Long-outstanding client ledger balances
Regulation of Practice
The Regulation of Practice Committee, which monitors compliance with the Solicitors Accounts Regulations 2014, wishes to draw attention to the issue of long-outstanding balances on the client ledger. This is an issue that the Regulation of Practice Committee regularly encounters in the course of discharging its statutory duties. In general, long-outstanding client ledger balances relate to moneys to which the solicitor is beneficially entitled or moneys held for or on behalf of clients.
Under regulation 5 of the Solicitors Accounts Regulations, solicitors shall not hold moneys to which a solicitor is beneficially entitled in a client account for longer than three months. Accordingly, moneys held in the client account in respect of fees and disbursed outlays, moneys held in the client account in respect of completed matters that would be properly available to be applied in satisfaction of professional fees and outlays if the solicitor had furnished a bill of costs to the client, or moneys held in the client account in respect of a client matter to the extent that the solicitor is beneficially entitled to a share of those moneys, all have to be withdrawn from the client account within a period of three months.
The Regulation of Practice Committee has a concern that some solicitors leave moneys to which the solicitor is beneficially entitled in the client account for longer than the three months permitted by the regulations. This is a breach of the regulations. When such matters come to the attention of the Regulation of Practice Committee, solicitors are required to immediately withdraw these moneys from the client account. Significant breaches of the regulations can lead to a referral to the Solicitors Disciplinary Tribunal.
However, in addition to moneys to which the solicitor is beneficially entitled remaining in the client account, the existence of long-outstanding balances on the client ledger also gives rise to concern that solicitors are holding clients’ moneys in the client account in respect of uncompleted client matters. It is often the case that long-outstanding balances on the client ledger represent stamp duty, registration fees, counsel’s fees, miscellaneous undisbursed outlay, or moneys due directly to clients.
In probate matters, many of the balances on the client ledger relate to unpaid beneficiaries or unpaid capital acquisitions tax and capital gains taxes. In many cases, the existence of long-outstanding balances on the client ledger is indicative of solicitors not completing the work they have been engaged to do by their clients. This inevitably leads to complaints from clients. Delays in stamping deeds are of particular concern. Not only does the failure to stamp the deed on time harm the interests of consumers of legal services, but it can also increase the financial liabilities of the solicitor. The Regulation of Practice Committee can refer instances of long-outstanding balances to the Solicitors Disciplinary Tribunal on the grounds of misconduct disclosed by the accounting records.
Review client ledger balances
The Regulation of Practice Committee requires that solicitors should review the client ledger balances and long-outstanding balances should be identified, investigated and cleared as soon as possible. Thereafter, solicitors should put in place procedures for the regular review of client ledger balances with the objective of identifying, investigating, and clearing long-outstanding client ledger balances.