BSB expect to be able to licence ABSs in April 2017

The Bar Standards Board expects to begin licensing alternative business structures imminently, saying long-awaited approval could be granted in the next few weeks.

In its business plan for 2017/2018 – due to be published this week – the regulator will state: ‘We expect to be able to licence ABSs that are jointly owned and managed by both lawyers and non-lawyers in April 2017.’

The BSB is awaiting final parliamentary sign off under the Legal Services Act and the Gazette understands this is imminent.

However, the regulator has struggled to meet its predictions before. In March last year, the Gazette reported that the BSB expected to be licensing ABSs in October that year. It had previously predicted dates as early as 2014.

Also revealed in the business plan is a slight reduction in the BSB’s 2017/2018 budget. For 2017/2018 the budget is £7.8m – down from £8.04m in 2016/17.

The regulator attributed the fall to an expected drop in income from BCAT and BPTC training courses on the assumption that a new training regime, approved last week, will lead to students deferring enrolment.

In addition, the BSB said it is seeking approval under Section 69 of the Legal Services Act that would allow it to intervene into legal practices.

The BSB said: ‘We are also seeking additional powers in relation to those we regulate already. If approved the order will grant us new powers to intervene into legal practices where it is necessary for us to do so in order to protect clients.’

However, it said this would be a ‘rare occurrence’ and used as a ‘last resort’.

The regulator will also seek to warn the public of the differences between barristers and paid McKenzie friends – and to work closely with solicitors on the issue. ‘We will seek to encourage the profession to cooperate more closely with solicitors and other legal professionals where that may offer advantages for the public,’ the business plan states.

SQM v Lexcel Survey

 SQM v Lexcel Survey


LSB to have new chair

Exclusive: LSB to have new chair after Pitt decides against applying for reappointment

15 March 2017

Pitt: 70 days’ work for the LSB a year

The Legal Services Board (LSB) is to have a new chair in the coming months, after incumbent Sir Michael Pitt took himself out of the running for a second three-year term, Legal Futures can reveal.

When Sir Michael’s predecessor, David Edmonds, was appointed for a second term, it was done without the position being advertised, but the Ministry of Justice (MoJ) has this time decided to hold an open competition.

Sir Michael’s term comes to an end on 31 April 2017, and the LSB has confirmed to us that he has decided not to apply for reappointment.

The process will be conducted under the new Cabinet Office governance code on public appointments and the main board of the LSB was told recently that an appointment will not be made until late June/early July.

As a result, the MoJ appears to have breached the code. This says that departments should build sufficient time into their planning for ministers to decide against making a reappointment or extension and holding a process to appoint a successor.

It adds: “There is no automatic presumption of reappointment; each case should be considered on its own merits, taking in to account a number of factors including, but not restricted to, the diversity of the current board and its balance of skills and experience.”

No reappointment or extension can be made without a satisfactory performance appraisal.

The MoJ did not say why it has decided on an open competition rather than reappointment. A spokesman said: “The process of appointing a new chair to the Legal Services Board is underway. The post will be advertised this month and the government encourages applications from those keen to ensure greater diversity in the legal profession.”

Sir Michael receives a non-pensionable remuneration of £63,000 per annum for a commitment of at least 70 days a year.

He has cut a far less controversial figure in his tenure than Mr Edmonds, but effectively came to the same conclusion as his predecessor that radical reform of legal regulation was needed, with publication last year of the LSB’s “vision for legislative reform of the regulatory framework”.

The Compliance Office

Audit Compliance Ltd are now resellers of The Compliance Office which is an online database customised to allow for user friendly recording, reporting and automated email chasing in the context of risk, CPD’s and compliance logs maintained by Solicitors’ firms;

The Compliance Office allows users to keep a record and monitor specific events in the context of regulatory risk including:

  • complaints;
  • undertakings;
  • SRA rule breaches;
  • CPD activity;
  • file reviews;
  • negligence claims;
  • high-risk cases;
  • key dates (e.g. limitation dates)
  • gifts and events;

The CPD functionality includes tools which help solicitors comply with the Solicitors Regulation Authority’s Continuing Competence regime.

By default staff chasing by email is automated in terms of both creating a CPD plan towards the start of the practising year and making the internal CPD declaration also towards the end of it;

  • Whilst some firms choose to keep all data entry going through a single resource in the business the application is designed to ease that administrative burden by allowing registered users to upload data to the registers more simply and robustly than would be the case with a centrally saved spreadsheet;
  • if firms (the Customers) wish to roll out the use of the system throughout the firm however then there are by default three user levels:
  • ‘general users’ (typically fee earners) – by default users can add to the complaints, undertakings, rule breaches, negligence claims, key dates, file reviews, high-risk matters, gifts and entertainment, experts / counsel and legal aid referral logs only.
  • The other logs are reserved to compliance managers and system administrators who are able to update their own entries as regards complaints, undertakings, key dates, high-risk matters and CPD. This is because typically we find that these are the areas where the matter holder is best placed;
  •  ‘compliance managers’ (typically COLPs, COFAs, MLRO, Senior Partners, Information Officers etc) – those with a need to monitor the compliance data are able to be given a compliance manager role within the system. This allows them to review and amend much of the data held on the system (see ‘administrator access’ below for the only exceptions to this);
  • ‘administrator’ – these individuals have all of the rights of a general user and a compliance manager but in addition can add users to the system, alter the user status (i.e. the rights) of an individual and remove individuals from the system. It is recommended that within each law firm there is only one administrator;
  • the system sends out email notifications to matter holder supervisors when new entries are made to certain higher risk registers, namely: complaints, rule breaches, negligence claims, high-risk matters, key dates falling within the next 40 days and gifts and entertainment. Similarly, emails are sent to matter holders and their supervisors where key dates which are due to expire in the next 5 weeks or undertakings due to expire in the next 40 days. If you would like these notifications to also go to other individuals such as the COLP or COFA etc then such individuals need to be entered onto the system as additional ‘escalation contacts’
  • Please note that in addition supervisors are emailed chasers when file review forms are out of date and by default such emails would be copied to the Customer’s system administrator.
  • Users ACL Price List excl VAT Price excl VAT
     The Compliance Office Annual Price Per Month
    Sole Practitioner £900.00 £75.00
    2 to 10 £1,495.00 £125.00
    11 to 25 £1,595.00 £145.00
    26 to 50 £1,795.00 £160.00
    51 + £1,995.00 £170.00

