LAW SOCIETY AGM AND PROPOSED NEW ACCOUNTS RULES
Your Council, on 9th April 2009, convened its penultimate meeting prior to the Law Society AGM of 28th May 2009 as the last occasion on which it would be practicable to take any action regarding proxies, motions, negatives etc., that might be required at that, latter meeting.
The coast seemed clear and the only issue in hand was the action taken by Abbey to remove solicitors from their panel for mortgage transactions and an appropriate motion of condemnation was duly drawn up and signed by the appropriate number of members for submission to the Law Society. It was agreed that, if any further matters subsequently arose for consideration then it would hardly be practicable to take the necessary action between 7th May, your Council’s ultimate meeting before the AGM, and 28th May, the date of the AGM. However, at about the time of Council’s meeting on 7th May, we received notice of the Agenda for the AGM and found that this included a highly controversial set of Accounts Rules, The (draft) Solicitors (Scotland) Accounts etc., (Amendment) Rules, 2009. Most members had not had the opportunity of perusing these rules prior to discussion on 7th May and the first and perhaps most pertinent objection to these rules arose from that very circumstance. If the Law Society AGM is in fact a meeting of the members at which decisions have to be taken, it seems that reasonable notice has to be given to members of matters arising. The legal minimum of fourteen days notice may be sufficient in respect of routine items on the agenda but it hardly seems to be sufficient for the introduction of five sheets containing eight new Rules, the ramifications of some of which would require examination and consideration of previous accounts. For that reason alone, Council may well have been persuaded to provide the membership with an option of accepting or rejecting the draft Rules. There was simply no time for ingathering views for discussion or debate before the AGM. However, consideration of the content of the rules confirmed that policy. Without any previous notice or consultation, and for no reasons known to your Society and without any known pressure from any external sources, the Law Society’s executive had decided to change Rule 11(2) of the principal rules which, from time in memorial, had required solicitors to account for interest on sums exceeding £500 which were likely to be held for more than two months and replaced this with a rule that solicitors had to account for interest on all sums held in excess of £500. Such a requirement appeared to be not only pointless but damagingly expensive in respect of sums in excess of £500 held for minimal periods such as, for example, by conveyancing solicitors, when interest rates are virtually nil and sums recovered are likely to be measured in pence rather in pounds. Even in the better times, the interest earned on £500 over two months is unlikely to exceed £10 and may well, in any case, be excluded by a reasonable de minimis interpretation. Some members were concerned also by the amendment to Rule 11a, to the effect that a solicitor shall return money held for or on account of a client promptly as soon as there is no longer any proper reason to retain that money. While this seems to be a simple enough proposition, members are concerned as to where this rule has come from and what particular problems it seeks to resolve and why this should appear as an accounting rule. There may be very many reasons why solicitors hold money for clients and, indeed, for other persons and there may be perfectly honourable disputes as to why and where that money ought to be held. Members found on the wrong side of such an argument should not run the risk of breach of the accounting rules. The vagueness and lack of definition in new draft Rule 19 gave rise to concern with its repeated references to the conduct of business in such a manner as may put the interest of the public or the interests of the profession at risk. Concerns from the membership were reflected in some of the letters which we received:-
“They seem ridiculous insofar as not only will domestic conveyancers have unnecessary additional unpaid work but our fees for our accountancy services will probably increase”
“I have had a word with my cashier. He has pointed out that the total amount of interest generated in my firm’s client account in the final quarter of our last financial year ended 31st March, 2009 was just slightly in excess of £100. This is interest generated over hundreds of (debt recovery) transactions. In the circumstances, my cashier is absolutely horrified at the thought of having to calculate hundreds of nominal amounts of interest and the time that this would take”
“I agree with your comments about the unnecessary restrictive and punitive Accounts Rules changes”
“It would appear to be that the people who draft these Rules have never worked in private practice?”
“Having read the proposed Accounts Rules, I am firmly of the opinion that it is unduly burdensome upon the profession and to no-one’s benefit. Especially in relation to small balances, there ought to be the ability to write these off if the costs of making contact with individuals is greater than the funds held”
“The £500 sum in the draft Accounts Rules, from memory, seems to have been with us for ever. Is there not a case for this being substantially increased within the context of the present Rules rather than removed altogether?”
“My biggest objection to the draft Accounts Rules is the requirement that the Society can demand I produce all my books and records to a location of their choosing which would be an unwarranted and unreasonable imposition. Sometimes it seems to me that the Rules are formulated by the Law Society to try to make life as difficult as possible!”
Our circulation for proxies met with a prompt and positive response so that within a few days the country was awash with these proxies. This very soon became public knowledge and the new Accounts Rules were duly withdrawn so that the membership of the Society and, indeed, the profession at large, shall now have the opportunity to consider and reflect upon these Rules and to make such representations as may enable the Law Society to bring out new rules which satisfy both the necessary interests of the public and the concerns of practitioners. One downside of these events has been the depreciation of the limited funds possessed by your Society along with the exhaustion of the time and energy of those few practitioners who devote their energies to the activities of your Society. We have already observed that non members benefit from these activities as well as members and each and every individual practising solicitor in Scotland who is not already a member of the Society is urged to consider that position and to contact the Society via the website at www.slas.co.uk where a membership application form can be downloaded, printed, completed, signed and sent to our secretary with an appropriate remittance.
It is to be hoped in particular that this will not be seen as a conflict between our own Society and the Law Society but rather as a perfect balancing of the regulatory and representative functions of our mutual profession and it is to be hoped that the strongest supporters of our own Society are equally strong supporters of the Law Society. For one thing, the constitution of our Law Society may well enable that Society’s Council, with the support of the Lord President, to proceed with the imposition of Accounts Rules, in the face of however many proxies emerge from the membership and there is perhaps room for acclamation and even gratitude that the Law Society should now withdraw its proposals pending further consideration. The profession needs both of these institutions and each of our institutions needs the support of the membership. Those who are in any doubt about that conclusion might spend a little time considering the alternatives and how the profession might otherwise be regulated and represented if certain interests from outwith the profession had their way.
Members are invited to submit their views upon these issues in order to assist Council’s determination of policy.