I move: "That the Bill be now read a Second Time."
The purpose of this Bill is to amend and extend the Solicitors Acts, 1954 and 1960, and to provide for related matters.
The principal legislation relating to the profession dates from 1954. A further Act in 1960 was necessary mainly as a result of a decision of the Supreme Court that disciplinary powers conferred on the Incorporated Law Society by the 1954 Act were unconstitutional. In 1991 a Bill was introduced amending the 1954 and 1960 Acts. That Bill lapsed, however, on the dissolution of the 26th Dáil.
The 1994 Bill is a major reforming measure which is intended to provide a modern framework for the solicitors' profession. Many former Ministers undertook to introduce legislation amending the Solicitors Acts but I am pleased to have the opportunity of bringing this legislation before the House.
This Bill was introduced against a background where there has been persistent public concern about the way in which complaints concerning solicitors are dealt with by the Incorporated Law Society and about the difficulties in obtaining redress against solicitors for negligence, shoddy work and over-charging. The Bill meets the commitment in the Programme for a Partnership Government to provide greater protection for clients of solicitors. It also takes account of a number of recommendations made by the former Fair Trade Commission.
The aims of the Bill are to ensure that clients of solicitors are better protected by the law in their dealings with solicitors, that the profession maintains the highest standards of conduct and a rigorous disciplinary system and that training and educational arrangements for solicitors are updated and improved.
Overall, the Bill proposes a wide-ranging reform of the law relating to solicitors which involves almost every aspect of the regulatory framework of the profession. One of the major areas of reform is based on the recognition of the rights of the consumer of legal services provided by solicitors. The uppermost concern in framing these measures is to ensure that consumers of legal services are fully protected by law in their dealings with solicitors.
The concept of consumers' rights was not generally recognised in legislation when the earlier Solicitors Acts were framed. There is today, however, a substantial body of consumer law and I want to ensure that the legislation which forms the basis for the regulation of the solicitors' profession reflects that positive development.
There are several measures in this Bill to protect the consumer. Solicitors' clients will have a right of redress where a solicitor provides inadequate services or where charges for services are excessive. There will be new requirements to ensure that solicitors are fully insured against damages awarded to clients arising from negligence on the part of solicitors. The powers of the Incorporated Law Society and the High Court to intervene in the practice of a solicitor in the interests of clients are also being increased. Clients will be entitled to clear information about the cost of a solicitor's services while undesirable charging practices are being prohibited. Criminal offences and tough penalties are provided where solicitors breach new tighter controls on handling clients' funds.
One of the most significant provisions is setting up a scheme for the investigation of complaints by an independent adjudicator about the Incorporated Law Society's handling of complaints about solicitors.
Part V contains major reforms reflecting the need to update and streamline the training and educational provisions of the existing legislation. The Bill comprehensively amends the society's functions in this area.
I now propose to turn to some of the more significant proposals for reform in these main areas. I want to deal first with those measures designed to strengthen the protection for members of the public who engage the services of solicitors.
The Incorporated Law Society will have new powers under section 8 to impose sanctions on solicitors who are found to have provided inadequate or shoddy services. The society will be empowered to limit the costs which a solicitor may recover from a client or require a solicitor to refund costs paid by a client and to rectify any error at the solicitor's expense arising from the inadequate services. Section 9 will empower the society to order solicitors, who are found to have charged excessive fees, to refund fees paid by their clients or to waive the right to recover costs.
These sections will provided a speedy and inexpensive remedy for many complaints against solicitors without affecting a client's right to seek redress through the courts.
Section 10 empowers the society to require a solicitor to produce any document relating to a complaint made against him or her which the society is investigating.
It is desirable that the exercise of the new powers being conferred on the society by sections 8, 9 and 10 should be capable of being appealed to protect the legal rights of solicitors and section 11 gives solicitors that right. Under section 12 the society will have new powers to enable it recover from a solicitor some of the costs — up to £1,000 — that it may incur in investigating complaints made under sections 8 or 9.
