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5 October 1999


KEARNS J:

BACKGROUND

The Law Society decided to investigate the practice of Giles J Kennedy & Co on the 15 April 1993.

The minutes of the particular meeting of the Compensation Fund Committee which made the determination on behalf of the Law Society simply record a decision to 'reinvestigate" a number of practices, following which six practices were identified, including that of the Applicant.

The Applicant's practice had been the subject matter of earlier investigations in 1983 and 1985. The 1983 investigation identified a deficit of £37,000.00 in the Applicant's Drumcondra practice which was resolved to the satisfaction of the Compensation Fund Committee in November 1983. Thereafter the further investigation took place in 1985 against a background where Mr Kennedy was in breach of the Accounts Regulations because his accountant's certificates were in arrears. No significant deficit or irregularity was uncovered by this latter investigation.

Accordingly, there was an interval of time of some eight years prior to the investigation the subject matter of these proceedings. By 1993, it was the policy of the Law Society, according to the evidence of Mr Connolly, the Registrar of the Law Society, to investigate every practice in the country as a matter of routine at least once every five years.

Alarming changes in the legal landscape took place between 1989 and 1993, at least insofar as the Law Society was concerned. Because of the default or fraudulent behaviour of a number of Solicitors, the Law Society faced ever increasing demands on its Compensation Fund to the point where its assets were reduced from £13m to just £25,000.00 and the Law Society could no longer get insurance for its Compensation Fund. In 1989/90, claims paid (net of recoveries) amounted to £624,000.00. In 1990/91 the claims paid amounted to 4 million pounds. In 1991/92 the figure was £3,079,175.00 and in 1992/93 was in excess of 5 million. The most notable cases were those of Jonathan Brooks and Elio. Malocco, but in 1992 the claims also included a payment in excess of £70,000.00 which the Society was obliged to pay in respect of fraudulent claims for personal injury compensation emanating from a practice in the west of Ireland. In that instance, the Society had to refund to various insurance companies monies paid out by the insurers to one Gerard Martin, Solicitor, in respect of fraudulent claims.

It is hardly surprising, against such a background, that the Society felt itself to be "under siege's as stated by Mr Connolly when giving evidence.

The Society began to build up its own panel of in-house investigating accountants to combat these difficulties and developed important co-operation with the Garda Fraud Squad and the Insurance Industry. As a result, confidential lists of suspected fraudulent claimants became available to the Respondents in 1992. This improved intelligence resulted in the successful investigation of two Dublin practices in early 1993, namely, Donal O'hUadhaigh and Co and Brendan Hill and Co, both practices in Dublin which were suspected of processing fraudulent claims. Both of these investigations took place under the Solicitors' Accounts Regulations No 2 of 1984 (SI No 304 of 1984) without objection or challenge to their propriety from either of the two practices concerned.

It is a regrettable fact of history that the Courts were for many years unable to lead in the fight against fraudulent claims. There were very good reasons why this should have been the case. A Defendant to a personal injury claim pleads fraud at his peril and will be liable to pay punitive damages if he cannot prove his case. This deterred insurance companies for many years from giving instructions to their legal representatives to contest suspicious cases by pleading fraud. It was rarely an issue on which Judges could pronounce. However, improved co-operation between insurance companies and the pooling of relevant information in the early 1990's slowly but gradually improved the understanding of how fraudulent claims were organised and processed and identified some of the persons and parties involved. One of the modus operandi identified in this hearing was for such parties to arrange for the hire of a vehicle, load it with passengers and then cause it to rear-end another vehicle which had a similar complement of passengers. Others methods included noting the position of holes or defects in roadways or pavements into which vehicles or individuals could drive or fall. With hindsight it could be said that many claims of this nature should have been uncovered as fraudulent claims, but individual Judges could only deal with the cases on the Pleadings and on the evidence before them which in many cases was uncontroverted or incapable of being controverted because of the fraudulent circumstances.

In July 1991 a significant breakthrough occurred when the High Court threw out the personal injury claims of one David Lillicrap and John Burke brought against Lydia Glass and Avis Rent-a-Car (Ireland) Limited. This was a personal injury car crash case. At the conclusion of the evidence, Mr Justice Johnson dismissed both of the Plaintiffs cases with costs and referred the papers to the DPP to ascertain whether or not there had been criminal conspiracy and fraud in the case.

In the case, the learned trial Judge found that Mr Lillicrap was acquainted with a Mr Stephen Walsh, otherwise known as "Rossi" Walsh, a person who was not before the Court, but appeared to be a key figure in the drama. There was evidence in the case that the claims investigator of Cornhill Insurance who attempted to interview Lydia Glass, driver of one of the cars involved, was prevented from doing so by Mr Rossi Walsh. There was evidence that the Plaintiff attended the trial of one David Glass, husband of Lydia Glass and also attended pre-trial procedures of arranging the date for the hearing of the case and did so in the company of Mr Rossi Walsh.

In short, it became clear that Mr Rossi Walsh, a notorious criminal, was promoting fraudulent claims and for that purpose utilising the offices of different Solicitors in Dublin. To use the Applicant's own expression in conversation with the Law Society investigator in July 1993, Rossi Walsh was known as Mr "Dial-a-Witness". Not only did he procure fraudulent claimants, but also was able to secure advances or loans for them through the Bank of Ireland at Dublin Airport and arrange for undertakings to be given by individual claimants to that branch whereby their claims could be funded.

The Applicant's office acted for David Lillicrap in the case but the Court made no criticism of the firm or any member thereof and there was no evidence given in the case which could have provided a basis for any such finding. Indeed in 1991 and 1992 the Applicant came off record in a number of cases for suspect claimants.

