Legal Services Bill [HL]

House of Commons

Session 2006 - 07
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Other Bills before Parliament

Legal Services Bill [HL]

Legal Services Bill [HL]
Schedule 16 — The Law Society, solicitors, recognised bodies and foreign lawyers
Part 1 — The Solicitors Act 1974 (c. 47)
236

(i)
prescribe circumstances for the purposes of section 13A(2)
(circumstances in which conditions can be imposed during
period of practising certificate);
(j)
require solicitors who hold practising certificates to notify the
Society of such matters as may be prescribed, at such times,
5
or in such circumstances as may be prescribed.
(3C)
Regulations about the keeping of the register under section 10A may
(among other things)—
(a)
make provision about the form in which the register is to be
kept and the manner in which entries are to be made, altered
10
and removed;
(b)
require information of a specified kind to be included in
entries in the register;
(c)
require information (or information of a specified
description) on the register to be made available to the public;
15
(d)
specify the manner in which it is to be made so available and
require it to be made so available during office hours and
without charge.
(3D)
Regulations under this section may make provision for appeals to
the High Court against decisions made by the Society under the
20
regulations.
(3E)
In relation to an appeal under regulations made by virtue of
subsection (3D), the High Court may make such order as it thinks fit
as to payment of costs.
(3F)
The decision of the High Court on such an appeal shall be final.
25
(3G)
Regulations under this section may—
(a)
provide for a person to exercise a discretion in dealing with
any matter;
(b)
include incidental, supplementary and consequential
provision;
30
(c)
make transitory or transitional provision and savings;
(d)
make provision generally or only in relation to specified
cases or subject to specified exceptions;
(e)
make different provision for different cases.”
      (6)
Omit subsections (4) and (5).
35
28    (1)
Section 31 (rules as to professional practice, conduct and discipline) is
amended as follows.
      (2)
In subsection (1)—
(a)
for “Council may, if they think fit,” substitute “Society may”,
(b)
omit “, with the concurrence of the Master of the Rolls,”,
40
(c)
after “conduct” insert “, fitness to practise”,
(d)
for “Council” (in the second place) substitute “Society”, and
(e)
after “being” insert “, or have been,”.
      (3)
After that subsection insert—
“(1A)
The powers conferred on the Society by subsection (1) include power
45
to make, in relation to solicitors, provision of a kind which the

Legal Services Bill [HL]
Schedule 16 — The Law Society, solicitors, recognised bodies and foreign lawyers
Part 1 — The Solicitors Act 1974 (c. 47)
237

Society would be prohibited from making but for section 158(5)(c) of
the Legal Services Act 2007 (exception from prohibition on approved
regulators making provision for redress).”
      (4)
Omit subsections (3) and (4).
29    (1)
Section 32 (accounts rules and trust accounts rules) is amended as follows.
5
      (2)
In subsection (1)—
(a)
for “Council” (in the first place) substitute “Society”,
(b)
omit “, with the concurrence of the Master of the Rolls”,
(c)
for paragraphs (a) and (b) substitute—
“(a)
as to the opening and keeping by solicitors of
10
accounts at banks or with building societies for
money within subsection (1A);
(aa)
as to the operation by solicitors of accounts kept by
their clients or other persons at banks or with
building societies or other financial institutions;
15
(b)
as to the keeping by solicitors of accounts containing
information as to money received, held or paid by
them for or on account of their clients or other persons
(including money received, held or paid under a
trust); and”,
20
(d)
in paragraph (c) of that subsection—
(i)
for “Council” substitute “Society”,
(ii)
for “them” substitute “it”, and
(iii)
after “being” insert “, or have been,”, and
(e)
omit from “and the rules” to the end.
25
      (3)
After that subsection insert—
“(1A)
The money referred to in subsection (1) is money (including money
held on trust) which is received, held or dealt with for clients or other
persons.”
      (4)
Omit subsection (2).
30
      (5)
In subsection (4)—
(a)
for “Council” substitute “Society”, and
(b)
omit “or (2)”.
      (6)
In subsection (5) for “by virtue” to the end substitute “or a part of the rules.”
      (7)
Omit subsection (6).
35
30    (1)
Section 33 (interest on clients’ money) is amended as follows.
      (2)
For subsection (1) substitute—
“(1)
Rules under section 32 may require a solicitor to pay interest, or sums
in lieu of and equivalent to interest, to a client, any other person or
any trust, for whom the solicitor holds money.”
40
      (3)
In subsection (2), omit from “and the rules” to the end.

