HL Deb 11 March 1965 vol 264 cc249-72

6.17 p.m.

Order of the Day for the House to be put into Committee read.

Moved, That the House do now resolve itself into Commitee—(Lord Tangley.)

On Question, Motion agreed to.

House in Committee accordingly.

[The LORD STRANG in the Chair.]

Clause 1 agreed to.

Clause 2 [Amendment of section 3 of principal Act]:

LORD TANGLEY

This Amendment relates to a matter of pure drafting. Clause 2(2) of the Bill is the equivalent of Section 3(2) of the Solicitors Act, 1957, and I am satisfied that that section of the Act of 1957 is now imported into the Bill already. Therefore subsection (2) of Clause 2 is not necessary. I beg to move.

Amendment moved— Page 2, line 28, leave out subsection (2).—(Lord Tangley.)

On Question, Amendment agreed to.

Clause 2, as amended, agreed to.

Clause 3 [Amendment of section 4 of principal Act]:

THE DEPUTY CHAIRMAN OF COMMITTEES

There is one slight misprint in the next Amendment. It should read: Page 2, line 34, leave out the first ('for') and insert ('of').

LORD TANGLEY

I am much obliged for that correction. The Amendment itself was designed to remedy a misprint, and I apologise for both cases. I hope we have now got it right and that the Amendment may be accepted. I beg to move.

Amendment moved— Page 2, line 34, leave out the first ("for") and insert ("of").—(Lord Tangley.)

VISCOUNT DILHORNE

I must say that when I read this Amendment I suspected there had been a slight grammatical slip. I had not detected that the Bill as drafted defined a class of solicitors as "solicitors for certain overseas solicitors", which would be a very odd conjunction. I am glad that the mistake has been put right.

On Question, Amendment agreed to.

Clause 3, as amended, agreed to.

Clauses 4 and 5 agreed to.

Clause 6 [Amendment of section 12 of Principal Act]:

6.20 p.m.

LORD TANGLEY

I should like the Committee's permission, in dealing with Amendment No. 2, to refer also to Nos. 3, 4, 5 and 6. They all deal with the same matter. When I was introducing this Bill on Second Reading I drew the attention of the House to the fact that it is possible, under the modern system of education, for an articled clerk to become qualified by examination as a solicitor with little more than two years' practical experience. And I suggested, I think with the approval of your Lordships, that the Law Society ought to have the right, for the first three years, to attach to a man receiving a practising certificate conditions making it quite plain that during that period he should not necessarily be entitled to practise on his own. Some doubt was expressed as to whether the clause in fact went further than that and would authorise the Law Society to refuse a practising certificate altogether in those circumstances. Indeed, I was a little doubtful about that myself. The redrafting of this clause makes the situation quite plain, and, I think, puts the clause into exactly the position that I wished it to be in when I was explaining it to your Lordships before. I beg to move Amendment No. 2.

Amendment moved— Page 4, line 30, leave out ("subsection") and insert ("section")—(Lord Tangley.)

VISCOUNT DILHORNE

I think the doubt was raised by me. I am grateful to the noble Lord for now putting the position beyond all doubt.

THE LORD CHANCELLOR

I am not sure that it was not I who in fact raised the objection, but I am equally grateful.

On Question, Amendment agreed to.

LORD TANGLEY

This Amendment is consequential. I beg to move.

Amendment moved— Page 4, line 31, leave out ("1)").—(Lord Tangley.)

On Question, Amendment agreed to.

LORD TANGLEY

This Amendment, also, is consequential. I beg to move.

Amendment moved— Page 4, line 34, leave out ("subsection (3)") and insert ("the provisions").—(Lord Tangley.)

On Question, Amendment agreed to.

LORD TANGLEY

Again, this Amendment is consequential. I beg to move.

Amendment moved— Page 5, line 40, at end insert— ("( ) Subject as aforesaid, the applicant shall, unless the Society or the Master of the Rolls otherwise orders, give to the Society not less than six weeks before his application for a practising certificate notice of his intention to apply therefor, and the Society may in its discretion—

  1. (a) grant or refuse the application; or
  2. (b) decide to issue a certificate to the applicant subject to such terms and conditions as the Society may in its discretion think fit,
and where the Society decides to issue a certificate subject to conditons, it may, if it thinks fit, postpone the issue of the certificate pending the hearing and determination of any appeal under subsection (2) of the next following section. ( ) The Society shall not refuse an application by a solicitor for a practising certificate in a case where subsection (2) of this subsection has effect by reason only that the applicant is applying for the first time or has not held a practising certificate free of conditions since the date of his admission. ( ) Where a solicitor applies for a practising certificate—
  1. (a) a certificate issued to him on that application shall not, in the case where subsection ( ) of this section has effect by reason only of his not having held a practising certificate free of conditions since the date of his admission, be made subject to any conditions binding upon him in respect of any period beyond three years after the date on which the first practising certificate issued to him had effect;
  2. (b) in a case in which the said subsection ( ) has effect by virtue only of such circumstances as are mentioned in paragraph (g), (j) or (k) of subsection (l) of this section and an appeal has been made to the appropriate court against the order or judgement in question, the Society shall not refuse the application before the determination of that appeal unless in the opinion of the Society the proceedings on that appeal have been unduly protracted by the appellant or are unlikely to be successful.
 ( ) Where a practising certificate free of conditions is issued by the Society under subsection ( ) of this section to a solicitor in relation to whom that subsection has effect by virtue of particular circumstances such as are mentioned in paragraph (a), (b), (c), (d), (e), (f), (h), (j) or (k) of subsection (1) of this section, the said subsection ( ) shall not thereafter have effect in relation to that solicitor by virtue of those circumstances.'").—(Lord Tangley.)