On the 24 May 1993, Mr PJ Connolly, Registrar of Solicitors in the Law Society, assigned Ms Aisling Foley as investigating accountant under paragraph 29 of the Solicitors Accounts Regulations No 2 of 1984 (SI 304 of 1984) and authorised her to inspect the books of account and other documents of the practice of Giles J Kennedy and Co, 81 Bodes Street, Dublin 7 and report thereon to the Society.

As will be apparent, there is nothing either in the minute or record of the Compensation Fund meeting of the 15 April or on the face of this assignment memo to suggest that the investigation of fraudulent claims was part of the instruction given to Ms Foley, a Chartered Accountant, who had been employed by the Law Society since December 1992 and who had carried out some twenty-seven mainly routine investigations of different Solicitors practices prior to the instant case.

By letter dated 24 May 1993, Mr Connolly wrote on behalf of the Law Society to the Applicant in the following terms:-

"I am instructed by the Council of the Society pursuant to paragraph 29 of the Solicitors Accounts Regulations No 2 of 1984 that they have appointed Ms Aisling Foley, Chartered Accountant, to inspect and report to the Society on the books of account and other relevant documents in connection with the Solicitor's practice carried out by you at the above address. Ms Foley shall act as an Accountant within the meaning of the said Regulations and you are required to produce to her all books of account, bank statements, files and other documents as Ms Foley may require.

Ms Foley will commence her examination on Wednesday May 26 1993 at 9.30 am or at such time as she may agree with you. She will telephone you prior to visiting your offices. In order to minimise the time taken by the inspection, please ensure that the following matters are attended to:-

1. All books of account including the clients and office ledgers should be fully written up to April 30 1993.

2. Bank statements for all bank accounts should be obtained up to the close of business on April 30 1993.

3. A letter should be obtained from your bankers setting out the balance on all office and clients accounts as of April 30 1993.

4. Your book-keeper should have prepared the following as at April 30 1993

(a) a list of balances extracted from the clients and office ledger;

(b) a clients ledger control account covering the period from your last Accountant's Report to April 30 1993 in order to prove the correctness of the list of balances at 4(a) above:-

(c) a bank account and reconciliation for clients current account and a list of balances in relation to client deposit accounts and deposit receipts, if these are not already included in 3(a) above.

Should you wish to discuss the above requirements with Ms Foley, please do not hesitate to contact her at the above address.

Yours faithfully"

On receipt of this letter Mr Kennedy telephoned Mr Connolly advising that his accountant, Mr Mulcahy, was away attending to some other business and that his Senior Book-Keeper was on a week's holiday. He sought a month's extension which Mr Connolly agreed to and accordingly Ms Foley's investigation did not commence until the 28 June 1993.

As of that date, insofar as Mr Kennedy was concerned, he was a Solicitor in good standing. Indeed, it is of some interest to note that in the year 1992 Mr Kennedy was contemplating being called to the Bar and in that connection had sought an appropriate certificate or reference from the President of the Incorporated Law Society of Ireland that he was a fit and proper person to be called to the Bar. The then President, Mr Adrian P Bourke so certified on the 8 September 1982. At an earlier stage, on the 28 January 1992, Mr Connolly had confirmed in writing by way of reference that the Applicant was a Solicitor in good standing and that there were no proceedings pending against him for professional or other misconduct.

I did receive evidence during the hearing of various client complaints which were raised against the practice of Giles Kennedy & Co in the years leading up to the 1993 investigation and Mr Connolly seemed to feel that these were higher in number than the average for individual practices. Be that as it may, most of these complaints do not appear to have been matters of gravity or substance and there has been no attempt in this hearing on the part of the Law Society to suggest otherwise.

There was, however, in the background one matter of serious complaint and concern, namely the non-payment of Barrister's fees by Mr Kennedy which culminated in a letter from the then Director of the Bar Council to Mr Chris Mahon, then Director of Professional Services of the Law Society, on the 2 November 1989. This complaint was brought on behalf of three individual Banisters to whom substantial fees were due and outstanding. There had been an earlier complaint by a particular Barrister of non-payment of fees in 1988, but this had been resolved. The 1989 complaint referred to about £40,000.00 of outstanding fees and indicated that there were amounts outstanding to Banisters other than the three named in the complaint.

It appears that these problems were resolved by September 1992, so that in 1993, the year of the investigation, there were no complaints about outstanding fees due to Counsel ox indeed any other complaints from clients or members of the public concerning the practice in question on the agenda of either the Compensation Fund Committee or the Registrars Committee of the Law Society. Nonetheless, I have been told and accept that non-payment of professional fees, past or present, is always a matter of grave concern to the Law Society, not only because it brings the Solicitors profession into disrepute, or is capable of doing so, but also because, as Mr Connolly pointed out, it can be a pointer that other irregularities or problems may exist in the particular practice. It is accordingly a significant marker for any decision to investigate any individual practice', even if the specific complaint is dealt with.

INSTRUCTIONS GIVEN TO INVESTIGATING ACCOUNTANT

At the conclusion of the evidence on the 15 day of the hearing of this action I made two specific findings of fact in the hope of simplifying matters for the parties. Firstly, I found that, in initiating the investigation, the investigating accountant was specifically instructed by the Law Society that, in addition to looking at the books 'of account, to look for evidence of fraudulent claims passing through the practice. Secondly, II also found on the evidence that this latter aspect of the inquiry was not disclosed to Mr Kennedy either prior to or at the commencement of the investigation.

This first finding was consistent with the position accepted by Counsel on behalf of the Respondent at the very outset of the hearing when it was conceded that about 50% of the investigation work undertaken by Ms Foley and her assistant, Ms Healy, was in respect of the books and accounts and financial records of the Applicant firm and the other 50% of the investigation time was related to the presence or otherwise of fraudulent claims passing through the practice. This estimate was later accepted by the Applicant also.

Mr Connolly qualified as a Chartered Accountant in 1970 and was made Registrar of the Law Society in 1990. He is also Secretary to the Compensation Fund Committee.

