- The SRA shall establish and maintain a fund for making grants in respect of claims made in accordance with these rules.
- Solicitors, RELs, RFLs, recognised bodies and licensed bodies must make contributions to the Fund in such amounts and at such times as may be prescribed.
- Any unpaid contributions may be recovered as a debt due to the SRA.
- The SRA may at any time:
SRA Compensation Fund Rules (Archived)
No longer in effect
The SRA Compensation Fund Rules were superseded on 5 July 2021 by the SRA Compensation Fund Rules 2021. The SRA Compensation Fund Rules still apply in respect of applications before 5 July 2021.
Introduction
These rules govern the way that we operate the SRA Compensation Fund. This is a discretionary fund of last resort for making grants to people whose money has been stolen, or has not been accounted for, as a result of the acts or omissions of those regulated by us, and to relieve losses for which firms authorised by us should have had, but did not have, insurance.
It is funded by contributions from individuals and firms authorised by us.
We have provided guidance on the way we operate the fund.
Part 1: The Fund
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- The Fund is a discretionary fund of last resort and no person has a right to a grant enforceable at law.
- The primary objects of the Fund are:
- to replace money which a defaulting practitioner or a defaulting practitioner's employee or manager has misappropriated or otherwise failed to account for; and
- to relieve losses arising from the civil liability on the part of a defaulting practitioner or a defaulting practitioner's employee or manager who in accordance with the SRA Indemnity Insurance Rules should have had, but did not have, in place a policy of qualifying insurance.
Part 2: Payment of grants from the Fund
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- For any grant to be made out of the Fund, an applicant must satisfy the SRA that the applicant is eligible in accordance with rule 4 and (save in respect of a grant made under rule 3.4) has suffered or is likely to suffer:
- loss in consequence of the dishonesty of a defaulting practitioner or the employee or manager or owner of a defaulting practitioner; or
- loss and hardship in consequence of a failure to account for money which has come into the hands of a defaulting practitioner or the employee or manager or owner of a defaulting practitioner, which may include the failure by a defaulting practitioner to complete work for which the defaulting practitioner was paid,
- For the purposes of rule 3.1(b):
- an individual whose dealings have been in a personal capacity with the defaulting practitioner and who has suffered or is likely to suffer loss due to a failure to account shall be deemed to have suffered hardship; and
- a body corporate, or an individual whose dealings have been in a business capacity with the defaulting practitioner and who has suffered or is likely to suffer loss due to a failure to account must provide evidence to satisfy the SRA that it, he or she (the body or individual) has suffered or is likely to suffer hardship.
- The SRA may make a grant as an interim measure.
- The SRA may make a grant to alleviate direct losses suffered as a result of the civil liability of a defaulting practitioner (other than a solicitor or REL who falls within rule 5.2(b)) or a defaulting practitioner's employee, manager or owner in circumstances where:
- the defaulting practitioner in accordance with the SRA Indemnity Insurance Rules should have had, but did not have, in place a policy of qualifying insurance;
- the liability of the defaulting practitioner or the defaulting practitioner's employee or manager would have been covered by a policy of qualifying insurance; and
- the loss is not covered by the SIF.
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- A person is eligible under this rule to apply for a grant out of the Fund where the person:
- is an individual; or
- at the time the application is made, is a sole trader, partnership, body corporate, unincorporated association or mutual association with an annual turnover of less than £2 million,
- A person is eligible under this rule to apply for a grant in the circumstances set out in rule 3.1(a) if at the time the application is made the person falls within one or more of the following categories:
- A person is eligible under this rule to apply for a grant in the circumstances set out in rule 3.1(b) if the person:
- at the time the application is made falls within one or more of the following categories:
- has satisfied the SRA that its beneficiaries have suffered, or are likely to suffer, hardship if a grant is not made.
- A person is eligible under this rule to apply for a grant in the circumstances set out in rule 3.1(a) or (b) if the person:
- at the time the application is made falls within one or more of the following categories:
- has satisfied the SRA that its beneficiaries have suffered, or are likely to suffer, hardship if a grant is not made.
