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You are here: BAILII >> Databases >> High Court of Ireland Decisions >> O'Duffy v. Law Society of Ireland [2004] IEHC 372 (3 December 2004) URL: http://www.bailii.org/ie/cases/IEHC/2004/372.html Cite as: [2004] IEHC 372 |
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Neutral Citation No. [2004] IEHC 372
[2003 No. 143 JR]
BETWEEN
APPLICANT
RESPONDENT
JUDGMENT of Mr. Justice Kelly delivered the 3rd day of December, 2004.
Introduction
The applicant seeks an order of certiorari to quash a decision of the Compensation Fund Committee – Finance Section of the respondent (the Law Society) dated the 5th December, 2002, whereby it decided to refer a report of an investigating accountant into the conduct of the applicant to the Disciplinary Tribunal.
Leave was given by O'Donovan J. to seek a variety of other orders in addition to the one to which I have just referred. Counsel for the applicant accepts that these do not fall for consideration. Either they are ancillary to the application for certiorari already referred to or alternatively cannot as a matter of law be granted. Amongst those in this latter category is an application for certiorari to quash the report of the investigating accountant.
Leave was given to pursue a claim for damages. It was agreed that that element of the case would be stood over to abide the result of the application for certiorari.
The Applicant
The applicant is a solicitor who has been in practice for well over twenty years. In 1985 he went into partnership with James Quinn Solicitor and practised under the name of O'Duffy Quinn Solicitors. In July, 1996, that partnership was dissolved. Since that time he has practised as a solicitor under the style of O'Duffy and Associates. That practice is carried on at 10 Blessington Street, Dublin 7.
The First Inspection
The applicant was the subject of an investigation by the Law Society while he was in partnership with Mr. Quinn. That investigation followed a complaint from a client of that firm regarding a payment of hospital fees in a personal injury claim. It was found, inter alia, that the firm operated a client loan scheme and that solicitor/client fees deducted were being lodged to the personal accounts of the partners. At a meeting of the Compensation Fund Committee held on the 6th April, 1995, counsel for the applicant and his partner stated that he had advised his clients of the contents of the Solicitors (Amendment) Act, 1994 and that in future all the documentation on file would be in accordance with the necessary requirements.
The subsequent inspections with which this judgment is concerned were not triggered or brought about in any way by reference to this first inspection. The matter is relevant only to demonstrate that the applicant was fully au fait, thanks to his counsel's advice, with his statutory obligations as a solicitor. He also had a familiarity with the procedures followed by an investigating accountant appointed by the Law Society to conduct an inspection of a solicitor's practice.
The Second Inspection
In January, 2001, the Law Society appointed Mary Devereux as investigating accountant to investigate the applicant's practice. That investigation was conducted as part of the Law Society's ongoing policy of inspection of solicitor's practices.
Mary Devereux is a Fellow of the Institute of Chartered Accountants. She has been employed as an accountant by the Law Society for twenty two years. In that time she has conducted of the order of six hundred investigations into solicitors' practices.
At no time did the applicant make any complaint concerning this inspection or the report which was prepared on foot of it.
The Report of the Second Inspection
Ms. Devereux prepared a report on her inspection which was dated the 9th March, 2001. She raised a number of matters of concern in that report. Some were more serious than others. One of the more serious was that the applicant maintained his own personal account in the client ledger which at times went into debit. The effect of that was that the applicant was using general client funds for his personal use. Neither that finding nor indeed any of the other findings in Ms Devereux's report have ever been contested by the applicant.
The report of Ms. Devereux was considered by the Compensation Fund Committee of the Law Society. That Committee directed that the findings and recommendations as detailed in Ms. Devereux's report be brought to the applicant's attention. Accordingly on the 23rd May, 2001, the applicant was written to by the Law Society and was sent a copy of the report. The letter to him inter alia said as follows:-
"The Committee noted in particular that you maintained a personal account in the client ledger which at times went into debit in breach of Regulation 7 of the Solicitor's Account Regulations No. 2 of 1984. The Committee considered this a serious breach of the regulations and instructed that you confirm that your personal transactions will no longer be transacted through clients account.
The Committee also noted that the practice books of account were not maintained in accordance with Regulation 10 of the Regulations, in respect of some clients, who had a number of matters ongoing at any one time. The Committee directed that separate ledger accounts not one general ledger account for all matters should be opened and maintained for each matter/transaction.
The Committee also instructed that your attention be drawn to the provisions of s. 68 of the Solicitors (Amendment) Act, 1994 and that you should take all necessary steps to ensure that your practice is fully compliant with the said provisions.
I take this opportunity to thank you for the cooperation and assistance afforded by you to Mary Devereux, the investigating accountant, and I would be glad if you would acknowledge receipt of the report, at your convenience."
Although that letter in two separate places quite clearly sought a response from the applicant none was forthcoming. Indeed in a replying affidavit sworn by him on the 3rd June, 2003, he said:-
"Although on the face of it the said letter does not call for a response I in fact responded in or about June 2001 in writing to the said letter. I have been unable to locate a copy of this letter but recollect very clearly dictating same to my secretary and recall informing the respondent that I was in receipt of their report and furthermore that I would take steps to comply with the directions of the Compensation Fund of the Law Society."
The applicant was cross examined on his affidavits before me pursuant to an order of Quirke J. made on 26th January, 2004.
His assertion on oath in the course of his affidavit that this letter on the face of it did not call for a response is plainly wrong. Having had the opportunity of listening to and observing him during the course of his cross-examination I regret to say that I do not believe that he ever responded or attempted to respond to the letter. I found his testimony on this and a number of other matters evasive and unconvincing.
No response to the letter of 23rd May, 2001, was received by the Law Society. The applicant was unable to produce a copy of the letter of response. I do not believe he ever dictated one to his secretary.
The Third Inspection
By letter of the 10th September, 2002, the applicant was informed that the Council of the Law Society had appointed Ms. Devereux to inspect and report to the Law Society on the books of account and other relevant documents in connection with his practice. The letter read:-
"I am instructed by the council of the Society pursuant to s. 66 of the Solicitors Act, 1954 as substituted by s. 76 of the Solicitors (Amendment) Act, 1994 that they have appointed Ms. Mary Devereux, Chartered Accountant, to inspect and report to the Society on the books of account and other relevant documents in connection with the solicitors practice carried on by you at the above address. Ms. Devereux shall act as the Society's 'authorised person' within the meaning of s. 76(10) of the Solicitors (Amendment) Act, 1994 and you are required to produce to her all books of account, bank statements, files and other documents as Ms. Devereux may require.
