Question of ethics archive

Important: The guidance below was written and issued before the introduction of the SRA Handbook on 6 October 2011, and may refer to regulatory material that is no longer in effect. Although it may still be relevant, this guidance has not been rewritten in light of the wide-ranging regulatory changes implemented on 6 October 2011. Accordingly, it has been archived.

October 2010

Note that references to a "rule" or to the "Code" mean the rules in the Solicitors' Code of Conduct 2007; "the Accounts Rules" mean the Solicitors' Accounts Rules 1998. 

Dealing with left-over client balances

Q. I recently had occasion to look at another firm's terms and conditions. One of the conditions states that if there is £10 or less on a client ledger at the conclusion of a matter, the firm will donate it to a charity of their choice. Is this acceptable under the Solicitors' Accounts Rules 1998?

No. Under rule 15(3) of the Accounts Rules, a solicitor must account to his/her client for all money held in a client account at the end of a matter. You must therefore make every effort to return the money to the client and it would not be acceptable to have a standard term as you have suggested, no matter how small that amount is.

If the amount is very small, then you can seek the client's instructions as to whether to send a cheque to the client or to put the monies in a charity box, but it is the client's decision. You should confirm the arrangement in writing (although in the case of a very small, one-off amount, it may be sufficient just to keep an attendance note of the conversation).

Rate of interest payable

Q. I have been acting for an executor, who is also the sole residuary beneficiary, in the administration of an estate. The deceased’s tax affairs were quite complex and have taken some time to resolve, as a result of which we have held a reasonable sum of money in a separate designated client account at our bank. However, the client is now complaining about the amount of interest earned and has suggested that we failed to act in his best interests by shopping around to obtain the best possible rate. Should we have done so?

There is no requirement to obtain the best rate of interest. However, rule 25(1) of the Accounts Rules states that you must aim to get a reasonable rate of interest on monies held in a separate designated client account and it is not acceptable to look only at the lowest rate of interest obtainable.

Destroying old files

Q. We are fast running out of storage space for old files and other documents. In the current economic climate, we are not prepared to consider seeking additional space and are therefore proposing to destroy the older files. In this respect, how long does the SRA expect us to keep the files?

The Code does not specifically deal with the storage of files, but you need to bear in mind the following points:

  • As a matter of law, many of the papers on the file will belong to your client(s). Unless, therefore, you reserved the right to destroy the file after a specified period of time (either at the outset of the retainer, or by agreeing this with your client prior to placing the file into storage), you will need to assess the risk involved if you destroy files without your clients' consent, both in terms of a possible claim on your indemnity policy and a complaint to the Legal Ombudsman on the grounds that you have provided an inadequate professional service. It may therefore be advisable to seek the views of your insurers.
  • Original documents such as title deeds, wills, etc. should not be destroyed without the owner's consent.
  • It is very important to check each file to ensure that there is no outstanding balance left on your client account. If there is, the file should not be destroyed until such time as you have dealt with the outstanding balance by
    • returning it to the client, or
    • if the client cannot be traced, in accordance with rule 22 of the Accounts Rules if the amount held is £50 or less, or
    • by making an application to the SRA for authorisation under rule 22(1)(h) of the Accounts Rules.
  • In deciding whether, and if so which, files to destroy, you will doubtless wish to take into account the likely statutory limitation period for any action which may arise out of the file. However, you also have obligations to retain certain documents for specified periods, both at law (e.g. for VAT purposes or under the Money Laundering Regulations) and in conduct (e.g. under the Solicitors' Financial Services (Conduct of Business) Rules 2001 and under rules 32(9), 33 and 38(2) of the Accounts Rules).
  • You owe a continuing duty of confidentiality to former clients. Therefore, if you do decide to destroy files, you should ensure that it is done in a manner that will not breach that confidentiality.