- The SRA may take into account such evidence as it sees fit when determining eligibility under rules 4.1 to 4.4 and may make a broad estimate of any relevant amount.
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- The SRA may only make a grant in respect of acts or omissions of a defaulting practitioner, or of a defaulting practitioner's employee, owner or manager as appropriate, which fall within rule 3.
- A defaulting practitioner means:
- a solicitor or an REL who at the date of the relevant act or omission was:
- practising in an authorised body; or
- practising in a non-commercial body;
- a solicitor or an REL who at the date of the relevant act or omission:
- was self-employed and practising in their own name, and not through a trading name or service company;
- did not employ anyone in connection with the services they provided; and
- was engaged directly by their clients with their fees payable directly to them;
- an RFL who is a manager or owner of an authorised body;
- a recognised body; or
- a licensed body,
- a solicitor or an REL who at the date of the relevant act or omission was:
- A grant may be made where, at the date of the relevant act or omission:
- a defaulting solicitor had no practising certificate in force;
- the registration of a defaulting REL or defaulting RFL had expired or been revoked;
- the authorisation of a defaulting recognised body or defaulting licensed body had been suspended or revoked;
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- The SRA may make a grant to a defaulting practitioner who or which has suffered or is likely to suffer loss by reason of their liability to any client in direct consequence of an act or omission of:
- in the case of a defaulting solicitor, defaulting REL or defaulting RFL, any of their employees or any fellow manager;
- in the case of a defaulting recognised body, any of its employees or managers or owners;
- in the case of a defaulting licensed body, any of its employees or managers or owners, provided that such act or omission arose in the course of performance of an activity regulated by the SRA in accordance with the terms of the body's licence,
- The SRA may make a grant under this rule by way of a loan upon such terms as the SRA specifies.
- In the case of a defaulting recognised body or a defaulting licensed body, the SRA may make such grant payable to one or more of the managers or owners of the defaulting recognised body or defaulting licensed body. If a loan is made to more than one person, they shall be jointly and severally liable for the repayment of the loan.
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- In respect of any grants made under rules 3, 6 or 7 the SRA may make a supplementary grant by way of a sum in lieu of lost interest on the loss underlying the principal grant. Such interest will be calculated by the SRA in accordance with prescribed rates.
- Where the application for the principal grant is in respect of a failure to redeem a mortgage, the SRA may also make a grant in respect of the additional interest accrued to the mortgage account as a result of the defaulting practitioner's failure to redeem.
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- For the avoidance of doubt, the SRA shall not make a grant in respect of losses that:
- arise solely by reason of professional negligence by a defaulting practitioner, or the employee or manager of a defaulting practitioner, save as provided for in rule 3.4;
- are indirect or consequential, save where a claim is made for costs of completing or remedying work for which the defaulting practitioner has been paid, or as otherwise provided for in these rules;
- are, or result from, the trading debts or liabilities of the defaulting practitioner;
- are for interest payable to the applicant, save where the discretion to make a grant under rule 8 is exercised;
- are suffered by the Legal Aid Agency as a result of making regular payments under the Agency's contracting schemes for civil or criminal work;
- are where the applicant:
- has been made bankrupt and any grant would vest in the trustee in bankruptcy;
- has entered into a voluntary arrangement with their creditors and any grant would vest in the administrator of the arrangement; or
- is in liquidation.
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- The SRA shall not make a grant in respect of any act or omission of an REL, or the employee of an REL, where such act or omission took place outside the UK, unless the SRA is satisfied that the act or omission was, or was closely connected with, the act or omission of a solicitor or the employee of a solicitor, or that the act or omission was closely connected with the REL's practice in the UK.
- The SRA shall not make a grant in respect of the act or omission of an RFL, or the employee of an RFL, where such act or omission took place outside England and Wales, unless the SRA is satisfied that the act or omission was, or was closely connected with, the act or omission of a solicitor or the employee of a solicitor, or that the act or omission was closely connected with practice in England and Wales.