Ms. Devereux may commence her examination on Monday 30th September, 2002 at 9.30 a.m. or at such time as she may agree with you. She will telephone you prior to visiting your offices. In order to minimise the time taken by the inspection, please ensure that the following matters are attended to:
1. All books of account including the clients and office ledgers should be fully written up to 31st August, 2002.
2. Bank statements for all bank accounts should be obtained up to the close of business on 31st August, 2002.
3. A letter should be obtained from your bankers setting out the balances on all office and client accounts as at 31st August, 2002.
4. Your book-keeper should have prepared the following as at 31st August, 2002:
(a) a list of balances extracted from the clients and office ledger;
(b) a clients ledger control account covering the period from your last accountant's report to 31st August, 2002 in order to prove the correctness of the list of balances at 4(a) above;
(c) a bank account and reconciliation for clients current account and a list of balances in relation to client deposit accounts and deposit receipts, if these are not already included in 4(a) above.
Should you wish to discuss the above requirements with Ms. Devereux, please do not hesitate to contact her at the above address.
Yours faithfully,
P.J. Connolly
Registrar of Solicitors"
The applicant complains that he was not informed of any reason, complaint made or cause for the inspection mooted in this letter. Indeed in his oral testimony in response to counsel for the Law Society he indicated that he had no idea what this inspection was all about and that it was a mystery to him. Despite that he made no enquiry of the Law Society or Ms. Devereux nor did he make contact with her on foot of the invitation to do so in the last sentence of the letter of 10th September, 2002. In fact it was Ms. Devereux who made contact with him. She did so on 25th September, 2002. She telephoned him on that occasion. This telephone call was in accordance with her standard practice of contacting a solicitor to confirm the date and time of the appointment for the inspection. No query, question or objection was made by the applicant concerning the proposed inspection or its purpose.
On foot of her appointment, Ms. Devereux attended at the applicant's practice on 30th September and again on 1st, 2nd, 8th and 9th October, 2002.
Later in this judgment I will consider what happened in the course of that inspection but before doing so it is convenient to deal with a suggestion made by the applicant to the effect that the Law Society had some form of hidden agenda which motivated the carrying out of this inspection.
No Hidden Agenda
The applicant is quite correct when he asserts that this inspection was authorised in the absence of any complaint. Unlike the first inspection which was carried out when he was in partnership, no client or third party made any complaint to the Law Society in respect of him.
I am quite satisfied from the evidence that the reason why this third inspection was carried out was the applicant's own failure to respond to the letter of 23rd May, 2001. That letter was written on foot of a report which demonstrated the existence of uncontroverted breaches of the Solicitors' Accounts Regulations. No confirmation had been received from the applicant that the practices set forth in that report had ceased. Not unnaturally this was a matter of concern to the Law Society. Indeed, one can ask could it be otherwise?
The statement of practice of the Law Society concerning the investigation of solicitors makes it clear that the Society's objective is "to protect clients monies in the interest of the public generally and to protect the profession, who must make up deficits through the Society's compensation fund". Given such an objective, in my view criticism could be made of the Law Society if it did not take some action in the absence of any response from the applicant to its letter of 23rd May, 2001.
Later in this judgment I will have to consider the applicant's arguments that the ordering of this third inspection was unnecessary or disproportionate and therefore legally flawed. On the facts, however, I am quite satisfied that the sole reason for directing the third inspection was concern on the part of the Law Society as to the way in which the applicant might be dealing with funds given the breaches identified to the applicant in the Law Society's letter of 23rd May, 2001. Such breaches might well be ongoing in the absence of any confirmation from him to the contrary.
I therefore find as a fact that there was no hidden agenda on the part of the Law Society in directing the third inspection to take place. The sole purpose was to ascertain whether the Solicitors Accounts Regulations were being observed by the applicant.
The Method of Inspection
The inspection was carried out by Ms. Devereux and a number of complaints had been made by the applicant concerning how that inspection proceeded. I will return to these later in this judgment. At that stage I will, insofar as it is necessary, have to resolve conflicts of testimony between the applicant and Ms. Devereux. Insofar as such conflicts exist I resolve them in favour of Ms. Devereux. I found her to be a thorough, competent and convincing witness. That was in contrast to the applicant whom I found to be evasive, unconvincing and at times incredible in his testimony.
The Report of the Third Inspection
Having completed the third inspection Ms. Devereux prepared a report for the Compensation Fund Committee of the Law Society. It was dated 29th October, 2002. It is lengthy and I do not propose to reproduce it in full. It is sufficient that I reproduce the summary which reads as follows:-
"4. Summary
4.1. There appears to be a sufficiency of clients' funds as at 31st August, 2002 as per the books of account. However, books of account cannot be relied on because of the other findings detailed in this report. (My emphasis).
4.2. Books of account were not maintained at all times in the period from September, 2001 to late February, 2002.
4.3. Debit balances were created in breach of Regulation 7(2) of the Solicitors' Accounts Regulations, 2001 on numerous occasions when fees were taken from client's account to office account before the fees were received.
As at 21st June, 2002, debit balances of €24,967.36 were cleared.
4.4. There was a breach of Regulation 7(9)(iii) when there were various transfers of costs to office accounts which were 'matched' with ledger account later.
4.5. Clients were not given copies of bills of costs nor details of costs received in litigation matters.
4.6. Some of the files reviewed contained copy letters purportedly issued to clients to show the solicitor's compliance with s. 68(9) of the Solicitors (Amendment) Act, 1994 but which have not issued to clients.
4.7. It appears that the personal injury files inspected as given to me by the solicitor did not contain the following although these were available on closed files.
(a) the authority to settle signed by the client, informing him of his right to taxation and of solicitor/client fees;
(b) a further authority to settle detailing the amount of the solicitor/client fees charged.
Section 76(13) of the Solicitors (Amendment) Act, 1994 states:-
'It shall be an offence for a solicitor …
(b) to remove from his place or places of business, or to destroy, deface or mutilate, all or any part of his accounting records, with intent to prevent or interfere with an authorised person acting in pursuance of the purpose as specified in sub-section (10) of this section;
(c) to provide knowingly false or misleading information to an authorised person acting in pursuance of the purpose specified in sub-section (10) of this section.'
