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Professional – update

Financial news across both spectrums of the profession seems grim. Manchester PI firm Carter Law Solicitors collapsed in December 2016, with debts of £3m (barristers and medical reporting agencies are among the major creditors). Interestingly, one of the former directors now owns the successor practice – with the value of the work in progress at the previous firm being assessed at a mere £1. [2017] LSG 23 January 1. Plus, of course, we have continuing bad news from Slater Gordon; while mega firm King & Wood Mallesons (which merged with SJ Berwin three years ago) has had its European branch go bust. [2017] LSG 23 January 6.

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Advice privilege – the ‘client’

Legal advice privilege protects lawyer/client communications that were made for the purpose of giving or obtaining legal advice.

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SDT – standard of proof?

The SDT has traditionally applied a criminal standard of proof (beyond reasonable doubt) when exercising its regulatory and disciplinary functions. However, the more senior SRA (under which it operates) only applies the civil standard (balance of probabilities). Needless to say, many commentators have called for a change, arguing the lower civil standard should apply to the SDT (on the basis that these measures are intended to protect the public).

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SDT – fining guidelines

The Solicitors Disciplinary Tribunal has for the first time published fining bands guidance, along with commentary on the more detailed mitigating factors.

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Professional – update

The merger of CMS, Nabarro, and Olswang is going ahead – it will create a firm with combined fees of £1bn [2016] LSG 10 October 4. At the other end of the scale, Prolegal, a ‘new breed’ of PI firm has gone into administration [2016] LSG 10 October 2. There are concerns that holiday sickness compensation is becoming a new hunting ground for claims management companies, given the marked increase in the number of gastric illness claims, many of which are unsubstantiated. One law firm involved in this area says on its website that average compensation for mild food poisoning ranges from £700 – £3,000, and claimants could receive anything from £7,000 to £40,000 if the food poisoning is severe [2016] LSG 31 October 3.

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Money laundering – 4MLD

The Fourth Money Laundering Directive (4MLD) was due to be implemented by June 2017. However, the EC has now brought the deadline forward to 1 January 2017. Many governments (including the UK) have said that this timetable simply cannot be met.

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Accounts – accountant’s report

Previously, the Accounts Rules were unclear as to whether a solicitor who held little client money would need to obtain an accountant’s report. The guidance was that a waiver could be obtained if there were only a small number of client money transactions, or if a small amount of client money was held. But, there was no guidance on what counted as ‘small’. This meant each application had to reviewed on an individual basis.

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Partnership – forfeit profit share?

A partner who is in breach of fiduciary duties may forfeit their profit share (as well as having to pay compensatory damages). Similar principles apply to an LLP member. This was confirmed in a recent case where the compensatory damages were £1.5m, but the loss of profit share amounted to £10m.

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Social media – downside

Marketers are always exalting law firms to embrace social media to spread the firm’s brand. As a counter-balance it should not be forgotten that badly judged postings can virtually destroy a brand. For instance, Milton Keynes firm Baker Small specialises in representing local authorities defending claims brought by parents of children with special educational needs. The law firm posted several tweets in which it gloated about defeating some of those claims, but the language used was at best insensitive, and at worst deeply offensive. The end result was extensive adverse publicity (in particular, by social media), with several LAs then deciding to no longer instruct the firm – resulting in it losing over £1m-worth of business. In practical terms, the firm’s brand within that sector has been all but destroyed by its stupid use of social media. [2016] LSG 11 July 19.
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Accounts – interest policy

’Interest paid must be a fair and reasonable sum calculated over the whole period for which the money is held’ (r23.1 Accounts Rules 2011).

All firms should have an ‘interest policy’. While there is no definition of ‘fair and reasonable’, the guidance notes to r23.1 give examples of the factors that will have to be considered when deciding on an interest policy. The amount paid as interest need not necessarily reflect the highest rate of interest obtainable but it is unlikely to be the lowest. Factors to be taken into account will include the sum held; the length of time; the need for instant access; current rates of interest; and the practice of the bank where the account is kept. The end result is that the practice should set an interest rate which incorporates all of these factors, and that should be reviewed on a regular basis to ensure that it is still appropriate.

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