On Question, Amendment agreed to.

LORD TANGLEY

This is a further consequential Amendment. I beg to move.

Amendment moved— Page 5, line 41, leave out subsection (2).—(Lord Tangley.)

On Question, Amendment agreed to.

Clause 6, as amended, agreed to.

Clause 7 agreed to.

6.24 p.m.

LORD TANGLEY moved, after Clause 7, to insert the following new clause

Interest on clients' money

.—(1) Rules made under section 292 of the principal Act shall make provision for requiring a solicitor, in such cases as may be prescribed by the rules, either—

  1. (a) to keep on deposit in a separate account at a bank for the benefit of the client money received for or on account of a client; or
  2. (b) to make good to the client out of the solicitor's own money a sum equivalent to the interest which would have accrued if the money so received had been so kept on deposit.

(2) The cases in which a solicitor may he required to act in accordance with rules made pursuant to this section may be defined, among other things, by reference to the amount of any sum received or the period for which it is or is likely to be retained or both; and such rules may include provision for enabling a client (without prejudice to any other remedy) to require that any question arising under the rules in relation to the client's money be referred to and determined by the Society.

(3) Except as provided by rules made pursuant to this section, a solicitor shall not be liable by virtue of the relation between solicitor and client to account to any client for interest received by the solicitor on moneys deposited at a bank being moneys received or held for or on account of his clients generally.

(4) Nothing in this section, or in rules made pursuant to this section, shall—

  1. (a) affect any arrangement in writing, whenever made between a solicitor and his client as to the application of the clients' money or interest thereon; or
  2. (b) apply to money received by a solicitor being money subject to a trust of which the solicitor is a trustee."

The noble Lord said: This is an Amendment of substance which I feel I must justify to the Committee. Your Lordships will recall that on Second Reading I drew attention to the effect of a decision of your Lordships' House, sitting in its Judicial capacity, in the case of Brown v. Commissioners of Inland Revenue. That case was a tax case coming from Scotland, but it affirmed the principle that a fiduciary relationship exists between solicitor and client and that, in consequence, a solicitor may not, without the full knowledge and free assent of his client, make any pecuniary advantage from him other than proper charges and disbursements. The particular point of the case is that it applied this principle to clients' money in the hands of a solicitor which the solicitor puts on deposit and which, in consequence, earns interest. Your Lordships held that solicitors must account to their clients for any such interest.

I want to make it abundantly plain that the solicitors' profession completely and absolutely accepts that decision. There is not the slightest desire on the part of the Law Society, or on the part of the profession, to repeal the decision in that case. On the contrary, it is the foundation of the practice of a solicitor that this particular fiduciary relationship exists and should be maintained; indeed, the whole structure of the Law Society's supervision and, if necessary, discipline of the profession rests upon that foundation. The Amendment to which I am asking the Committee to agree is designed, not to repeal this case but, in fact, in some respects, to put additional obligations upon solicitors and to define the proper way in which the principle of the case should be applied in certain instances.

As it stands to-day, the position is that a solicitor who receives clients' moneys is under obligation to put them in a separate banking account, apart from his own moneys. There is no obligation whatever on the solicitor to put clients' moneys on deposit, or to earn interest upon them. If he does, then he must account for it. The difficulty in the practical application of this case relates to sums which are themselves too small to be put on deposit, or sums which are held for too short a period to justify their being put on deposit. A solicitor will have, in his clients' account, perhaps, a large number of sums of £1 or 10s. in respect of rents or small debts collected, or in respect of maintenance payments under a separation order which have been collected. I think the Committee will agree that it would be ridiculous to suppose that there could be any possibility of that money being put on deposit and earning interest which should be accounted for to the client.

Then there is the other extreme, that of sums which are large enough in themselves to be justifiably put upon deposit but which are being held for too short a period. A typical instance is in a conveyancing practice, where a large number of conveyancing matters are always going on—the buying and selling of houses of £5,000 or £6,000 in value. The solicitor will have these sums coming in and he will be paying them out again within a few days. So there are two elements, really, in this matter that have to be taken into account: the size of the amount and the period over which it will be wanted.

Now the problem arises in this way. Although these sums, whether by reason of their amount or by reason of the period, cannot properly or reasonably be put on deposit, it is possible for a solicitor prudently to look at the sum total of his clients' account and say, "I think I could safely put a fifth, a fourth, or a third of this money on deposit for a particular period of time, and earn interest upon it". The difficulty in practice of applying the decision in Brown's case is that it is quite impossible to calculate what, if any, part of that interest earned would be attributable, shall we say, to the 10s. the £1 and the 5s.—the small sums to which I have been referring. It is really impracticable to do the arithmetic and to work it out in that way. I explained that difficulty, I think, to your Lordships on Second Reading.

