking systems is very interesting – then do we still need client account?”

While “giving us a choice around the need for client account is very important”, Mr Hudson said that at the moment there do not appear to be any practical alternatives to it in residential conveyancing. The society is to research the issue in the coming year.

The Bar Council is piloting a third-party escrow account which from next year should allow barristers to deal with client money. Mr Hudson said there was “much to admire in [this] client account ‘lite’”, but added: “I’m not sure it’s as simple as they think.”

The role of client account, and particularly client account interest, has been a recurring theme in recent years. A decade ago Mr Hudson’s predecessor, Janet Paraskeva, floated the idea of using the interest to pay for the Solicitors Compensation Fund, while more recently the government looked at – but ultimately rejected – using interest to offset the cost of legal aid. Instead it encouraged solicitors to use interest to fund pro bono and charitable work, which some City law firms already do.

In 2006 the then chairman of the Solicitors Regulation Authority, Peter Williamson, suggested that, “in this day and age with the modern banking techniques we have”, there was a decreasing need for client accounts to exist.

Highlighting other competition issues, Mr Hudson revealed that recent Law Society research showed that 10% of law firms do not have a website, while he warned barristers conducting direct access work that “solicitors’ firms are going to think twice about instructing” them.

However, both he and former Bar Council chairman Nick Green agreed that the next round of criminal legal aid contracting, and likely introduction of ‘one case, one fee’, is likely to lead to closer working between solicitors and barristers.

 

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