Solicitors

Our Ref: EMcG            Your Ref;                                    8^th October 2012

Alan Shatter TD

Minister for Justice and Law Reform

St. Stephen’s Green

Dublin 2

Re: Legal Services Regulation Bill 2011

Dear Minister,

I am writing this open letter to you about one element of your proposed legislation, the Legal Services Regulation Bill 2011. That element is the errors in the Bill, relating to legal costs.

What is wrong with your Bill, relating to legal costs? Well, it correctly assumes that some reform is needed in the area. Ever since early Victorian times, a solicitor has had obstacles put in his/her way to recover legal costs. You already know of those obstacles. Allied to that, the calculation of legal costs has been rendered so abstruse that even an expert like yourself has fallen foul of the rules applying to their calculation. See the judgment of the High Court in Gallagher, Shatter v De Valera (1983) HERE.

I do not think that your expertise has been improved with the passage of time since that judgment. You were wrong then and you are wrong now, for different reasons.

So, what IS wrong with your Bill?

1.   Litigation is expensive. Nothing in your Bill will change that. Of course, your Bill may reduce legal costs from a category of “very expensive” to “expensive”, but it will not make those costs “affordable”.

2.   Worse than that, the Bill ignores reality. It assumes that, in every litigation case, the solicitor’s client pays his or her legal costs. You and I know that that is not the norm.

3.   In Ireland, and the UK, the judiciary, generally, follow a practice of awarding costs of the action to the victor.

4.   This is a two edged sword. It makes litigation a very risky business; the costs, if you lose, are high. On the other hand, it encourages certain forms of litigation. It encourages victims of abuse of power to challenge their abuse. I am not just referring to abuse of power by office holders like yourself; I include abuses by people who have more money than the victim. It is easy to dominate people who lack the resources to fight back, particularly in a society like ours where, rightly, we insist that disputes are to be settled only in a court system and not by direct action.

5.   Encouragement is not sufficient to deliver justice; for that, a victim also needs help from a lawyer or lawyers. If that help is not forthcoming the encouragement is a disservice. The victim might become a litigant without representation (a “lay litigant”). (There are more and more lay litigants appearing in the court system nowadays. They represent a serious problem for the courts, not least because a case with such a litigant takes much longer than otherwise).

6.   A litigant, without representation by a lawyer, is gambling on winning and is increasing the chances of losing. At the same time the litigant is likely to suffer very high levels of stress.

7.   Your Bill, overall, is likely to increase the number of lay litigants.

8.   That fact alone is an indictment of you. It should be your primary duty to deliver justice to the citizens and residents of Ireland. The place where they get that justice is in court and you should facilitate that court justice. The major problem in this area is a lack of proper civil legal aid. A lay litigant is not a match for an opponent with legal representation. In short, the court system cannot run correctly without lawyers.

9.   You and your predecessors have had your work done for you by Ireland’s lawyers. By “work”, I mean discharging your primary duty. Because the courts will award costs to successful plaintiffs Ireland’s lawyers consistently act for indigent plaintiffs who are victims of abuse of power. The plaintiffs are the clients of the lawyers, but they are clients who, generally, do not pay their own lawyer. Those lawyers assess and filter the injustices in our society and advance claims in court for people who otherwise would suffer injustice without redress. This “system” is inefficient. Practising lawyers cannot undermine their livelihood by taking all such cases on a “deferred fees” basis. They inevitably select those with the best chance of success. (They are the “marginal” cases beloved of economists.)

10.   Your Bill fails to acknowledge this. Worse, it pretends that no such activity takes place. It pretends that you are the defender of those plaintiffs as they “pay” for those legal services.

11.   The State has established, nominally, a system of civil legal aid. In practice that delivers, very slowly, legal services only to indigent family law litigants. Nobody knows this better than you; your livelihood, as a lawyer, has been derived from family law litigation representing persons who do not qualify for legal aid.

12.   Who, then are the beneficiaries of your Bill’s provisions relating to legal costs? The litigants who lose are the beneficiaries.

