SMDF Bailout

Maximilian

What do solicitors here think of this proposal? Just got my ballot paper and I'm dithering.

Not sure I have the stomach for another bailout.

Imhof Tank

I am voting against.

Obviously its a complex issue but the main reasons are

1. non disclsure/ probable unreliablity of source financial information on which the €16m estimate is based;
2. very sketchy detail in relation to the intentions of the reinsurers (no concrete committment from them to cover their 90% exposure even if the proposal is passed afaik);
3. directors of SMDF get a free ride if liquidation avoided;
4. non disclosure of "beneficaries" of the proposals - percentage of shortfall relating to claims by covered banks for example, uninsured exposure "per partner" for firms affected.

There have to be alternatives - Alan Shatter says SMDF has to be saved "in the public interest" - I suppose €16m - a drop in the ocean - from the state would be out of the question??? Didnt the state justify a bail out of the pork and bacon industry on these grounds?

Or how about the state puts in the €16m and then put 0.5% extra VAT on legal services for a certain period?? Similar to the insurance levy.

bath handle

If the Law Society give money to the SMDF isn't it a taxable gift? Doesn't the tax have to be paid up front? Where is the SMDF going to get the money to pay the tax? Another gift? Also taxable. From who? The mind boggles at this madness.

Beano

Imhof Tank wrote: »

I am voting against.

Obviously its a complex issue but the main reasons are

1. non disclsure/ probable unreliablity of source financial information on which the €16m estimate is based;
2. very sketchy detail in relation to the intentions of the reinsurers (no concrete committment from them to cover their 90% exposure even if the proposal is passed afaik);
3. directors of SMDF get a free ride if liquidation avoided;
4. non disclosure of "beneficaries" of the proposals - percentage of shortfall relating to claims by covered banks for example, uninsured exposure "per partner" for firms affected.

There have to be alternatives - Alan Shatter says SMDF has to be saved "in the public interest" - I suppose €16m - a drop in the ocean - from the state would be out of the question??? Didnt the state justify a bail out of the pork and bacon industry on these grounds?

Or how about the state puts in the €16m and then put 0.5% extra VAT on legal services for a certain period?? Similar to the insurance levy.

so the taxpayer pays twice to bailout a profession that failed to regulate itself?

234

Beano wrote: »

so the taxpayer pays twice to bailout a profession that failed to regulate itself?

If the state stepped in they would be shoring up an insurance fund, not a profession. If the SMDF was allowed to collapse then insurance costs would go up for solicitors and this cost would have to be passed on in the form of increased legal fees (while the IMF is somehow trying to reduce then).
Unlike banks, were there are only a few large institutions or systemic importance, there are thousands of solicitors even if some are part of large firms. It would be impossible to have a regulator large enough to monitor the porfession to the extent that people could not act dishonestly if they choose to.

Beano

234 wrote: »

If the state stepped in they would be shoring up an insurance fund, not a profession. If the SMDF was allowed to collapse then insurance costs would go up for solicitors and this cost would have to be passed on in the form of increased legal fees (while the IMF is somehow trying to reduce then).
Unlike banks, were there are only a few large institutions or systemic importance, there are thousands of solicitors even if some are part of large firms. It would be impossible to have a regulator large enough to monitor the porfession to the extent that people could not act dishonestly if they choose to.

how about exchanging a bailout for an indepedent regulator with the statutory power to strike off solicitors? you cant ask for bailout without giving something in return.

234

Your first post implied that a lack of regulation put the profession in the position it is in at the moment. No matter how competent and independent the regulator they can't be looking over the shoulder of every solicitor in the country. There are just too many. They would rely on discplining solicitors after complaints have been made (as the Law Society does now). This would still not stop determined wrongdoers who knew how to conceal their actions for a certain period of time.
Compare this with the banking sector where there are a few large banks who are in the position they are in now because of sustained periods of wilfull stupidity. This could have been curtailed with effective oversight.

