§ Order for Second Reading read.
§ The Attorney-General (Sir Donald Somervell)
I beg to move, "That the Bill be now read a Second time."
I think it would be proper, before I go on to explain the Bill, if I reminded hon. Members how it comes about that I am moving a Bill which comes from another place and which was produced there on behalf of the Law Society, by a noble lord, as a Private Member's Bill. The House may remember that when it passed the original Resolution, under which only Government Bills are introduced and Private Members' time is taken, the Prime Minister was asked whether the bar was absolute, and whether there might not be exceptional cases in which legislation coming from another place in the form of a Private Member's Bill might not be given facilities if it was generally regarded as an acceptable and desirable Measure. The Prime Minister, on behalf of the 382 Government, then stated that the bar was not absolute, and that there might be circumstances which would lead the Government to give such a Bill facilities if they were satisfied that it was the general wish of the House that the Bill should reach the Statute Book and if they were satisfied further that it could reach the Statute Book as an agreed or, in effect, uncontroversial Measure. It is in pursuance of that general understanding that this Bill has been given facilities, and that my right hon. Friend the Prime Minister, in reply to my right hon. Friend the Member for Windsor (Sir A. Somerville), said a short time ago that the Government hoped it would be possible to provide facilities for the consideration of this Measure on the understanding that it would be treated as uncontroversial.
The circumstances which have led the Government to give facilities to the Bill arise in part from its history. Before the war, in the 1938–39 Session, a Bill was introduced, on behalf of the Law Society, in another place dealing with a number of matters, some of which are dealt with in the Clauses of this Bill, and that Bill, after its introduction, went before a Joint Committee of both Houses. The Joint Committee approved in substance the Clauses in the original Bill which were largely of a procedural nature, but, in full agreement with those who were representing the Law Society, suggested that the Law Society should submit to Parliament provisions for dealing with the matter of defalcations by solicitors, a matter which we all deplore —and none more than the solicitors' profession—but cases of which arise from time to time. In their report, the Joint Committee suggested that there should be a provision for an annual examination of accounts, and they suggested also—they thought it was perhaps outside their terms of reference—that the Law Society should consider a provision under which a fund could be set up and subscribed to, and out of which in proper cases certain payments might be made to those who had suffered as a result of defalcations by solicitors. The result was that the Bill as introduced was withdrawn, on the understanding that the Law Society would submit in the next Session of Parliament a Bill adopting the suggestions that had been put forward to deal with this matter, to which great importance is attached in the House as well as outside. Such a Bill 383 was introduced last Session, but owing to difficulties of Parliamentary time it never came before the House. The present Bill was passed in another place, and I am now moving its Second Reading here. The Bill contains three Clauses to which I shall refer briefly because I think they raise principles of importance in the light of what I have said, and it contains also the original procedural Clauses and certain other procedural Clauses which were not in the original Bill, but which I do not think raise any points of principle.
I think the House would like me to pay a tribute to the Law Society. The Joint Committee having made their recommendations, the Law Society, in spite of the disturbances caused to their work as to that of others by war conditions, interpreted the wishes of the House as meaning that they should go ahead and try to formulate provisions which could be put on the Statute Book during the war, if the House so agreed, to deal with this very important matter. I think they are entitled to our gratitude and the gratitude of the public for having gone ahead with the matter instead of, as possibly they might have done, pleading the inconveniences to their offices and businesses arising out of war conditions as an excuse for postponing the matter. It is true that, in the circumstances, I think it is impossible for one of the provisions to be put into effective operation during the war, but if the Bill is passed that provision will be on the Statute Book and will come into operation when times are more normal.
Hon. Members may have seen a Motion on the Order Paper, with the names of certain hon. Members attached to it, for the rejection of the Bill. Discussions have taken place between those who had their names to this Motion and the Law Society, and the reasons which lead some hon. Members to put their names to the Motion have been the subject of discussion. As a result, the Law Society have agreed to suggest to the House at a later stage certain Amendments to which I will refer in due course. I understand that, if the House agrees to those changes, the hon. Members who had their names to the Motion will be satisfied that the Bill should proceed as an uncontroversial Measure. The hon. Member for North Battersea (Mr. Douglas) still has his name 384 on the Order Paper, and no doubt he is-not completely satisfied, but I hope he will not carry his opposition so far as to make the Bill a controversial Measure, which would mean that the Bill would be lost altogether.
Clause I provides that there should be an annual. Certificate by an accountant to be presented by the solicitor at or about the time when he applies for and gets his practising certificate. That was, in effect, the suggestion made by the Joint Committee. It is, I think, a matter of very great importance. It has been pointed out, however, that in present conditions it would be impracticable to get the services of accountants to carry out these duties in cases where there has not been previously a regular survey of the accounts. I am told that solicitors who have had accountants for years, and who have had their accounts audited or examined in the ordinary way, are themselves finding difficulties in getting the necessary accountancy labour to carry out the work. Therefore, to put this extra work on accountants by bringing in a compulsory examination of the accounts of a large number of firms who have not previously had such examinations would be to introduce a procedure which would break down. It is proposed therefore at a later stage to introduce an Amendment postponing the operation of this Clause until after the war.