13.   Who are the litigants who lose? Ironically, lay litigants are, generally, losers, but the big losers are the companies in Ireland’s insurance industry, and, on occasion, the State. These are the most litigious parties in Ireland’s court system. It is inevitable, particularly in the case of the insurance companies, that they will lose. They are contractually obliged to indemnify their customers when claims are made against the customers. They, generally, cannot decline indemnity just because the customers’ actions are or were egregious and inflicted loss, injury and damage on innocent plaintiffs.

14.   So, they should settle those claims. But they do not. At least, they do not settle enough of them. There are reasons for this, but this is not the moment to canvass those, disparate, reasons.

15.   There is one reason worth mentioning; sometimes the insurance company or even its insured, calculate that the victim plaintiff is vulnerable to pressure. The available pressure to apply is the stress generated by litigation. Litigation and its oppressive costs are weapons in the contest between plaintiffs and defendants.

16.   Your Bill is a contribution to that contest. You have weighed in on the side of the defendants and, consequently, will drive more injured  victims beyond the “margin”.

Yours faithfully,

McGarr Solicitors

1. I have been injured; will the person who injured me, or his/her insurance company, hasten to fully compensate me?

No, they will not. This is human nature and also implied in the social arrangements under which we live.

2. Will the Injuries Board ensure that my interests are fully looked after?

No, it will not. It has a limited focus. It only addresses one question; the level of compensation the injured person ought to get. It does little to ensure that you will actually get your compensation.

3.         How can that be?

An injured person will get nothing unless he/she can prove, if necessary, that some other person has been at fault and that the injury results from that fault. The Injuries Board expressly excludes consideration of fault.

4.         Surely that’s a good thing?

Yes, if the person who injured you expressly admits the fault.

5.         Will that happen in the Injuries Board system?

No, it never comes up for mention.

4.         Who will look after my interests, then?

You will.

5.         How do I do that?

By fully understanding what is implied in the Injuries Board system.

6.         What is implied in the Injuries Board system?

The Injuries Board system exists to ensure that any legal costs incurred by you as a result of your injury will be borne by you and not by the person who injured you.

7.         Is that true?

Not completely. That’s how the Injuries Board started out, but it has changed its mind. It now makes an effort to make your opponent pay for your legal representation, or some of it, if you, the injured person, are a vulnerable person.

8. I have been injured. Am I not vulnerable by that fact alone?

No, not in the view of the injuries board. In the view of the person from whom you are trying to extract compensation, or his/her insurance company, yes, you are vulnerable, but that is advantageous to them and they owe you no duty to reduce your vulnerability.

9.         I am inexperienced in these matters. Am I not vulnerable by that fact, then?

No, not in the view of the injuries board.

10.       What is a vulnerable person, in the view of the Injuries Board?

Someone who needs legal advice to make the application to the Injuries Board.

11.       But surely no such advice is necessary?

The Injuries Board thinks it is sometimes. If you are a vulnerable person.

“Into the face of the young man who sat on the terrace of the Hotel Magnifique at Cannes there had crept a look of furtive shame, the shifty, hangdog look which announces that an Englishman is about to talk French.”

So starts “The Luck Of The Bodkins”, by P. G. Wodehouse. His triumph is to continue writing with the same skill, as in the first sentence, for the rest of the book. He does something else; he imparts meaning to the world.

Every litigant in court must do the same and invariably a litigant must convey that meaning in writing, either in pleadings or in affidavits or both. The premier mode of writing to convey meaning is narrative. It not only implies a point of view, it implies understanding. A litigant without understanding of his/her case will lose it.

This is what my computer dictionary/wikipedia has to say about third party narration, that is narration by “… an unspecified entity or uninvolved person…”.

“Traditionally, mainstream fiction with third person narration operates near the middle of the subjective/objective spectrum, alternating between objective and subjective reality and also offering alternating perspectives of the main characters. This allows the narrator to present both the objective reality and the subjective perspectives of the various characters on that reality. Given this information, the reader can then judge for themselves (without being told outright by the narrator) whether the character is a hero, fool, or other type based on the way they perceive and interact with the established reality.”