Beano

234 wrote: »

Your first post implied that a lack of regulation put the profession in the position it is in at the moment. No matter how competent and independent the regulator they can't be looking over the shoulder of every solicitor in the country. There are just too many. They would rely on discplining solicitors after complaints have been made (as the Law Society does now). This would still not stop determined wrongdoers who knew how to conceal their actions for a certain period of time.
Compare this with the banking sector where there are a few large banks who are in the position they are in now because of sustained periods of wilfull stupidity. This could have been curtailed with effective oversight.

i'm not suggesting they look over the shoulder of every solicitor but why not a random sample every year? obviously the current system of waiting for a complaint and then investigating (and i cant imagine that such an investigation would happen immediately or quickly) is not working.

234

Beano wrote: »

i'm not suggesting they look over the shoulder of every solicitor but why not a random sample every year? obviously the current system of waiting for a complaint and then investigating (and i cant imagine that such an investigation would happen immediately or quickly) is not working.

But why solicitors? Granted they do work that can potentially have a huge impact on the lives of clients, but so do builders; if they mess up the foundations of your newly-built family homw you life is ruined. Yet nobody is suggesting that builders need any kind of regulation, let alone increased regulation.

gizmo555

234 wrote: »

Yet nobody is suggesting that builders need any kind of regulation, let alone increased regulation.

Huh???

http://www.environ.ie/en/DevelopmentHousing/BuildingStandards/#Building Control Regulations 1997 - 2009

Grolschevik

Beano wrote: »

i'm not suggesting they look over the shoulder of every solicitor but why not a random sample every year?

As far as I remember, the Law Society sends in the investigating accountants on a random basis...

Hennybug

I've already cast my vote and voted against it. Some of the reasons are those as set out by Imhof Tank but I also don't believe the €16m will be an end to it and we'll have them coming back again and again in a bank bailout scenario.

What really put me off was the information that came from the Law Society prior to the proposed mid week Dublin based vote, it was emotive and designed to make those who didn't want to cough up feel guilty as if we were letting down our colleagues.

The reality is the SMDF shouldn't have gone back in the market last year, and a bailout of any Insurance Company is a dangerous precedent to set.

Delancey

I'm not a Solicitor but think this bailout is crazy in that all Solicitors are being asked to cough up , it seems ludicrious that a Solicitor who has already paid out a large sum for cover with another insurer is being asked to fund an insurer he is not covered by - like paying twice over ?

Maximilian

Thanks for the various opinions. I think I'm going to take an objectivist attitude and vote against this proposal.

I'm not convinced this isn't another blank cheque bailout and aside from all of that I don't see why I and others should have to bail out negligent solicitors, which is what this all boils down to.

mamapeist

My inclination is to vote against. I feel its another example of the small guy paying for the mistakes of the big guys. SMDF effectively got rid of small practices by pricing them out. The small practices are really hurting now, unlike the larger ones. I have seen no breakdown of the value of claims between different sized practices and my suspicion is that a large percentage of the value of the outstanding claims relate to large practices.

234

gizmo555 wrote: »

Huh???

http://www.environ.ie/en/DevelopmentHousing/BuildingStandards/#Building Control Regulations 1997 - 2009

That link shows there there is pleanty of regulations for buildings but almost none for builders. "Builder" is not a protected title, anybody can call themselves a builder and a builder cannot be "struck off" some hypothetical register of builders and not be allowed to practice.

jacko1

unless you are in the smdf it would be madness to vote for the resolution - you might as well hand over €2k minimum to the next stranger that you meet on the street

Only sensible solution is a NO vote

Delancey

Is it possible that a rejection of the SMDF rescue/bail-out will lead to a 'cull ' of Solicitors through inability to get P.I.I. and result in a reduction of the oversupply of solicitors that seems to exist for now ?

dats_right

If the SMDF immediately goes bust it will have major implications for all firms regardless of who insures them. Firms not covered 'by the fund', for their own and clients' interests, will require other firms to confirm details of their PII before being able to conduct a transaction. This will in turn lead to an enormous paralysis within the profession, especially as a substantial portion of firms will overnight become uninsured and basically unable to carry on.

