ANALYSIS:THE POWER of the High Court to order the closure of a firm of solicitors has existed in law since the 1994 Solicitors Act, but has been very rarely used.
This Act permits the intervention of the Law Society when it appears a legal firm is incapable of managing its affairs.
However, according to legal sources, there is no objective test for such a move, so solicitors firms will not be aware of what the threshold is. Small firms may be more vulnerable than larger ones, even though proportionately their liabilities may not be greater.
The Law Society told the High Court yesterday it did not consider the existing proposal to deal with the firm’s liabilities to be viable.
The court gave the firm four weeks to allow Cormac O’Ceallaigh, one of the partners, to come up with an arrangement acceptable to all parties that would allow him to continue to operate the practice.
One possibility in such circumstances, according to legal sources, is for a “white knight” firm to come forward and take over the firm and its clients.
This, or some other form of merger, would be seen as preferable from the point of view of the clients to the closure of the firm, which would lead to the dispersal of the clients, some of whom would have uncompleted cases, to a variety of other firms.
The Law Society also said that it did not see a situation where Mr O’Ceallaigh, who is not implicated in any of the actions that led to the firm’s difficulties, should be allowed to run the firm because of the failure of supervision of his fellow partner and brother Ruairí, who admitted losing millions on the stock exchange and on property deals.
However, according to another solicitor, it is not uncommon for the honest partner in a firm to be unaware of the dishonest activity of another partner.
Whatever the outcome of this case, it will be watched with interest by other solicitors firms who have liabilities they are not at the moment in a position to meet.