He pointed out that the ongoing claims experience against the Law Society resulted in the Law Society becoming much more strict in recent years in relation to their members. In 1980 they had two qualified in-house accountants which number was increased to five in 1989. By 1993 the number had been increased to seven and at the date of trial in July, 1999 two further accountants were being recruited. Both Ms Healy and Ms Foley, the investigating accountants involved in the instant investigation, joined the Society in December 1992, within a few weeks of each other.

All these investigating accountants attended the various meetings of the Compensation Fund Committee and the reports of other investigating accountants were circulated amongst them in advance of such meetings.

Mr Connolly indicated a priority system whereby certain factors were taken into account in determining whether a particular Solicitor should be investigated and these factors were:-

A. Delay in furnishing the annual Accountant's Report;

B. Frequent changes of accountant;

C. Complaints;

D. Fraudulent or bogus claims or reports of same;

E. Information from members of the Society as a whole, usually of a confidential nature.

He was aware that the Judgment in the Lillicrap case was available to Ms Foley before she commenced her investigation and that she had in addition several confidential lists of suspect claimants supplied by the Fraud Squad/Insurance Industry to the Law Society in her possession.

He referred to a pattern of complaints in relation to the Applicant's practice amounting to twenty-three complaints over a period of seven years, none of which were 'live' in April 1993.

Mr Connolly also told the Court that prior to the commencement of this investigation he had information from 'a reliable source within the Council of the Law Society' of some connection between Rossi Walsh and Giles Kennedy in relation to claims referrals. He was also aware of allegations and rumours circulating in the Solicitor's profession to the same effect. He received this information before the meeting on the 15 April 1993.

He pointed out that it was not the practice of the Law Society in the written instruction or memo to the investigating accountant to spell out all the detailed considerations giving rise to the particular inquiry, but he would verbally advise the investigating accountant to look at matters such as suspicious or fraudulent claims. An investigating accountant would also check with the Complaints Department as to what complaints were current.

In cross-examination by Counsel for the Applicant, Mr Connolly maintained that the investigating accountant was sent in for two distinct reasons, namely, to ascertain compliance with the Accounts Regulations and to inquire if Mr Kennedy's firm was involved in spurious claims. He agreed that in an earlier application to the Court he did not allude to the 'tip-off from the Council member.

Ms Foley herself told the Court that she was made aware of two things prior to commencing her investigation by Mr Connolly. Firstly, that there were a number of complaints over a period of time against the Solicitor's practice relating to non-payment of Third Party fees. The second matter was a suggestion that there were some Solicitors in Dublin processing fraudulent claims and the name Rossi Walsh was mentioned and Mr Kennedy's office was one office that was named.

She also confirmed she was given a copy of the transcript of the Lillicrap case and given copies of the lists of names already referred to, together with a form of working questionnaire prepared in relation to the investigation of other practices where similar concerns about fraudulent claims had arisen.

This working instruction sheet suggested the investigating accountant seek information under the following headings:-

1. Date of accident.

2. Date of instructions.

3. Any undertakings.

4. Plaintiffs address.

5. Defendant's address.

6. Doctor involved.

7. Solicitor on the other side.

8. Amount of settlement

9. Party and Party costs details.

In addition Ms Foley was advised to make a general resume of the actual case itself. As far as she was concerned, she was not told "not to look at anything" and felt free to look at Counsel's opinions and medical reports. Her instructions were to review files in their entirety.

Ms Foley advised the Court that Mr Connolly told her he had been advised that Mr Kennedy's practice along with two others were associated with the name Rossi Walsh and that there was a suspicion of fraudulent claims or referrals from Rossi Walsh.

She summarised her instructions by saying that she was to review the documents and tabulate that information and to record any other data that she might think was relevant for the Committee to review.

There can be no doubt therefore that this was a two-pronged investigation and there is no issue or conflict on the non-disclosure aspect of the case. The Law Society did not inform Mr Kennedy of that aspect of the investigation which concerned fraudulent claims. When, as the investigation progressed, Mr Kennedy wrote to Mr Connolly expressing alarm at the number of files being requested by Ms Foley and referring to the possibility of a 'hidden agenda', he was met with a response by way of letter from Mr Connolly of the 6 July 1993 in which Mr Connolly took exception to Mr Kennedy's reference to a 'hidden agenda' which was allegedly being pursued by the Society. In effect, it was a denial.

During the hearing before this Court, Counsel on behalf of the Law Society sought to draw a distinction between investigation of clients of the practice on the one hand and the possible involvement of the practice in fraudulent claims on the other as providing some sort of reasonable justification for this response from Mr Connolly. In short, it was suggested that Mr Kennedy had identified the wrong "hidden agenda" when he enquired if his clients affairs were being scrutinised when in fact it was the possible involvement of the practice which concerned the Respondents.

Mr Ward McEllin, the then Chairman of the Compensation Fund Committee, explained more frankly the policy of the Law Society in a situation of this nature in the course of his evidence. His view simply was that the investigation of fraudulent claims could not be disclosed to the investigation subject. He advised the Court that if a Solicitor is being dishonest and is involved in fraudulent claims, "you do not knock on his door to say . . . we are here to look at your files to see if you are fraudulent. If you do the files will disappear or be filleted or be re-created".

Also on this aspect of the case, Ms Foley herself accepted that when first asked by Mr Kennedy if there was a hidden agenda she said "no" that what she was trying to do was to put some sense into the client's listing and was looking for groups of files where certain names recurred.

It is contended on behalf of the Law Society that Mr Kennedy must have known and appreciated from a very early stage that the Law Society were concerned with this aspect of possible fraudulent claims and subsequent analysis of the progress of the investigation will address this issue, but the fact nonetheless remains that Mr Kennedy was initially kept in the dark about the Society's interest in fraudulent claims.

