The Law Society have issued a practice note providing interim guidance on mitigating any risk of liability for these funds.  It is unlikely that you will be liable for negligence for the loss of client’s monies, so long has you have placed the monies in accordance with the Solicitors’ Accounts Rules.  However any final decision on this is for the courts to decide.

 

The practice note suggests areas to consider in order to mitigate any risk of liability:

1. It would be prudent to advise your clients that you may not be liable to repay money lost through a banking failure. You may therefore update your terms of business to disclaim any liability.

2. You should make a reasonable assessment of the circumstances surrounding your individual client accounts and take any appropriate action. Factors to consider could include:

      - any statements from the bank reassuring customers of its stability

    - any government guarantees for depositors in UK banks, or for particular banks (This is not an exhaustive list)

3. You should not attempt to limit the extent of your liability to honour undertakings.

4. The client should also be reminded that the financial institutes holding the funds will group the account balances of individuals, sole traders, partnerships of less than1.4 million turnover and small companies so that they are only protected up to the £50,000 limit under the FSCS scheme (this new limit came into being 7/10). In other words clients with other accounts in a failing bank would only be covered for cumulative balances up to the protected amount of £50,000.

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