§ Order of the Day for the Second Reading read.
§ LORD WRIGHT
My Lords, I beg to move that this Bill will now be read a second time. I do not intend on this occasion to detain your Lordships very long in discussing the principles of the Bill, because last year I had the honour of introducing a Bill which, with one exception, is practically identical with the present Bill. The Bill which I introduced last year went through all stages in this House with, I think, general approval, and it had the support of the noble and learned Lord Chancellor. Unfortunately, owing to lack of time, it could not be introduced into the other place by the Attorney-General, who was prepared to do that if there had been time, and it was thought better to reintroduce the Bill here this year.
The Bill may be divided into two parts. One part may be said to deal with larger questions of considerable public interest. The other deals with many matters of detail and administration which in the ordinary professional societies would be dealt with by the societies themselves, but owing to the very close regulation by Parliament which has gradually reduced the power of proceedings by solicitors, recourse must be had to Parliament whenever it is sought to modify the processes 941 followed by the Law Society in dealing with professional matters. The second division of the Bill is not a formal division; I merely make it for convenience. It needs, I think, no comment here to-day. All the provisions in that particular part were examined by a Joint Select Committee of both Houses of Parliament which sat upon the earlier edition of this Bill, so that these provisions which are now in the Bill to-day have not merely been approved by this House but have also had the approval of the Joint Select Committee.
The part of the Bill which is of more general interest deals with the question of solicitors' accounts. Although the standard of honesty and honour among solicitors is very high it is, unfortunately, only too familiar that from time to time solicitors are guilty of defalcation, such as taking out and spending and converting to their own use funds of their clients. We have all heard of some very distressing instances. As long ago as 1933 it was sought to deal with that difficulty by giving the Law Society power to make rules requiring solicitors to keep their accounts in a certain way and to keep their money separate from that of their clients. These rules have been made, and there is a general power under the earlier Act for the Council of the Law Society to examine accounts. That was successful to a very considerable extent, but it was not effective enough, and the Joint Select Committee to which I have already referred, and of which I was a member, when considering that question, made, with the support and sympathy of the Law Society, certain recommendations which have been embodied in this Bill.
The first is that every solicitor who obtains what is called the "practising certificate," which is necessary if he is to conduct a practice on his own account, has to produce to the Law Society, to the Registrar of Solicitors, an accountant's certificate for the previous year. The dates, of course, are conveniently fixed, but each year an accountant's certificate must be produced. The Law Society are charged with the duty of determining the precise extent of that certificate. On the last occasion my noble friend Lord Man-croft criticised with very considerable effect the provisions in that respect, because he thought that express provision should be made for a much more stringent 942 audit than appeared to be suggested. I can only say that the Law Society considered very carefully what he said, and indeed the Select Committee had had their attention directed to the same question; but the conclusion arrived at was that, as a practical measure and out of fairness to practising solicitors, the requirements as to the audit ought not to be more stringent than had been contemplated in the previous Bill, and as contained in the present Bill.
I may point out, however, that most stringent powers are given to the Council of the Law Society, in any instance where there is a prima facie case of dishonesty made against a solicitor, to call for the closest scrutiny and discovery of documents, papers, accounts and so on. A special clause deals with the position of a solicitor who acts as a trustee—what is called a trustee solicitor. He is not a trustee in his professional capacity, which is a separate capacity, and therefore the matter must be separately provided for. That deals with the question of accounts.
The next main provision carries the matter a stage further. The mere keeping of accounts cannot secure absence of dishonesty or defalcation and, that being so, it was decided, again following the recommendations of the Select Committee, and with the sympathy and support of the Law Society, and indeed at their instigation, to recommend that a fund should be created which would be fed by contributions from the members. Each solicitor obtaining a practising certificate will have to make his contribution, along with the fee which he has to pay. In that way a fund will be created which will be administered by the Law Society, and they will make rules for the due conduct of the matter—the creation of the fund, payment to sufferers and so on.
There is one other thing which I wish to mention to-day, and that is the provision which requires every solicitor who takes out a practising certificate to become a member of the Law Society. The Law Society, when founded a hundred years ago, was in the nature of a club: but it has now grown, and, of the 17,000 practising solicitors, 11,000 are members of the Law Society. The Law Society have very serious duties to perform; and it has 943 been felt—and your Lordships approved the suggestion on the last occasion—that all practising solicitors should be members of the society and should have an interest in what is going on and should be able to take part in the proceedings; incidentally, moreover, they should make a small contribution to the expenses of the Society by paying the subscription which every member has to pay. These are the three main provisions to which I wish to refer to-day, and, as I say, they have already received the approval of this House. I beg to move.