This sort of approach is no longer possible as S 14 of the Solicitors (Amendment) Act, 1994 now requires the person seeking to inspect a Solicitor's documents, on behalf of the Law Society, to inform such Solicitor of the purpose of his attendance at the Solicitor's place of business.

STATUTORY FRAMEWORK

The Respondent is established by Royal Charter enrolled on the 27 April 1852. A Supplemental Charter was enrolled on the 22 December 1888. The Charter granted to the Petitioners the status of "body politic and corporate in deed and in law, by the name and style of 'The Society of the Attorneys and Solicitors of Ireland", with power to use a common seal for the affairs in business of the Society. The Charter further provided that the Society should have perpetual succession and be capable in law of acquiring lands and disposing of same.

It further provided that there should be a Council of the Society for the "better direction and management of the concerns thereof" and that such Council should have the sole and entire management of the Society and of the income and property thereof for the uses, purposes and benefit of the Society.

The Charter provided that at any general meeting it should be lawful for the members of the Society to make such Bye-laws as might be deemed necessary for the proper regulation and good government of the Society and of the numbers and officers thereof, and the manner of appointing and admitting persons to members of the Society, and of removing and expelling members from the said Society and generally for carrying the objects for which the Society was founded into full and complete effect, with reasonable penalties, fines and amerciaments for non-performance of, or for disobedience to, the same. Any such Bye-laws were required to be reasonable and not repugnant or contrary to the laws and statutes "of this our Realm".

Lastly, the Charter provided that it's terms were to be liberally construed for the best advantage of the Corporation.

The Respondent is governed by the General Council of the Law Society which is elected by Solicitors in Ireland and which may include members admitted to the Council because of positions previously held, such as former Presidents. The General Council from time to time delegate specific powers to committees and in the instant case had on the 16 October, 1992 delegated their powers under the Solicitors Accounts Regulations No 2 of 1984 (SI 304/1984) to the Compensation Fund Committee of the Respondent.

The Compensation Fund Committee of the Law Society is a committee which deals primarily with the financial aspects of Solicitors professional practice, such as enforcement of compliance with the accounts regulations, the issuing of practising certificates and administration of the Compensation Fund.

The Solicitors Act 1954 was an Act providing for the admission, enrolment and control of Solicitors.

Section 4 of the Act provided that the functions vested in the Society by or under the Act should be performed by the Council of the Society. Section 5 of the Act conferred the power on the Society to make regulations for the purpose of the execution of the provisions of the Act. Part II of the Act provided for the establishment of a "Registrar of Solicitors", the maintenance of a Roll of Solicitors and the Admission and Enrolment of Persons as Solicitors. Part III (Later Repealed By The 1960 Solicitors (Amendment) Act) provided for the Establishment of a Disciplinary Committee. Part IV dealt with requirements for admission as a Solicitor and for admission to apprenticeship. Part V of the Act dealt with the issue of practising certificates.

Part VII dealt with Accounts of Solicitors and provided as follows at Section 66:-

"(1) Regulations made with the concurrence of the Chief Justice shall make provision with respect of the following matters:

(a) the opening and keeping by Solicitors of accounts at banks for clients' moneys and for moneys of any trust of which the sole trustee is a solicitor or the trustees are a solicitor with a partner, clerk or servant of his or with more than one of such persons;

(b) the keeping by Solicitors of accounts containing particulars of and information as to moneys received, held or paid by them for or on account of clients;

(c) the keeping by Solicitors of accounts containing particulars of and information as to moneys received, held or paid by them

(d) for or on account of any trust of which the sole trustee is a solicitor or the trustees are a solicitor with a partner, clerk or servant of his or with more than one of such persons,

(d) enforcing compliance with the regulations;

(e) ascertaining whether the regulations have been complied with;

(f) the delegation by the Society to the Disciplinary Committee of any such power of enforcement or ascertainment

(2) the provisions contained in regulations for the purposes of this section for ascertaining whether the regulations have been complied with may include, in particular, provisions requiring Solicitors to furnish certificates by duly qualified accountants that the regulations have been complied with."

Part VIII of the Act established the Compensation Fund (this part was later repealed by the 1960 Act) and for the payment of annual contributions to the fund by practising Solicitors.

Section 71 of the Act provides:-

"Regulations may be made with respect to the professional practice, conduct and discipline of Solicitors".

This section had not been amended at the time of the 1993 investigation of the Applicant.

The Solicitors (Amendment) Act 1960 was enacted primarily to replace those portions of the 1954 Act which had been found to be unconstitutional, particularly those relating to disciplinary procedures in relation to Solicitors.

Part III contained a number of important provisions. Section 7 (later substituted in the 1994 Act) provided, inter alia:-

"(1) An application by another person or by the Society for an inquiry in to the conduct of a solicitor on the ground of alleged misconduct shall, subject to the provisions of this Act; be made to and heard by the Disciplinary Committee in accordance with rules made under Section 16 of this Act."

Misconduct includes 'conduct tending to bring the Solicitors profession into disrepute'. Under the Section, the Disciplinary Committee must be of opinion that there is a prima facie case for inquiry before proceeding.

Section 19 (later substituted by S 27 of the 1960 Act) provided inter alia as follows:-

"(1) Where the Society are of opinion that a solicitor or a clerk or servant of a solicitor has been guilty of dishonesty in connection with that solicitor practice as a solicitor or in connection with any trust of which that solicitor is a trustee, they may by notice require the production or delivery to any person appointed by the Society and make take possession of all or any documents in the possession or control of such solicitor or his firm or relating to any trust of which such solicitor is the sole trustee or of which the trustees are such solicitor with a partner, clerk or servant of his or with more than one of such persons:

(2) Where a person, having possession or control of documents which he has been required under this section to produce or deliver, refuses or fails to produce or deliver them in accordance with the requirement --

(a) he shall be guilty of an offence under this section and shall be liable on summary conviction thereof to a fine not exceeding fifty pounds, and

(b) the Society may apply to the High Court and that Court may by Order require such person to produce or deliver the documents".

