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The SMDF debacle

1. The solicitors of Ireland are going to decide an issue (on a postal poll).

2. The issue is whether they should assume responsibility to indemnify some negligent solicitors against claims made, or to be made, against those solicitors. The solicitors are (or were) solicitors “insured” by the Solicitors Mutual Defence Fund Ltd. (SMDF) and against whom successful claims for professional negligence have or will be made.

3. The Council of the Law Society of Ireland is in favour of this idea and sought to get authority to impose the responsibility on the profession by convening a meeting of Law Society members in the City West conference centre in Dublin.

4. There were sufficient members of the Society opposed to the Council’s idea to stymie its plan. The opposition, invoking the Society’s rules, undermined the Council’s meeting and forced remittance of the matter to a decision by postal poll. (Contrary to press report, the “meeting”[which convened anyway] in City West did not remit the matter to the poll).

5. Every practicing solicitor in Ireland is, nowadays, obliged to have insurance cover (PI insurance) for claims arising from the professional negligence of the solicitor.

6. There are a number of entities offering cover of this kind, the SMDF having been one.

7. “Entities” is used here to distinguish SMDF from its rivals, or competitors; they, unlike it, are all authorised insurers, regulated, nominally at least, by the Central Bank of Ireland. The SMDF was not like that. It appears to have been modeled on the structure of UK medical professional defence bodies current at its formation. Those bodies, at that time, denied that they “insured” member doctors, in the contractual sense; they indemnified them in practice, but denied an obligation to do so.

8. It is an astonishing fact that solicitors in Ireland accepted “cover” of such a weak kind, (from SMDF) to protect them when they most need help, but they did.

9. The cover was weak for two reasons; it was discretionary and it was, it seems, unregulated. (Being unlike its rivals/competitors, SMDF liquidators [if appointed] will be unable to access the Insurance Compensation Fund to make up shortfalls).

10. In principle the Law Society’s proposal is very odd. It overlooks the fact that every individual solicitor has paid for professional indemnity insurance. It seems to take for granted that solicitors should be collectively responsible for the negligence of any individual solicitor. This is a new principle; before PI insurance became compulsory, the only person answerable for a solicitor’s negligence was the solicitor at fault (and his/her partners, if any).

11. That SMDF has failed is, of course, of great concern. It was promoted by the Law Society of Ireland. Its directors were, invariably, past Presidents of the Law Society. Arguably, the failure of the SMDF is a failure of the Law Society. But that is not to say that the Law Society’s members are responsible for that failure. The members had no method of seeking accountability for the activities of the SMDF or the Law Society’s failures relating to it. (Even the High Court is constrained here; the Law Society of Ireland is a corporate body, but a very unusual one; it is not subject to the provisions of the Companies Acts. Most of the jurisdiction of the High Court over corporate bodies is derived from those Acts).

12. The Law Society’s proposal is not just odd in principle; it is unsustainable even on a cursory examination of its terms. It assumes that the Law Society or its members has the legal authority to impose a charge on solicitors.

13. The Law Society, in its proposal, intends to make the charge on solicitors a condition of furnishing the annual practicing certificate. In short, it will withhold the certificate if the charge is not paid.

14. The power of granting the certificate is one conferred on the Law Society by statute (the Solicitors Acts 1954-2002).

15. That such a refusal would be unlawful is immediately obvious, for this reason; solicitors do not have to be members of the Law Society.

16. To be a solicitor and to be a member of the Law Society is not one and the same thing. Consequently, what the members of the Law Society decide is irrelevant to the solicitors’ profession.

17. Consequently, it would be unlawful of the Law Society to deny a solicitor a practicing certificate unless he/she paid for the SMDF shortfall.

18. There are other good reasons to question the Law Society’s idea. The profession has no information as to why SMDF is insolvent. It has no information on any investigation, proposed or actual, into the management of SMDF. Without information like that, it is not possible to know exactly who is going to benefit from the Law Society’s proposal. By definition, only solicitors who have been negligent will benefit. Furthermore, given that SMDF asserts that it operates on a “claims made” basis for indemnity and that cover is yearly only and the only possible uncertainty lies with respect to claims which may be made before the end of 2011, the identities of the negligent solicitors in question are known to every practicable degree.

19. Who are they, that the Law Society is anxious to protect them?