Therefore, if a solicitor is to comply strictly with the full principle of Brown's case in those circumstances, there is only one thing he can do; that is, not to put the money on deposit at all. In that case nothing is earned, the client gains absolutely nothing and the solicitor loses a certain amount of interest. The only party who gains is the bank, who will have the money on current account without paying any interest at all. I am sure the Committee will agree that, to work this thing in practice in such a way that the client gets nothing, the solicitor loses and the bank gains, was certainly not the intention of this House when laying down this very right and proper principle in Brown's case.

What is the remedy I am proposing for this situation? I am suggesting that where it is fair to the client, money shall be put upon deposit account. It is a legal obligation, in the right and proper case where it is fair to the client, to put the money on deposit. That is a new legal obligation, because it goes far beyond what was required by the Brown case. I propose further to provide that if the solicitor does not put the money on deposit in a case where he should have done so then he shall still be bound to account to the client for the amount of interest that would have been earned if he had put that money on deposit.

I referred just now to two factors: the amount and the period. Each of those is relevant in coming to a conclusion as to whether, in fairness to the client, the money should or should not be put on deposit. Broadly speaking, rough justice might be done if it was said that it would be unnecessary to put the money on deposit or to account for the interest if the sum was less than £500 or the period over which it was held was less than, shall we say, eight weeks or two months. Neither of those factors, I am sure the Committee will agree, can be regarded as absolute. One can remember cases where the sum would be less than £500, where it would be say £450, but would be available for six months. Clearly, that money ought to be put on deposit. One can conceive of cases of a million pounds, held for three or four weeks. That clearly ought to be on deposit. The solution I offer is this. Above the limit of £500 or two months there should be an absolute obligation to put the money on deposit. Below those limits there should be an obligation to put the money on deposit where it was fair and right for the solicitor to do so in the interests of the client.

The means whereby it is proposed to carry that principle, if you approve it, into effect is by means of this new clause that I am moving, coupled with rules which the Law Society would make under the clause. The clause, as the Committee will see, is mandatory upon the Law Society. It says: Rules made under Section 29 of the principal Act shall make provision for requiring a solicitor, in such cases as may be prescribed by the rules … et cetera. So the Law Society has to do it; and I am authorised by the Law Society to give an absolute assurance that they will make such a rule and bring it into force simultaneously with the coming into force of this Bill, if and when it becomes an Act.

I think the Committee will agree that some form of rule procedure is necessary, because, from what I have said, a measure of elasticity is essential in giving effect to fairness in this way. It did not seem to me to be right that I should ask the Committee to give the Law Society this power without ascertaining what means they would use to exercise this power and without bringing that to your Lordships' notice. Therefore, I invited the Law Society to draft a rule and to submit it to the Master of the Rolls for his provisional approval (if I may use that colloquial expression) because it seemed to me right that the Committee should be in a position to judge the combined effect of the clause and of the rule.

That rule has been drafted and it provides, virtually, that if the two limits, £500 and two months, are exceeded, there shall be absolute liability to put the money on deposit and to pay interest to the client. If, on the other hand, it is reasonable and fair to the client, even under those limits, that it should be done, there is equally an obligation there. There are three sanctions for that. There is the first and obvious one that the court has the last word in these matters. Second, we are providing a new sanction in the rule that the Law Society may be asked by the client to give a certificate as to whether the solicitor was right or wrong in not accounting for interest or not putting his money on deposit. Lastly, and probably most important of all, there is the accountant's certificate—I am still calling it a "certificate" though I am going to move an Amendment later to call it a "report"—which the solicitor has to produce before he can get a practising certificate. That accountant's report must certify that the accounts rules have been complied with. This new rule will be one of the accounts rules and will fall within the ambit of the accountant's inspection.

I am glad to say that the Law Society responded to my invitation: that is, to draft the substance of the rule that they are prepared to make. I am glad to say also that they submitted it to the Master of the Rolls; and I am even more glad to say that, according to my information, the Master of the Rolls would be prepared to approve such a rule. But as I see the noble and learned Lord, Lord Denning, is sitting here beside me, he will no doubt be able to tell us whether I am right or wrong in reading his mind. The last thing—I am not sure whether I said this before—is that we are not proposing that this clause should be retrospective. We do not like retrospective legislation and we are leaving the profession to sort out for themselves as best they can the situations in which they find themselves from the date of the Brown case to the date that this Bill becomes an Act and, as I hope, comes into force. I beg to move.

Amendment moved— After Clause 7 insert the said new clause.—(Lord Tangley.)

VISCOUNT DILHORNE

I am sure the Committee are grateful to the noble Lord for his clear exposition of what at first sight appears rather a complicated proposal. I am also sure that the proposals put forward could solve the difficult problem which arose for members of the solicitors' profession in the light of the decision on the Brown case. I would congratulate the noble Lord and, indeed, the Law Society for the proposals now put forward, which, for my own part, I fully support.