Section 20 of the Act (also substituted in the 1994 Act) provided as follows:-

"(1) Where the Society are of opinion that a solicitor or a clerk or servant of a solicitor has been guilty of dishonesty in connection with that solicitor's practice as a solicitor or in connection with any trust of which that solicitor is a trustee, they may apply to the High Court, and the High Court may make an Order directing either --

(a) that no banking company shall, without leave of the High Court, make any payment out of a banking account in the name of the solicitor or his firm, or

(b) that a specified banking company shall not, without leave of the High Court, make any payment out of a banking account kept by such company in the name of the solicitor or his firm;

(2) The High Court shall have power to hear in camera an application for an Order under sub-section (1) of this section;

(3) Where the High Court make in relation to a solicitor an Order under sub-section (1) of this section, the High Court may at the same time order that his practising certificate be suspended until the certificate expires;

(4) If any person act as agent or nominee of a solicitor or his firm so as to render nugatory an order made by the High Court under sub-section (1) of this section, such person shall be guilty of an offence under this section and shall be liable on summary conviction thereof to a fine not exceeding one hundred pounds".

None of these sections was invoked by the Society in relation to the Applicant in the instant case.

Section 21 dealt with the Compensation Fund and provided that where it was proved to the satisfaction of the Society that any person who had suffered loss in consequence of dishonesty on the part of any solicitor the Society should make a grant to that person out of funds and the amount of such grant should be such as would represent in the opinion of the Society full indemnity for any loss. Again, this section was substituted by Section 29 of the 1994 Act but was the operative section at the relevant date.

Part IV of the 1960 Act transferred certain functions of the Chief Justice under previous legislation to the President of the High Court.

Section 31 of the Act is also important and relevant to the instant case and provides as follows:-

"(1) Every Solicitor to whom the provisions of the Solicitors' Accounts Regulations apply shall, once in each practice year, unless he satisfies the society that owing to the circumstances of his case it is unnecessary to do so, deliver to the Registrar a certificate signed by an accountant (in this section referred to as an accountant's certificate) stating

(a) -- that in compliance with this section and any regulations made thereunder the accountant has examined the books, accounts and documents of the solicitor or his firm for such accounting period as may be specified in the certificate,

(b) whether or not the accountant is satisfied, from his examination of the books, produced to him and from the information and explanations given to him, that during the said accounting period the solicitor or his firm has complied with the Solicitors' Accounts Regulations, and

(c) if the accountant is not satisfied as aforesaid, the matters in respect of which he is not so satisfied

(2) The Society shall with the concurrence of the President of the High Court, make regulations (in this section referred to as the Accountant's Certificate Regulations) prescribing --

(a) the qualifications to be held by an accountant by whom an accountant's certificate may be given;

(b) the nature and extent of the examination to be made by the accountant of the books and accounts of a solicitor or his firm and of any other relevant documents with a view to the signing of a certificate to be delivered by the solicitor under this section;

(c) the form of the accountant's certificate, and

(d) the evidence, if any, which shall satisfy the Society but the delivery of an accountant certificate is unnecessary and the cases in which such evidence is or is not required;

(3) the Accountant's Certificate Regulations may include provision --

(a) permitting in such special circumstances as may be defined in the regulations in a different accounting period from that specified in sub-section (4) of this section, and

(b) regulating any matters of procedure or matters incidental, ancillary or supplemental to the provisions of this section;

(4) Subject to the Accountant Certificate Regulations, the accounting period for the purposes of an Accountant's Certificate shall --

(a) begin at the expiry of the fast preceding accounting period for which an Accountant's Certificate has been delivered,

(b) cover not less than twelve months,

(c) terminate not more than twelve months, or such less period as the Accountant's Certificate Regulations may prescribe, before the date of the delivery of the certificate to the registrar, and

(d) where possible, consistently with the foregoing paragraphs, correspond to a period or consecutive period for which the accounts of the solicitor or his firm are ordinarily made up;

(5) A certificate under the hand of the registrar shall, until the contrary is proved, be evidence that a solicitor had or, as the case may be, has not delivered to the registrar an accountant's certificate or supplied any evidence required under this section or the Accountant's Certificate Regulations;

(6) Before a practising certificate is issued to a solicitor, he shall comply with the provisions of this section of the Accountant's Certificate Regulations and the registrar may withhold the issue of the practising certificate until the solicitor delivers to him an accountant's certificate in respect of the last preceding accounting period stating that the solicitor has during that period complied with the Solicitors' Accounts Regulations "

The Solicitors Accounts Regulations (SI No 304 of 1984) were made by the Law Society in exercise of the powers conferred on it by sections 4, 5, 66 and 71 of the Solicitors Act, 1954 referred to above and "of every other power enabling it and with the concurrence of the President of the High Court".

The Regulations came into operation on the 1 January 1985.

Regulation 3 requires a Solicitor who holds 'or receives clients money to pay such money into a client account, without delay.

Regulation 7 is the first important provision from the point of view of the instant case and inter alia provides as follows:-

"There may be drawn from a client account --

(a) in the case of client's money

(i) money properly required for a payment to or on behalf of the client,

(ii) money properly required for or towards payment of a debt due to the solicitor from the client whose money has been paid into that account or in reimbursement of money expended by the solicitor on behalf of the client,

(iii) money drawn on the client's authority;

(iv) money properly required for or towards payment of the solicitor's costs where there has been delivered to the client bill of costs or other written intimation of the amount of the costs incurred and it has thereby or otherwise in writing been made clear to the client that money held for him is being or will be applied towards or in satisfaction of such costs; and

(v) money which is thereby transferred into another client account;

(b) in the case of trust money then --

(i) money properly required for a payment in the execution of the particular trust; and

(ii) money to be transferred into a separate bank account kept solely for the money of the particular trust;"

The key word in Regulation 7 is the word "properly" which occurs on four different occasions and at a later point the significance of this word will be considered in more detail.

