Rafter v Solicitors Mutual Defence Fund Ltd

• Jurisdiction: Ireland
• Judgment Date: 20 May 1999
• Date: 20 May 1999
• Docket Number: [No. 1996/6170P],Record No. 1996 No 6170P
• Court: High Court

THE HIGH COURT

Record No. 1996 No 6170P

BETWEEN

HELEN RAFTER

PLAINTIFF

AND

SOLICITORS MUTUAL DEFENCE FUND LIMITED

DEFENDANT

Abstract:

Tort - Insurance law - Road traffic accident - Personal injuries - Failure of solicitor to issue proceedings - Preliminary issue - Statute barred - Complaint to Law Society - Disciplinary committee - Claim for professional negligence - Whether plaintiff able to recover against defendant - Professional indemnity - Whether claim fell within terms of scheme - Whether benefits provided to solicitor by defendant constituted insurance policy or contract to provide indemnity - Whether obligations by defendant to solicitor held by him in trust for plaintiff and enforceable by plaintiff as beneficiary - Refusal of defendant to indemnify plaintiff - Whether information gleaned at hearing of Law Society's disciplinary committee available to defendant - Whether obligation on defendant to indemnify solicitor - Civil Liability Act 1961 (No 41) s.62

While the real point in the case was whether there was an obligation on the defendant to indemnify a solicitor member of the defendant against whom a decree for £31,000 damages and costs for professional negligence was awarded for his failure to institute a claim for damages for personal injuries for the plaintiff within the statutory limitation period, the defendant was a mutual defence company and the granting of an indemnity was discretionary. No policy of insurance existed in respect of which s.62 of the Civil Liability Act 1961 could apply. Even if a trust existed whereby the defendant was bound to pay the plaintiff any monies due to the solicitor, there was still no payment due to the plaintiff as there was no payment due to the solicitor. The plaintiff appeared to be left with no remedy due to a most unfortunate series of events which were beyond her control. The defendant would appear to have power to make ex gratia payments but that was something which the court could only commend to them for their consideration. The High Court so held in dismissing the action.

1 JUDGMENT of Mr Justice McCracken delivered the 10th day of May 1999

2 This is a very unfortunate case in which the Plaintiff has for many years sought to recover damages for substantial personal injuries suffered in a road traffic accident and has through no fault of her own failed to do so. The traffic accident in which she was injured took place as long ago as 21st February 1981 and she subsequently instructed a Solicitor named Michael Collier to act for her, and to institute proceedings against the driver of the other vehicle involved. Regrettably Michael Collier failed to issue the proceedings within the statutory period of three years and on 17th of May 1988 following the trial of a preliminary issue in those proceedings it was held that the Plaintiff's claim was statute barred.

3 In the meantime, the Plaintiff had made a formal complaint to the Law Society on 15th October 1985 regarding the handling of the case by Michael Collier and subsequently the disciplinary committee of the Law Society found that there was misconduct on his part in relation to the matter.

4 The Plaintiff then issued proceedings against Michael Collier for damages for professional negligence, and on 6th December 1990 she obtained a decree on foot of those proceedings for the sum of £31,000 and costs. However, she was unable to recover the sum from Michael Collier. and eventually petitioned to have him declared a bankrupt. By Order of Mr Justice Murphy dated the 21st of June 1993 Michael Collier was duly adjudicated bankrupt and the unfortunate Plaintiff has been unable to obtain any redress and is highly unlikely to do so in the future unless she can recover against the Defendant in these proceedings.

5 To understand the claim being made against the Defendant, it is necessary to set out the background to the formation of the Defendant. It appears that a problem arose in 1985 in relation to professional indemnity insurance for solicitors, in that very large increases in premiums were being charged. As a result, the Law Society investigated the possibility of setting up a professional indemnity mutual insurance scheme, and proposals to that effect were presented to the Annual General Meeting of the Law Society in November 1986, and were accepted in principle. The proposal was that the precedent of the Medical Defence Union Scheme be followed through the establishment of a guarantee company to be entitled "Solicitors Mutual Defence Fund Limited", that the scheme would provide cover for £200,000 in respect of each and every claim and that top-up cover above that sum should be sought from the insurance market. It should be added that, at this time, professional indemnity insurance for solicitors was not compulsory. Following on these considerations, the Defendant company was registered as a company limited by guarantee. It is quite clear that while in one sense it is an instrument of the Law Society, and one of its functions is to report to the Council of the Law Society in respect of the management and administration of the fund, nevertheless it was quite deliberately set up as a separate legal entity. Furthermore, it was set up as a company limited by guarantee which operated for the benefit of its

6 members, and any Solicitor who wished to join in the scheme operated by the Defendant was obliged to become a member of the company.

7 Like every other company. the Defendant is only empowered to have such functions and objects as are authorised by its Memorandum of Association. In the present case, certain of the object clauses are of particular importance, and I would quote them in full.

8 They are:

9 (A) To act as the company recognised by the Incorporated Law Society of Ireland hereinafter also referred to as "The Law Society" to create, hold, manage and administer a Mutual Defence and Indemnity Fund ("the Fund") in relation to civil liability claims affecting the professional character or professional interests of solicitors practising in the State with a view to mitigating or preventing losses sustained or likely to be sustained by virtue of such claims and in particular and without prejudice to the generality to the foregoing to do all or any of the following things:

• (i) To arrange by way of mutual benefit for those entitled to seek benefit for the giving of advice and legal assistance to any member or former member of the company, or any contributor or former contributor to the fund, or the personal representatives of any deceased member or former member or of any deceased contributor or former contributor, on any question or matter which affects directly or indirectly the professional character or interests of the member or former member, or the contributor or former contributor, or deceased member or former member, or deceased contributor or former contributor

• (iv) To indemnity, to such extent...