Dreamvar (UK) Ltd v Mishcon de Reya

I think that it is fair to say that many conveyancers have been shocked by the decision in Dreamvar (UK) Ltd v Mishcon de Reya (see Today’s Conveyancer January 30th 2017). But it is consistent with previous court decisions and follows basic principles. The buyer’s solicitors were held liable to a buyer client for breach of trust in paying the purchase price over to solicitors acting for a seller who was not the owner of the property but a fraudster.

But it is not new law to hold that a buyer’s conveyancer holds the purchase money on trust; it is not the conveyancer’s money after all. It is not new law to say that the terms of that trust are that it can only be used for the purchase of the property; why else was it given to the conveyancers other than to fund the purchase? It is not new law to hold that if a trustee uses trust funds for an unauthorised purpose, that trustee is liable for the loss irrespective of fault.

But there is protection; the Trustee Act 1925, section 61, states: If it appears to the court that a trustee, … is or may be personally liable for any breach of trust, … but has acted honestly and reasonably, and ought fairly to be excused for the breach of trust …, then the court may relieve him either wholly or partly from personal liability for the same.

Note the three conditions for relief. Yes, the trustee must have acted honestly and reasonably, but that is not enough; it is also necessary to show that he/she ‘ought fairly to be excused.’ That was the issue in this case.

To quote the Judge:

… it is common ground that it is insured for events such as this, and that its insurance cover is sufficient to cover in full the loss suffered, should it not be excused from liability. In terms of balancing the relative effects or consequences of the breach of trust, it is apparent that MdR (with or without insurance) is far better able to meet or absorb it than Dreamvar. While, as I have held, it was not unreasonable for MdR not to have advised Dreamvar about the risk of fraud, or to have sought greater protection for Dreamvar against that risk (such as further undertakings), it is also not irrelevant that MdR was necessarily far better placed to consider, and as far as possible achieve (a matter not in the event tested), greater protection for Dreamvar against the risk which in fact occurred….. 

For these reasons, I conclude that MdR ought not fairly to be excused for the breach of trust 

This has been the most controversial aspect of the case – the conveyancer is insured, therefore they should carry the can.

But the question has to be asked, who should fairly bear the loss? How would YOU have decided that very difficult question? In most cases there are four innocent parties: the real owner of the property; the seller’s conveyancers; the buyer’s conveyancers; the buyer himself/herself (and sometimes the buyer’s lender as well). Which of these innocents should carry the loss?

Do we wish to accept the view that it should be the buyer personally who accepts the risk? If not the buyer, it either has to be the buyer’s or the seller’s conveyancers. But in the case, all claims against the seller’s solicitors failed.

Note that the judge held that it was not unreasonable for Mishcon’s not to ask for confirmation from the seller’s solicitors as to the identity of their client but should we all, when acting for a buyer, start asking for confirmation that the person purporting to sell a property really is the seller?

But if you were so asked, what would your reply be? If you do so certify then you will be the one that foots the bill if it all goes wrong. And of course, we all act for both buyers and sellers anyway.

Insurance against fraud is also available to buyers. One international title insurer has told me that they could sell an insurance policy to protect a buyer against fraud for about £100 plus tax. Not a lot for a client to pay for freedom from worry – but we all know clients are reluctant to buy any kind of policy. But we could we limit our retainer to disclaim liability for fraud to encourage use of the policy. But unless recommended by the Law Society and the Council for Licensed Conveyancers, it would be commercially difficult.

But unless we start using dedicated policies like this it seems likely that either seller or buyer’s conveyancers will continue to bear the risk of fraud.

As to which, I can do no better than set out the view of another judge. In Patel v Freddy’s Limited [2017] EWHC 73 (Ch ) Tribunal Judge Elizabeth Cooke, sitting as a Deputy High Court Judge set out her view of the position with regard to fraudsters. Her view was:

… it is the task of the vendor’s solicitor in a conveyancing transaction to check the identity of his or her client, establishing not only that the vendor’s name is what the vendor says it is but also that the vendor really is the owner of the property. So it was for Mr Cuthbert first to carry out the “Know Your Client” procedure required by the money-laundering legislation; hence the obtaining of the passport and a utility bill to ascertain that this client really was an Ashok Patel who lived in Barnet. But it was also for Mr Cuthbert to ascertain that this was the Ashok Patel who was the registered proprietor of Sai Villa. …The important point is that this is the vendor’s solicitor’s duty, because he is the one with access to the client and to his client’s documents… but it is not for the purchaser’s solicitor to duplicate the actual checking of the vendor’s identity, nor to check that the vendor’s solicitor has done so.

In the writer’s opinion, there is much force in such views. Note that both judges state that there is no obligation on a buyer’s conveyancer to check that the seller’s conveyancer has carried out such steps.

But we are badly in need of advice from the Law Society with regard to all of this. Time to stand up Law Society and say something.