Usually, when talking about residual client ledger balance problems under the Solicitors Regulation Authority (SRA) Accounts Rules, we tend to think of residual balances as a collection of numerous client ledger accounts rather than in isolation.
A recent disciplinary outcome published by the SRA demonstrates what could be viewed as a new and tougher approach towards residual client ledger balances.
A solicitor, a member of a large regional firm of solicitors, had acted for a long-standing client on a matter. Acting on the client's instructions, agreed to send to the client a cheque made payable to a third party in the sum of £25,830.43 in October 2009. The cheque wasn't presented and after a period of time, the cheque was cancelled and reissued.
This was repeated a number of times between February 2010 and April 2013. None of the cheques were ever cashed. The solicitor left the firm in August 2016 at which time the balance remained on the relevant client ledger account.
The SRA considered that the solicitor was in breach of Rule 14.3 of the SRA Accounts Rules 2011 by virtue of having failed to return the money to the client between October 2012 and August 2016.
Additionally, the solicitor was found to be in breach of Rules 14.4 of the SRA Accounts Rules 2011 by failing to inform his client between October 2012 and February 2016 that the firm continued to hold money on behalf of the client. The solicitor was rebuked by the SRA and fined £1,000 as well as having to pay the SRA's costs of £600.
In reaching their decision, the SRA said that the conduct continued for an unreasonable period and persisted after the solicitor should have realised that it was improper. Further, the SRA found that the conduct was neither trivial nor justifiably inadvertent.
Conclusion
This highlights the importance of dealing with residual client ledger balances in a timely and appropriate manner. It will be of concern to many in practice, including Compliance Officers for Finance and Administration (COFA's), to note that a single instance of a breach of Rule 14.3 and/or Rule 14.4 of the SRA Accounts Rules 2011 is considered sufficiently serious by the SRA to warrant disciplinary action resulting in a fine of £1,000.