Clause 2 deals with the compensation fund. It provides for rules to be made under which a contribution not exceeding £5 would be made by solicitors towards setting up a fund, subject to various conditions which I need not go into in any detail. This will not be postponed beyond the period when the necessary rules can be made. When the preliminary work has been done, the provision will be brought into operation on a date which is to be fixed by the Lord Chancellor. It is right to point out that there are two Clauses, which I think were universally approved at a meeting of the Associated Provincial Law Society, which place two extra burdens on solicitors, I would point out also that at a meeting which was held in London and was attended by 700 members of the Law Society, there was a negligible number of dissenters.
It is necessary for me to say a word about Clause 3. This does not arise out of any recommendations of the Joint 385 Committee, although the principles which it embodies were referred to in the course of the proceedings and, I think, had the approval of the members of the Committee. It is a proposal under which membership of the Law Society should be compulsory. In the early days, say, 1oo years or more ago, the Law Society was a small body of the leading members, mostly in London, of the solicitor profession. There have been considerable changes since then. Its membership now numbers some 11,000—the total number of practising; solicitors is, I think, some 17,000. Although not all of the 11,000 are practising, the bulk of them are. The Law Society has to carry out many important statutory and other duties connected with the profession. It grants practising certificates, and it has a statutory responsibility for legal education and examination. It has a disciplinary committee, appointed by the Master of the Rolls, to which body members or ex-members of the Society are appointed.
Therefore, there are good grounds for saying that this body, which is now so largely representative and which is carrying out so many duties on behalf of the profession, should be entitled to say that those who practise must be members of it. The proposal was approved by a majority of the members of the Law Society, but it has been pointed out that they naturally would approve it, and that it would be wrong during the war to bring in this new principle, which was not in the original Bill and which, therefore, was not before the Committee, without giving all members of the profession an opportunity of expressing their opinion on it, and making it a condition that, say, two-thirds of all the solicitors, whether members of the Law Society or not, should express their approval of this Clause and the principles which it embodies before it comes into operation.
§ Rear-Admiral Beamish (Lewes)
Will that affect the large number of people, numbering between 6,000 and 7,000 who do not take out practising certificates, but who nevertheless are solicitors?
§ The Attorney-General
I was saying that it has been suggested that this Clause ought not to be brought into operation until those who are or are not members of the Law Society have had an opportunity of expressing their opinion on it.
§ Mr. Silverman (Nelson and Colne)
It applies, surely, to anyone who would be compelled to become a member of the Law Society, if the proposal were carried?
§ The Attorney-General
That point having been put before those responsible for the Bill, they thought there was substance in it, and they propose therefore to move an Amendment at a later stage, which, I hope, will commend itself to the House, that this Clause should not come into operation until approved by a two-thirds majority of all practising solicitors. That poll could not, of course, take place at the present time, but when times become normal, and when those who are at present out of the country have returned to their normal work, it will be possible to hold it.
That disposes of the important Clauses of the Bill. I might perhaps just refer to Clause 5, which is designed to assist in seeing that the accountant rules, which have been laid down with a view to minimising defalcations, are carried out. A solicitor must make a declaration that he has conformed to the rules. That brings the matter to his attention, because it has been said that not all solicitors realise the existence of these rules. Clause 18 gives the Law Society power to make rules for the keeping of a separate account of any money which a solicitor holds as a trustee in cases where he is either the sole trustee or trustee with a partner or clerk. There are one or two other matters which do not raise any point of principle upon which those responsible for this Measure may desire to put down Amendments on the Order Paper. I do not think, however, that they will raise any point of controversy. I hope, therefore, that this Bill, over which great trouble has been taken by those responsible for it, and which has been brought forward in order to carry out the wishes expressed in all quarters of the House, will receive the uncontroversial reception which it is necessary it should receive if it is, as I hope, to reach the Statute Book.