LORD SILKIN

I should like also to congratulate the noble Lord on the clear way in which he has explained this rather complicated Amendment. What I want to say has no bearing on the merits of the proposal. I think the Law Society are doing the right thing; and I consider the compromise, if I may so call it, is fair and reasonable. I should think it would commend itself to members of my profession. But I want to enter a caveat about the way in which this is being done. I realise that it may be rather late in the day to complain about the rules procedure, the procedure of an organisation making rules which provide for a legal obligation on members of the profession and which, as the noble Lord explained, lay down certain penalties in the event of a breach of these rules. From time to time all of us, I, especially, and the noble and learned Viscount himself, have complained about delegated legislation: the growing practice of passing legislation by means of regulations under an Act which have to be approved, or which can he rejected by means of a Negative Resolution. But, at least, these regulations are published, and Parliament has an opportunity of expressing its views either by a Negative or a Positive Resolution. Nevertheless, it is regarded as unsatisfactory, but possibly inevitable in view of the increasing complexity of legislation and the inevitable length of the Bills that come before us.

But this is a further step—the making of rules which do not have to be approved by anybody except three noble and learned Lords—the Lord Chancellor, the Master of the Rolls and the Lord Chief Justice. I am sure none of them will take my words as casting any reflection upon them in any capacity whatever. But to give the Law Society or any other body the power to make such rules, which are binding on the profession and, incidentally, affect the general public as well, without requiring their approval even by members of the profession, seems to me a very considerable extension of the doctrine of delegated legislation.

I realise that I am a little late in the day in complaining about this procedure. It was in the 1957 Solicitors Act and, so far as I know, it might have been in earlier legislation. But I think that the time has arrived when we ought to look at what we are doing and, if possible, call a halt to this increasing trend of legislation by rules. It is not my province this evening to put forward any alternative. I think that this is a matter which requires very careful consideration. All I want to do is to point out to the Committee that this is an undesirable practice and that it would be worth while looking into the whole question to see whether any alternative can be found, which would give the people concerned—that means, the general public and the members of the profession—the opportunity of approving these rules and definitely of putting an end to this increasing trend of legislation by rule. I want to repeat that so far as the actual proposed rules are concerned, I see no objection to them. But that is quite irrelevant. These are rules which are going to affect a large number of people, with penalties imposed in respect of a breach, and those affected ought to have the opportunity of approving them.

LORD DENNING

May I say how much I sympathise with the view expressed by my noble friend Lord Silkin. It happens that the only person who has to approve these rules is the Master of the Rolls. The Lord Chancellor and the Lord Chief Justice are excused the responsibility in this case. The substantive section of the original Act says, as regards the rules on accounts: Any such rules shall not come into operation until they have been approved by the Master of the Rolls. It was originally proposed in this Bill that even that sanction should be taken away; but that is going to be amended. This is a special responsibility of the Master of the Rolls, because here it is not just the interests of the Law Society that are concerned, but also the interests of clients. I have been privileged to see the proposed rules and, as Master of the Rolls, I should like to say that I am satisfied that they fairly protect the interests of clients.

At all events, in the new rules the principles in law and equity settled by Brown's case are to be followed so far as possible. What has happened over the years is that solicitors, and, I may say, other people such as stockbrokers and estate agents, who have in their hands large amounts of clients' money and who put them into current account, where there is no interest, have not been responsible to anyone, but if they put those moneys into deposit account they were held responsible for the interest. That has always been the position in law and equity, but in point of practice this has not been so. I may say that many counsel, when their fees have been in the hands of solicitors and it has been a long time before they received them, have thought about what has happened to the interest on the fees.

This rule goes further than Brown's case. It says that a solicitor is responsible for the interest not only when he puts money on deposit; if he ought to have put the money on deposit and has not done so, he is responsible for the interest, too. That is a big advance, a great strengthening of the position from Brown's case and it has to be encouraged. There is this additional safeguard. If the amount is over £500 and is to be held for more than two months, then in any case the solicitor has to be responsible for the interest to the client. Apart from that there is the overriding rule, in fairness to the client, whether the money is on deposit or ought to have been on deposit, that he must account for the interest. As the rules follow out those principles. I am sure that all Masters of the Rolls will be pleased to approve them. This rule is to come into operation at the same time as the exempting section. So I would support this Amendment.

THE LORD CHANCELLOR

The Government have given careful consideration to the practical difficulties which have been occasioned to the solicitors' profession by the decision of your Lordships' House in Brown v. Inland Revenue Commissioners. It was not very easy to see what would be the right method of solving those difficulties so that they would be both practical and fair to clients. But, having given this Amendment careful consideration, the Government accept it. They feel that this is a right and proper method by which those difficulties might be solved.

I have some sympathy with the point raised by my noble friend Lord Silkin, but of course this is just the sort of case in which experience might suggest that either the monetary limit or the period of time should be increased or decreased. Where legislation to make changes of that kind is necessary, one is apt to be told that there is no Parliamentary time. The difficulty is that we cannot have it both ways. The Government feel that if it were for the Law Society to make these rules on their own, there might be some question about it; but the public interest is fully safeguarded in that such rules require, and will continue to require, the approval of the noble and learned Lord the Master of the Rolls. For those reasons, the Government accept the Amendment. This means, of course, that we will also accept it in another place.

