The Council of the Law Society probably harbours people with mixed motives for proposing the bailout of the SMDF, but none can gainsay the fact that the appeal to the members of the Law Society is an appeal to them to conspire in their own humiliation.

The Law Society is entrenched in a conventional intellectual assumption that the Society is unlike other bodies and, at bottom, better. This view is, paradoxically, at odds with the fact that the Society has in the relatively recent past striven to grasp at manufactured heritage (the purchase of the Kings Hospital in Blackhall Place), a sure sign of insecurity.

A person of even moderate vision, not blinded by personal interest would see that the humiliation of an entire profession is against the real interests of that profession.

Consider; the Council shows no sign of devoting energy to meeting the challenge of the IMF/ECB bailout terms; instead it is navel gazing at a failed project of the past.

Whatever it may do, the Law Society of Ireland may not levy the bailout of the SMDF on solicitors, conditional on giving the annual practising certificate. Asked why the Law Society of Ireland would not  cite the legal basis for the claim that it could so, Mr. Gilhooly, the Law Society’s designated spokesman replied;

@Tupp_Ed it already has. S.26 of 1994 act gives power for levy. Specific legal advice from Bryan Murray s.c. C docs sent out with sgm notice

Wednesday, December 31, 1969 11:59 pm via Twitter for iPhoneReplyRetweetFavorite

@DSBAPresident

Stuart Gilhooly

To find out what the Law Society may do in relation to PI insurance for solicitors, just read Section 26 of the Solicitors (Amendment) Act 1994;

Section 26 (1) authorises the Society to make regulations “making provision for indemnity” against losses…incurred by…solicitors…”. [A bailout of SMDF is not within this provision.]

Section 26 (2) lists some of the things the Society may provide for. [None of these things fall within the current bailout proposal.]

Section 26 (3) gives a general power to the Society to do things to facilitate the implementation of the other powers vested in the Society under the Section. (“…indemnity within the section…”). [It is not a free standing power to do what the Society wants; it must refer to some other power of the Society and facilitate the exercise of that power.] This is a typical example of what is commonly termed “sweeping up words” in legislation. Bennion on Statutory Interpretation [5th Ed., p. 255] says;

“A power to do something extends only to that thing. Its purported exercise extending to a different thing is to that extent not an exercise of the power at all: ‘the power exercised must be the power conferred’.

Section 26 (4) stipulates some of the conditions the Society may set, relating to the insurance indemnity of solicitors. [None of these things fall within the current bailout proposal.]

PS It is fully acknowledged by the Law Society that payments by SMDF to cover the liabilities of its members are discretionary. Consequently, “SMDF” and “indemnity” are mutually exclusive terms.

Think about it.

Now, re-read Section 26.

The Council of the Law Society, many, if not all, of whom are members of the SMDF considered whether they could compel SMDF members to bailout the SMDF themselves. They decided they could not.

However, they decided they could compel members of the Law Society to do so. They have identified the pressure point on Law Society members as the annual practising certificate. Without the certificate a solicitor cannot practise. They propose to refuse a certificate unless the solicitor pays the bailout cost.

This assumes that the delivery of the certificate is a gift or a grant from the Law Society; it is not. The furnishing of the certificate is an act of the executive power of the State; the Law Society is simply an agent of the State in the transaction. It has no right to deny the certificate to a qualified solicitor. In furnishing the certificate it is following the provisions of legislation for the granting of certificates.

That legislation confers no power on the Law Society to extort its members to bailout a private, dodgy, financial services provider, the SMDF.

The Council of the Law Society is about to crash and burn, whatever the outcome of the postal poll.

On the 13th April 2011 the Council of the Law Society unanimously decided … to convene an EGM of the members of the Law Society and… recommended to support SMDF financially… up to a maximum of €16 million…

Following the failure to achieve their objective in the EGM, the matter was remitted to a postal poll of Law Society members. The Council is promoting the proposal in the poll and is using the resources of the Law Society to ensure acceptance.

A large number of the Council members are members of the SMDF. Their personal interests require that the proposal be adopted. Those personal interests arise from membership of SMDF, not as ordinary members of the Law Society.

Council members are fiduciaries and the applicable law is clear;

“..it is an inflexible rule of the Court of Equity that a person in a fiduciary position… is not, unless expressly provided, entitled to put himself in a position where his interest and his duty conflict.”

[Bray v Ford (1896 AC 44)]

It is a breach of corporate law and good governance to allow such a situation to arise, Even if the proposal is carried, it is open to challenge in the High Court because of the breach of fiduciary duty by the Council.

It is worthwhile looking at the profile of member firms in the SMDF. This is set out in the 2009 Annual report of SMDF, seen HERE.

A little more than one third were sole practitioners. The majority were mid-range firms. These firms have a stability, a solidity to them. They are profitable.

They are the firms failing to bailout their fund, the SMDF.

According to their spokesman;

“The chances of SMDF members voluntarily contributing to a bailout are “very slim””

Instead, they have decided to off-load the burden of the bailout on their fellow solicitors in the Law Society.

Furthermore they have captured the Council of the Law Society and are using the resources of the Law Society to promote their personal interests.

They have no interest in justifying the proposed SMDF bailout by reference to statute. Even it they did, they would have a problem; there is no statutory power in the Law Society to levy a bailout of the SMDF on Law Society members.

If the solicitors in the SMDF convene an EGM they can, in most conceivable circumstances, act as they decide.

