The Co-operative Legal Services (CLS) has been hit with a massive fine last month of just over £143,000 for failings within its accounting procedures. The fine by the Solicitors Regulation Authority (SRA) is the largest so far to be imposed on an Alternative Business Structure (ABS).

CLS explained that they had entered into an agreement with a medical disbursement supplier which included a discount on medical reports for cases settling early, but this discount was not always taken into account during costs negotiations and a number of reduced medical report fees continued to be claimed in full.

The accounting error occurred as a result of CLS accidentally billing the full rate of invoice, rather than the discounted rate. The error was not initially picked up as the amounts were nominal and did not affect any clients.

The SRA recorded that the “Co-Operative Legal Services Limited breached Principle 6 of the SRA Principle 2011 and Rule 1.2 (e) of the SRA Accounts Rules 2011 by wrongly recovering the sum of £28,777.12 in relation to medical disbursements from third party insurers. This was a breach of the indemnity principle of costs law.”

The SRA added that “Co-Operative Legal Services Limited acted recklessly in not considering the impact of its agreement with a medical disbursement supplier regarding the recovering of its fees upon its processes and procedures used by its staff.”

Whilst the CLS do not agree with the SRA decision, they say they have accepted it and have been committed to resolving the error by refunding the overpayments as soon as they were identified.

In a statement, the firm said: ‘Co-op Legal Services takes its values of openness, honesty and social responsibility seriously. We have a strong track record of compliance with the SRA with no previous disciplinary history’

The level of the fine, however, shows how seriously the SRA takes even accidental breaches of its accounts rules and firms not dealing with money for disbursements appropriately. Not only was this considered a breach of solicitors accounts rules, but also a breach of the principle to maintain trust in the legal profession (now set out in Section 1 of the SRA Code of Conduct 2019).

Unfortunately for CLS, a salutary lesson for all in the profession that funds for disbursements need to be treated just as carefully as client money.

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