LORD AIREDALE

May I humbly put forward a suggestion for one small drafting improvement? This new clause being mandatory, as the noble and learned Lord, Lord Tangley, told us, I should have thought that subsection (2) would have begun by saying, not as it stands, The cases in which a solicitor may be required to act … but rather The cases in which a solicitor shall be required to act …". I may be quite wrong about this, but if I am right there will be the opportunity at the next stage of the Bill to make this small drafting Amendment.

LORD TANGLEY

I think I should deal with that last point. I am obliged to the noble Lord for raising it, but I believe the word "may" is correct in the context. I will explain why this is so if the noble Lord wishes me to, but I am satisfied that "may" is the right word to use in this connection.

On Question, Amendment agreed to.

Clause 8 [Amendment of section 30 of principal Act]:

6.51 p.m.

LORD TANGLEY moved, in the proposed new subsection (1) of Section 30 of the principal Act to leave out "certificate" and insert "report". The noble Lord said: I would ask the permission of the Committee to take with this Amendment, No. 8, Amendments Nos. 9 to 15 inclusive. This battery of Amendments, if I may so describe them, is designed entirely to sooth the consciences and increase the repose of the accountants. The position is, as I reminded your Lordships just now, that accountants have to produce a document to a solicitor, and a solicitor has to produce the document to the Law Society before he can get a practising certificate. The accountant's document must state that the hooks have been examined and that the Solicitors' Account Rules, which will include such a rule as we have been discussing in the last Amendment, have been complied with during the relevant period.

There are certain factors in those investigations which involve the accountant in forming a matter of opinion. The accountants say that only, facts should be certified and that one will report upon an opinion. And if opinion and fact are mixed, they think that "report" is the right way to describe their document, rather than "certificate". Far be it from me to worry the accountants' consciences or to disturb their repose. Far be it from a lawyer to quarrel with an accountant on a mere matter of wording. I am in a benevolent mood in this matter, and I want to give this point to the accountants, even if it takes ten Amendments to do it. I hope your Lordships will join me in that benevolent state of mind and agree to the Amendments. I beg to move.

Amendment moved— Page 6, line 21, leave out ("certificate") and insert ("report").—(Lord Tangley.)

On Question, Amendment agreed to.

LORD TANGLEY Amendments Nos. 9, 10 and 11 are consequential Amendments. I beg to move.

Amendments moved— Page 6, line 22, leave out ("certificate") and insert ("report") Page 6, line 25, leave out ("certificate") and insert ("report") Page 6, line 29, leave out ("certificate") and Insert ("report").—(Lord Tangley.)

On Question, Amendments agreed to.

LORD TANGLEY: This is a consequential Amendment. I beg to move— Page 6, line 30, leave out subsection (2) and insert: ("( ) In section 30(2)(c) of the principal Act, for the word 'certificate' there shall be substituted the word 'report'. ( ) In section 30(3) of the principal Act:—

  1. (a) after paragraph (a) there shall be inserted the following paragraph—
  2. (b) in paragraph (h), for the word 'certificate' there shall he substituted the word 'report'.")—(Lord Tangley.)

On Question, Amendment agreed to.

LORD TANGLEY

This, too, is a consequential Amendment. I beg to move. Page 6, line 34, at end insert— ("( ) For the words 'accountant's certificate' wherever they occur in section 30 of the principal Act there shall be substituted the words 'accountant's report'.")—(Lord Tangley.)

On Question, Amendment agreed to.

Clause 8, as amended, agreed to.

Clause 9 agreed to.

Clause 10 [Solicitors guilty of undue delay in certain matters]:

LORD TANGLEY

This Amendment is a pure matter of drafting. The Law Society are taking powers, as I explained on Second Reading, to act in certain cases of delay, and it has been represented to me that it was not clear under this clause, as drafted, whether those powers could be exercised only when a solicitor was acting purely as a solicitor, or whether they could be pursued when he was also acting as a trustee. The object of this Amendment is to make that clear. I beg to move.

Amendment moved— Page 7, line 1, leave out ("with any") and insert ("any matter which relates to the administration of a").—(Lord Tangley.)

On Question, Amendment agreed to.

LORD TANGLEY

This Amendment relates to the Postmaster General. Under the clause in the original Bill the Postmaster General was asked to undertake certain duties with regard to redirection of postal packets. He has represented to the Law Society that we are asking him to do more than he has power to do. The object of this Amendment is to relieve him of an obligation which he says he cannot undertake. I beg to move.

Amendment moved— Page 7, line 14, leave out ("paragraph 7") and insert ("paragraphs 7 and 8").—(Lord Tangley.)

On Question, Amendment agreed to.

Clause 10, as amended, agreed to.

Clause 11 [Control of clients' documents and moneys in the control or possession of certain solicitors]:

LORD TANGLEY

This is another drafting Amendment. It is exactly the same point as I raised on Amendment No. 16, about a solicitor who is also acting as a trustee. I beg to move.

Amendment moved— Page 7, line 42, leave out ("with any") and insert ("any matter which relates to the administration of a").—(Lord Tangley.)

On Question, Amendment agreed to.