§ Major Milner
The House is, I am sure, indebted to the Attorney-General for the very lucid and interesting speech he has made in introducing the Bill now before 387 us. The speech, I imagine, is one of the few the Attorney-General has delivered without being previously prepared from a brief delivered by a solicitor. The matters to which this Bill refers have caused great concern to the Council of the Law Society, for whom I have the honour to speak, and on whose behalf I may, perhaps, thank the Attorney-General for the very proper tribute he has paid to them. These matters have also caused very great concern to other members of the profession. I imagine that no one realises more than they do the extent of the hardship and suffering which can be caused to wholly innocent people in cases of defalcation, and they also recognise the discredit which such conduct brings upon others in their profession. As the Chairman of the Select Committee said, the profession comprises a body of men of the highest character and probity who are proud of their membership of an ancient and honourable calling. That calling has played no small part in the preservation of our liberties in the past, in the development of our democratic Constitution and in the recognition of that rule of law which together with those other causes, we are at this very moment engaged in fighting to preserve and extend. This Bill is promoted by the Council of the Society, which, of course, under the Master of the Rolls, is the governing body of the profession. The intention of the Bill is, firstly, to endeavour to prevent defalcations occurring at all, secondly, to provide a means of making good, so far as is reasonably possible, any losses which, notwithstanding all that human ingenuity can do, may still come about, and, thirdly, to deal with various ancillary matters of a useful character involving, except perhaps in one or two instances which the Attorney-General has enumerated, no question of principle.
I should like to say a few words to put the problem in its proper perspective. The extent of the evil which the Bill seeks to mitigate should not be exaggerated in any way, and I am afraid that is very often the case. The Press invariably gives great prominence to cases of solicitors defaulting. I recollect one case to which in one newspaper publicity was given no fewer than 16 times. It was reported when the solicitor was found to be missing, when he was arrested, when he was brought up before the local court of summary jurisdiction, when the case 388 was adjourned, when it was finally heard, and the solicitor was committed to sessions or assizes, when the final trial took place, when the solicitor was eventually made bankrupt, when he appeared for his public examination, when he was finally struck off the Rolls on the recommendation of the disciplinary committee, and so on. I do not complain of that publicity, but I do think it is a fact that quite undue prominence is frequently given to these cases, which gives an entirely false impression to the general public, who imagine that each of these reports is a report of a fresh case. In point of fact, as was said by the Chairman of the Joint Select Committee, all the trouble is caused by the very few, mostly in one-man practices and not in cases of partnership. According to the evidence before the Select Committee the proportion of cases was less than one in 1,000 in any year of those taking out practising certificates, who number some 17,000. That indicates the very small proportion of black sheep in the profession. Further, many of these cases are not in the first instance deliberate cases; of fraud. I do not excuse them in any way,, but they are cases in the first place of carelessness, casual treatment of moneys, bad bookkeeping and so on. I therefore submit that the evil is not so frequent or so widespread as is commonly thought, although the consequences even of one case are serious to those affected. However small the evil is, the profession are anxious to take every step in their power to reduce it.
May I make one or two other general observations which may perhaps remove misconceptions. It is sometimes thought that the solicitors' branch of the legal profession is a rich one. It is not. It was given in evidence before the Select Committee, of which, along with the hon. Member for South-West St. Pancras (Sir G. Mitcheson) and the hon. Member for South Croydon (Sir H. Williams), I was a member, that the average income of solicitors in this country is less than £400 a year. That is, no doubt, largely due to the fact that there is a large number of solicitors who take out practising certificates as clerks to other solicitors. Nevertheless the figure is a striking one. The truth is that the profession is grossly overcrowded, and I commend that observation to the parents of those who may perhaps be considering entrance into the solicitors' 389 branch of the profession. It is frequently also thought that solicitors have tremendous privileges of some kind. They have one or two. They have the privilege of audience on behalf of other people in certain courts, usually along with members of the Bar. They have the privilege of taking legal proceedings on behalf of other people, and they have certain qualifications for certain appointments. That is about all nowadays, particularly when people, frequently to their regret, permit work to be done and documents, from memoranda and articles of companies to wills and agreements, to be prepared for them by all kinds of people who are quite unqualified and who, incidentally, are entitled to advertise and to tout for business, which of course is forbidden to members of the legal profession. Solicitors are also, I believe, the only profession whose charges are for the most part determined not by themselves but by law, and by a taxing master in cases of dispute: therefore any additional burden assumed by solicitors—and there are additional burdens assumed by them in this Bill— cannot be passed on to clients.
Another fact which is little if at all well known is that the solicitor is the most highly taxed professional man in the country, quite unjustifiably so, in my submission. The matter is of some slight historical interest at present. In 1784 Mr. Pitt, as Chancellor of the Exchequer, sought to raise a loan and new taxes to deal with the financial situation consequent upon the American War of Independence, which had then recently ended. In introducing his Budget, he said he was at a disadvantage in connection with any taxes he proposed to introduce and that the most palatable and popular taxes had long since been exhausted. Certain taxes were suggested by him on servants, retail shops, pawnbrokers, post horses and so on, when some Metropolitan Member of the House called out, "Why not tax the attorneys?" The result of that was, quite illogically, that Mr. Pitt introduced in place of the tax on shops a tax on attorneys and solicitors, which has remained until the present day and which has serious consequences on many solicitors.