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- The SRA may deduct from any grant such amount as it sees fit so that the applicant will not be in a better position by reason of a grant than the applicant would have been in if no loss had been sustained.
- The SRA may deduct from any grant such amount as it sees fit to represent monies already recovered, or which will or should have been recovered, by the applicant through other means in respect of the loss.
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- Where the loss has been sustained as a result of the act or omission of more than one party, the SRA will consider the role of each party in contributing to the applicant's loss in deciding whether to make a grant and, if so, the amount of any grant.
- In the case of a defaulting licensed body, the SRA will consider the extent to which the loss is attributable to an act or omission which falls outside the performance of an activity regulated by the SRA in accordance with the terms of the body's licence in deciding whether to make a grant and, if so, the amount of any grant.
Part 3: Applications and procedures
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- An applicant must make an application for a grant in the prescribed form, and within 12 months of the date they first became aware, or should reasonably have become aware, of the loss.
- The SRA may extend the 12 month period in rule 16.1 if satisfied that there are circumstances which justify the extension of the time limit.
- The applicant must provide information, documents and evidence requested by the SRA, which may include verification of matters by statement of truth or affidavit. Failure to provide such documentation or to co-operate with the SRA will be taken into account when determining the merits of the application.
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- The SRA may not make a grant unless it has given not less than 8 days' notice to the defaulting practitioner informing them of the nature and value of the application, unless it appears to the SRA that it would not be reasonably practicable to give such notice, or the grant should be made urgently.
- Where the SRA has made a grant urgently in accordance with rule 17.1, the SRA shall as soon as, and so long as, it is practicable to do so, give notice to the defaulting practitioner in the terms set out in rule 17.1 and may (insofar as any failure to give notice before the making of the grant has prejudiced the defaulting practitioner) waive in whole or in part the Fund's right of recovery under rule 18 against the defaulting practitioner.
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- Where the SRA makes a grant otherwise than by way of loan or if by way of loan repayments of the loan is waived or otherwise the borrower has failed to repay part or all of the loan, the SRA shall be subrogated to the rights and remedies of the person to whom or on whose behalf the grant is made to the extent of the amount of the grant.
- Where rule 18.1 applies, the recipient must if required by the SRA whether before or after the grant has been made and upon the SRA giving the recipient a sufficient indemnity against costs, prove in any insolvency or winding up of the defaulting practitioner and sue for recovery of the loss in the name of the recipient but on behalf of the SRA.
- The recipient of a grant must comply with all proper and reasonable requirements of the SRA for the purpose of giving effect to the SRA's rights under this rule, and shall permit the SRA to have conduct of any proceedings brought on its behalf.
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- If the SRA refuses to make a grant of either the whole or part of the amount applied for, the applicant will be informed in writing of the reasons for the decision.
- The fact that an application has been rejected does not prevent a further application being submitted provided that material new relevant evidence or information is produced in support of the new application.
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- Where an applicant intends to or has already instituted proceedings for recovery of their loss and wishes to apply for a grant in respect of the costs of the proceedings, the SRA will only consider such costs where:
- they can be shown to be proportionate to the loss and the amount likely to be recovered; or
- the proceedings were necessary for the making of an application to the Fund.
- Where a grant is made, the SRA may consider an application for a further grant in respect of the reasonable costs properly incurred by the applicant with either their solicitor or other professional adviser, provided that such costs were incurred wholly, necessarily and exclusively in connection with the preparation, submission and proof of the application.
Supplemental notes
Made by the SRA Board on 5 December 2018.
Made under sections 36 and 36A of the Solicitors Act 1974, section 9 of, and paragraph 6 of Schedule 2 to, the Administration of Justice Act 1985, section 83 of, and paragraph 19 of Schedule 11 to, the Legal Services Act 2007 and the Legal Services Act 2007 (The Law Society and The Council of Licensed Conveyancers) (Modification of Functions) Order 2011.