LORD TANGLEY

This also is a drafting Amendment, and in this connection I would refer also to Amendment No. 20. The Law Society are entitled under the clause to receive copies of certain documents under paragraph (i), and the provision should apply also to paragraph (ii). I beg to move.

Amendment moved— Page 8, line 11, leave out from ("subsection") to ("or") in line 12 and insert ("or to any sum of money referred to in paragraph (ii) of this subsection").—(Lord Tangley.)

On Question, Amendment agreed to.

LORD TANGLEY

This is a consequential Amendment. I beg to move.

Amendment moved— Page 8, line 12, after ("matter") insert ("or sum of money, as the case may be,").—(Lord Tangley.)

On Question, Amendment agreed to.

Clause 11, as amended, agreed to.

Clause 12 [Control of deceased solicitor's practice in certain circumstances]:

LORD TANGLEY

Under Schedule 1, the Law Society are entitled to take possession of documents in certain cases, either from a solicitor or from his personal representative. The object of this Amendment is to make it clear that if an order has been made against a solicitor and the solicitor dies that order shall continue in force against his personal representative without need to apply for a new order against the personal representative. I would refer also to Amendment No. 22, which is consequential upon this. I beg to move.

Amendment moved— Page 8, line 31, after ("and") insert ("shall continue to apply").—(Lord Tangley.)

On Question, Amendment agreed to.

LORD TANGLEY

This is a consequential Amendment. I beg to move.

Amendment moved— Page 8, line 32, after ("apply") insert ("or applied, as the case may be,").—(Lord Tangley.)

On Question, Amendment agreed to.

LORD TANGLEY

This Amendment is designed to remedy a purely grammatical slip. The phrase "personal representatives" ought clearly to be "the personal representatives". I beg to move.

Amendment moved— Page 8, line 33, after ("words") insert ("the").—(Lord Tangley.)

On Question, Amendment agreed to.

Clause 12, as amended, agreed to.

Clause 13 [On death of solicitor practising on his own account Society to deal with banking accounts of practice]:

LORD TANGLEY

This Amendment proposes to remove some words which I believe are now superfluous and might cause some difficulty in practice. It is a very technical point. I will explain it if any of your Lordships feels it desirable to spend any time on it, but I can assure you that it is purely a technical point. I beg to move.

Amendment moved— Page 8, line 44, leave out from ("Society") to ("to") in line 45.—(Lord Tangley.)

On Question, Amendment agreed to.

Clause 13, as amended, agreed to.

Clause 14 [Administration of practice of deceased solicitor where no grant applied for]:

7.0 p.m.

On Question, Whether Clause 14 shall be agreed to?

LORD TANGLEY

My Lords, I am asking your Lordships to leave out this clause. When I mentioned the matter on Second Reading, I told your Lordships that the Senior Probate Registrar believed that the object which this clause was designed to fulfil could be dealt with under the Judicature Act. I am glad to say that conversations have taken place between the Law Society and the Senior Probate Registrar, and the Senior Probate Registrar is prepared to issue a Practice Direction under the Judicature Act which will, we believe, solve the problem and make this clause and the powers it contains unnecessary.

THE LORD CHANCELLOR

As the noble Lord will remember, I felt bound to take some objection to this clause on Second Reading, for reasons which I then gave and need not now repeat. I am happy to know that other arrangements have been made which will enable the noble Lord to withdraw the clause.

On Question, Clause 14 disagreed to.

Clause 15 [Order under paragraph 7 of Schedule 1 to principal Act to be an act of bankruptcy]:

On Question, Whether Clause 15 shall be agreed to?

LORD TANGLEY

In this case also I am going to ask your Lordships to leave out the clause. I also mentioned this on Second Reading. The effect of the clause would have been to enable the Law Society, entirely in the interests of clients, to treat a freezing order of a solicitor's bank account as an act of bankruptcy. The President of the Board of Trade drew attention to the fact that there is no other act of bankruptcy except where there has been a debt—and an unpaid debt at that—and that it would be going far beyond the ordinary bankruptcy practice to allow this particular happening to be an act of bankruptcy. The Law Society have considered this, and I am inclined to the view that we have let the balance swing too far against the solicitor in this particular instance. Therefore I would ask leave for this clause to be left out of the Bill.

On Question, Clause 15 disagreed to.

Clause 16 [Power to make grants out of Compensation Fund in additional circumstances]:

LORD TANGLEY

This is really a drafting Amendment. The original clause, as drafted, relied on Section 32 of the Solicitors Act, 1957. It has been redrafted, with the aid of very distinguished draftsmen, to give full effect to the clause as I explained it on Second Reading. We believe that in this form it is more certain in its effect. I should like, if I may, to refer also to Amendment No. 26, which is consequential on this Amendment. I beg to move.

Amendment moved—

Leave out Clause 16 and insert the following new clause—

Power to make grants out of Compensation Fund in cases of hardship

(".—(1) Where the Council on a complaint being made to the Society against a solicitor are satisfied that he has failed to account for money due to a person in connection with his practice as a solicitor, or in connection with any trust of which he is a trustee, and that that person has suffered or is likely to suffer hardship in consequence of the failure, the Society may, subject to the provisions of this section, make to that person a grant (hereafter in this section called a hardship grant') out of the Compensation Fund maintained under section 32 of the principal Act.

