Law Society’s compensation fund suffers losses of €2.24m

The Law Society’s compensation fund incurred losses of over €2.24m in 2011 and 2010.

The fund compensates clients who have sustained loss as a consequence of dishonesty on the part of a solicitor or an employee of a solicitor.

According to the financial statements for 2011, it incurred a loss of €998,052, compared to a loss of €1.24m in 2010.

Just over €4.4m was paid out by the fund in 2010 and €1.9m in 2011.

The accounts also show €110,750 in disciplinary fines and investigation levies were imposed on solicitors in 2011, significantly less than the €311,000 in 2010.

The fund is financed by the country’s solicitors, who each year pay €2,148 for a practice certificate. In 2011, €700 of this payment was applied to the compensation fund.

The contribution levy for the fund increased by €40 per solicitor in 2011 resulting in total contributions of €5.8m to the scheme — an increase on the €5.3m contributed in 2010.

In spite of the losses incurred over 2011 and 2010, the fund has a healthy balance sheet with director general of the Law Society, Ken Murphy, confirming the current level of the fund is in excess of €18m.

“In addition, the fund has insurance cover against pay-outs in any one year of €50m in excess of €5m ie the compensation fund itself will pay out up to €5m in any year and would not be exposed again beyond its insurance cover until €55m had been paid out,” said Mr Murphy.

“The amount of payments, naturally, can vary considerably from year to year. In recent years, however, it has usually been of the order of €2m to €3m.”

The figures show the Law Society compensation fund paid out €2.2m to investigating accountants and litigation and general administrative support staff.

The fund also incurred €587,512 in costs from practice closure expenses that relate to dealing with recovery and distribution of clients’ files in distressed practice situations, such as abandoned practices.

The Law Society recorded a pre-tax profit before exceptional items of €2.4m in 2011 following revenues of €22.5m. The exceptional €2m cost related to the write-down in value of development land.

The Law Society had net assets totalling €22.4m that includes €9.4m in cash.