Kennedy v Law Society of Ireland (No. 3)

• Jurisdiction: Ireland
• Judge: Mr Justice Francis D Murphy
• Judgment Date: 20 December 2001
• Neutral Citation: [2001] IESC 35
• Date: 20 December 2001
• Court: Supreme Court
• Docket Number: [S.C.

KENNEDY v. LAW SOCIETY OF IRELAND & ORS

Giles J Kennedy

Applicant/Appellant

AND

The Law Society of Ireland, Patrick Joseph Connolly and Aishling Foley

Respondents

[2001] IESC 35

Murphy J

Murray J

McGuinness J

Hardiman J

Fennelly J

Record No: 312/1999

THE SUPREME COURT

Synopsis:

PROFESSIONS

Solicitors

Disciplinary inquiry - Judicial review - Procedures - Investigation by Law Society — Accountancy - Inspection of files - Client confidentiality - Role of investigating accountant - Whether investigating accountant possessed necessary qualifications - Whether investigation bona fide and in accordance with relevant regulations - Solicitors Accounts Regulations (No 2), 1984 SI 304/1984 - Solicitors Act, 1954 sections 4, 5, 66, 71 - Solicitors (Amendment) Act, 1960 sections 7, 19, 20, 21, 31 - Solicitors (Amendment) Act, 1994 section 14 (312/1999 - Supreme Court - 4/4/01)

Kennedy v Law Society - [2002] 2 IR 458

The applicant was the principal of a law firm which was under investigation by the respondent. The applicant claimed, inter alia, that the true nature of the investigation had not been revealed to him and was in excess of the powers conferred upon the respondent. The applicant also complained that the number of client files requested by the respondent was inordinate and in addition that these files were protected under client privilege and were confidential. The applicant sought an order quashing the said investigation and additionally sought damages. Kearns J rejected the arguments of the applicant. There had been sufficient evidence of fraud to warrant the investigation that had been undertaken. The investigation in question was one an authorised one within the meaning of the Solicitors Accounts Regulations (No 2), 1984. As a result no defence of privilege or client confidentiality could be said to arise. The non-disclosure at the outset of all the purposes of the investigation did not in this instance invalidate the investigation. The applicant appealed to the Supreme Court. Mr. Justice Murphy was not satisfied that the role of the investigating accountant was wider than that of a reporting accountant. The task assigned to each appeared identical. Neither the statutory provisions nor the regulations made thereunder suggested that such an accountant had a function in determining the profitability of a practice or the competence of a solicitor. It was the view of the learned judge that the investigation of the possibility of fraudulent claims was not an authorised purpose under the Solicitor's Accounts Regulations. The matter of whether the appointment of the accountant acting on behalf of the Law Society (which had a dual purpose, one intra vires the other ultra vires) was defective should be determined by the Court and at a later date. In addition the extent to which the Law Society could rely on a report produced in such circumstances should be discussed. The matter should be re-entered before the Court.

Citations:

SOLICITORS ACCOUNTS REGS (NO 2) 1984 SI 304/1984 ART 29

SOLICITORS ACT 1954 S66

SOLICITORS ACT 1954 S66(1)

SOLICITORS ACT 1954 S66(2)

SOLICITORS ACCOUNTS REGS (NO 2) 1984 SI 304/1984 PART I

SOLICITORS ACCOUNTS REGS (NO 2) 1984 SI 304/1984 PART II PARA 10

SOLICITORS ACCOUNTS REGS (NO 2) 1984 SI 304/1984 PART II PARA 10(3)

SOLICITORS ACCOUNTS REGS (NO 2) 1984 SI 304/1984 PART III

SOLICITORS ACCOUNTS REGS (NO 2) 1984 SI 304/1984 PART IV

SOLICITORS ACCOUNTS REGS (NO 2) 1984 SI 304/1984 PART IV PARA 19(2)

SOLICITORS ACCOUNTS REGS (NO 2) 1984 SI 304/1984 PART V

SOLICITORS ACT 1960 S31

SOLICITORS ACT 1960 S31(1)

SOLICITORS ACCOUNTS REGS (NO 2) 1984 SI 304/1984 PART V PARA 22

SOLICITORS ACCOUNTS REGS (NO 2) 1984 SI 304/1984 PART V PARA 23

SOLICITORS ACCOUNTS REGS (NO 2) 1984 SI 304/1984 PART IV PARA 29(2)

SOLICITORS ACT 1960 S31(1)(b)

SOLICITORS ACCOUNTS REGS (NO 2) 1984 SI 304/1984 PART IV PARA 29(1)

SOLICITORS ACCOUNTS REGS 1955 SI 218/1955 PARA 14(1)

SOLICITORS ACCOUNTS REGS 1955 SI 218/1955 PARA 14(2)

SOLICITORS ACT 1960 S31(6)

KINGSTON COTTON MILL (NO 2) 1896 2 CH 279

SOLICITORS ACCOUNTS REGS (NO 2) 1984 SI 304/1984 PART V PARA 21(3)

SOLICITORS ACT 1954 S4

SOLICITORS ACT 1954 S73(1)

1 Judgment of Mr Justice Francis D Murphy delivered the4th day of April, 2001 [nem diss]

2 The appeal herein raises three issues, namely:-

3 1 The nature, extent and, more particularly, the limits of the powers conferred on an accountant appointed by the Law Society of Ireland (the Law Society) under Article 29 of the Solicitors" Accounts Regulations No. 2 of 1984 (S.I. No. 304 of 1984).