Let's be realistic this scenario will not be allowed happen, so if this proposal fails, whether you like it or not some sort of external forced resolution will in all likelihood be forced upon the profession. Any such resolution would, let's not make any bones about it, be far more unpalatable to the profession as a whole.

The reality is that if we don't sort this ourselves, we will be beaten by an enormous stick by both the Goverment and media, who will peddle a simplistic and populist anti fat-cat rich lawyers, who are attempting to walk away from their liabilities at the expense of poor little Grannies who will lose everything by our actions. In the context of the IMF forthcoming enforced changes to our profession, we will lose whatever credibility we have left to negotiate comprimises as a profession to limit the more draconian and damaging aspects of these changes.

I don't like this proposal, I don't like colleagues who recklessly carried out work that have caused enormous financial and reputational damage to our profession, but I fear the implications of a rejection of this proposal more than the €200 per annum levy and on that basis (whilst still undecided) am likely, with great relutance, to support the proposal.

nuac

I am voting for the proposal.

SMDF was a Law Soc initiative to provide competition in the PI market place and thus keep down insurance costs.

Sadly it has not worked out, but if the bail out is limited to €200 a head p.a. I feel it should be supported in principle.

I also agree with points made by Dats Right.

PS I was never a member of the SMDF

FreudianSlippers

nuac wrote: »

I am voting for the proposal.

SMDF was a Law Soc initiative to provide competition in the PI market place and thus keep down insurance costs.

Sadly it has not worked out, but if the bail out is limited to €200 a head p.a. I feel it should be supported in principle.

I also agree with points made by Dats Right.

PS I was never a member of the SMDF

I can see both sides of the coin (as a non-solicitor) but my worry is that if this second "bailout" fails we may have a lot of people trying to stick their noses in and regulate both the bar and law society... and IMO we don't need public servants regulating the legal profession.

bath handle

nuac wrote: »

Sadly it has not worked out, but if the bail out is limited to €200 a head p.a. I feel it should be supported in principle.



F

What about the Gift Tax?

jacko1

nuac wrote: »

I am voting for the proposal.

SMDF was a Law Soc initiative to provide competition in the PI market place and thus keep down insurance costs.

Sadly it has not worked out, but if the bail out is limited to €200 a head p.a. I feel it should be supported in principle.

I also agree with points made by Dats Right.

PS I was never a member of the SMDF

why on earth would you hand over a minimum of €2000 (trust me it will be a lot higher) to an organisation that you have no involvement with? Why bail out someone else for their mismanagement

Vote NO and lets have Alan Shatter carry out an investigation into what was going on in the SMDF

Hennybug

I think irrespective of how we vote it's going to be thrown back to us again in a "lisbon treaty" style re-ballot! If that happens though, we might at least be given better information since all we've had up to now is pulling on the heart-strings with the you can't let your colleagues down spiel :rolleyes:

I also believe the figure quoted is only a drop in the ocean and the final figure will be multitudes of that :mad:

Maximilian

I didn't see anything that suggested it might not work out at more money than they are suggesting. 200 per year for 10 years (or whatever) is just an estimate. Just what exactly would the terms of the bailout be? Might that figure go higher?

I voted no and think the chips should fall as they may. There's a lot of if's and it may not be necessary for the government to intervene. A lot for example depends on how the liquidator acts and something might be done there. I think this 'solution' is a little half-baked.

Imhof Tank

Maximilian wrote: »

I didn't see anything that suggested it might not work out at more money than they are suggesting. 200 per year for 10 years (or whatever) is just an estimate. Just what exactly would the terms of the bailout be? Might that figure go higher?

