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Solicitors in crisis talks over loan guarantee
07 March 2010 By Kieron Wood
Solicitors are to hold an emergency meeting on Thursday to discuss the Law Society’s €8.4 million loan guarantee for the Solicitors’ Mutual Defence Fund.
The meeting is being called after more than 100 solicitors signed a petition seeking a special general meeting to discuss the guarantee given last October.
Solicitors were not told about the deal until December.
The Solicitors’ Mutual Defence Fund Ltd was set up in 1987 to cut the cost of professional indemnity insurance. Initially, the SMDF halved the cost of cover, by offering a policy with a IR£200,000 claims limit for a premium of IR£1,000 per solicitor.
The fund now claims more than 3,700 members. Its website says: ‘‘Our aim in the SMDF has always been, and will continue to (sic) keep costs to a minimum . . .Today the SMDF has retained substantial reserves, having made provision for all liabilities and charges."
But the SMDF’s 2008 accounts show that it invested its sinking/reserve funds in a bond which has dropped €8.4 million in value and is currently worth less than 3 per cent of its original cost. ‘‘Before the Saturn Bond investment, there seems to have been a serious drop in respect of the cost of investments and their market value," said solicitor Vincent Crowley, of Collins Crowley Solicitors in Bow Street, Dublin, one of the convenors of this week’s meeting.
‘‘Fixed-interest securities which cost €12.45 million had a market value in 2008 of €8.75 million. Irish equities cost the SMDF €9million,but their value in 2008 had dropped to €2.4 mil l ion. US equities cost €123,133, but were worth only €3,990 in 2008.
‘‘By June 30 last year, the values were down to €1,687,243 for fixed interest securities, €2,049,237 for Irish equities and €1,077 for US equities."
PricewaterhouseCoopers resigned as auditors in 2008, and the new auditors, BDO Simpson Xavier, expressed uncertainty about the SMDF’s ability to continue in business.
A note in the accounts said: ‘‘The company is dependent on the market valuation of investments on realisation, the ability of the company to obtain reinsurance and reinsurance companies continuing to meet their obligations to the company to continue as a going concern. These conditions . . .indicate the existence of a material uncertainty which may cast significant doubt about the company’s ability to continue as a going concern."
All SMDF claims are handled by an approved panel of solicitors and overseen by two executive directors, Laurence Shields and Thomas D Shaw. Both are former presidents of the Law Society, as are fellow directors Geraldine Clarke, Michael P Houlihan and Elma Lynch. SMDF director Patrick Dorgan is a member of the Law Society Council. The final director is Paddy Groarke.
The firms on the SMDF panel are not named in the annual report and there is no note of the fees charged by them. The accounts show that one director was paid €123,000 in 2008,while ‘‘management services’’ cost €152,583.The company had an average of four employees whose remuneration totalled €381,879.
Other topics likely to arise at Thursday’s special general meeting are losses on investments by the Law Society. The value of a one-acre site in Benburb Street, bought in 2005 at a cost of €20 million, has dropped to €7 million, according to the society’s accounts.
All practising solicitors are entitled to attend the 6.30pm meeting in Blackhall Place.
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