If the solicitors in the Law Society pass the proposed SMDF bailout resolution they can act on it only if the Law Society has statutory authority to do what the resolution proposes. The reason is this; it would be unlawful to deprive a solicitor of his or her livelihood simply because he or she declined to contribute to the Law Society’s favourite charity, the SMDF.

The Law Society does not have that statutory power.

It would cause phenomenal reputational damage to the solicitors’ profession if it is later demonstrated that the Law Society does not and did not have the legal authority to compel solicitors to bailout the SMDF.

There are two sensible things the Council of the Law Society should do urgently.

1. Cite the presumed statutory authority for the Council’s bailout plan;

2. Change plan and convene an EGM of SMDF members to have those members bailout their own private company.

The Council members who are SMDF members could easily procure the EGM meeting. At a minimum it would be instructive if the SMDF declines its own bailout

An unknown number of the Council members of the Law Society are insured with the SMDF. They are, consequently, members of the SMDF. Although unknown, the number must be large because they chose as their spokesman a person who is a member of the SMDF.

As Council members they owe a fiduciary duty to avoid a conflict between their duties to the Law Society and its members and their own interests. This, it seems, is the reason they sought to get agreement for the SMDF bailout plan at an EGM of the members of the Law Society. They have persuaded themselves that, in refraining from casting votes in the Council on the plan, they are nonetheless free to apply the resources of the Law Society to benefit themselves by procuring a “yes” vote in the poll on the bailout.

They find it inconceivable that the SMDF problem should be considered their problem alone. To the suggestion that the SMDF members bailout the SMDF by cash injection from their own resources, the spokesman says:

“The chances of SMDF members voluntarily contributing to a bailout are “very slim””

This is chutzpah by the bucketful. It also overlooks the fact that circumstances have not left SMDF members with a choice in the matter; either they fund the bailout or they manipulate a bailout by the Law Society.

“Chutzpah” in Yiddish has been defined as:

“that quality enshrined in a man who, having killed his mother and father, throws himself on the mercy of the court because he is an orphan.”

The SMDF never pretended to be other than what it was, an unregulated discretionary mutual fund. What it did pretend to be, by posture, was the equal of an insurer offering professional indemnity insurance to solicitors.

It was not that.

To the best of this writer’s knowledge, the SMDF has not made any payments, such that it is insolvent. Nevertheless, the Law Society says it is insolvent.

The Law Society says that the SMDF revealed its financial situation (whatever its name) in March 2011.

That was a mere three months after the SMDF induced solicitors to give it a premium as “insurance” for the year 2011. It was also a very short time after the Law Society had assisted the SMDF with a substantial guarantee. The guarantee was needed because, without it, the SMDF could not carry on. Everybody, the Law Society especially, knew that the SMDF finances were dodgy.

Note, there was no admission that SMDF was “insolvent” at that time. All it had to do, which it was expected to do, was to charge the market rate for its “services”. That meant it was expected to price a solicitor out of the market if his or her claims record or other feature of past practise indicated that that should happen. This meant that there was, potentially and actually, an annual “winnowing” of solicitors for the benefit of the public and the profession.

The Law Society and indeed the Government, had made plans for this; the solicitor could go into the “Assigned Risks Pool”. This is a very dangerous place for a solicitor. It means the solicitor is next to being uninsurable. Needless to say, that solicitor is not an attractive customer to a normal insurance company. He or she very likely will make claims substantially in excess of the annual premium paid.

A solicitor like that is half way out of business. Possibly such a solicitor should be investigated for disciplinary offences.

In recent years, solicitors were advised, by the Law Society, to seek quotes from several insurers. If the SMDF was overcharging good solicitors, they had a remedy; move to some other insurer. Bad solicitors also had a remedy; seek shelter in the SMDF. After all, the Council of the Law Society had stood as ultimate guarantor for the SMDF.

The implications of the pending default of the SMDF and, more importantly, the proposed bailout by the Law Society is to avoid the planned winnowing of good and bad solicitors.

The disputatious differences between the Law Society and the SMDF is undoubtedly a domestic dispute. There are clear connections between the Law Society and the SMDF.

The most obvious connection is one of chumminess. Consistently, Presidents of the Law Society have moved over to directorships in SMDF after finishing their stint in the Society. It did not happen invariably, but it was an established pattern.

Presumably because of this, the Law Society’s briefing note has the following statement:

“The Society obtained legal advice that it should be able to successfully resist any claim that it has a liability for the SMDF.”

As pointed out by the Irish Times, the Law Society claim is odd, given its location. It is in a document urging the assumption of responsibility for that very liability. It is also incomplete; it does not mention that any claim against the Law Society might come from a liquidator of the SMDF or even from one of the Law Society’s chums in SMDF.

Those chums are very dangerous. They know the Law Society intimately; they also know the SMDF intimately, to a greater or lesser extent, depending on the individual chum.

They also know something that ordinary solicitors do not know; why they remained in the SMDF basket when they could have moved elsewhere. They know their own businesses, in short. They know what risks and dangers exist in their practices.

The bailout by the Law Society will allow them, like war criminals amongst refugees, to discard their “uniforms”, destroy their party records and vanish, for a time at least, into the general population of innocent solicitors.

In this eventuality, who is the victim, and who is the aggressor? Who is betraying the profession, endangering the public and perpetuating wrongdoing?

Who should be excluded from the “family home”?