I voted no and think the chips should fall as they may. There's a lot of if's and it may not be necessary for the government to intervene. A lot for example depends on how the liquidator acts and something might be done there. I think this 'solution' is a little half-baked.

This particular proposal is limited to €16m, but the €200 per year for 10 years is based on at least the same numbers staying in the profession for those 10 years which has to be in doubt.

I just think the current proposal is the thin end of the wedge - if this is voted through, and they come back next year - just like the banks - and say the actual figure is €18m or €19m, it would be said that the extra few million should be approved and tacked onto the end of the payback period - because if not then the original €16m will be down the drain. Yes, there would have to be a second vote, but the real damage would already have been done.

dats_right

The results are in:

There was a total poll of 4,550 of which 8 were spoiled giving a total valid poll of 4,542. There were approximately 9,200 members entitled to vote.

The votes were cast as follows:-

Yes – 2,804

No – 1,738

To the nearest percentage point, the above vote represents 62% 'yes' and 38% 'no'.

The full text of the resolution which was the subject of the postal ballot was as follows:-

“That this General Meeting approves the recommendation of the Society’s Council to provide financial support to the Solicitors Mutual Defence Fund up to a maximum of €16million, to be funded by way of an equal payment from every practising solicitor for a period of ten years and to be collected through the practising certificate fee or as otherwise determined by the Society (currently estimated at €200 per solicitor per year).”

Delancey

That less than half those entitled to vote on such an inportant issue actually did so amazes me.

drkpower

Delancey wrote: »

That less than half those entitled to vote on such an inportant issue actually did so amazes me.

+1

And if this goes south and it turns into multiple further bailouts, you can be sure those who couldnt be arsed voting will be bemoaning the Yes vote....

Maximilian

Particularly considering how little effort was required to cast your vote.

ian deflic

I would like to present some facts which you may or not know concerning the recent SMDF Bailout.

Total Number entitled to vote 9200
Total Number who voted 4542
Total who voted Yes 2804
Total who voted No 1738

Remember All SMDF Members were urged to vote yes, so if you take the SMDF Members out of the mix, it does leave a very small number of non SMDF solicitors who actually voted yes.

Members were told that a levy of €200 per annum per solicitor for the next 10 to 15 years would be required to bailout the SMDF. This figure of €200 is only a guess on behalf of the SMDF and The Law Society and in reality this figure could become much greater in the coming years and a significant burden for solicitors to carry. The €200 euro amount is based on current claims experience and that all solicitors decide to continue to practice. These assumptions make no sense to any person living in the real world and this levy will grow and grow over the coming years. By agreeing to bailout the SMDF the members have signed a blank cheque and one which will continue to haunt them in the future. This bailout also lets the Directors of the SMDF off the hook and I will tell you why this should not be allowed to happen. Why did the Society not limit the amount of bailout money when asking the members to vote yes, this beggars belief and certainly would not be permitted in the real world.


The SMDF was set up solicitors for solicitors, the reality is the t SMDF is insolvent and the Directors and Management of the SMDF will not be made accountable under the bailout. The question has to be asked why this was allowed to happen.

As long as the SMDF contract contains 3.2 which says “There shall be no limit on the indemnity for legal costs”. This clause is a blank cheque and one which the solicitors of Ireland are been asked to pay.

A Director of the SMDF Mr. Patrick Dorgan is the first named Defendant in a high court action against his firm Coakley Moloney Solicitors. Guess who is defending this action? None other than LK Shields Solicitors. I wonder if this firm has any connection with Laurence K Shields the Chairman of the SMDF. Yes the SMDF is by solicitors for solicitors, just not every solicitor.

pauloshea2011

Ian : What do you mean by a blank cheque ? and are you sure that a director of the smdf is been sued.

ian deflic

The blank cheque I am referring to is that under the smdf contract clause 3.2 says that there is no limit on defence costs. What this means is that the panel solicitors appointed by the smdf to defend any case including future actions will have no limit on their legal fees and the smdf is asking the rest of the solicitors to pay for this. Ask yourself who has the most to gain ?

