The number of law firms shut down by the Solicitors Regulation Authority (SRA) fell to a 10-year low in 2018, but payouts to victims of dishonest solicitors have increased, new figures have shown.
The SRA’s 2017/18 annual report, published yesterday, also showed how the number of solicitors continued to increase, with the roll not far off from containing 200,000 names.
Only 33 firms were shut down in the year to 31 October 2018, down from 50 in the previous 12 months, and a post-financial crash high of 89 in 2008/09. Suspected dishonesty was a feature in 29 of the interventions.
But the report said: “We cannot yet say whether it is representative of a downward trend in the sector.”
The report highlighted the logistical challenge of interventions – the SRA collected 282,076 files from the firms it closed down during the year, and currently holds 400,000 boxes in storage at a cost of £1.3m.
It holds documents from the 1800s, 34,000 wills and last year even collected an artificial hip during an intervention.
The Compensation Fund makes payments – capped at £1m – to members of the public and small businesses to replace money taken or improperly used by their solicitor.
It only covers firms where all the partners are involved in the theft – because otherwise the loss is covered by the firm’s indemnity insurance – and so generally only supports clients of sole practitioners or very small partnerships.
In 2017/18, the SRA paid out on 1,553 claims worth a total of £18.1m, with the average value of a payment £11,500. This is the highest figure since 2013/14, when the fund paid out £23.6m.
Replacing people’s inheritance was the main drain on the fund, leading to £5.3m in payments, followed by replacing £3.7m in funds that were intended to pay for people’s property deposits.
The report said the largest single payment was for just over £820,000 after a shortfall in the firm’s client account meant there was not enough to pay the beneficiary of an estate what they were owed. The money was later recovered it from the estate.
A partner at the firm was struck off as a result, and two others at the firm made subject to practising conditions.
Concerns over the increasing number and value of claims against the fund led last year to a substantial increase in contributions from practising solicitors and firms.
The report said the SRA received 11,508 reports concerning solicitors’ or firms’ behaviour, 911 of which (8%) led to an internal referral for possible disciplinary action or a referral to the Legal Ombudsman.
The single largest complaint (15%) was that a solicitor had taken unfair advantage of a third party, such as a litigant in person, followed by inadequate client care (9%).
Other figures of interest in the report were the slow but steady increase in the number of solicitor apprenticeships available – 133 in 2018, compared to 75 and 25 in the previous two years – and in the number of people who qualified with part of their training satisfied through ‘equivalent means’ (meeting SRA training requirements in another way): 85 in 2018, up from 70, 63 and 8 in the previous three years.
The number of practising solicitors at 31 October 2018 was 146,625, up 2.5% over the 12 months, and those on the roll reaching 192,121, up 3.7%.
The number of law firms stayed virtually static at 10,407, although the trend for firms to incorporate and leave partnership behind continued.