Legal Services Bill [HL]
Schedule 16 — The Law Society, solicitors, recognised bodies and foreign lawyers
Part 1 — The Solicitors Act 1974 (c. 47)
238

      (4)
For subsection (3) substitute—
“(3)
Except as provided by the rules, a solicitor is not liable to account to
any client, other person or trust for interest received by the solicitor
on money held at a bank or building society in an account which is
for money received or held for, or on account of—
5
(a)
the solicitor’s clients, other persons or trusts, generally, or
(b)
that client, person or trust, separately.”
      (5)
For subsection (4) substitute—
“(4)
Rules under section 32 may—
(a)
prescribe the circumstances in which a solicitor may make
10
arrangements to limit or exclude an obligation imposed on
the solicitor by rules made by virtue of this section, and
(b)
prescribe the requirements to be met by and in relation to
those arrangements.”
31    (1)
Section 33A (inspection of practice bank accounts etc) is amended as follows.
15
      (2)
In subsection (1)—
(a)
for “Council” (in each place) substitute “Society”, and
(b)
omit “, with the concurrence of the Master of the Rolls,”.
      (3)
In subsection (2) for “Council” substitute “Society”.
32    (1)
Section 34 (accountants’ reports) is amended as follows.
20
      (2)
For subsections (1) to (5A) substitute—
“(1)
The Society may make rules requiring solicitors to provide the
Society with reports signed by an accountant (in this section referred
to as an “accountant’s report”) at such times or in such circumstances
as may be prescribed by the rules.
25
(2)
The rules may specify requirements to be met by, or in relation to, an
accountant’s report (including requirements relating to the
accountant who signs the report).”
      (3)
In subsection (6) for “this section or of any rules made under it” substitute
“any rules made under this section”.
30
      (4)
Omit subsections (7) and (8).
      (5)
At the end insert—
“(9)
Where an accountant, during the course of preparing an
accountant’s report—
(a)
discovers evidence of fraud or theft in relation to money held
35
by a solicitor for a client or any other person (including
money held on trust) or money held in an account of a client
of a solicitor, or an account of another person, which is
operated by the solicitor, or
(b)
obtains information which the accountant has reasonable
40
cause to believe is likely to be of material significance in
determining whether a solicitor is a fit and proper person to
hold money for clients or other persons (including money

Legal Services Bill [HL]
Schedule 16 — The Law Society, solicitors, recognised bodies and foreign lawyers
Part 1 — The Solicitors Act 1974 (c. 47)
239

held on trust) or to operate an account of a client of the
solicitor or an account of another person,