It is necessary to provide for further stronger measures to improve public confidence in the manner in which complaints about solicitors are handled. This is in response to public concern about the lack of an effective and transparent system for dealing with complaints against solicitors and, in particular, the absence of any public involvement in the process. To address this, section 15 of the Bill provides for the establishment of an independent adjudicator to investigate complaints about the society's handling of complaints against solicitors. The adjudicator will have wide powers, including the power to fully reinvestigate the original complaint made to the society about a solicitor, if the adjudicator is dissatisfied with the society's investigation of any complaint made to it.
The consent of the Minister for Justice will be required for the appointment of the adjudicator who, it is specifically provided, will be independent in carrying out his or her functions. It is also provided that the adjudicator must not be a practising solicitor, a member of the society or practising barrister. The adjudicator will be required to report to the Minister and these reports will be laid before both Houses of the Oireachtas.
I know the society is not opposed to the appointment of an independent adjudicator. It is, however, opposed to funding the scheme but the introduction of an adjudicator is necessary because of the failure of the solicitors' profession to live up to its responsibilities of self-regulation. The system for disciplining solicitors no longer commands complete public confidence. While I expect the cost of funding this new complaints scheme will be modest, it is wholly inappropriate to impose on the taxpayer for this purpose. I feel strongly that the profession should bear the cost involved and this is provided for in section 15.
A further measure intended to improve public confidence in the profession's disciplinary system is contained in section 16 which provides for the appointment, for the first time, of up to five lay members nominated by the Minister to the Disciplinary Committee of the High Court, to represent the interests of the general public. This committee, which from now on will be known as the Disciplinary Tribunal, is appointed by the President of the High Court and is responsible for conducting inquiries into allegations against solicitors of misconduct.
Under section 17 the disciplinary tribunal will be empowered to impose limited penalties where it finds that a solicitor has been guilty of misconduct. These new powers, recommended by the Fair Trade Commission, will enable the tribunal to dispose of some less serious cases of misconduct, without involving High Court proceedings which are necessary under the present legislation. I referred earlier to the Supreme Court decision in the "Solicitors Act" case that powers conferred on the Incorporated Law Society by the 1954 Act were unconstitutional. I am advised that the new powers now being conferred on the disciplinary tribunal under section 17 will not breach the constitutional requirements laid down in that case.
Section 18 extends the existing powers of the High Court to impose penalties on solicitors where the disciplinary tribunal report a finding of misconduct against a solicitor.
Under the provisions of section 22, the Incorporated Law Society will be required to publish information annually on complaints received about solicitors and the outcome of investigations by the disciplinary tribunal of complaints alleging misconduct. I hope that making this information generally available will help to improve the public perception of the manner in which the society handle complaints.
Sections 20 and 21 further restrict the employment of persons who have been struck off the roll of solicitors.
There have been instances in the past where funds were not available to meet the cost of damages awarded to clients arising from negligence on the part of their solicitors. Section 26 deals with such cases by enabling the Incorporated Law Society to require all solicitors to be covered by indemnity insurance against losses arising from civil liability claims. While I am aware that the vast majority of practising solicitors are covered by professional indemnity insurance, this provision constitutes an important additional safeguard. Practising solicitors also will be required under section 54 to satisfy the Incorporated Law Society that they are complying with the indemnity insurance requirements before practising certificates are issued to them. The Incorporated Law Society has assured me that it will introduce the necessary arrangements under section 26 as quickly as possible.
At present, the Incorporated Law Society can intervene in a solicitor's practice where a solicitor has been guilty of dishonesty. Experience has shown that considerably wider grounds for intervention are desirable to protect the interests of clients. Accordingly, under the provisions of sections 31 and 32 the Incorporated Law Society will be empowered to intervene in the practice of a sole practitioner who has died or who is incapable of managing his or her affairs through illness or because of an accident or who is adjudicated a bankrupt or who abandons the practice. In such circumstances, the society will be empowered to take whatever action it deems necessary in the interests of the clients. Where the conduct of such solicitor is likely to give rise to the payment of grants out of the compensation fund, the High Court may authorise the society to sell that solicitor's practice under the provisions of section 33.
Section 28 extends the society's powers to apply to the High Court for an order to freeze bank accounts where it believes that a solicitor has been guilty of dishonesty. It also gives the society a new power to apply for an order to freeze the assets of such solicitor.
