Rectify financial errors quickly

Accounting errors should not appear in conveyancing completion statements, but when they do occur they must be rectified quickly.


Mr K instructed solicitors in the re-mortgage of a property in north London. He was purchasing another property in west London and a release of equity from the re-mortgage was required to fund his purchase.


The transaction proceeded conventionally, but when completion statements were prepared, the solicitors made an accounting error indicating that they were to pay Mr K the sum of £2,200. In fact, Mr K owed that sum to the firm to balance the account for the simultaneous transactions.


On completion, the solicitors sent documents to Mr K with a cheque for £2,200. Mr K quickly spent the money on refurbishments in his new property.


Three months later, the solicitors wrote to Mr K identifying the error and asking him to return the money, while requesting a similar sum to balance the account. Mr K replied that he had been advised not to pay as the solicitors had made an error. The solicitors commenced proceedings in the county court. As soon as proceedings were served, Mr K paid the required sum.


Of course the error should not have occurred in the first place, and had proper attention been given to the preparation of the relevant statement it would not have done so. However, the solicitors reasonably pointed out that Mr K must have realised the position himself. He had earlier been advised that a sum of money would be due from him on completion, and he had taken advantage of the firm's error. The solicitors took the view that Mr K had acted unreasonably in refusing to repay the sum erroneously sent to him.


Had the matter ended there, the adjudicator may not have taken further action. However, the period of three months that passed between the erroneous payment to Mr K and the subsequent notification of the error to him was unrealistic. The position should have been noted when the firm's client account monthly reconciliation statement was prepared. The solicitors said that they had spoken to Mr K on the telephone 'fairly soon' after the event, but no evidence of any discussion was available. Thus the adjudicator was unable to reach a conclusion.


In the circumstances, a modest compensatory award of £100 was made. It took into account all the circumstances of the matter. The adjudicator expressed concern that the solicitors had taken a long time to identify and address their error.


This column is written by a Law Society adjudicator