4.8. The standard s. 68 letter on the files inspected states that solicitor/client fees will be charged.
The solicitor neither confirmed nor denied that solicitor/client fees are charged.
There is no evidence of these fees being charged through the books of account.
4.9. A proper bill of costs file is not maintained in breach of Regulation 20(1)(b).
4.10. Individual ledger accounts are not open for client matters as required by Regulation 12(3)(a).
4.11. It appears that the solicitor does not comply in a timely manner with undertakings issued by his firm to financial institutions.
4.12. In some files examined, particularly those files for Liam Smith and his family, it appears that clients were not always clearly informed and in writing of the client's responsibility to ensure that deeds of purchase are stamped properly and registered together with the mortgages obtained being registered.
4.13. In a personal transaction, the solicitor failed to stamp a deed of purchase in time, with the result that penalties of about €41,540 were paid in addition to the stamp duty.
The undertaking given to the financial institution in respect of this transaction was not complied with promptly.
4.14. Loans are sometimes given to clients from office account who have personal injury claims ongoing. There is no evidence of these loans being repaid.
This is not a recommended practice.
4.15. In some litigation cases, it appears that although settlement cheques were received, the party on party costs were not received.
4.16. There are outstanding queries which have not been dealt with by the solicitor.
4.17. In a previous investigation, the solicitor admitted to lodging solicitor/client fees to personal accounts, and through his counsel confirmed that no 'such trouble would arise in the future'".
Prior to completing that report Ms. Devereux wrote to the applicant on 11th October, 2002, asking him to deal with a series of queries which she raised as a result of her inspection. She requested that he would deal with these queries as soon as possible because she wished to finalise her report. The applicant did not respond until 5th November, 2002, although he accepted in the witness box that the letter of 11th October, 2002, required to be answered as soon as possible or, as he described it, "fairly smartly."
Events Subsequent to the Third Inspection
On 21st October, 2002, the Registrar of Solicitors wrote to the applicant. He informed him that he was required to attend the next meeting of the Compensation Fund Committee of the Law Society. That meeting was scheduled to take place on Thursday, 7th November, 2002. The applicant was told that he should be in attendance at 11 a.m. and that he might be legally represented at the meeting.
The registrar's letter informed him that the purpose of his attendance before the committee was to examine him on the findings as detailed in the investigating accountant's report relating to his practice. He further informed him that the report would be finalised on receipt of documentation requested by the investigating accountant from the applicant. A copy of the report would be forwarded to him in advance of the meeting. The final paragraph of the letter reads as follows:-
"I wish to emphasise the importance of attending the meeting as a decision may be made to refer the matter to the Disciplinary Tribunal together with any other action which may be deemed appropriate."
As the applicant had not replied to the queries raised in Ms. Devereux's letter of 11th October, 2002, she proceeded to finalise her report on 29th October, 2002. In the introduction to her report (which was addressed to the Chairman and Vice Chairman of the Compensation Fund Committee) she pointed out that there were outstanding queries which had not yet been addressed by the applicant at the time of the writing of the report.
On 30th October, 2002, the registrar wrote to the applicant referring to his letter of 21st October, 2002, requesting the applicant's attendance at the Compensation Fund Committee on 7th November, 2002, at 11 a.m. This letter of the registrar enclosed the investigating accountant's report relating to the practice for the applicant's consideration. The letter went on:
"You will note that the report refers to the fact that you have failed to reply to the investigating accountant's letter dated 11th October, 2002. You should ensure that Ms. Devereux's queries are responded to in advance of your attendance at the Compensation Fund Committee meeting on 7th November, 2002."
This letter was sent to the applicant by ordinary pre-paid and registered post. The registrar's letter of 21st October, 2002, had been sent to the applicant in like fashion.
The evidence satisfies me that the applicant was in receipt of both of these letters within a day or two of them being posted to him. He accordingly had Ms. Devereux's report by no later than 1st November, 2002.
The Applicant's Response
On 5th November, 2002, the applicant wrote a letter to the Law Society in the following terms:-
"Re: Solicitors' Accounts Regulations
Dear Sirs,
I acknowledge receipt of your letter of 21st October, 2002.
I would ...sic) be unable to attend the meeting schedule (sic) for 7th November, 2002 as I had booked a vacation some time ago for 5th November for one week.
It was not possible to cancel the holiday at such short notice so under these circumstances I would be much obliged if you would re-schedule the meeting for a date after 15th November, 2002 when I return.
I look forward to hearing from you regarding the above.
Yours faithfully,
Kiran O'Duffy"
This was the first intimation that the Law Society had of any application for an adjournment being sought in respect of the meeting scheduled for 7th November, 2002. The holiday in question had been booked in either the first or second week of October. The applicant was fully aware of his difficulty in attending the meeting of 7th November when he received the registrar's letter of 21st October, 2002. He chose to defer seeking the adjournment until he wrote his letter of 5th November, 2002. What is even more extraordinary is that that was the day upon which he left the country to go on holiday. So he wrote the letter seeking the adjournment in circumstances where he could not be aware of the Law Society's response to it because he would be out of the country. On any view of it that was a strange attitude for a solicitor to adopt. But in the case of the applicant it renders entirely hollow his testimony to me that this was a matter of serious concern to him.
Two further things are of note in relation to this episode. First, the holiday was spent in the applicant's own apartment in Marbella so the only expenditure involved in a deferral or cancellation was the cost of a plane ticket. Secondly, contrary to what was stated in the letter of 5th November, 2002, and his sworn testimony in paragraph 18 of his affidavit of 28th February, 2003, the applicant was scheduled to and did in fact return to Ireland on 12th November, 2002 and not 15th November, 2002.
In any event the Law Society acceded to the request for an adjournment and this decision was notified to the applicant by letter dated 22nd November, 2002. It read as follows:
"Dear Mr. O'Duffy
I refer to previous correspondence in connection with matters arising form the investigation of your practice pursuant to the Solicitors Accounts Regulations. In view of your inability to attend the Compensation Fund Committee meeting held on 7th November, 2002 the committee adjourned the matter on a peremptory basis to its next meeting. Please note that this meeting will take place at the above address on Thursday 5th December, 2002 when you should be in attendance at 11.00 a.m. As previously advised you may be legally represented at the meeting.