the accountant must immediately give a report of the matter to the
Society.
(10)
No duty to which an accountant is subject is to be regarded as
5
contravened merely because of any information or opinion
contained in a report under subsection (9).”
33
For section 36 (compensation fund) substitute—
“36
Compensation grants
(1)
The Society may make rules concerning the grant of compensation
10
by the Society in respect of loss that a person has suffered, or is likely
to suffer, as a result of—
(a)
an act or omission of a solicitor or former solicitor;
(b)
an act or omission of an employee or former employee of a
solicitor or former solicitor;
15
(c)
the exercise by the Society of any of its powers under Part 2
of Schedule 1.
(2)
The rules may (among other things) make provision—
(a)
as to the circumstances in which such grants may and may
not be made;
20
(b)
as to the form and manner in which a compensation claim is
to be made;
(c)
as to the procedure for determining compensation claims;
(d)
for the making of grants in respect of a compensation claim
before it is finally determined;
25
(e)
for a grant to be made by way of loan in such circumstances
and on such terms as may be prescribed in, or determined in
accordance with, the rules;
(f)
for a grant to be made by way of making good a deficiency in
monies held in trust by the Society under paragraph 6 or 6A
30
of Schedule 1;
(g)
as to the minimum and maximum grants payable in respect
of a compensation claim (or a claim of a prescribed
description);
(h)
for the Society to be subrogated, to such extent as may be
35
prescribed, to any rights and remedies of a person to whom a
grant is made in relation to the loss in respect of which the
grant is made.
(3)
The circumstances which may be prescribed by virtue of subsection
(2)(a) include in particular—
40
(a)
the nature of the loss;
(b)
in a case within subsection (1)(a) or (b), the nature of the act
or omission.
(4)
For the purposes of subsection (2)(f), there is a deficiency if the
monies mentioned in that subsection are insufficient to satisfy the
45
claims of all persons with a beneficial interest in the monies.

Legal Services Bill [HL]
Schedule 16 — The Law Society, solicitors, recognised bodies and foreign lawyers
Part 1 — The Solicitors Act 1974 (c. 47)
240

(5)
The Society may prepare and publish guidance as to the criteria it
will apply in deciding whether to make a grant in respect of a
compensation claim, or any part of a compensation claim.
(6)
Where the Society decides—
(a)
not to make a grant in respect of a compensation claim or any
5
part of a compensation claim, or
(b)
to make a grant of less than the amount claimed,

it must give reasons for its decision.
(7)
Rules under subsection (1) which are not regulatory arrangements
within the meaning of the Legal Services Act 2007 are to be treated as
10
such arrangements for the purposes of that Act.
(8)
In this section—
“compensation claim” means a claim for the Society to make a
grant of the kind mentioned in subsection (1);
“prescribed” means prescribed in rules under subsection (1).
15
36A
Compensation funds
(1)
Compensation rules may require or authorise the Society to establish
or maintain a fund or funds (“compensation funds”) for the purpose
of making grants in respect of compensation claims.
(2)
Compensation rules may require solicitors, or solicitors of a
20
description prescribed in the rules, to make contributions to
compensation funds of such amounts, at such times and in such
circumstances, as may be prescribed in or determined in accordance
with the rules.
(3)
Any amount payable by virtue of such a requirement may be
25
recovered as a debt due to the Society.
(4)
Subsection (2) does not apply to a solicitor who is a Crown
Prosecutor.
(5)
The Society may invest any money which forms part of a
compensation fund in any investments in which trustees may invest
30
under the general power of investment in section 3 of the Trustee Act
2000 (as restricted by sections 4 and 5 of that Act).
(6)
The Society may insure with authorised insurers, in relation to
compensation funds, for such purposes and on such terms as it
considers appropriate.
35
(7)
The Society may, in such circumstances and subject to such
conditions as may be prescribed in or determined in accordance with
compensation rules—
(a)
borrow for the purposes of a compensation fund;
(b)
charge investments which form part of a compensation fund
40
as security for borrowing by the Society for the purposes of
that fund.
(8)
A compensation fund may be applied by the Society for the purposes
mentioned in subsection (9) (in addition to the making of grants in
respect of compensation claims).
45

Legal Services Bill [HL]
Schedule 16 — The Law Society, solicitors, recognised bodies and foreign lawyers
Part 1 — The Solicitors Act 1974 (c. 47)
241