In considering this Bill and the increased burdens which solicitors are assuming, the House ought therefore to have certain facts in mind with regard to payments made by solicitors as compared 390 with payments made by other professions. The solicitor pays £80 stamp on his articles, a fee of £25 on admission to the Rolls and an annual fee on his practising certificate of £9 in London and £6 in the provinces. On the other hand, the profession which the learned Attorney-General adorns, whose fees are proportionately much greater than those earned by the lower branch of the profession, pays £50 on his articles, £25 on admission, and no more. An estate or house agent pays 2s. 6d. on his articles and an annual fee of £2. A chartered accountant, not an un-prosperous profession, pays 2s. 6d. on his articles and nothing more. An architect pays 10s. on his articles and no more, while a doctor pays is and no more. There is no logical basis for the disparity between the various professions, and I hope that some future Chancellor of the Exchequer will be moved by a sense of justice to mitigate some of these heavy payments. I claim that in the circumstances which I have set out the Law Society, as the Attorney-General indicated, and the solicitors' profession as a whole, which passed these proposals by a tremendous majority, are entitled to some credit for assuming the additional obligations and burdens imposed by this Bill.
The first of these obligations is set out in Clause I, which requires every practising solicitor to deliver to the Registrar a certificate, signed by an accountant showing that he has examined the books and accounts of the solicitor and stating whether or not from his examination and the information and explanations given to him he is satisfied, and, if he is not satisfied, the matters in respect of which he is not satisfied, that the Solicitor has complied with the provisions of the solicitors' accounts rules. That certificate has to be obtained once every year. This clearly involves the employment of an accountant. There are exceptions to this obligation, for example, a solicitor who is a town clerk or anything of that sort in the whole-time employment of a local authority. In the event of the certificate not being produced or not being satisfactory, it will be the duty of the council of the Law Society or a committee appointed by the council to consider the case. There may be cases of delay or accidental slips where no harm has been done to anyone. On the other hand, there may be cases where there is 391 serious non-compliance, or where there are suggestions that the solicitor has failed to pay into his client's account money he ought to have paid, or that he has improperly used money. In those cases it will be the function of the Council of the Law Society to recommend that proceedings be taken before the disciplinary committee, which is an independent body appointed and removable by the Master of the Rolls. Before that committee the solicitor will have the opportunity of giving his explanation, and the committee will have the right to impose punishment such as striking off the roll, suspension of practice, or the payment of a fine not exceeding £ 500, which, incidentally will also go to the Treasury.
In the proceedings before the Select Committee it was suggested that the employment of an accountant was not a very serious obligation and that it might cost, perhaps, in small cases £10 10s. When I point out that in my own practice I pay an accountant, and have done for many years, over 100 guineas a year, and no doubt larger firms pay a good deal more, it will be appreciated that this Clause is, indeed, adding a heavy burden to those already carried by solicitors. There are, however, many solicitors, particularly in one-man practices, who do not have such accountants and who will now be compelled to have them. The Attorney-General mentioned the position arising owing to the war. It was the almost unanimous wish of the profession, as indicated at the meeting of which the Attorney-General spoke, that this provision should be brought in at the earliest possible moment. Owing to the war that has been found impossible. Accountants are suffering from shortage of staff and great pressure of work, while many solicitors are in the Forces. As there was opposition to the Clause on that account and the Government were not willing to give facilities to the Bill unless it was non-controversial, the Law Society had to give way. In Committee an Amendment will be moved to postpone the operation of the Clause. Nevertheless, I am confident that as soon as the Bill passes the very fact that the Clause is in the Bill will have a salutary effect in cases where accounts are not already kept satisfactorily.
The second proposal is to set up a compensation fund under which every practising 392 solicitor will be legally liable to pay £5 every year to the council of the Law Society for the purpose of making grants to indemnify or mitigate losses, if there be any-—and I hope there may not be many—still sustained by persons in consequence of the dishonesty of solicitors. Various conditions are imposed into which I need not go. There is one tribute which I ought to pay. It was suggested at one stage that certain classes of solicitors might be exempted from these payments, for example town clerks or solicitors in the whole-time employment of county councils or urban or rural district councils. The clerks of those authorities have, through a committee, been consulted by the Law Society, and they very properly, if I may say so, at once agreed that, as the object of the fund would be to maintain the reputation of the profession and retain the confidence of the public in it, they are just as much concerned as solicitors in private practice and should therefore pay their contribution.
There are some 17,000 practising solicitors in England and Wales, so that the fund may be expected to produce something like £80,000 per annum, a sum considerably in excess of the average amount of the defalcations which have taken place, unfortunately, ever a period of years, and it is expected that this contribution will be amply sufficient. I ought to say this, perhaps, to remove any misapprehension: It is clear that it was not possible for the Law Society, or indeed any body of men, to undertake to give complete indemnity in all cases, for the reason that it is quite impossible to estimate the extent of the losses which may occur, but it is confidently hoped that the amount of the fund will be sufficient, and that when the provisions of the Bill, and particularly of Clause I, which relates to the examination of accounts, are in full working order, the losses suffered by the clients of solicitors will be greatly diminished and eventually, it is hoped, done away with altogether.