(2) The Society shall not make a hardship grant unless—

  1. (a) it has given to the solicitor (except in a case where he has died) at least eight days' notice in writing requiring of him an explanation of the state of affairs to which the complaint against him relates, and
  2. (b) the solicitor has failed to comply with the notice, or he has complied with it but the Council are of the opinion, and have so notified the solicitor in writing, that his explanation does not constitute a sufficient assurance that the money will be accounted for within a reasonable time.

(3) A hardship grant may be made whether or not the solicitor had a practising certificate in force at the time of any act or default by him which is relevant to the matters giving rise to his failure to account, and notwithstanding that subsequently to that act or default the solicitor has died or had his name removed from or struck off the roll, or has ceased to practise or been suspended from practice.

(4) A hardship grant may be made either unconditionally or subject to the conditions of this subsection, and if the Society determines that it shall be so subject and, when making the grant, gives to the person receiving the grant notice in writing of its determination, the following provisions shall have effect, that is to say,—

  1. (a) the Society shall to the amount of the grant be subrogated to any rights and remedies of that person in respect of any matters giving rise to the solicitor's failure to account, and
  2. (b) that person shall have no right under bankruptcy or other legal proceedings or otherwise to receive in respect of those matters any sum out of the assets of the solicitor until the Society has been reimbursed the full amount of the grant,
and in paragraphs (a) and (b) of this subsection references to the person to whom the grant is made or to the solicitor include, in the event of his death, insolvency or other disability, references to his personal representative or any other person having authority to administer his estate.

(5) The Council may make rules with respect to the procedure to be followed in giving effect to the provisions of this section, and of Schedule 2 to the principal Act, including rules as to the furnishing of particulars by a person appearing to be eligible for a hardship grant; and for the purposes of inquiring into any matters which may affect the making or refusal of a hardship grant, the Council or any committee appointed by the Council and authorised by them to exercise any of their functions or to assist them in the exercise of any such functions, may administer oaths.

(6) In this section the expressions 'trust' and 'trustee' have the same meanings as in section 29 of the principal Act.

(7) At the end of paragraph 7(d) of Schedule 2 to the principal Act (which enables the Compensation Fund to be applied in making grants under section 32 of that Act) there shall be added the words ' or of any hardship grant which the Society may make under section 16 of the Solicitors Act 1965'.

(8) The provisions of this section shall be supplemental to, and not derogate from, the provisions of section 32 of the principal Act (which enables grants to be made out of the Compensation Fund in the case of a solicitor's dishonesty).")—(Lord Tangley.)

On Question, Amendment agreed to.

Clause 17 [Amendment of Schedule 2 to principal Act]:

LORD TANGLEY

This is a consequential Amendment. I beg to move.

Amendment moved— Page 10, line 43, leave out from ("under") to ("of") in line 44 and insert ("section 16(4)").—(Lord Tangley.)

On Question, Amendment agreed to.

LORD TANGLEY

This is not quite a drafting matter, but it is really very formal. It relates to the Compensation Fund. The Society's servants and agents are, under various provisions of the existing legislation, indemnified against the consequences of acting under the orders of the Law Society, but there seems to be some little doubt as to whether the Compensation Fund itself would bear any such indemnity. There is no doubt that that was the intention, and this Amendment makes it clear. I beg to move.

Amendment moved— Page 10, line 44, at end insert ("and the following sub-paragraph shall be inserted after paragraph 7(d) of that Schedule: (dd) for payment of all costs and damages incurred by the Society, its servants or agents by virtue of paragraph 16 of Schedule 1 to this Act'.").—(Lord Tangley.)

On Question, Amendment agreed to.

Clause 17, as amended, agreed to.

Clauses 18 and 19 agreed to.

Clause 20 [Amendment of section 46 of principal Act]:

LORD TANGLEY moved to leave out subsection (1). The noble Lord said: This is a clause relating to the quorum of the Disciplinary Committee. On Second Reading I explained to your Lordships that in the interests of the parties it was thought desirable to enable the parties to agree to the proceedings continuing notwithstanding the temporary absence of one member of the Committee. The quorum, of course, is three. I have had an opportunity of discussing this matter at some length with the noble and learned Lord, the Lord Chancellor, and he has persuaded me that I ought to drop this provision. I do that with some regret, because there is nothing for the Law Society, there is nothing for the profession, in this clause: it is entirely for the convenience of the parties. But the Lord Chancellor has represented to me, as he did on Second Reading to the House, that this could cause embarrassment.

He has also made the point, which I think is a very cogent one, if I may say so with respect, that when you are conducting proceedings which may lead to the ruin of a solicitor, he ought at least to have three of his judges there all the time. It is too serious a matter to be left to less than three. I have weighed up all these representations, and, with some regret but none the less feeling the force of these arguments, I propose that we drop this proposal. I beg to move.

Amendment moved— Page 12, line 2, leave out subsection (1).—(Lord Tangley.)

THE LORD CHANCELLOR

I am grateful to the noble Lord for having met the points I raised on the Second Reading debate.

On Question, Amendment agreed to.

Clause 20, as amended, agreed to.

