THE POSTAL ballot of members of the Law Society on providing financial support to the Solicitors Mutual Defence Fund (SMDF) will start this Wednesday. All ballots must be returned by June 13th at 1pm.
The ballot follows a general meeting of members of the society earlier this month, which was called by a petition organised by some members opposed to providing financial support to the SMDF, which insures about 30 per cent of solicitors. It is insolvent and is being wound down with liabilities estimated by the society at €170 million.
The resolution being put to members is to “provide financial support to the Solicitors Mutual Defence Fund up to a maximum of €16 million, to be funded by way of an equal payment from every practising solicitor for a period of 10 years and to be collected through the practising certificate fee or as otherwise determined by the society (currently estimated at €200 per solicitor per year)”.
The €170 million figure is challenged by the person nominated to write the opposing statement, Vincent Crowley, who claims the society has grossly underestimated the extent of SMDF liabilities. He says the society’s own adviser, Deloitte, estimated these to be €308 million for 2008/2009.
Mr Crowley calls for full disclosure of all the experts’ reports along with the 2010 accounts of the SMDF, which he says have not been disclosed. He also says in his statement that in the SMDF’s previous audited accounts the reinsurers expressly reserved their position on payment. The society has stated that 90 per cent of the SMDF’s liabilities are covered by reinsurance.
Mr Crowley also says that if the proposal is approved the society will be compelled to take the same steps in the event of the failure of another insolvent insurer. “There is no logical justification for fixing the entire profession with the cost of bailing out insolvent insurers,” he says.
He alleges that there is a conflict of interest among members of the council of the Law Society. “There are 12 members of the society’s council who have interests as SMDF members in the passing of the resolution, which puts those council members in a position of irredeemable conflict of interest,” he writes.
He also states that failure to disclose claims and their nature raised concerns that a small number of firms may be responsible for the bulk of the €308 million, adding that financial institutions make up the majority of claimants against the SMDF.
Supporting the motion that all solicitors (whether or not members of the SMDF) should support it through a levy, Law Society council member Stuart Gilhooly says liquidation of the SMDF would have “unthinkable consequences for those with claims and notifications”.
The overwhelming majority of firms with claims have less than four solicitors, and the consequences of liquidation would extend beyond the SMDF and would potentially affect all firms, clients whose compensation or costs would not be paid and reputational damage as a whole, he says.
Referring to criticisms made of the SMDF, he said: “No director of the SMDF will receive any remuneration in the future and the legal panel will be put out to tender.” This refers to the panel of solicitors which represented the SMDF when fighting claims against solicitors insured with it.