Source : Straits Times - 24 Oct 2008
EVERYONE should join Chief Justice Chan Sek Keong in applauding the Law Society’s agreeing that lawyers should discontinue the practice of holding clients’ money. In a speech made at a recent Law Society event, CJ Chan pointed to the overriding public interest that needed protecting. As ethical standards decline amid financial temptation, questions will persist and, if unanswered, will hasten erosion of public confidence in an essential class of professionals. Client losses, the majority relating to property transactions, have been scandalous enough for the society’s council, in CJ Chan’s words, to ‘have seen the light’. Six lawyers have fled with some $29 million in the last five years. Clients have found it difficult if not impossible to recover their money. Grants from the society’s compensation fund are an inadequate consolation.
The society has since 2004 inspected clients’ accounts and told small firms to submit accountants’ reports. Since July last year, the Legal Profession (Solicitors’ Accounts) Rules have required a second signatory for any withdrawal from a client’s account exceeding $30,000. The case of a lawyer who went missing with $6 million last November made a mockery of those safeguards. Neither has threat of punitive action against those caught stealing clients’ money, nor difficulty for those so disbarred to gain professional reinstatement, proved to be adequate deterrence. Similarly, fraud insurance presents problems, not least of which is the question of premiums. Who should pay: lawyers or clients and, anyway, wouldn’t that imply how untrustworthy lawyers are? So, eliminating the temptation has become a last resort, unfairly pejorative though the implications still may be for the vast majority who uphold professional ethics. It is as watertight a prophylactic measure as there can be, and promises to be much more effective than the piecemeal self-policing the profession has adopted.
As they take shape, details of the arrangement should ensure that clients incur neither more inconvenience nor higher service fees. Indeed, third-party fund custody should make it unequivocally justifiable for them to recover interest accrued on what is held. Small firms should stop citing practicality as an excuse for wanting to hang on to current practice. A secure Internet bank transfer from any account takes only a couple of days and mouse clicks to complete. Instead of increasing book-keeping costs, they should fall, if not disappear, if a third party takes over not only custodial but accounting responsibility. Lawyers will take a big step in reinforcing confidence as they embrace not only the principle but the mechanics of the new measure.
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