SRA - Accounting Rules

[Beagle2000]

Hi, apologies I'm unsure where to post this specifically.

A law firm has some money held in a client account that it received by way of over payment, attempts had been made to return this money but have been unsuccessful. Since then the client has built up some outstanding debt and has not paid the bills. Under SRA rules, can the company use the client funds to clear the outstanding debt? the company has tried to engage with the client to get permission to do this and to obtain payment for outstanding debt but has had no response. Can the money be used or not?

Thanks!

[Beagle2000]

Ula*could you place into the right area if possible

[des8]

This is from*https://www.lawsociety.org.uk/suppor.../client-funds/

If you require payment of your fees from the money you hold for a client, you must first send them a bill of costs or other written notification of the specific amount. You may then transfer that amount from the client account to your office account, provided that there are sufficient funds held on behalf of the relevant client.*

[Beagle2000]

des8*Thanks for your reply. Would this not contrevene rules 5.1(a) as we are using the funds for something other than the purpose of the held funds? the original payment receieved was in error and not for bills at the time and we have not been able to return them.

[ULA]

I think it's ok to leave it in this area as it is a general question.

Was the overpayment made on a matter which is now closed and for which Rule 2.5 of the Accounts Rules requiring the law firm to have made sure "that client money is returned promptly as soon as there is no longer any proper reason to hold the money" has not been adhered to?

I presume that bills have been send to the client for services carried out by the law firm which are outstanding. Did the law firm not get any monies on account?

What attempts have been made by the law firm to 1) return the overpayment 2) seek payment of current outstanding bills?

Sorry I just need to understand a bit more as to how the law firm is in receipt of “surplus” client money.

*

[des8]

I had assumed (always my problem!) the over payment was by way of over paying fees and so* could have argued using it would be in compliance with 5.1(a).
But why not ask SRA for written authority as per 5.1(c)
The prescribed reasons in 5.1(c) are here*https://www.sra.org.uk/solicitors/st...-client-money/

The Law Society advice does seem a bit iffy when you delve into the matter.
IMO, to be safe, obtain prior written authority from SRA !

[ULA]

Agree des8 if the SRA gives authority then the law firm is covered !

[Beagle2000]

Hi both. The payment was made via cheque for a matter that did not go ahead. Since then other matters have been opened. We tried to return the payment via cheque in absence of bacs details. But the client never cashed it. How long does it take for the SRA to approve?*

[des8]

Sorry, but impossible to guess, especially in the current climate

[ULA]

How long ago did you send the cheque because typically most banks will say they reserve the right not to pay a cheque date more than 6 months prior?