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”?