§ Moved, That the Bill be now read 2a.—(Lord Wright.)
§ LORD MANCROFT
My Lords, I think that I have taken a somewhat active part in nearly every step connected with proposals for legislation of the kind indicated in this Bill since the Solicitors Bill was introduced in the other House in 1929 by Sir A. Somerville, M.P. Now that we have probably come to the end of our journey, at any rate for a few years, I should like to offer my thanks to my noble and learned friend—and the thanks of the public are due to him also—for having given his time and his unrivalled knowledge of the problem to helping forward this legislalation. As he has said, this Bill is substantially the Bill which went through the various stages in your Lordships' House in July, 1940. I supported it then in principle, and ventured to inflict upon your Lordships' House on that occasion a long series of observations of a critical, but not of a hostile nature, in which I pointed out what I considered to be weaknesses in the machinery of the 1940 Bill. My noble and learned friend has referred to my observations. All I desire now is that this Bill's machinery should be strengthened. So, although I wish to speak for a moment now, I do not propose to repeat those criticisms on the 1940 Bill, but merely to ask that they may be accepted as applying to this 1941 Bill, subject to alterations which have been imported into it since I last spoke.
I am more than ever convinced, however, that a great part of the mischief which has affected a body of men who are undoubtedly honourable, conscientious and upright, who have undeservedly suffered from the ill-deeds of a very small number of their body, the 944 mischief which has caused much of the loss that has fallen upon the public, has arisen from the way in which sole partnership firms have sometimes been conducted. I myself have noticed how the mischief has developed. I should like to say both to my noble and learned friend and to the Law Society (if my words reach so far) that they must realise that the focus of mischief which has brought discredit upon an honourable body of men and losses to the public, is for the most part to be found in the sole partnership firms. For that reason I will say this. This Bill gives definite powers to the Law Society, particularly the power of requiring accountants' certificates. Is it too harsh for me to say that the Law Society should exercise the powers under this Bill with regard to accountants' certificates more rigidly where there is a sole partnership firm than it would do in the case of a firm which has more than one partner? It seems an illogical thing to say, but there it is. If you look through the convictions in the criminal courts your Lordships will find that unfortunately the majority of the cases refer to sole partnership firms.
My noble and learned friend Lord Wright, referred to the fact that I did not think the accountants' certificates in the form it was proposed to demand them would be strong enough for the purpose. That is my view. Whether it be with regard to a solicitor's firm or with regard to an ordinary manufacturing or trading firm, such as I have been associated with the whole of my life, I do not like the term "as shown by the books." It shirks the task. Books can deceive. For an accountant to be satisfied with what he sees as shown by the books is not enough in many cases. I think there should be no difficulty in constructing a form of book for solicitors, just as banks construct their own form of books, which are examined by visiting inspectors to branch banks to enable the inspectors to find track of every sum of money and every security that passes into the custody of the bank or the solicitor, as the case may be.
The accountant, before he gives a certificate, ought to satisfy himself by his own test that any securities, valuables or money which have passed into the custody of the solicitor are recorded there, so that what he finds recorded in the books 945 he knows himself to be true of his own knowledge. Then I think he should demand to be shown by actual exhibit or by vouchers and proper certificates what has become of this money, or what has become of this deed, whether it exists. The whole route of the property must be followed right through the books till it passes out or remains, and its existence shown in the books on which the auditor has to give a certificate. I think that if the accountants and auditors would only get away once and for all from shielding themselves behind the phrase "as shown by the books" of a concern, we should go a long way towards curing this mischief which has brought discredit on an honourable body of men. Well, I wish this Bill well. It has been delayed ten years too long. I support its principles and I hope that, subject to such Amendments as another place may consider it wise to import into it, it will pass into law at the earliest possible moment.
§ THE LORD CHANCELLOR
My Lords, before I put the Question, perhaps I might be allowed to say in a couple of sentences that I hope this Bill will receive the support of your Lordships' House and will in the course of the Session find its way to the Statute Book. It appears to me that those specially interested are greatly indebted to my noble and learned friend Lord Wright for the endless trouble he has taken in the matter. So far as I can see, the Bill is now in a form which would well justify our giving it a Second Reading, and I hope that without too much change we shall pass it and send it to another place.
§ On Question, Bill read 2a, and committed to a Committee of the Whole House.