The House has been good enough to bear with me for rather a long time, and I will be as brief as possible in dealing with the rest of the Bill. In the main all the other Clauses were in the Bill of 1939 and were approved by the Joint Select Committee, but I should like to deal with one or two of the exceptions. Clause 3 makes it compulsory for every practising solicitor 393 to become a member of the Law Society. This Clause has been inserted in pursuance of a resolution passed at the largest meeting of solicitors which has ever been held, I think. It was passed there by a substantial majority, and, again, was approved on a poll which was held by post. I have taken a somewhat personal interest in this proposal, have to some extent fathered it, because I believe that it is the duty of all of us to join our appropriate professional or trade organisations or trade unions. If every solicitor had to join the Law Society it would give the Society greater power, it would be of great advantage both to the public and to the members and would add to the safeguards provided by the Bill. It was stated before the Select Committee that the proportion of defaulters among those who were not members of the Law Society was considerably greater than among those who were members, for one reason because members of the Law Society are kept closely in touch, through the Society's "Gazette," and by other means, with up-to-date procedure and correct conduct in the profession.
Many people imagine that all solicitors are members of the Law Society. Unfortunately that is not the case. There are 17,000 practising solicitors, of whom 11,000 are members of the Society. I regret to say that here, again, objection has been made to this particular Clause being inserted in the Bill, objection emanating principally, I think I am right in saying, from solicitors who are not members of the Society, and against my will, certainly, it has been necessary for the Law Society to agree that this provision shall not come into force until after a two-thirds majority of those voting in a poll has been obtained.
The other provisions of the Bill are very largely in the nature of an improvement in, or a tightening up of, existing procedure. They include an amended form of declaration which has to be made by a solicitor, and if he commits a breach of that declaration he will lay himself open to severe penalties. They also relieve the Master of the Rolls, under whose authority the profession is conducted, from certain formal duties, and they also provide for a discretion to prohibit certain solicitors, where the Council of the Law Society are satisfied that it is a proper case, from taking an articled clerk 394 or employing a clerk who has been a party to the professional misconduct of another solicitor.
I feel that I ought not to trespass further on the good nature of the House, and I will conclude by commending the Bill to the House as a courageous effort, under difficult circumstances, to ensure that in future the interests both of the public and the profession may be better safeguarded than in the past, so that those who come after us may have no cause to regret having entrusted the conduct of their affairs to the custody of any member of the solicitors' branch of the great legal profession, and so that our British principles of justice, equity and the rule of law may remain untarnished forever.
§ Sir Annesley Somerville (Windsor)
Today we are taking part in the achievement of a very large number of reforms which have been long overdue, and the general public ought to be grateful to the Attorney-General and to the Government for the opportunity now afforded of obtaining a Second Reading for this Measure. The Attorney-General has given a very clear account of the progress of this Measure. Twelve years ago I had the opportunity of introducing in this House a Measure on similar lines. I did so on behalf of a group of Members who were interested in the matter. The guiding spirit among them was Mr. Arthur Michael Samuel, now Lord Mancroft, to whom great credit is due for his continual efforts to bring about this reform and who has recently taken part in getting the Measure through another place. Another Member of the House who took a great interest in it was the then Senior Member for Cambridge University, Sir John Withers. He was president of the Law Society, but resigned his presidency in order to forward the reform. Since that time the Law Society has taken up the matter and has obtained practically the unanimous consent of its members to this Measure. As my hon. and gallant Friend the Member for South-East Leeds (Major Milner) has said, the occasions for this reform are comparatively few, and there are no persons who more strongly desire reform than the members of the great profession concerned. We may say that the whole of the legal profession is in favour of the reform. The Bill was guided through the other House by one of his Majesty's judges, and I understand 395 that the whole of the Bar and the whole of the Bench are in favour of the Measure. The Measure itself contains two main provisions. There are, first, the audit of accounts and, secondly, the compensation fund. The compromise that has been agreed to by the Attorney-General seems to be proper. We have in this Measure, which has the support of the whole of the legal profession, all the reasonable protection that the public may naturally expect when they take reasonable care of their own property.