You will be examined by the committee on findings as detailed in the investigation accountants report relating to your practice as of 31st August, 2002 together with the matters raised in the investigating accountants letter of 11th October, 2002 and your reply dated 5th November, 2002.
I take the opportunity to advise you that you have not dealt properly with query number 2 raised by the investigating accountant in her letter dated 11th October, 2002 relating to the under noted 3 RTA files. [Details of these files are then set out]
The investigating accountant has been unable to trace the receipt of party and party costs and the discharge of outlay relating to these cases. If these party and party costs have not been received you should furnish confirmation from the defendant's solicitors that the party and party costs are still outstanding and have not been paid in respect of each of the three cases listed above. Any documentary evidence/confirmation regarding the above should be filed with the Society prior to your attendance at the meeting on 5th December, 2002.
I wish to emphasise the importance of attending the meeting as a decision may be made to refer the matter to the disciplinary tribunal or to take any other action that may be deemed appropriate.
Yours faithfully,
P.J Connolly
Registrar of Solicitors."
This letter was sent to the applicant by ordinary and registered post.
The Applicants Response to the Letter of 22nd November, 2002
The applicant did not respond to the query raised in this letter. Of more significance however he failed to turn up to the peremptorily fixed hearing on 5th December, 2002. Instead the applicant telephoned the Law Society at 11.15 a.m. on that day and later faxed a letter to the Society which was received at about 1.28 p.m. requesting an adjournment of the meeting. The Compensation Fund Committee received a note of the telephone message that the solicitor had left fifteen minutes after he was due to attend the hearing. It considered the matter and decided to refer the applicant's case to the disciplinary tribunal.
The applicant's letter to the Law Society of 5th December, 2002, was in the following terms:-
"Dear Sirs
We refer to the above matter and to your letter of 22nd November, 2002. We note that the matter was adjourned to 5th December, 2002 and we refer to the writer's recent telephone conversation with your secretary this morning in relation to adjourning the matter to a date which would be suitable to all parties.
I would advise that I have instructed counsel in the matter who unfortunately would be ...sic) unable to appear at the Compensation Fund meeting for this morning, 5th December, 2002.
Under the circumstances I would be obliged if you would adjourn the meeting to a suitable date and I look forward to hearing from you in this regard.
Yours sincerely
Kiran O'Duffy
O'Duffy & Associates".
The applicant was cross-examined in respect of this assertion of counsel being unable to appear before the Compensation Fund meeting. His explanation was less than impressive. I am quite satisfied that the applicant made little or no effort to obtain either legal advice or legal representation until the very last moment. Although he had been in receipt of the report from Ms. Devereaux since 1st November, 2002, at the latest he made no effort to obtain legal advice concerning it until shortly before the hearing on the 5th December, 2002.
He would have me believe that he was unable to get legal advice until the morning of the peremptorily fixed hearing. I do not accept his testimony in that regard. I cannot accept that a solicitor would be unable to obtain counsels' advice on a matter of importance to him over a period of five weeks. I believe that he approached junior counsel only a day or two before the hearing was due to begin and was told that he should seek the advice of senior counsel. He alleged that it was because of the advice that he received from senior counsel that he failed to attend the hearing. The first telephone conversation with senior counsel was on the day of the hearing but I am quite satisfied that the only attempt which he made to contact senior counsel was at the earliest the preceding day.
Although he gave evidence of being seriously concerned about his position with the Law Society, he never gave any written instructions to counsel to advise him nor did he even write a letter of instructions. Such contact as he made was by telephone and even then at the last possible moment. I would be surprised if he was advised to behave as he did, namely to ignore the meeting and to make a request for an adjournment after the meeting commenced.
The attitude which he displayed towards the Compensation Fund Committee was indicative of his whole attitude to the Law Society, which at best was one of indifference.
The Compensation Fund Committee referred to the matter to the disciplinary tribunal and that gave rise to the instant proceedings.
The Following Days
On 6th December, 2002, the applicant attended at the offices of his solicitor and met with its principal. On the following day a letter was written by the applicant's solicitors on the following terms:-
"We refer to the above and we confirm that we act for Mr. Kiran O'Duffy, practising as O'Duffy & Associates, 10 Blessington Street, Dublin 7.
We refer to a purported accounts inspection conducted by Ms. Mary Devereux, Chartered Accountant an alleged authorised person for and on behalf of the Society as appointed by Mr. P.J. Connolly, allegedly pursuant to the 1994 Solicitors' Amendment Act and the account regulations made thereunder.
We confirm our instructions were given at approximately 4.00 p.m. on the afternoon of Friday 6th December, 2002 and arising therefrom and on the advice of counsel we deemed it appropriate to contact the Law Society to ascertain the current status of this purported accounts inspection and the issue that had been listed before a division of the Compensation Fund Committee as chaired by our colleague, Ann Colley.
We refer to our Mr. Kennedy's telephone conversation with your Mr. P.J. Connolly wherein he confirmed that the matter had been dealt with in the list of the Compensation Fund Committee aforesaid and a decision had been made forwarding the issue and/or other issues to the disciplinary tribunal appointed to the 1994 Solicitors Amendment Act.
We would be obliged if you might please arrange to forward a written copy of the decision aforesaid and the minutes and notes of the meeting. As we understand your Mr. P.J. Connolly is secretary to the committee aforesaid we expect there will be no delay in relation to the furnishing of the minutes and decision aforesaid.
Our firm contacted you on the direction of counsel and we confirm that we will be in touch with you in due course and/or will take such steps as we are advised by counsel in regard to the quashing of the purported appointment of Ms. Mary Devereux and the decision to refer our client, Kiran O'Duffy to the disciplinary tribunal.
Yours faithfully
Giles J. Kennedy & Company".
It is to be noted that this was the first occasion upon which any written communication was received by or on behalf of the applicant raising any question concerning Ms. Devereux's appointment.
On 3rd March, 2003, application was made for leave to commence these proceedings.
The Basis for the Present Claim
Three arguments are made in support of the applicant's claim to have the order of the Compensation Fund Committee quashed. They are:-
1. That he was denied basic fairness of procedure by the committees' failure, refusal or neglect to permit him any reasonable time or opportunity to be heard and represented before it.
2. That the inspection conducted by Ms. Devereux which was the subject of the report before the committee was unlawful because it had been carried out without any reasonable or probable cause and was unnecessary. Her report was therefore not properly before the committee and the committee was not authorised to act on foot of it.