Again, to protect the public, section 37 restricts newly qualified solicitors from setting up practice, without the consent of the Incorporated Law Society, as sole practitioners, or in partnership, for a period of three years following qualification. On the face of it, this provision appears to be somewhat restrictive but clients stand to benefit from it.
Section 68 addresses a major concern relating to the way solicitors deal with clients. This is the matter of solicitors and client costs. I feel strongly that clients should be informed in advance about a solicitor's charges or likely charges for providing legal services. At present, clients can be left in the dark about the cost of the solicitor's services. There can be great uncertainty. Often it is only at the conclusion of legal business that clients learn of the full liability to their solicitors. Deputies on all sides of the House will agree that this situation needs to be changed. I accept that the calculation of actual charges in advance in every case would not be possible particularly in contentious matters. However, these new requirements offer a very flexible structure providing statements of charges and solicitors should have little or no difficulty complying. Under this section at the outset solicitors will have to provide clients with particulars in writing of the actual charges or, where this is not possible, an estimate or, if neither is possible, the basis on which they will be charged for legal services.
In contentious business, such as personal injury actions, solicitors will be required also to inform clients where they will be liable to pay additional costs to the solicitor, over and above those recovered from the losing party. Having concluded contentious business, solicitors will be required to provide clients with details of the legal services provided, damages and costs recovered and, separately, the charges for the solicitor's services.
My intention here is to ensure that the client gets the maximum information possible, particularly at the outset, about the costs of a case and the costs of dealing with solicitors.
I am concerned with the apparently widespread practice among solicitors of deducting a substantial premium — often 10 per cent or more — from the damages awarded to their clients in personal injury cases, over and above the costs payable by the losing party. Those costs should normally cover most if not all of the necessary costs incurred by the successful client's legal representatives. To deal with this problem, section 68 prohibits solicitors from deducting an amount from clients' damages without the prior agreement in writing of the client, and, more importantly perhaps, it prohibits solicitors from charging costs to their clients on the basis of a percentage of any damages that may be awarded to a client.
Section 76, a major provision, faces up to the difficult issue of serious dishonesty in the solicitor's profession. It is, of course, unfortunate and regrettable that the reputation of the profession has been harmed by a small number of solicitors who have misappropriated or absconded with clients funds. It is in the nature of the work of solicitors that they are entrusted to handle very large amounts of money belonging to their clients. This is not, of course, any excuse for dishonesty on the part of solicitors. On the contrary, this should establish a special relationship of trust between solicitors and their clients. In fact the law recognises that there is a fiduciary relationship between solicitor and client.
Solicitors who misappropriate their clients money abuse this special relationship of trust. I need hardly state that the vast majority of solicitors are hardworking and honest professionals, and that the money misappropriated by dishonest solicitors is very small in comparison with the total amount handled by the provession in their dealings with the public.
Nevertheless, there is a problem. I know that the society is as determined as I am to tackle this abuse. To that end, section 76 creates criminal offences for breaches of a number of new requirements in relation to the handling by solicitors of clients' money. Solicitors will be required to keep clients' funds in bank accounts prescribed by the society and to maintain an accurate record of transactions involving those funds. The society will also be empowered to enforce these provisions. Breaches of these requirements will carry a maximum fine of up to £10,000. I am confident that rigorous enforcement of these provisions will significantly reduce acts of dishonesty by members of the profession and provide a quicker and more effective system for dealing with such cases as they arise. Above all, these provisions will act as a significant deterrent against abuse involving clients' money.
Section 73 obliges the society to make regulations, with the concurrence of the High Court, requiring solicitors in general to maintain clients' money in deposit accounts or to pay clients the interest on such money. This is an area where the Incorporated Law Society has taken action but I am convinced that it is appropriate in the public interest to make statutory provision for these matters.
The provisions of section 29 concerning the compensation fund will also benefit the clients of solicitors although perhaps less obviously than the provisions to which I have referred. The fund is maintained by the Incorporated Law Society to compensate for losses arising from dishonesty on the part of solicitors. Two major changes are proposed in the provisions governing the compensation fund. The first concerns section 21 of the 1960 Act which provides that any person suffering loss can be compensated from the fund. A Supreme Court decision in 1989 interpreted this as giving access to the fund to financial institutions incurring loss as a result of undertakings given by solicitors.