§ Mr. Douglas (Battersea, North)
This Bill has been introduced, as the Attorney-General said, at the instance of a private organisation, the Law Society. In order that it should be discussed in the House, the Government have given it facilities which would not otherwise have been afforded. I do not complain about that, because I think that out of discussion some improvements may come. The main purpose of the Bill, of course, is to protect the public against the defalcations of solicitors, and it is on that account that the Government have helped it forward, but it also has a number of other objects. One of those objects is to impose compulsory membership of the Law Society upon every practising solicitor. I think it is highly improper for any body—I do not care what it is—or any association, to seek to promote legislation imposing upon everybody who happens to practise that profession the obligation to be a member of a society of this kind. It is entirely irrelevant to suggest that this body is something in the nature of a trade union. I am sure the members of the Council of the Law Society would indignantly repudiate any suggestion of that kind. I never expect to see the Law Society applying to the Trades Union Congress for affiliation to that body, and if it did, I am perfectly certain the Trades Union Congress would refuse it, because it is not an association of employees or workpeople. It is a professional association including people who are employers, and probably the majority of whom are employers. It is not in any sense a trade union, and in any case this House has not yet committed itself to the principle of compulsory trade union membership. I say it is improper to impose compulsory membership of a society upon people practising some occupation.
396 The protection which it is proposed to give to the public takes two forms. There is, first, the provision that accounts shall be kept and audited and an auditor's certificate be procured at the expense not of the State but of the solicitor. That is an obligation which is not imposed upon people practising any other profession or upon individuals carrying on any other kind of occupation. It is something entirely novel, but I think it has some merits, because it may be the means, if systematically employed, of preventing people from slipping inadvertently or carelessly into a position in which they mix up their own money with that of their clients and so take the first step in many cases towards more serious offences. I am not going to complain of that proposal in itself, but it has a bearing upon a point which I will come to presently.
The other way in which it is proposed to protect the public is by establishing a compensation fund to which solicitors are to be compelled to make a contribution as a condition of practising at all. Compulsion upon them is absolute and cannot be escaped by any means. That is a provision which is entirely contrary to the policy of the Common Law of this country. It has never so far been admitted in any case, because it is a proposal to enable people to insure themselves against the consequence's of criminal conduct. Any contract of that kind which anybody attempted to enter into at the present moment would be absolutely void as against public policy, but it is now proposed to give statutory authority to an arrangement by which solicitors will have to contribute to a fund for the purpose of compensating people who suffer loss by the defalcations of solicitors.
I may add incidentally that it ought to be made clear to the public that although this fund will be brought into existence, no person who suffers loss will have any statutory right to benefit by the fund, because its administration will be entirely at the discretion of the Council of the Law Society, and they will decide whether they will make any payment in a particular case or not. Not only is it proposed that solicitors should make a compulsory contribution to this fund, but it is also proposed that the contribution shall be made at a flat rate—the sum suggested in £5 a year—irrespective of the economic position of the solicitor, irrespective of whether the income he 397 derives from his profession is large or small. In fact, those who are most badly off will be compelled to contribute an equal amount for the benefit of those who make the most profit out of their profession. That seems to me to be highly inequitable and highly unfair. If the contribution were in proportion to the income made by practising the profession, at any rate it might be said that the burden was distributed in equal fashion.
Now let us look at what the total effect of this and of existing legislation will be upon solicitors. At the present moment a solicitor in London is compelled to pay an annual fee of £9 before he can practise his profession. He is compelled to pay a registration fee of £1 to the Law Society. In addition to that, it is proposed that he shall pay £5 towards the compensation fund, that he shall pay for the audit of his accounts a sum which the Law Society themselves estimate as a minimum of ten guineas a year, perhaps more, and that he shall be compelled to be a member of the Law Society and pay the annual subscription of three guineas a year. I think that amounts to a total of £28 13s. a year each, which every solicitor in London will be compelled to pay, and three pounds less in the provinces.
In addition to that, the solicitor has had to pay £80 as Stamp Duty to the State upon his articles of apprenticeship and £25 Stamp Duty to the State as a tax upon his admission certificate. That is £105 of capital taxation or, spread over a life of 30 years, let us say, about £3 10s. a year. So we get a total of nearly £32 a year which is to be imposed as a statutory obligation upon people practising this profession. The Law Society themselves have stated that the average income of a solicitor is about £400 a year. In all these averages of income it is obvious that the incomes of a few who happen to do remarkably well swell the average, and therefore it is obvious that the majority of solicitors are making less than £400 a year. Out of that income they will be compelled to make these contributions of one kind or another, amounting to a total of some £32 a year. There is no other profession in this country which is obliged to submit to an imposition of that kind.
If, as the Government have admitted, the Bill raises an important question of public policy which ought to be dealt with, the Government ought to take into 398 account the position of solicitors and to remit the taxes which are at present imposed upon them, if they are going to add these new statutory burdens. It is only equitable that the Government should redress this injustice, which would, in any case, have been an injustice—as my hon. and gallant Friend the Member for South-East Leeds (Major Milner) has said—produced by pure accident in 1784 by William Pitt who, although he professed to be a follower of Adam Smith, appeared to put into practice the full maxims of Colbert of plucking the goose with the least amount of squawking. As solicitors were a small body, and uninfluential as compared with the retail traders whom he proposed to tax in the first place, the sales tax was shifted on to them, where it has remained ever since. I believe that on not less than 10 or 11 occasions Parliament has passed Motions admitting that it was an unjust and unfair tax.