3. That the inspection conducted by Ms. Devereux, even if it was duly authorised, was improperly carried out, went beyond the scope of what is permissible under the relevant regulations and consequently the Report prepared on foot of it was not lawfully before the committee.
I will consider each of these grounds in turn.
The Refusal to Adjourn
It is said that the refusal of the committee to accede to the applicant's belated request for an adjournment of the peremptorily fixed hearing on 5th December, 2002, was flawed for four reasons. It is said that the committee should have, but failed to take into account before making the decision in suit, the following matters:-
(a) That the applicant wished to attend before the committee and to address it with respect to the report of Mary Devereux. It ought to have known this from previous communications from the applicant, it is said.
(b) That the applicant may not have had a real opportunity to secure and instruct counsel to represent him before the committee.
(c) The possible serious implications for the applicant as a solicitor.
(d) That no serious prejudice to the respondent's position would have occurred by reason of granting the adjournment sought.
I will deal with each of these complaints in turn.
(a) It is difficult to see how the Law Society could have been aware from previous communications with the applicant that he wished to attend before the Compensation Fund Committee and to address it with respect to the report of Mary Devereux. The plain fact is that there were no communications from the applicant in advance of the hearing giving any such intimation. Even in the letter of 5th December, 2002, there is no such intimation given. I reject any criticism of the decision of the Compensation Fund Committee on this basis.
(b) As to the contention that the applicant may not have had a real opportunity to secure and instruct counsel to represent him before the committee the following is the position. The applicant had Ms. Devereux's report by no later than 1st November, 2002. He had secured an adjournment of the hearing from 7th November, 2002, to 5th December, 2002. The suggestion by counsel that he had only eight working days in which to prepare himself for the hearing of 5th December, 2002, is manifestly incorrect. I am quite satisfied on the evidence that during the bulk of this time the applicant did nothing to procure legal advice or representation. I have already set out my findings as to the applicant's behaviour in this regard.
He had full and ample opportunity to do all that was necessary to prepare his defence both as to fact and law well in advance of the hearing of 5th December, 2002 and simply failed to do so. In this context it has to be borne in mind that the applicant is a solicitor of over twenty years standing. He apparently has considerable success in property dealings owning many investment properties and is clearly a man of some business acumen. He had prior experience of the workings of the Compensation Fund Committee, and indeed had been represented by counsel at the hearing which took place in 1995. There is simply no excuse for the way in which he behaved on this occasion.
(c) I find no evidence in support of the contention that the Compensation Fund Committee had no regard for the possible serious implications for the applicant as a solicitor.
The Disciplinary Tribunal will, if the applicant is unsuccessful in these proceedings, consider the documents furnished to it and decide whether or not a prima facie case has been disclosed against the applicant. If the matter proceeds to a hearing before the Disciplinary Tribunal the applicant will have a full oral hearing with legal representation. The Law Society will have to prove the allegations against him. Oral evidence will be called in that regard and a full opportunity of cross-examination of the Law Society's witnesses will be given to the applicant. He will be entitled to call his own witnesses and to give evidence himself. In the event of the Disciplinary Tribunal finding that the allegations have been made out against him it has to decide whether the conduct amounts to professional misconduct and if so it may then impose a sanction. There will therefore be ample opportunities presented to the applicant to defend himself before the Disciplinary Tribunal makes any findings which might affect him in his professional capacity. The mere referral of the matter to the Disciplinary Tribunal carries no sanction so far as the applicant is concerned.
In any event it is doubtful whether a mere decision to refer a matter to the Disciplinary Tribunal requires that rights of natural or constitutional justice be afforded to affected persons. In many ways the situation is not dissimilar to that which obtains in investigations conducted under the Nursing Acts and the Companies Acts. In O'Kelly v. An Bord Altranais [2000] 4 IR 54 Barron J. said at p. 92:-
"There can be no obligation to inform a nurse that an application is going to be made to the Fitness to Practice Committee. Such an application does not prejudice the nurse. It is the commencement of the process. Her position is protected by the obligation of the Fitness to Practice Committee to exercise fair procedures once it becomes involved".
Those observations appear to me to apply by analogy to the position which obtains here.
Similar considerations arise when one considers investigations being carried out pursuant to provisions of the Companies Acts. In dealing with such investigations Shanley J. said in In Re National Irish Bank (No.1) [1999] 3 IR 145 at 168:-
"I am satisfied that there is no entitlement to invoke the panoply of rights identified by the Supreme Court at the information gathering stage of the Inspector's work. The procedures identified by the inspectors following the outcome of the first stage accord in my view with the requirements of fairness and justice and guarantee, where appropriate, the exercise of the rights identified in In Re Haughey [1971] IR 217".
The decision here to refer the matter to the Disciplinary Tribunal does not in and of itself affect the rights of the applicant. Having regard to the procedure which the Disciplinary Tribunal is obliged to follow the applicant's rights and entitlements will be fully protected in that forum.
(d) It is suggested that there would have been no serious prejudice to the respondent's position if a further adjournment had been granted. I do not accept this to be the position.
The Law Society must be concerned with the protection of clients' monies, in the interests of the public generally and the profession itself. Given the track record of the applicant in breaching the accounts regulations in the past, failing to reply to correspondence and his disdainful treatment of the Compensation Fund Committee, I cannot identify any legitimate criticism of that committee in deciding as it did. To grant yet another adjournment to the applicant in the circumstances of this case could well leave the Compensation Fund Committee open to criticism.
In my view the Compensation Fund Committee did not breach any of the applicant's entitlements to fair procedures by deciding as it did and I reject the applicant's claim under this heading.
The Decision to Conduct the Third Inspection
Section 66 (10) of the Solicitors Act, 1954 as inserted by s. 76 of the Solicitors (Amendment) Act, 1994 provides that:-
"Where it appears to the Society that it is necessary for the purpose of exercising any of the Society's functions prescribed under subsection (1) of this section for an authorised person to attend either with or without prior notice, at a place of business of a solicitor, an authorised person may so attend at such a place for that purpose."
The subs. (1) referred to in the above quotation provides that the Law Society may make regulations for a number of specified purposes, including the keeping of accounts by solicitors, the enforcement by the Society of compliance with the regulations and the appointment by the Society of persons to carry out functions relating to securing compliance with and enforcing such regulations.
