An investigation by the Law Society into a Dublin law firm, which identified "apparent irregularities" in the books and accounts, was proper, the High Court ruled yesterday. The merits or otherwise of the apparent irregularities will now be investigated by the society's disciplinary tribunal.
Dublin solicitor Mr Giles J. Kennedy, carrying on practice as Giles J. Kennedy & Co, Eccles Street, had challenged the investigation in the High Court, and also sought damages.
In his reserved judgment on the challenge yesterday, Mr Justice Kearns said the investigation was carried out from June to August 1993 under the Solicitors' Accounts Regulations by an in-house accountant with the society, Ms Aisling Foley.
From an early stage, it became apparent to Mr Kennedy that the investigating accountant was seeking a large number of files rather than simply sampling on a random basis for verification and vouching of financial records.
Mr Kennedy had then asserted both client privilege and his own constitutional right to privacy to challenge what he regarded as an unauthorised and unnecessarily wide trawl through the files in his office.
He challenged the society to indicate if it had some agenda other than an investigation to test compliance with the society's regulations and was given to under stand that there was no other "hidden agenda".
Mr Justice Kearns said the evidence in the case clearly disclosed that there was another agenda - the investigation of the possibility of fraud extending into claims themselves, as distinct from any irregularities or fraudulent activities that might be ascertained from an investigation of the financial records and accounts alone.
The extended area of possible fraud related to bogus personal injury claims, which were a source of concern to the society in 1993.
In that year, two other practices had been investigated under the regulations because of similar concerns and two solicitors were struck off. Due to those and other claims, the society's compensation fund had been reduced from £13 mil lion to £25,000.
The society accepted that this consideration was very much in mind when its employee conducted this investigation. It was accepted at the start of the court hearing that the time and effort expended by Ms Foley was divided 50/50 between an investigation of the books, accounts and financial records on the one hand and consideration of possible fraudulent claims on the other.
Mr Justice Kearns said the fruits of Ms Foley's investigation were contained in her interim report. It identified a significant number of irregularities.
Specifically, it identified an admitted area of fraudulent activity involving a legal executive in the practice who was dealing with personal injuries litigation.
That executive, who had since left, received bonus or commission payments for the introduction of new business.
The judge said Mr Kennedy claimed to have been unaware of this practice, which continued for three years, involved a sum of £24,000 and extended over 30 files or cases. The payments were in respect of client referrals and new business thereby generated.
It seemed that where an instance of fraud was uncovered in the accounts and records of a solicitor, the investigating accountant had a right and duty to explore any area of possible fraud which might be reasonably connected with the fraud found within the books, Mr Justice Kearns said.
In this case, a reasonable connection did exist. This was because the same area of litigation was involved, the same individual who was in receipt of fraudulent payments within the office was in charge of personal injuries litigation, and the payments were specifically made to him for client referrals.
Those referrals were the subject matter of the society's concern in that they believed Rossi Walsh, "a notorious criminal", was at the time referring bogus personal injuries claims to the office.
The evidence disclosed that Walsh referred 22 claims to the practice and that another man referred another 16 claims. Mr Kennedy had come off record for many of these claimants.
The investigation turned up a large number of apparent irregularities, the merits or otherwise of which remained to be dealt with by the society's disciplinary tribunal, the judge said.
He ruled that the extended investigation by Ms Foley was proper and returned the case for mention in two weeks' time.