For those reasons the Government, if they think these further obligations ought to be imposed, ought to come to the relief of solicitors by relieving them of the burdens which are placed upon them. I placed an Amendment upon the Order Paper because I feel strongly about this question. I do not want to defeat the main purpose which underlies the Bill of affording a reasonable degree of protection to people, but solicitors are subject to burdens which are not imposed upon other people who handle money which does not belong to them. Auctioneers, estate agents, bankers, and companies handle the money of other people, but none of them is compelled to submit to these requirements or has obligations imposed upon them of this kind. I repudiate any suggestion that solicitors are less honest and trustworthy than any of those other people, upon whom Parliament has not chosen to impose these liabilities. I therefore hope that I shall have the assistance of hon. Members when the Bill comes to the Committee stage in helping to rectify some of these injustices, and in that hope I propose to withdraw the Amendment which stands in my name upon the Order Paper.
§ Rear-Admiral Beamish (Lewes)
I have listened with great interest to the speech of the hon. Member, but I must say that I am not greatly impressed with the argument, which would hold up the Bill for an indefinite period. I hope to 399 mention a point or two to support my view. I am particularly interested, because I made a promise many years ago to support such a Bill, and once having embarked upon it I have had no lack of encouragement and no evidence to cause me to change my views as to the necessity for such a Bill. When one looks back at the history of this matter one realises that, from what might be called the impossible, we are very near to the stage of achievement.
More than one individual has remarked to me what a solicitor also said: ''Oh, you are the man who hates all lawyers." Nothing could be farther from the truth. I have been subject, as many of us have been, to stringent laws. I am subject now to the Naval Discipline Act, which carries with it the fiercest retribution. I agree with all those laws. This Bill will be a law, which I hope will help solicitors. We ought all to remember the Latin, which says:"Ut metus ad omnes pœna ad paucos perveniret."Everybody should fear and understand that things may happen, but that retribution may reach but very few people. In all sincerity, I support the Bill for the honour and welfare of a profession which I look upon as indispensable, and whose activities and good name have been and are being circumscribed, restricted and endangered by the criminal actions of a minute minority. Over a period of years, the number per annum is tiny, compared with the 17,000 practising solicitors. With all reasonable men I admire the warm humanity and ripe wisdom of a good solicitor. How much preferable is that warm humanity and ripe wisdom to the cold impersonality of the banks and even of accountants and public trustees, who are rapidly taking over a great deal of the work done so admirably in the past by solicitors. I am strongly averse to banks, accountants, and public trustees absorbing the work of solicitors and removing the basis of our essential reliance upon the profession.
This is a mutual guarantee Bill. There is nothing new about it except that it is new in this House. Bills of this type have been passed by New Zealand, Queensland, and New South Wales. I believe I am right in saying that some legal society in Scotland, about whose name I am not clear, has entirely approved the whole 400 principle of the Bill. There is nothing new in the suggestion of a fidelity or guarantee or compensation fund—call it what you will. The principle of compensation has been objected to by the lion. Member who just spoke, I understand. He made some criticisms of it, as he was fully entitled to do. Some of them I agree with, but only in part. After all, this compensation is a very old system indeed, and it extends to a very great many other enterprises and some other professions. It is to be seen, and has been seen in the past, among the banks, certainly among insurance companies, and it has been my experience, while serving abroad in the Navy, to see the system of mutual guarantee utilised by commercial houses in order to keep up the credit either of individuals or of some special community for which the establishment and buttressing of credit is of enormous importance. I must confess with some little surprise that during all the centuries solicitors have been working they have never mutually agreed to help one another in order to protect the public against that very small, but very irritating and constantly recurring criminality reported in the Press in connection with defaulting solicitors.
I do hope there will be real generosity in connection with this compensation when the sums are paid out. Naturally the Bill protects the Law Society against gold-digging. They are right to protect themselves, but I would ask that they should remember that compensation means ''Recompense, remuneration, amends." I am told—I have no figures to go on, but I have read it in more than one place—that the annual sum taken away from members of the public approaches something like £60,000 a year, and I was glad to hear my hon. and learned Friend say that the recompense or compensation fund would amount to a great deal more than that. I sincerely hope that it will never be necessary to apply all that amount of money, but one realises that that sum of £60,000, judging from the records of the courts, comes in most instances from people who are certainly very much to be pitied because their faith and trust in a solicitor have been destroyed, or from people who have been left in the gravest difficulties. Many cases have been reported to me. One woman wrote to me and said, "It is no consolation to me that retribution should have come upon this man and that 401 he should have got penal servitude." It is certainly no compensation.