Regulation 10 provides:

"(1) Every solicitor shall at all times keep proper books of account --

(a) to show all his dealings with --

(i) clients money received, held or paid by him, and

(ii) any other money dealt with by him through a client account; and

(b) to distinguish separately --

(i) in respect of each client all money of the category specified in sub-paragraph (a) of this paragraph which is received, held or paid by him on behalf of that client, and

(ii) all money of the said categories received, held or paid by him, from any other money received, held or paid by him

(2)(a) all dealings referred to in sub-paragraph (a) of paragraph (1) of this Regulation shall be recorded as may be appropriate --

(i)(a) either in a clients cash book, or a clients column of a cash book; or

(b) in a record of sums transferred from the ledger account of one client to that of another,

(ii) and in a client's ledger or a client's column of a ledger; and

(b) all dealings of the solicitor relating to his practice as a solicitor other than those referred to in paragraph (1)(a) of this Regulation shall (subject to compliance with the Regulations contained in Part III hereof) be recorded in such cash book and ledger or such other columns of a cash book and ledger as the solicitor may maintain

(3)(a) In respect of every accounting period commencing on or after the 1 January 1985 every solicitor shall as at each reporting date cause the balance between the client bank lodged and drawn columns of his cash book or the balance on his client's bank ledger account, as the case may be, to be agreed with his client bank statement, and

(b) as at the same date or dates extract from his client's ledger a list of balances due by him to clients and prepare a statement comparing the total of the said balances with the reconciled balance in the client bank account; and

(c) as at the same date or dates prepare a client's ledger control account containing the totals of all items posted in detail to the debit and credit columns of the client's ledger and reconcile the balance therein with:

(i) the total of the balances on the individual client's ledger accounts; and

(ii) the reconciled client bank balances".

Part IV indicates the minimum books which a solicitor should keep to include a cash book, showing monies received and paid, a ledger or ledgers kept so as distinguish clearly between transactions on client account and trust bank account and transactions on office account and a record of bank lodgments of monies received by the solicitor in connection with his practice, distinguishing between lodgments made to client account or to trust bank account and lodgments made to other accounts.

Part V of the Regulations provides that every solicitor to whom the Regulations apply shall deliver to the Society within six months of the accounting date in each practice year a certificate in the form of a report signed by an accountant in the form set out in the second schedule to the regulations or in such other form as might be approved by the Society in respect of the accounting period.

The qualifications of an accountant to give an Accountant's Report are detailed at Regulation 21, to which I shall later return.

Regulation 22 provides, inter alia, as follows:-

"(1) For the purpose of giving an Accountant's Report, an Accountant shall ascertain from the solicitor particulars of all bank accounts, (including trust bank accounts) kept, maintained or operated by the solicitor in connection with the solicitor's practice at any time during the accounting period to which his report relates and make an examination of the books, accounts and other relevant documents of the solicitor as set out in paragraphs (2) and (3) of the Regulation".

The following sub-paragraphs set out the nature of the examination and test checks which the accountant must perform, which include an examination of the book-keeping system of every office of a solicitor so as to enable the accountant to verify that such system complies with Regulations 10 and 19 already referred to. It is worth noting the provisions of paragraph (4) of Regulation 22 as follows:-

"Nothing in paragraph (1) (2) or (3) of this Regulation shall require the accountant --

(a) to extend his inquiries beyond the information contained in the relevant documents relating to any client's matter produced to him supplemented by such information and explanations as he may obtain from the solicitor."

Paragraph 5 provides that where it appears to the accountant following an examination in accordance with pars: (1)-(4) of Regulation 22 that the Regulations have not been complied with, he shall make such further examination as he considers necessary in order to complete his report with or without qualification.

Regulation 23 is also important and provides as follows:-

"The solicitor shall produce to the accountant any document which the accountant may consider necessary for him to inspect for the purposes of his examination in accordance with Regulation 22 of these Regulations. It shall not be necessary to disclose a clients entire file to the accountant but the correspondence covering payments/receipts shall be made available to the accountant to enable him to vouch the transactions in the books of account with the supporting files and, where the solicitor declines to make available such correspondence, the accountant shall qualify his report to that effect setting out the circumstances."

Part VI contains the crucial provisions relevant to these proceedings because Regulation 29 thereof sets out the circumstances in which the Council may conduct its own investigation, as distinct from that of the reporting accountant.

Regulation 29 provides as follows:-

"(1) In order to ascertain whether these Regulations have been complied with, the Council acting either on its own motion or on a written complaint lodged with it, may approve and appoint an accountant for such purposes as hereinafter mentioned.

(2) Where the Council approves and appoints an accountant, the solicitor shall produce at a time and place appointed by the Council his books of account, bank statements or pass books, statements of account, vouchers, files and any other necessary documents including accounting statements prepared under Regulation 31(1) hereof for the inspection of the accountant and shall afford to such accountant all other facilities which the accountant may consider necessary for completing an inspection and report to the Council on the result of the investigation. Subject to the provisions of the next succeeding sub-paragraph of this paragraph the solicitor shall be responsible for the costs and expenses of such inspection and report if the Council determines that there has been a material breach of the Regulations.

(3) Before instituting an inspection on a written complaint lodged with it the Council shall require prima facie evidence that a ground of complaint exists, and may require the payment by the person lodging the complaint of a reasonable sum to be fixed by it to cover the costs of the inspection and the costs of the solicitor against whom the complaint is made, and any sum not so applied shall be refunded to the person lodging the same."