The Law Society issued a statement of practice in respect of the investigation of solicitors pursuant to the provisions of the Solicitors Accounts Regulations. Under the heading of 'Frequency of Investigations' that statement provided as follows:-
"It is the Society's policy to investigate a solicitors practice within two to three years after setting up and thereafter at least once every five years. Complaints of a financial nature or a serious qualification endorsed to the annual accountants report will obviously render it necessary to conduct a more immediate investigation".
Under the heading of "Consistent Administration", the statement provides:-
"The Society will follow the highest standards of administration in its dealings with the solicitor and with a view to achieving this aim, it will ensure that the solicitor is dealt with properly, fairly and impartially. The Society will administer the requirements of the Solicitors Acts and regulations made thereunder consistently."
The applicant contends that in deciding to hold the third inspection the Law Society was in breach of the terms of s. 66 (10) and of its own statement of practice.
The basis for this contention is alleged to be that no reason or no adequate reason has ever been offered by the Law Society to explain the decision to investigate the applicant's practice for a second time within a period of eighteen months. It is said that the Law Society's decision in this regard was irrational or that it exercised its discretionary power in bad faith or alternatively the exercise of this discretion was disproportionate. In the written grounds supporting the application the applicant contends in addition that there was no entitlement to order an inspection in the absence of any complaint.
The Law Society has made regulations pursuant to s. 66 of the Act of 1954 as inserted by s. 6 of the Solicitors (Amendment) Act, 1994. Under part IV of the Solicitors Accounts Regulations, 2001 (S.I. No. 421 of 2001) which deals with the investigation of solicitors practices the following is to be found:-
"28. (1) Where it appears to the Society, whether as a result of a complaint or otherwise, that it is necessary, for the purpose of investigating whether there has been due compliance by a solicitor with these Regulations and with the provisions of section 66 (as substituted by section 76 of the Act 1994) of the Act (as set forth in the first schedule hereto) or otherwise for the purpose of exercising any of the Society's functions under these Regulations, for an authorised person to attend, with or without prior notice, at the place or place of business of the solicitor, an authorised person may so attend at such a place or places for that purpose".
The applicant was refused leave by O'Donovan J. to seek a declaration that s. 28 of the Regulations of 2001 from which I have just quoted is invalid.
Section 28 of the Regulations of 2001, when read in conjunction with s. 66 (10) makes it quite clear that it is not necessary for there to be a complaint before an investigation of a solicitor's practice can be directed. Indeed even on the wording of s. 66 (10) itself without reference to s. 28 (1) of the Regulations of 2001 such is the case. It would be strange if it were otherwise. If the Law Society had to wait for a complaint to be made by a member of the public or client before an investigation of a solicitor's practice could be directed its ability to ensure compliance with the regulations would be considerably impaired to the detriment of both the public and the profession. I am therefore quite satisfied that the absence of any complaint (as is the case here) is no bar to an investigation of a solicitor's practice being ordered.
The decision on whether or not it was necessary to direct an investigation in the present case is one which, pursuant to the statutory provisions, reposes in the Law Society. This court is not a court of appeal from that decision. That is not to say that such a decision is immune from review by this court. However in reviewing the decision I must do so on strict judicial review principles. (See Flood v. Garda Complaints Board [1997] 3 IR 321). Those principles would only permit this court to intervene to set aside the decision to conduct an investigation of the applicant's practice if it were shown to have been made unlawfully. Thus a decision to order an inspection which was irrational, made mala fide, in breach of statutory requirements or disproportionate would be capable of being set aside. In the present case I find no evidence of these matters.
I am quite satisfied that there was a rational basis for the Law Society taking the view that it was necessary to conduct the investigation of the applicant's practice. That arose as a result of his failure to respond to the letter of 23rd May, 2001. The absence of any response left the Society in the position where as far as they were concerned the breaches identified in the report following the second inspection might very well be continuing.
It has been argued that the Law Society might have dealt with this difficulty in some lesser way than ordering an investigation of the applicant's practice. Even if I were of the opinion that that were so it would not entitle me to intervene. The legislature has invested the Law Society with the power to decide upon the necessity of an investigation. That is a function reserved to it and not to this court. I would only be justified in intervening in one of the circumstances which I have already mentioned, none of which apply in the present case. It cannot be said that the decision to conduct this further investigation is disproportionate to the issues raised as a result of the applicant's own earlier breaches and his lack of response to previous correspondence. Even, therefore, if I were of the view that the adoption of a less dramatic course might have been more prudent or appropriate I could not substitute my view for that of the Law Society given the role of this court on judicial review.
In the event I do not take a different view to that of the Law Society. It seems to me that one of the principal functions of the Solicitors Accounts Regulations, 2001 is the protection of clients' funds. Given the behaviour of the applicant the Law Society were perfectly right to direct the third investigation of his practice. I expressly reject any suggestion that the appropriate way to deal with a solicitor who ignores letters from the Law Society is to write more letters to him.
Criticisms of The Inspection
The criticisms made of Ms. Devereux in the conduct of the inspection can be summarised as follows:-
1. It is alleged that she failed to give information to the solicitor as is required of her.
2. That she carried out a search of the premises which was not authorised and failed to obtain the authority of the solicitor to inspect such files as she did.
3. That in inspecting and reporting upon letters issued by the solicitor pursuant to s. 68 of the Solicitors (Amendment) Act, 1994 she was acting in excess of the regulations.
I will consider these complaints in turn. Before doing so it is necessary to make findings of fact as to what actually occurred at the inspection. As I have already indicated where there is a conflict between the account given by the applicant and that given by Ms. Devereux for the reasons already stated I prefer Ms. Devereux's evidence.
The Facts
The letter of 10th September, 2002, which I have already set out in full earlier in this judgment, made it clear to the applicant that Ms. Devereux had been appointed as an authorised person within the meaning of s. 76 (10) of the Solicitors (Amendment) Act, 1994 and that the applicant was required to produce to her all books of account, bank statements, files and other documents as she might require.
The terms of that letter made it perfectly clear that a general inspection was going to be carried out by Ms. Devereux. Despite the invitation in the letter to contact Ms. Devereux if he wished the applicant made no attempt to do so.
Ms. Devereux telephoned the applicant on 25th September in accordance with her standard practice. The applicant never made any query or raised any question about the purpose of the inspection.