The only other thing I want to say is this: I have made as careful a study as a layman can of the question of the annual audit of accounts, and I have talked it over with accountants and so on. I am assured by such people as I have been able to get in contact with that the difficulties associated with a complete and very exact and annual audit is not as great as it is said to be, and although I agree that difficulties do exist during the war, I hope that if any alteration is made it will be in the direction of a more accurate and detailed audit than the Bill already suggests. If I put down an Amendment to that effect in order to get a statement from the Attorney-General I hope I shall be forgiven. I am told that solicitors of good standing insist at the present time upon the fullest possible audit of their accounts, and I see no reason why that should not be extended. The Bill is a very welcome one. The solicitors' profession is part of our national and family life, and one which is admired and imitated by all other countries. I therefore wish the Bill well and the solicitors' profession likewise.
§ Mr. Garro Jones (Aberdeen, North)
I do not propose to detain the House for more than two or three minutes, but I think it is just as well to state that many of us would approve this Bill not solely from the standpoint of the legal profession but from the standpoint of the interests of the public as a whole. There can be no doubt that the principal reasons why the Bill has been given these unusual facilities is the provision in Clause 2, under which the public are to be protected, nominally at any rate, against defalcations on the part of solicitors or their agents. I, therefore, want to make two suggestions, which I hope it is not yet too late to make, as to how the Bill can be improved in its passage through the House on the Committee stage. I should like the Attorney-General to be good enough to understand quite clearly that though it has been agreed by us that the Bill is not to be regarded as a controversial Bill, that does not mean that we regard it as a perfect Measure not susceptible of amendment. Indeed, we think it is susceptible of amendment, and have not agreed with complete ease of mind to its passage through the House and Committee.
402 My hon. Friend the Member for North Battersea (Mr. Douglas) pointed out that under the main provision of the Bill in Clause 2 there is no obligation whatever upon the Law Society to pa}' out any sum in compensation for losses by defalcation against which this Bill is mainly intended to provide. I must say I view that absolute discretion given to the Law Society with some misgivings. The Law Society have not always shown themselves to be a body with very wide and broad views. Everybody knows that the Coun-cil of the Law Society consists of the wealthiest members of the solicitors' branch of the legal profession, and whether it is a body which will be able to administer with complete impartiality the large fund which will eventually be built up under Clause 2 of this Bill is a matter upon which two opinions might reasonably be held. I therefore want to suggest to the right hon. and learned Attorney-General that the Law Society, in framing the rules which they are charged to make under Clause 2, should be obliged to submit them for approval to some legal authority. I would perhaps suggest the Master of the Rolls as being the most appropriate judicial authority to whom the rules might be submitted before they come into force.
Admittedly we are in an experimental sphere in attempting to foresee how this fund will be administered. For that reason it has been found impossible to lay upon the fund the obligation to pay all claims in full. There is no limit to the possible amount. One defalcation might be for many millions of pounds, and, therefore, it is impossible to say what proportion of defalcations should be met. It is not that the number of solicitors who are guilty of these malpractices is large. We all know they are a very small proportion. But sometimes the amount involved is very large, and one cannot tell how large the total amount may be. It will take some years of experience, and of the collection of figures, before we can get any reliable guide as to what proportion of losses has actually to be compensated for, and I hope the Attorney-General will therefore be good enough to consider, and perhaps to have consultations on, if he thinks necessary, the suggestion that the rules should be submitted when they are first made, and perhaps every three or four years thereafter, to the Master of the Rolls for approval or confirmation.
403 The second point to which I wish very briefly to draw the attention of the House is a point which arises in the Third Schedule. It is a point of principle. The Solicitors Act, 1932, made many drastic provisions to prevent persons not members of the legal profession from preparing any documents or carrying out any duties which have been thought to be the exclusive preserve of the legal profession. Various penalties were imposed under the Act for persons who tried to participate in this form of legal practice. This Schedule makes a very drastic amendment to most of these restrictions. It lays open to penalties a person who prepares these legal documents, it may be a will or some very simple form of legal document. Many forms of legal documents are undoubtedly prepared by laymen, by accountants, and by persons who could not possibly afford the assistance of qualified legal practitioners. I think it is going a little far to lay upon such persons the burden of proof that they are carrying out these duties without expectation of fee, gain or reward, directly or indirectly. It is very hard for any man to prove that he has no such expectations. Very heavy penalties may be imposed upon him. I invite my hon. Friends to be a little broader than the view of the legal profession. We must be particularly careful when we are legislating on matters affecting the legal profession to see that the interests of the public are even more, perhaps, than in other cases safeguarded by the provisions we make. It is for that reason that I have attempted to detach myself from the purely legal point of view to make these two suggestions as to how the public might be better protected.
§ Question, "That the Bill be now read a Second time," put, and agreed to.
§ Bill read a Second time.
§ Bill committed to a Committee of the Whole House for the next Sitting Day.— [Mr. Holdsworth.]