Clauses 21 to 31 agreed to.

Schedule 1 [Substituted Schedule 1 to principal Act]:

LORD TANGLEY

In speaking to this Amendment, may I also refer to Amendment No. 30? This raises the ancient and very serious question as to what is a postal packet. That is a happy hunting ground—the noble Lord, Lord Conesford, is not here—for many lawyers in many fields. We had included in this Bill our own definition of postal packets, telegrams, letters, et cetera, but we thought that discretion was the better part of valour and that we had better fall back on the sanctified definition of Section 87(1) of the Post Office Act, 1953. I beg to move.

Amendment moved— Page 17, line 17, leave out from ("fit") to ("postal").—(Lord Tangley.)

On Question, Amendment agreed to.

LORD TANGLEY

This Amendment is consequential. I beg to move.

Amendment moved— Page 17, line 17, after ("packets") insert ("(as defined by section 87(1) of the Post Office Act 1953)").—(Lord Tangley.)

On Question, Amendment agreed to.

LORD TANGLEY

This Amendment is also for the benefit of the Postmaster General. He has drawn our attention to the fact that we are putting certain duties upon him. In this case, he finds that he can undertake these duties but thinks he ought to be paid for doing them, which is quite right. That is what this Amendment provides. I beg to move.

Amendment moved— Page 17, line 23, at end insert— ("( ) Where such an order is made under sub-paragraph ( ) of this paragraph the Society shall pay to the Postmaster General the like charges (if any) as would have been charged and payable:—

  1. (i) in respect of an application or instructions by the addressee, in the case of a permanent change of his place of business, for the re-direction or delivery of postal packets to which the order relates to him at the address of the person to whom they are to be re-directed, sent or delivered under the order, during the time specified in the order, and
  2. (ii) in respect of the re-direction or retransmission of any individual postal packet in accordance with the order, if the packet had been re-directed or re-transmitted in accordance with such application or instructions as aforesaid.")—(Lord Tangley.)

On Question, Amendment agreed to.

LORD TANGLEY

With your Lordships' permission, I should like to take Amendments Nos. 32, 33 and 36 together, as they raise the same principle. It really is a simple matter of drafting. We are proposing to omit paragraph 17. We are satisfied now that Section 99 of the Judicature Act, 1925, already covers the point, so there is no need to make special provision in this Bill. I beg to move.

Amendment moved— Page 17, line 27, leave out ("paragraphs 17 and 18") and insert ("paragraph 17").(Lord Tangley.)

On Question, Amendment agreed to.

LORD TANGLEY

This Amendment is consequential. I beg to move.

Amendment moved— Page 17, line 28, leave out ("they affect") and insert ("it affects").—(Lord Tangley.)

On Question, Amendment agreed to.

LORD TANGLEY

This Amendment is purely a matter of drafting. Attention has been drawn to the fact that firms as well as individual solicitors have clients. Therefore, we ought to refer to firms' clients as well as "his" clients—the reference there is, of course, to an individual solicitor. I bee to move.

Amendment moved— Page 17, line 32, after third ("his") insert ("or his firm's").—(Lord Tangley.)

On Question, Amendment agreed to.

LORD TANGLEY

This Amendment deals with a similar point. It provides that procedural notice may be necessary for a firm no less than for an individual solicitor. I beg to move.

Amendment moved— Page 18, line 15, after ("solicitor") insert ("or his firm").—(Lord Tangley.)

On Question, Amendment agreed to.

LORD TANGLEY

This Amendment is consequential. I beg to move.

Amendment moved— Page 19, line 11, leave out paragraph 17.—(Lord Tangley.)

On Question, Amendment agreed to.

Schedule 1, as amended, agreed to.

Schedules 2 and 3 agreed to.

Schedule 4 [Provisions of principal Act repealed]:

LORD TANGLEY

This Amendment provides that all rules should require approval of the Master of the Rolls, and not only some. This is the matter to which the Master of the Rolls himself referred just now, and it makes all rules subject to the approval and consent of the Master of the Rolls. I beg to move.

Amendment moved— Page 20, line 29, leave out from ("subsection;") to ("sections") in line 30—(Lord Tangley.)

On Question, Amendment agreed to.

LORD TANGLEY

I have to apologise for the next Amendment; it is a hangover. There was a clause in an early draft of this Bill to which this was appended. The clause was not included in the Bill as I introduced it, and I am very sorry to say we overlooked that these words were still there. It is a disgraceful confession to have to make, but these words relate to nothing else in the Bill, and, therefore, I ask that this vermiform appendix be removed. I bee to move.

Amendment moved— Page 20, line 31, leave out from ("subsection;") to ("in") in line 32.—(Lord Tangley.)

On Question, Amendment agreed to.

Schedule 4, as amended, agreed to.

In the Title:

LORD TANGLEY

This Amendment to the Long Title is designed to provide accommodation (if that is the right way of putting it) for the new Clause 7 arising out of Brown's case. I beg to move.

Amendment moved— Line 11, after ("solicitors;") insert ("to make provision with regard to interest on clients' money;").—(Lord Tangley.)

On Question, Amendment agreed to.

Title, as amended, agreed to.

House resumed: Bill reported, with Amendments.