When Ms. Devereux attended at the applicant's premises she was given the use of a room on the first floor. All of the books of account were maintained in the basement. It was therefore necessary for her to go up and down two flights of stairs every time she wished to examine something or obtain further information that was not already in the room allocated to her. The book-keeper employed by the applicant was available and in the office for the first day of the inspection.
On the morning of the first day of the inspection she met the applicant and it was he who showed her to the room on the first floor which was being made available to her. He effected the introduction to the book-keeper and requested that she deal with Ms. Devereux's queries. He then left her to go on with the inspection.
I am quite satisfied that the method of operation adopted by Ms. Devereux on this inspection was no different to that employed by her in the approximately six hundred other inspections that she has carried out over the last twenty years.
The solicitor was not present during much of the inspection. There is nothing unusual about that and Ms. Devereux would not expect a solicitor to be present throughout.
On 4th October, 2002, Ms. Devereux sent a letter by fax to the applicant. In it she indicated that she wished to complete the inspection and sent to him a list of files which should be available for her for inspection on Tuesday, 8th October. She also indicated that she would like to discuss matters with him but would need to review the files first. She asked for confirmation that those files or at least some of them would be available to her on 8th October.
The files which she sought to inspect were a random sample. I accept her evidence that the inspection of files is an important part of the inspection of accounts in order to verify the transactions as contained in the books of account. No inspection can be completed without the inspection of files. I am also satisfied that her findings at that stage were contingent on whether or not further matters arose following her inspection of the files.
She attended at the applicant's premises on 8th October, 2002. I am satisfied that she asked to see "intact files" and that she did not ask for the files to be given "without interference" as the applicant alleged.
On 8th October, the files which she had requested in her fax of 4th October, 2002, were in the applicant's own room which was locked. The applicant arrived shortly before 10 a.m. and gave the files to her. Included in the files that he gave were ten litigation files, nine of which contained a s. 68 (1) letter dated 31st May, 2001.
On 9th October, Ms. Devereux attended again. She spent the entire morning waiting for the applicant. He finally arrived at about 2.30 p.m. That was the first chance that she had to speak with him since she had received the clients' files the previous day. She requested a further five or six files. When she examined four of these files which related to litigation matters none of them had s. 68 (1) letters. Included in that list was a file for a Ms. MG who was involved in the same accident as her sister, Ms. LG, whose file she had examined initially. Both sisters had their cases settled the same day and were issued with settlement cheques on 29th May, 2002. Despite that, the first file she examined had a s. 68 (1) letter and the second had not. Ms. Devereux was oe fin
f the view that because of this she could not rely on what was in the file since the applicant appeared willing to add letters to them in an apparent effort to cover deficiencies. Thus it was not the issue of the s. 68 (1) letters themselves which concerned her so much as what it revealed about the manner in which the records of the practice were kept. That was clearly relevant to her investigation of the accounting records.
Ms. Devereux indicated her concern in this regard to the applicant on 9th October, 2002. I am satisfied and so find that the applicant did not say to her that the letters had been sent out the clients in response to a letter of 23rd May, 2001, from the Law Society arising out of the previous inspection. The first time that such a suggestion was made by the applicant was in his affidavit grounding this application. In fact the applicant neither confirmed nor denied the matters that were of concern to Ms. Devereux but simply stated that the letters were standard letters and that he did not understand s. 68 at all.
I find that the first explanation given by the applicant was that he did not understand s. 68 and that he never gave to Ms. Devereux the explanation now furnished on affidavit to the effect that the letters were placed on file in response to the Law Society's letter of 23rd May, 2001.
A complaint was made by the applicant that on 9th October, around lunchtime and prior to meeting with Ms. Devereux, he observed her in the basement going through client files which she had not requested. He contended that this inspection of files was not being carried out in a proper and lawful manner because he had not been requested to nor did he give permission for such files to be examined.
I am satisfied that the following was the position. The applicant did not attend his premises at all on 9th October during the presence of Ms. Devereux until around 2.30 p.m. She told him that she had examined at random closed files which she found in the basement. She was in the basement because that is where the books of account were kept. She opened a few files to see if there were any s. 68 (1) letters in them. There were none. However, she did find on the files authorities from clients to deduct specified solicitor and client fees. There was no record of such fees in the books of account. That is a breach of the Solicitors' Accounts Regulations. It was, therefore, clear to her that she could not rely on what was in the applicant's accounts since they did not match with what was in the actual files. I reject the suggestion that she removed original documents from the files and did not return them to the applicant. The only documents which she took were photo-copies, some of which are actually appended to her report. The procedure adopted by Ms. Devereux
on this inspection was precisely the same as that when she conducted her previous one at the applicant's premises. None of the objections raised by him now were raised in respect of that earlier inspection and in particular he did not require that she had to specifically request every document from him before she could look at it.
The Alleged Failure to Furnish Information
Section 66 (11) of the Solicitors Act, 1954 as amended by s. 76 of the Solicitors (Amendment) Act, 1994 reads (insofar as it is relevant) as follows:-
"Where an authorised person attends pursuant to subsection (10) of this section at a place of business of a solicitor, he shall inform the solicitor or any clerk or servant of the solicitor of the purpose of his attendance as specified in subsection (10) of this section and may thereupon or thereafter, in pursuance of that purpose, require the solicitor or any clerk or servant of the solicitor to do any one or more of the following things:
(a) to make available to him for inspection all or any part of the solicitors accounting records."
I have already reproduced the provisions of s. 66 (10) in this judgment.
In the present case it is quite clear that Ms. Devereux conducted her third inspection on notice to the applicant. It was not a case of an authorised person attending without prior notice as provided for under s. 66 (10). Moreover the letter of 10th September, 2002, made it abundantly clear to the applicant what the purpose of her visit was. It was to inspect and report to the Society on the books of account and other relevant documents in connection with the applicant's practice. The applicant was under no illusion as to what was to occur and that much is exemplified by his whole approach to the inspection. The conversations which he had with Ms. Devereux further attest to that. I am quite satisfied that not merely was he informed of the purpose of Ms. Devereux's attendance but that the letter of 10th September, 2002, also required him to produce to her all books of account, bank statements, files and other documents as she might require.
The notification which was given to the applicant was in complete conformity with the Law Society's Statement of Practice. Under the heading of notification it says:-
"The Society's initial letter with regard to the appointment of an authorised person will advise the solicitor on the purpose of the examination…".
