The Law Society’s compensation fund incurred losses of almost €1 million in 2011, a drop of 20 per cent on the previous year.
Latest accounts for the fund show that €110,750 in disciplinary fines and investigation levies were imposed on solicitors in 2011. This followed €311,000 under the same heading in 2010.
The compensation fund is in place to compensate a solicitor’s 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 Law Society’s compensation fund’s financial statements for 2011, a loss of €998,052 was incurred, following a loss of €1.24 million in 2010.
The losses chiefly arose from a provision for compensation claims of €4.4 million in 2010 and a much lower €1.9 million in 2011.
The fund is financed by the State’s solicitors who each year pay €2,148 for a practice certificate. In 2011, €700 of this payment was applied to the fund.
The contribution levy for the fund increased by €40 per solicitor in 2011 resulting in solicitors contributing €5.8 million to the scheme – an increase on the €5.3million contributed in 2010.
In spite of the losses incurred over 2010 and 2011, the fund has a healthy balance sheet . Director general of the Law Society Ken Murphy says the current level of the fund is in excess of €18 million.
“In addition the fund has insurance cover against payouts in any one year of €50 million in excess of €5 million, ie the compensation fund itself will pay out up to €5 million in any year and would not be exposed again beyond its insurance cover until €55 million had been paid out,” he said.
“The amount of payments, naturally, can vary considerably from year to year. In recent years, however, it has usually been of the order of €2 million to €3 million.”
The figures show that Law Society compensation fund incurred €2.2 million in investigation and support salaries in 2011, an identical figure to 2010.
These costs relate to funding the Law Society’s team of investigating accountants, and litigation and general administrative support staff in the regulation function.
In 2011, the fund also incurred €587,512 in costs from practice closure expenses relating to dealing with recovery and distribution of clients’ files in distressed practice closures.
The Law Society Compensation Fund incurred costs of €553,487 under the same heading in 2010.
On the 2012 out-turn, a statement from the Law Society said: “The compensation fund accounts for the year ended 31st December 2012 have not yet been published and the Law Society is therefore unable to comment on them.”
Separately, the Law Society recorded a pre-tax profit before exceptional item of €2.4 million in 2011 following revenues of €22.5 million. The exceptional €2 million cost related to the write-down in value of development land.
The Law Society had net assets of €22.4 million, including €9.4 million in cash.