In “Law and Philosophy”[2007, Oxford University Press] one essay, with the title “Objectivity and Value: Legal Arguments and the Fallibility of Judges”, by Stephen Guest, runs for 27.5 pages and we need all of them. It is required of judges that they be objective, otherwise they cannot be wrong and the hierarchy of courts giving opportunities for appeals implies that judges can be wrong.

From the litigant’s standpoint, to expect him/her to relate “just the facts” is to ask him/her to abandon meaning. As my computer dictionary/Wikipedia puts it;

“Naturally, any being that is omniscient is supernatural, or God-like, and must hold back information due to the constraints of time and the potential to overwhelm the reader.”

We must be selective in the facts we choose to relate and, of course, nobody is omniscient. What is not obvious is that, in litigation, the applicable law determines what are the relevant facts. Unless you know the law you cannot know the facts.

So, that’s what we need lawyers for; to write the pleadings and affidavits of the litigants and to make sense of the world.

The Council of the Law Society of Ireland has proposed that the members of the Law society vote for the following proposal:

“That [the members] approve[s] the recommendation of the Society’s Council to provide financial support to the Solicitors Mutual Defence Fund…”

Surprisingly for lawyers, the Council seems not to recognise that it carries a risk of non-persuasion. This is evidenced in its several failures to treat the members respectfully.

Why did the Council submit the proposal to the members, rather than adopt it at the Council? The Council elided the question, but the answer is very relevant. Many of the Council members are also members of the SMDF and would therefore, be conflicted. A vote by persons with a conflict of interest would be easily overturned in the appropriate forum. In short, the Council could not lawfully adopt the proposal.

The Council has not been restrained in its advocacy of the proposal. It has urged its adoption on the Law Society members. It is using the resources of the Law Society to procure its adoption. It is doing this without declaring the conflict of interest of the Council’s SMDF members. It is the fiduciary duty of corporate directors to avoid conflicts and they are further bound to disclose them.

The proposal is of doubtful legality. The SMDF, the Council of the Law Society says, is a private independent body, not controlled by the Law Society. The funding of the SMDF bailout will not be voluntary. It will be enforced by a planned refusal of the Law Society to make it a condition, of the receipt of an annual practicing certificate, that solicitors pay a levy for the bailout.

The Council has, it says, received legal advice from Counsel that the proposal is lawful. It has not disclosed that advice to the members, and clearly the Council has no intention of disclosing it now. It is not credible, without full disclosure, that the Council has such advice.

The claimed source of the law validating or empowering the proposal is Section 26 of the Solicitors (Amendment) Act 1994. A bailout of the SMDF was never in the contemplation of the Oireachtas in passing Section 26. None of the provisions of Section 26 authorise the Council’s proposal. Indeed, special mention, in Section 26, had to be made of SMDF because it does not fit with an essential ruling idea in the Section; that solicitors be indemnified. An indemnity, legally, implies a right to indemnity, usually in contract. It is generally admitted that the members of SMDF have, and had, no right to indemnity from SMDF; its benefits were available only at the discretion of the directors of SMDF.

There is something more immediate to throw the Council’s proposal into questionable light; is the SMDF insolvent?

The Council asserts it is, but there are reasons to doubt this. The Council itself discloses that the regulations governing SMDF preclude the SMDF directors from making any payment resulting in insolvency. In addition, the SMDF itself has not claimed it is insolvent. This is not surprising because there could be malign consequences for the directors of SMDF if that were the case. The issue is not a minor one; much of the Council’s case is predicated on the un-foreseeability of the actions of the inevitable liquidator of SMDF. But, if there is no insolvency, there is not likely to be a liquidator. (For lawyers, “insolvent” has a precise meaning; that the entity is unable to pay its debts when they fall due.) A letter from SMDF to some practitioners dated 27^th May 2011 is confirmation that SMDF is not insolvent; it says…

”It should be understood that the Fund has no immediate difficulties…”

If there is a problem in the SMDF, why do its members, including those on the Council of the Law Society, not solve their own private problem?