(9)
The purposes are—
(a)
payment of premiums on insurance policies effected under
subsection (6);
(b)
repayment of money borrowed by the Society for the
purposes of the fund and payment of interest on any money
5
so borrowed;
(c)
payment of any other costs, charges or expenses incurred by
the Society in establishing, maintaining, protecting
administering or applying the fund;
(d)
payment of any costs, charges or expenses incurred by the
10
Society in exercising its powers under Part 2 of Schedule 1;
(e)
payment of any costs or damages incurred by the Society, its
employees or agents as a result of proceedings against it or
them for any act or omission of its or theirs in good faith and
in the exercise or purported exercise of such powers.
15
(10)
In this section—
“compensation claim” has the same meaning as in section 36;
“compensation fund” has the meaning given by subsection (1);
“compensation rules” means rules under section 36(1).”
34
In section 37 (professional indemnity)—
20
(a)
in subsection (1) for “Council, with the concurrence of the Master of
the Rolls,” substitute “Society”, and
(b)
in subsection (3)(h)—
(i)
for “Council” substitute “Society”,
(ii)
for “they consider” substitute “it considers”, and
25
(iii)
after “being” insert “, or have been,”.
35
Omit section 37A (redress for inadequate professional services).
36
Omit section 40 (solicitor not to commence or defend actions while in
prison).
37    (1)
Section 41 (employment by solicitor of person struck off or suspended) is
30
amended as follows.
      (2)
After subsection (1A) insert—
“(1B)
Where—
(a)
a solicitor (“the employed solicitor”) is employed by another
solicitor in accordance with a written permission granted
35
under this section, and
(b)
the employed solicitor is disqualified from practising as a
solicitor by reason of a fact mentioned in subsection (1)(b) or
(c),

section 20(1) does not apply in relation to anything done by the
40
employed solicitor in the course of that employment.”
      (3)
In subsection (3)—
(a)
for “Master of the Rolls who” substitute “High Court which”, and
(b)
in paragraph (b) for “he” substitute “it”.
      (4)
In subsection (4) for “shall” to the end substitute “may—
45
(a)
order that his name be struck off the roll,

Legal Services Bill [HL]
Schedule 16 — The Law Society, solicitors, recognised bodies and foreign lawyers
Part 1 — The Solicitors Act 1974 (c. 47)
242

(b)
order that he be suspended from practice for such period as
the Tribunal or court thinks fit, or
(c)
make such other order in the matter as it thinks fit.”
      (5)
After that subsection insert—
“(4A)
In relation to an appeal under subsection (3) the High Court may
5
make such order as it thinks fit as to payment of costs.
(4B)
The decision of the High Court on an appeal under subsection (3)
shall be final.”
      (6)
Omit subsection (5).
38    (1)
Section 43 (control of solicitors’ employees and consultants) is amended as
10
follows.
      (2)
For subsections (1), (1A) and (2) substitute—
“(1)
Where a person who is or was involved in a legal practice but is not
a solicitor—
(a)
has been convicted of a criminal offence which is such that in
15
the opinion of the Society it would be undesirable for the
person to be involved in a legal practice in one or more of the
ways mentioned in subsection (1A), or
(b)
has, in the opinion of the Society, occasioned or been a party
to, with or without the connivance of a solicitor, an act or
20
default in relation to a legal practice which involved conduct
on his part of such a nature that in the opinion of the Society
it would be undesirable for him to be involved in a legal
practice in one or more of the ways mentioned in subsection
(1A),
25

the Society may either make, or make an application to the Tribunal
for it to make, an order under subsection (2) with respect to that
person.
(1A)
A person is involved in a legal practice for the purposes of this
section if the person—
30
(a)
is employed or remunerated by a solicitor in connection with
the solicitor’s practice;
(b)
is undertaking work in the name of, or under the direction or
supervision of, a solicitor;
(c)
is employed or remunerated by a recognised body;
35
(d)
is employed or remunerated by a manager or employee of a
recognised body in connection with that body’s business;
(e)
is a manager of a recognised body;
(f)
has or intends to acquire an interest in such a body.
(2)
An order made by the Society or the Tribunal under this subsection
40
is an order which states one or more of the following—
(a)
that as from the specified date—
(i)
no solicitor shall employ or remunerate, in connection
with his practice as a solicitor, the person with respect
to whom the order is made,
45
(ii)
no recognised body shall employ or remunerate that
person, and