THE LAW Society’s regulation of practice committee is opposed to a solicitors’ firm with a deficit of more than €6.3 million being allowed to continue to trade, the High Court has heard.
Yesterday the president of the High Court Mr Justice Nicholas Kearns was told an accountant’s report concluded that a proposal to repay the money owed by legal firm Seán Ó Ceallaigh and Co was not viable.
As a result of the report, conducted by David Rowe, and of other circumstances in the case, the Law Society’s committee said the firm should be shut down.
Last month the court suspended the practising certificate of one the firm’s partners, Ruairí Ó Ceallaigh, after he admitted losing millions on the stock exchange and on property deals.
His brother and partner Cormac Ó Ceallaigh, who has done nothing wrong or dishonest in running the firm, is making efforts to repay the money.
Mr Justice Kearns agreed to adjourn what he described as a matter of the “utmost gravity and seriousness” for four weeks to allow Cormac Ó Ceallaigh time to come up with an arrangement, deemed acceptable to all parties, that would allow him to continue to operate the practice.
The adjournment was granted after Séamus Ó Tuathail, for Cormac, said that while Mr Rowe was not happy with the proposal, it was possible to come up with an alternative scheme of arrangement between the parties.
Paul Anthony McDermott, for the Law Society, said after considering Mr Rowe’s report on the viability of the practice the committee concluded that based on the current proposal to repay the debts the firm does not have a viable future.
Counsel said that the liability was quite significant and did not believe that proposals put forward by the firm would enable it to cover what was owed. In addition to the deficit both brothers had built up a large property portfolio and between them had total liabilities of €40 million.
Counsel said the society was aware of liabilities of €6.3 million owed by the firm. This was made up of a deficit in the client account of €2.4 million, amounts subject to a double mortgage of €1.5 million, an existing balance-sheet deficit of €735,000 and claims against the firm amounting to approximately €1 million. The remainder of the total deficit consisted of money owed to the Permanent TSB and for stamp duty and penalties.
In an affidavit, Noreen MacCarthy, a chartered accountant with the Law Society’s regulation department, said the society had found nothing inconsistent with the explanation that the deficit was due to the wrongful actions of Ruairí Ó Ceallaigh.
The society had not received any affidavit from the firm as to how the fraud was perpetrated or where all the missing funds had gone.
Ms McCarthy said serious issues also arose concerning Cormac because a large deficit was allowed to build up in the firm in which he was an equal partner with his brother. Being a partner in a law firm carried with it the obligation of supervision, she said.
The committee viewed the issue of supervision as a very grave one, and in the circumstances could not see a situation where Cormac Ó Ceallaigh would be permitted to run the firm.
Ms McCarthy said that the committee had also considered Seán Ó Ceallaigh’s affidavit where he indicated his willingness to clear the deficit by putting up his home for sale and obtaining loans from friends and family.
However, the committee could not take any comfort from what was a general reference given the size of liability and the current economic situation.