Section 29 will limit the scope of the compensation fund to clients of solicitors only. This is clearly right. It was never the intention that financial institutions engaged in large financial transactions, in pursuit of their own business and relying on undertakings from solicitors should be able to claim against the compensation fund should the solicitor default in circumstances in which the financial institutions are not clients of the solicitors. Banks and other financial institutions always have relied on solicitors' undertakings for purely business reasons and without any expectation that they would be entitled to have recourse to the compensation fund. Financial institutions are in a strong position to protect their own interests. They should not have to rely on the fund as a form of insurance considering the resources at their disposal and the expertise available to them in deciding whether or not to accept a solicitor's undertaking.
The second change affecting the compensation fund is the application of a cap or maximum grant limit of £250,000 in respect of a claim made on the fund. I am satisfied that this limit will provide more than adequately for the vast majority of claims for compensation made against the fund.
Nevertheless, should a claim in excess of £250,000 arise, section 29 provides that the society may exceed the grant limit in cases of grave hardship. This is an important additional safeguard for clients of solicitors. I am also empowered to increase the cap of £250,000 in line with inflation. No payment in excess of £250,000 has ever been made in respect of a claim on the fund by a non-corporate client of a solicitor. Unlimited liability or indeed any higher statutory limit could lead to depletion of the fund. In that scenario, the Incorporated Law Society could experience extreme difficulty in dealing fully and effectively with all losses suffered by clients. Clearly this would be unfair to clients.
Without these amendments, there would be the continuing risk of large financial institutions lodging claims against the fund of the order of perhaps several millions of pounds. Claims of that order would inevitably deplete the fund and it would become impossible for the Incorporated Law Society to make good losses suffered by clients of solicitors for whom the fund was designed to protect in the first place.
In 1988, the Incorporated Law Society made regulations permitting solicitors to advertise their services, subject to certain general limitations, including a prohibition on specifying a fee for services.
Section 69 of the Bill contains a provision that lifts this restriction. It prevents the Incorporated Law Society from prohibiting fee advertising by solicitors for any specified legal service. The society is opposed to this provision. One objection is that clients are not in a position to assess in advance the quality of the service being offered and are likely to be misled if they make decisions based solely on price.
The Bill gives the society powers to deal with false and misleading advertising. I have more faith in consumers than perhaps the Incorporated Law Society has. Every day consumers have to make important financial decisions for themselves in relation to services and products. Users of legal services are used to making decisions about the quality of services being offered. Advertising by solicitors of their services has been a reality since 1988 although fee advertising continues to be prohibited by the society. Price is clearly a key factor that consumers take into account but there are other factors such as the reputation of the supplier, dependability and quality of service. I see price advertising as providing further vital information to consumers so that they can make the optimal choice. I am not suggesting that it would be possible to advertise the prices of all services provided by solicitors but there are services of a more routine and predictable nature which will be suitable for price advertising, such as conveyancing and probate services. I am not aware that price advertising in England has had the dire consequences predicted by the society. In fact it is understood to have resulted in substantial reductions in costs, particularly in the area of conveyancing.
The society also suggests that price advertising is likely to expose the public to the risk of shoddy work from unscrupulous solicitors. The number of unscrupulous solicitors in the country is small and I take it the society is not suggesting otherwise in its objections to this provision. The Oireachtas has delegated to the society the responsibility to maintain a high general standard of professional conduct under the Solicitors Acts. The Bill gives the society new and additional powers to deal with shoddy or inadequate services and in general strengthens the society's regulatory control over the profession.
The society will have sufficient powers to deal with false or misleading advertising and to crack down on unscrupulous solicitors who provides less than quality services to their clients and I expect the society to deal vigorously with any such cases that may arise.
I now come to a number of provisions in the Bill which have been the subject of some debate outside this House. Sections 78 to 80 would open up will-making, probate and conveyancing services to competition from other bodies. I am a proponent of greater competitiveness in the provision of services generally as I believe that invariably the consumer stands to benefit. This may not be the case, however, in relation to relatively specialised services such as those in question. I accept that probate, will-making and conveyancing services represent an important part of many solicitors' practices. I am considering bringing forward proposals to amend those sections on Committee Stage. In the meantime, I would welcome the views of my colleagues in the House.