In answer to your second question go to the court service site www.courts.ie and go to high court search and put in the number 2010 6640P and you will see that Mr. Patrick Dorgan who is the Managing Partner at Coakley Moloney Solicitors is also a Director of the smdf. Strange but true.

pauloshea2011

Ian : I see from the site that there is eight people listed as defedents, are they all directors of the smdf ?

ian deflic

No only Patrick Dorgan is a director of the smdf. The other 7 defendants are all partners in Coakley Moloney Solicitors

pauloshea2011

I find it hard to understand a situation where an insurance company is sued and the Chairman of the insurance company stands to make a personal profit out of it. Seems to be double standards. Does anybody know who gets the work from the smdf ????????

ian deflic

I have no idea who defends the actions for the smdf; maybe someone can throw some light on this.
I do not know who is on the defence panel of solicitors for the smdf nor do I know if Coakley Moloney solicitors are insured by the smdf. I would be very surprised if they were not as the managing partner of Coakley Moloney is Mr. Patrick Dorgan who is also a director of the smdf.
All I can say with certainty is what is on the court service site. The eight partners of Coakley Moloney solicitors are been sued by Emerald Isle Assurances since July 2010 and the case is listed for hearing in December 2011. The eight partners listed on the site are Patrick Dorgan, Sylvester Duane, Nicholas O Keeffe, Kevin O Keeffe, Eugene Glendon, Eileen Nagle, Shane Moloney and Julian Kahn. The site says that the Defending solicitors are L K Shields Solicitors Dublin.
I do not know if Coakley Moloney solicitors are insured through the smdf or if L K Shields are on the defence solicitors panel but if the answer is yes to both then serious questions have to asked and more importantly answered.

blueythebear

ian deflic wrote: »

I have no idea who defends the actions for the smdf; maybe someone can throw some light on this.
I do not know who is on the defence panel of solicitors for the smdf nor do I know if Coakley Moloney solicitors are insured by the smdf. I would be very surprised if they were not as the managing partner of Coakley Moloney is Mr. Patrick Dorgan who is also a director of the smdf.
All I can say with certainty is what is on the court service site. The eight partners of Coakley Moloney solicitors are been sued by Emerald Isle Assurances since July 2010 and the case is listed for hearing in December 2011. The eight partners listed on the site are Patrick Dorgan, Sylvester Duane, Nicholas O Keeffe, Kevin O Keeffe, Eugene Glendon, Eileen Nagle, Shane Moloney and Julian Kahn. The site says that the Defending solicitors are L K Shields Solicitors Dublin.
I do not know if Coakley Moloney solicitors are insured through the smdf or if L K Shields are on the defence solicitors panel but if the answer is yes to both then serious questions have to asked and more importantly answered.

I can see the point that you are making but in the vote for the SMDF bailout, the links between management in the SMDF and certain solicitor firms were identified as being an issue in the argument for a "no" vote. The motion was passed nonetheless so it would seem that the people (members of fthe law society) have spoken on this and don';t care about any vested interests involved in the SMDF.

Delancey

Should the 200 p.a. ' contribution ' from solicitors to fund the SMDF prove inadequate and need to be increased to , say , 500 p.a. will there be a second vote or can the Law Society impose this without reference to it's membership ?

Mrs Shuttleworth

Delancey wrote: »

Should the 200 p.a. ' contribution ' from solicitors to fund the SMDF prove inadequate and need to be increased to , say , 500 p.a. will there be a second vote or can the Law Society impose this without reference to it's membership ?

The wording of the motion said support to a maximum of 16m, funded by a current estimate of 200 Euro per solicitor per year for ten years.

So technically if the number of solicitors practising slumps by half, the annual contribution would double.

Deloitte estimated the losses to be in the region of 300m, so once the 16m contribution is hit we're in unknown territory.

What's more of interest is whether or not the profession will be insurable at all come November.