I am quite satisfied that the applicant was fully au fait with what was involved and that his complaint under this heading is not made out.
For the sake of completeness I should note that s. 3 of the Solicitors (Amendment) Act, 2002 inserts a new s. 66(11) into the Act of 1954 but it came into operation on 1st November, 2002 and so is not relevant to the present case.
Procedure During Inspection
It has been alleged that Ms. Devereux conducted an improper search of the applicant's premises and looked at files and documents without the permission of the applicant. I find that as a matter of law that it was not necessary for Ms. Devereux to obtain the consent of the applicant before inspecting any of the applicant's accounting records. The statute creates an obligation on a solicitor to make available such documents for inspection and failure to do so is a criminal offence.
The term "accounting records" is defined in s. 66 (18) of the Act of 1954 as amended by s. 76 of the Solicitors (Amendment) Act, 1994 as follows:-
" 'accounting records' means the books of account and all other documents required to be maintained and kept by a solicitor arising from his practice as a solicitor in accordance with regulations made pursuant to subsection 1 of this section."
The Solicitors Accounts Regulations, 2001 (S.I. 421 of 2001) are the relevant regulations made pursuant to subs. 1 of the section from which I have just quoted. They define the term "accounting records" as meaning:-
"The books of account and all other documents required to be maintained and kept by a solicitor arising from his or her practice as a solicitor in accordance with these Regulations, and in particular Regulation 20; and for the avoidance of doubt, they include loose-leaf books, cards and such other forms of permanent documents of record as are appropriate for the operation of and of the vouching of an efficient accounting system, whether written, mechanical or electronic."
The same regulations define "documents" as including:-
"Deeds, wills, papers, books of account, records, vouchers, correspondence and files and shall be construed to include any documents stored in an electronic or other non-written form or on film or otherwise."
Section 12 (1) of these regulations requires a solicitor to:-
"At all times in the course of and arising from his or her practice as a solicitor, maintain (as part of his or her accounting records) proper books of account, and such relevant supporting documents as will enable clients' moneys handled and dealt with by the solicitor to be duly recorded and the entries relevant thereto in the books of account to be appropriately vouched."
In the light of these definitions it is difficult to see how it can be said that in examining files and documents Ms. Devereux was acting in excess of her authority. It is equally difficult to understand how it can be maintained that the consent of the applicant was required before she could inspect files given the statutory obligation placed upon him to make available for inspection all or any part of his accounting records.
In any event Ms. Devereux gave evidence that the normal position is that solicitors say to her that their records and files are available to her when she is conducting an inspection. The whole approach of the applicant and his conduct towards Ms. Devereux in this case was indicative of there being no objection to her inspecting files as she saw fit. For substantial portions of the time the applicant was not present and that was perfectly understandable. She examined files and records solely to ensure that the accounts regulations were being complied with. I see nothing wrong with that and it does not appear that the applicant did so either until long after the event.
Ms. Devereux was on the applicant's premises to ensure compliance with the regulations. The files and records of the applicant were crucial to her in the carrying out of her task. There was in my view neither an improper nor unlawful search of his premises nor any necessity to obtain the specific authority of the applicant to inspect such files as she did. In any event it appears to me that the applicant's conduct and co-operation during the inspection was an implicit consent on his part to her inspecting as she did.
Section 68
I have already reproduced the comments made by Ms. Devereux in the conclusions reached by her concerning the s. 68 letters which she came across in the course of her inspection.
Section 68 (1) of the Solicitors (Amendment) Act, 1994 requires a solicitor on the taking of instructions to provide legal services to a client or as soon as practicable thereafter to provide that client with particulars in writing of the actual charges or where the provision of particulars of the actual charges is not in the circumstances possible or practicable an estimate of the charges or where the provision or particulars of the actual charges or an estimate of such charges is not in the circumstances possible or practicable the basis on which the charges are to be made by that solicitor or his firm for the provision of such legal services.
The applicant says that these letters could not form any part of his accounting records. It was therefore not open to Ms. Devereux to inspect them, still less to comment upon them.
I have already set out the relevant definitions of the terms "accounting records", "documents" and the provisions of s.12 (1) of the Regulations of 2001 which require a solicitor to maintain as part of his accounting records inter alia relevant supporting documents to allow the entries in the accounts to be vouched.
It is quite clear from the evidence of Ms. Devereux that she, as a professional accountant involved in inspections of this sort for many years, regarded the s. 68 letters as documents which were reviewed by her in order to vouch the transactions in the clients' account.
She reiterated how she came to comment on these letters. It was while she was inspecting the files which had been requested by fax. She discovered that they all had s. 68 letters dated 31st May. When she inspected the files which had been requested in the afternoon of 9th October, they did not have s. 68 letters on them. She thought it a remarkable coincidence that some files did and others did not. It underlined for her the unreliability of the records themselves.
The only expert accountancy evidence that was called in this case was that of Ms. Devereux. I accept her evidence. These letters were "documents" as defined in the regulations. They were inspected by her in the context of them being supporting documents to enable her to try and vouch accounting records in respect of transactions in the applicant's accounts. I believe she was entitled to regard them as such and to comment as she did upon the remarkable matters which she discovered in the course of that inspection. It follows therefore that the applicant's complaint under this heading is without substance.
The Case of Kennedy v. The Law Society
During the course of the hearing reference was made on a number of occasions to the decision of the Supreme Court in Kennedy v. the Law Society (No. 3) [2002] 2 IR 458.
That case was very different to the present one. In Kennedy it was held that the accountant conducting the inspection had been specifically instructed that, in addition to inspecting books of account, she was to look for evidence of fraudulent claims passing through the practice and furthermore that those instructions were not disclosed to the applicant at the commencement of the investigation or prior thereto.
The inspection in the present case had no ulterior motive. There is no evidence whatsoever that the inspections here were conducted for any purpose other than ensuring compliance with the accounts regulations. The report produced by Ms. Devereux focuses on breaches of the accounting regulations. The attempt by the applicant to bring himself within the ambit of the decision in Kennedy and thus to have the decision of the Compensation Fund Committee quashed fails.
Delay
In view of the findings which I have made on the merits I will not consider whether the application ought to fail because of delay as the Law Society submits.
Conclusion
This application is dismissed.