4 2 The qualification which a person must possess or approvals which he or she must have to enable him or her to be appointed as an accountant pursuant to and for the purposes of Article 29 aforesaid.

5 3 The manner in which and the persons by which such an accountant may be appointed by or on behalf of the Law Society.

6 The particular circumstances in which those issues arose were pleaded in detail in the points of claim in which pleadings in the various proceedings herein culminated; they were explored in the evidence taken in the High Court; they were analysed fully in the judgment of Mr Justice Kearns and they were repeated in the detailed written submissions to this Court. In those circumstances and having regard to the fact that the issue is largely one of construction the factual matrix to the issues need only be set out briefly as follows.

7 The Applicant/Appellant (Mr Kennedy) qualified as a solicitor on the 31st April, 1978 and has carried on practice in private under the style of "Giles J. Kennedy & Co." at 81, Eccles Street, Dublin 1, since the 1st February 1981. In 1983 an investigation of Mr Kennedy's practice identified a deficit of £37,000 in the account of the practice. That deficit was resolved to the satisfaction of the Compensation Fund Committee of the Society in November, 1983. Further investigation took place in 1985 against the background where Mr Kennedy was in breach of the accounts regulations requiring the production of accountants certificates. No significant deficit or irregularity was uncovered by that investigation.

8 It appears that in 1991 Mr Kennedy's firm acted for Mr David Lillicrap who, with John Burke, instituted proceedings against Lydia Glass and Avis Rentacar (Ireland) Limited claiming damages for personal injuries. At the conclusion of the evidence in that case the trial Judge dismissed the claims of both plaintiffs with costs and referred the papers to the Director of Public Prosecutions to investigate whether there had been a criminal conspiracy or fraud involved in the case. The Court made no criticism of Mr Kennedy's firm in relation to the conduct of those proceedings.

9 On the 15th April, 1993, the Compensation Fund Committee (the CFC) of the Society decided to investigate the professional practice of six solicitors (including that of Mr Kennedy) pursuant to the provisions of Regulation 29 of the 1984 Regulations. On the 24th May, 1993, Mr PJ Connolly, Registrar of the Society assigned Ms Ashling Foley, one of a numbered of chartered accountants in the employment of the Society, to carry out that investigation. By letter dated the 24th May, 1993, Mr Connolly wrote informing Mr Kennedy of the fact that Ms Foley had been appointed to carry out the investigation and drawing the attention of Mr Kennedy to his obligations under the accounts regulations. It is clear (and the learned trial Judge has so found) that Ms Foley was specifically instructed by the Society that in addition to inspecting the books of account she was to look for evidence of fraudulent claims passing through the practice and, secondly, that these instructions were not disclosed to Mr Kennedy at the commencement of the investigation or prior thereto. Ms Foley was aware of the Lillicrap case and was further informed by Mr Connolly of his suspicions in relation to other fraudulent claims which might have been processed by Mr Kennedy's office. Ms Foley was required to investigate whether Mr Kennedy's firm had complied with the Accounts Regulations and whether his firm was involved in spurious claims. It was, as the learned trial Judge held, a two-pronged investigation.

10 The investigations carried out by Ms Foley appear to have been challenged by Mr Kennedy at every stage and on a variety of grounds. Initially it was the Society that instituted plenary proceedings against Mr Kennedy on the 29th July, 1993, claiming (amongst other things) a mandatory injunction directing Mr Kennedy to produce to the Society's agents certain documents required for the purposes of the investigations being carried out by Ms Foley. The Society's claim was disputed in the defence delivered by Mr Kennedy which went on to counter claim for damages then estimated at a sum in excess of £250,000 on grounds which included the allegation that the investigation had "exceeded its lawful remit". By motion dated the 29th day of April, 1996, Mr Kennedy sought and obtained leave to apply for orders for judicial review by way of certiorari to quash (among other things) the appointment of Ms Foley to carry out the inspection aforesaid and for an order quashing a purported decision of the Society communicated to Mr Kennedy on the 12th February, 1996, to seek an inquiry by the Disciplinary Tribunal of the High Court into his professional conduct. These proceedings were pursued vigorously and gave rise to a variety of interlocutory applications and the preparation and exchange of voluminous documentation. Ultimately the plenary proceedings and the judicial review matter were consolidated by order of the High Court made on the 5th day of March, 1998, and in pursuance of that order points of claim were delivered by Mr Kennedy on the 26th day of March 1998, and points of defence on behalf of the Society and the other Respondents on the...