Even if the SMDF is not insolvent, it is possibly suggesting that it will not pay out on some at least of valid claims against solicitor members of the SMDF. Why do the members not top-up the “mutual fund” that is the SMDF, to meet those claims? On the figures provided by the SMDF, this would cost the members approximately €1000 per year. According to the Council of the Law Society, the prospects of them agreeing to this are “slim”, but they have not been tested.

Separately, the members of the SMDF could seek real professional indemnity insurance elsewhere. They will have to do this anyway at the end of the current year; the SMDF says it will not take on any business after this year; (we now see “business” here is a misnomer).

If SMDF members have poor claims histories they can apply to enter the “Assigned Risks Pool”, a device provided for in the Solicitors (Amendment) Act 1994. This allows solicitors with very poor claims records to continue in practise.

Consequently, there is no immediate problem. According to the SMDF, it has re-insured 100% of the risks for this year. In previous years it re-insured 90% of the risks. We do not, in the light of those facts, know why SMDF is taking the extreme step of ceasing “business” at the end of this year, but it is.

Here again, the Council of the Law Society has failed to properly inform the members as to what the problem is, and its implications.

The members of the Law Society should vote no to the Council’s proposal.

The Irish solicitors’ profession seems peopled by rabbits. The Irish Bar is preparing to make submissions relating to the forthcoming IMF/EU diktats. It rolled out the Attorney General in a conference at the weekend just past, to invoke pious words about the need to preserve the missionary-like zeal of “pro bono” barristers. (This writer approves of such barristers, when he can find them.)

The Law Society of Ireland, however, is wasting energy on the SMDF. More importantly it appears to be ignoring the need to prepare for the IMF/EU issues.

What are they? Because the IMF is busy and not often in Ireland, it, of necessity, has to find available domestic criticism of solicitors as ammunition to fire off. They believe they have it in the report of the Competition Authority of December 2006 “Competition in Professional Services; Solicitors & Barristers”.

The good news for the Law Society is that the IMF/EU ammunition is, in every sense, shoddy. (“Shoddy” was a cloth material for army uniforms for the Union soldiers in the American civil war; think of the fluff from the filter of your tumble drier and make it on an industrial scale. Now shape it into a garment. Now, send its wearer into the rainy winter).

At paragraph 5.274 it states the following;

“In seeking to limit excessive and costly litigation in relation to personal injuries, the regulations carry the risk of overly restricting advertising for other legal services. Other measures have recently been introduced in relation to personal injury claims, such as the Personal Injuries Assessment Board (PIAB) and the Civil Liability and Courts Act 2004, both of which also seek to control unnecessary and costly litigation, and consequently there is less need to rely on advertising restrictions as a means to limit personal injury litigation.”

This farrago of bad ideas indicates this; we are likely going to find ourselves looking at solicitors’ advertisements on the backs of busses.

OK, so what? So this; the IMF/EU nostrums will carry an outrageous agenda, as expressed in paragraph 5.274, that victims of personal injury should be hindered in the search for justice (a policy already established).

That is the point of attack the Law Society should be focusing on. It is incapable of doing so.

(The Maya independently invented the wheel, but could find no use for it.)

The proponents of the Law Society Council’s proposal to bail-out SMDF Limited have made much of their estimate of the cost of same per solicitor.

They have settled on a figure of €200 per year, for 10 years. This figure is reached by making a series of suppositions- that claims liability will be no more than 16 million euro, that the number of solicitors in practice will stay the same over 10 years, that reinsurers will not repudiate some or all of the claims on them and that the Law Society has the power to compel members to make such a payment.

Each of them are questionable. All of them must turn out to be true to make the €200 figure valid.

Nevertheless, if we accepted, for the sake of argument, that €16m was a valid figure, we could use it to work out what it would cost if paid for only by SMDF members. As we know SMDF indemnifies (not insures) 22% of the profession, then we can say that the total amount which would require to be levied on only them to reach the same figure is only slightly less than €1000 per year.

If, as has been asserted by the Law Society Council, it would be a disaster for that €16 million over 10 years not to be raised, it seems strange that they have rejected the (reasonable) principle that those who will benefit most, SMDF members, should look to their own resources first.

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

January 1, 1970 12:59 am 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.