THE INVESTIGATION

The investigation of the practice of Giles Kennedy & Co is still ongoing as of the date of this hearing. On the 9 February 1996, the Compensation Fund Committee decided to seek an inquiry into the conduct of the Applicant by the Disciplinary Tribunal and that Tribunal has as yet made no findings of any sort in relation to the instant case.

As the main issue in these proceedings is whether the investigation in the form it actually took was authorised and permissible under the Solicitors Account Regulations, I invited the parties to consider whether an examination of a reasonable portion of the history of the investigation would suffice and would provide sufficient material for that purpose. Having taken time for consideration, the parties agreed that the period from the 20 June 1993 when Ms Foley commenced her investigation and ending in the production of her interim or first Report in October, 1993 would be adequate for the purpose of resolving that question. Essentially therefore the analysis will be directed to an examination of the entrails of the investigation and behaviour of the parties during that period to try and ascertain, if possible, what was the dominant or true purpose of the investigation. Was there a bona fide investigation under the Regulations, or was the investigation merely a 'colourable device' while the Law Society pursued an unauthorised agenda?

Given that an adjudication on the merits of the case is a matter for the Disciplinary Tribunal of the Law Society, it was further agreed that this Court should not in any way substitute itself for that body or attempt to discharge that particular function as defined by the Solicitors Act, 1960. Accordingly, with the exception of one agreed area of irregularity, no findings or comment will be made on the merits of the case, sent to the Disciplinary Tribunal.

Specifically, it is accepted by the Applicant that no question of 'malice' or bad faith is to be attributed to the Law Society in respect of this agreed period, although the Applicant 'reserves his position' to make such a claim in respect of later periods of the investigation with which this Court is not presently concerned.

Ms Foley commenced her investigation on Monday the 28 June 1993. She was given her own room in the Applicant's office in Eccles Street.

She first sought and received the Applicant's client listing as at April 30 1993. This consisted of a computer print out of seven thousand names which also contained the client balances. About 2,500 of these were 'live' cases. She also sought the firm's books of account for the year ending 31 January 1993 but was informed the books were with Mr Mulcahy, the Applicant's accountant, who returned same to Ms Foley the following day.

Ms Foley began her work by adding the balances on the client listing and comparing same with the list of client bank balances. This exercise revealed a deficit of £3,769.73. She also found that the balance on the Ulster Bank Client Account was overstated by £6,000. This latter discrepancy turned out to be a simple error of no significance.

She also asked Maria Coleman, the Applicant's Office Accountant, for a client control account for the year ending April 30 1993. This is an account exercise whereby the balances on the client listing are added together and matched with the balances and total thereof appearing on the bank accounts.

On the second day, Ms Foley requested the full client ledger account report which would outline all transactions on each of the individual client matters. This information, also stored on computer, would have involved printing out the financial sections of many thousands of files and would have taken over two weeks to complete.

When this was pointed out to Ms Foley, she agreed to limit her request for client ledger accounts to a print out of individual client ledger accounts on a 'file requested" basis only. She then sought 19 files, including the Lillicrap case, based on a perusal of the client listing. These files all had a common feature: all of the Defendants either bore the surname "Glass" or were names linked to cases where that name had occurred. Glass had, of course, been the Defendant in the Lillicrap case.

Of those files requested, Ms Foley received eight files on that day, a further eight the following day and three other files on the 1 July 1993.

On the 29 June, or early in the morning of the 30 June, Ms Foley sought a further 79 files which were supplied in dribs and drabs over the following weeks. As of the 8 July, 23 of those files requested on the 29 June had still not been furnished. A further 68 files were sought on July 8. Ms Foley claims to have had a similar experience in relation to the production of these files also.

Mr Kennedy appears to have taken Counsel's advice even prior to his first meeting with Ms Foley on the 30 June 1993 at which he expressed alarm at the number of files being sought and indicated his concern about his obligations of confidentiality to his clients. He indicated that the Lillicrap file contained highly sensitive data. He informed Ms Foley that if she indicated what she was looking for that he might be able to help.

On the 1 July Mr Kennedy suggested to Ms Foley that there was some form of "hidden agenda" taking place. Ms Foley said no, that in seeking the number of files requested, she was merely trying to make sense out of the client listing by grouping similar names together. I can only infer that Ms Foley gave this plainly untrue reply on instructions, because she otherwise impressed me as a truthful and precise witness who was well capable of carrying out an investigation of the sort which she did in a highly competent manner.

He also produced to her a memo which he requested her to sign because of his stated concern about intrusion into client confidentiality. The purpose of the confirmation was to clarify that the information being sought from the files was in Ms Foley's professional opinion necessary to test the clients compliance with the provision of the Solicitors Accounts Regulations and that only information for that purpose would be extracted from files and that the information so extracted or recorded would not in any circumstances be communicated to any person not reasonably connected with the enforcement of compliance with the Regulations. Mr Kennedy also faxed a copy of the memo in question to Mr Connolly in the Law Society.

The following day Mr Kennedy wrote to Mr Connolly complaining, inter alia, that Ms Foley was taking away in the evening time the client listing print out and also that she was photocopying documents from different files.

On the 2 July Mr Connolly responded to the faxed communication of the 1 July and enclosures which had included Counsel's opinion, regarding the investigation of his practice as follows:-

"The law is clearly set out in Statutory Instrument No 304 of 1984. Regulation 29(2) of the Statutory Instrument gives the Investigating Accountant appointed by the Society unfettered access to clients files pursuant to her appointment by the Society.

Your memo addressed to Ms Foley describes the matter as an external audit. It is not an external audit. It is an inspection by the Society pursuant to Regulation 29(2) of the Solicitors Accounts Regulations No 2 of 1984.

Regulation 29 of Statutory Instrument No 304 of 1984 provides that an Investigating Accountant appointed by the Society pursuant thereto is entitled to unfettered access to files and any other necessary documents. The Society is not prepared to tolerate the imposition of any pre-conditions by a Solicitor who is the subject of an investigation. Unless you co-operate and make the files available forthwith the Society will be obliged to initiate proceedings against you forthwith.

