HC Deb 11 May 1956 vol 552 cc1592-5

Motion made, and Question proposed, That the Clause stand part of the Bill.

12.59 p.m.

Sir Lancelot Joynson-Hicks (Chichester)

If the Committee will bear with me for a few moments, I think it would be proper for me to say something about this Clause, because h is the most important Clause of the Bill. One factor which transpires on an occasion like this is how exceedingly necessary it is for the members of my profession to work professionally on Fridays. I have received apologies from numerous of my hon. Friends and from hon. Members opposite who are members of the profession, but who are unable to be present today. They have between them raised with me one or two points upon this Clause to which I think it would be proper for me to reply even in their absence.

In the first place, there is nothing exceedingly new about the provisions in Clause 1 which double the amount of the contribution at present levied on members of the profession in order to build up the Compensation Fund. They were discussed by the profession as long ago as last July. I do not think this a proper time to go into the principles of the Compensation Fund; possibly at a later stage that point could be elaborated. But last July the matter was first considered by the Law Society at its annual general meeting and subsequently It was considered again at the annual conference; so that the profession has had ample opportunity to consider both the necessity for, and the proposals contained in, this Clause.

As a result, and following correspondence initiated in The Times, ten letters were received and only eight were in opposition. The basis of the proposition primarily deals with two points. First, whether it is just and right that the contribution to the Compensation Fund should be assessed upon a flat rate on every person in the profession who takes out a practising certificate. An alternative was suggested and was considered at some length in another place during the discussions on the Bill, which has already passed through the House of Lords. It was to try to arrange for a contribution based on the turnover of the solicitor's business. That would be an exceedingly complicated and difficult matter to assess.

The flat-rate system is much simpler, and one of the points which is of concern in the consideration of this matter is that regarding risk, and the majority of cases in which the Compensation Fund is called on—in fact, the vast majority—are of small firms with a small turnover. Therefore, so far as equity is concerned, it would look as though the flat-rate basis of contributions is at least as fair as the far more complicated system of a contribution based on turnover. In any event, when one takes into account that the contribution of a solicitor in private practice is a deductible expense for tax purposes, the argument is certainly one of de minimis.

The second point put up by colleagues in the profession is that contributions should extend only to those solicitors who are in private practice and not to those solicitors who are practising in employment. The argument for this—it has been mentioned to me by several colleagues—is that those who are in employment are not those handling clients moneys. Therefore, they are not exposed to the risk of dishonesty, with the consequent risk of the Compensation Fund being called upon as a result of their activities.

This aspect of the matter has been considered by the Law Society and by the profession at considerable length. Surely, the answer is that the Compensation Fund is not a form of individual insurance for a solicitor at all. It is collective insurance on the part of the profession as a whole. Its object primarily is to maintain the honour of the profession by guaranteeing that the profession, comprehensively and collectively, recognises 'its responsibilities towards any people who may suffer as a result of its members falling by the wayside.

For that reason it is considered that when a solicitor benefits in his capacity for earning his living by the necessity of having a practising certificate, and, therefore, he benefits from being a member of the profession, it is right and reasonable that he should be called on to contribute towards the Compensation Fund for the general honour of the profession.

On the question of the actual amount and the need for the increase which is contained in this Clause, the situation is simply that since the Compensation Fund was started it has never been possible to build up any reserve at all. It is felt that in case there were a calamity in case there were a greater run on the Fund—which we sincerely hope will not occur—than is envisaged at present, it is a proper and desirable thing that there should be a reserve built up. Once that has been built up, following on the increased rate of contribution contained in this Clause, it will be possible for the contribution called for to be reduced from the maximum named in the Clause, and to revert to what it is at present, or to some intermediate or lesser sum.

Finally, a point of criticism which has been raised is why should not there be a differential between the new practising solicitor, one who has just entered the profession and is starting to make his way, and one who is already well established? The answer is that there is exactly such a differential. Under the principal Act, amended by these proposals, the contribution towards the Compensation Fund is waived during the first three years of the solicitor's practice. He does not have to pay his contribution when he takes out his first three certificates. For the next three certificates his contribution is a moiety of the standard rate, and, therefore, it is not until he is entering his seventh year of practice that he is called upon to contribute the full standard rate provided by this Clause.

If there are any questions which any hon. Gentleman wishes to raise about the Clause, I shall be happy to try to answer them.

Mr. Eric Fletcher (Islington, East)

I wish to support what has been said by the hon. Member for Chichester (Sir L. Joynson-Hicks). The hon. Gentleman explained that this Compensation Fund was originally introduced for the honour of the profession, as a measure of collective contribution to ensure that if any "black sheep" in the profession deliberately or otherwise caused a loss to a client, then this would be a fund out of which compensation could be paid.

As the hon. Gentleman has said, I think that all who have the honour of serving the community as solicitors realise that they have great responsibilities, not only to their clients, but to the community, and that a considerable measure of privilege is entrusted to them in the handling of the affairs of other parties; and it is their satisfaction to be able to record that the cases where there has been any loss are few and far between. One has, however, to recognise that they have occurred in the past. They may occur in future despite all the increasing safeguards taken by the Council of the Law Society in connection with admission to the profession.

Therefore, it is most desirable that this experiment, which was established a few years ago and has proved so successful, should be maintained on a basis which from the financial point of view is sound. The Law Society has devoted a great deal of thought to the subject. A great deal of time was devoted to the matter before the Bill was introduced. Objections which have been voiced in the Press to the proposal for an increase in the flat rate have been considered. I agree that the conditions are entirely in favour of the flat rate and of the increase proposed in the Clause. I very much hope that the Committee will take that view and that the Clause will be approved in the form suggested by the Law Society.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Clauses 2 and 3 ordered to stand part of the Bill.