Ms Foley will resume her inspection on Monday morning next July 5 1993 and I trust there will be no further difficulties placed in Ms Foley's way."

Accordingly, no confirmation of the type sought by Mr Kennedy was executed by Ms Foley.

Prior to the resumption of the investigation, on the 5 July, Mr Kennedy learned from another source that Ms Foley had been involved in the investigation of other A Solicitors practices where he was given to believe a 'hidden agenda' was in operation, namely an examination of fraudulent claims rather than the individual Solicitor's books and accounts.

On the 5 July 1993 Mr Kennedy prepared a further memo for Ms Foley which was copied to Mr Connolly in the Law Society. In this letter Mr Kennedy stated that he had been advised by Counsel that the Law Society had no entitlement to delve into the confidential and personal aspect of clients business and that the use of the Solicitors Accounts Regulations for that purpose infringed his clients constitutional rights. The memo pointed out that Mr Peter Doran would henceforth attend Ms Foley at all times during the continuance of her investigation and would make copies of documents or papers available to her when and if requested by Ms Foley. Any queries regarding accounts, files, office premises, staff members were to be directed to Mr Kennedy. He also queried her qualifications and again raised the question of a 'hidden agenda'. He wrote as follows:-

"It occurs to me and I must formally put it to you as the investigating accountant that you and your Principals are operating a hidden agenda. It appears that your principle concern and 'the substantive issue' is not an enquiry into compliance with the Solicitors Accounts Regulations but an enquiry into Clients rather than this firm of Solicitors.

We have recorded our concern and we propose seeking a meeting with the Compensation Committee so that our Counsel can make formal legal submissions.

This memo was copied to Mr Connolly who on the 6 July 1993 wrote as follows to Mr Kennedy:-

"I reiterate, the Society is not prepared to tolerate the imposition of any preconditions by a solicitor who is the subject of an investigation. I take grave exception to some of the matters referred to in your letter to Ms Foley of July 5 1993. I take particular exception to any solicitor questioning the qualifications and experience of the Investigating Accountant appointed by the Council of the Society. I also take exception to your reference to a 'hidden agenda' which is allegedly being pursued by the Society.

In view of your attitude to date as evidenced by your recent correspondence and treatment of the Society's Investigating Accountant I am requiring you to attend before the next meeting of the Compensation Fund Committee of the Society. The meeting will be held at the above address on Thursday July 22, 1993 when you should be in attendance at 10.30 am.

I am instructing Ms Foley to return to your practice this afternoon at 2 pm and hopefully there will be no further obstruction placed in her way."

Returning briefly to the 5 July, Mr Kennedy informed Ms Foley on that date that she was now being moved from the small room at the top floor of 81 Ecoles Street to a room in the basement. He also complained to her that she had received telephone calls while in the office from individuals with no connection to the Law Society. He also informed her of the exact office hours and indicated he did not wish Ms Foley to be in attendance before or after those hours. Ms Foley for her part explained that she had given the office telephone number to one particular friend as she had a personal matter which needed to be dealt with urgently.

Ms Foley had a further meeting that evening with Mr Kennedy at which Mr Ralph McConn, a Legal Executive in the practice also attended. Mr McConn dealt with most, if not all, of the litigation and was directly involved in most, if not all, of the cases which Ms Foley was investigating:

In essence Ms Foley asked questions as to who was the Mr Walsh who appeared to have referred a number of cases to the office. Mr Kennedy advised Ms Foley that this was the "Infamous Rossi Walsh -- Dial A Witness". Mr Kennedy had acted for his daughter and recovered for her a large amount by way of compensation for very severe injuries which she had suffered in an accident.

The evidence discloses that Mr Walsh referred some 22 claims to the practice and a Mr Kealy referred another 16 claims, some of which involved the name "Glass" as a Defendant and others of which involved Bord Gais as Defendant. Mr Kennedy had come off record for many of these claimants, particularly those referred by Mr Kealy.

She put a number of questions concerning certain cases which had been referred from another firm of Solicitors pointing out that the witnesses named on the instruction sheets given to the original solicitor did not match the witnesses named on the subsequent instructions sheet prepared in the office of the Applicant. According to Ms Foley the various questions which she put or addressed to Mr McConn were dealt with by Mr Kennedy who tended to cut across and say he would have to review particular files before answering the questions she raised. She found this to be a 'frustrating" meeting because she came out without having had most of the queries answered at all which was in marked contrast with her experience in other offices where generally queries were dealt with very quickly.

On the morning of the 6 July, Ms Foley states that the Applicant apologised for his behaviour on the previous day towards her if it had appeared as though he was trying to bully her. According to Ms Foley, Mr Kennedy stated that his sole concern was to protect his clients and that the correspondence and memos which he was writing were intended as "a shield, rather than a sword".

On the same date he again wrote to Mr Connolly following receipt of Mr Connolly's hand delivered letter of the same date and again addressed the question of a hidden agenda in the following terms:-

"The Writer was alarmed at the list of files Ms Foley selected The list appears to have been selected on the basis of --

(i) names of Plaintiffs

(ii) names of Defendants

(iii) dates of accidents

(iv) litigious history of families

(v) perceived common factors

On the advice of Counsel, a confirmation form was drafted which is consistent with the Judgment of Buckley J in the Parry Jones case. In short, we were seeking confirmation that the information, files and documents to be inspected, were 'truly necessary' for the purposes of the investigation. Ms Foley, no doubt on advice from her Principals, choose not to execute this document. We requested this information and you choose not to give it. The selection of files is not a random selection and the statistical probability of selection of these files is so remote as to support the conclusions we reached. If there is not an explanation well and good it is yet to be put forward."

A number of points may be made by way of observation at this juncture. Firstly, Ms Foley felt she was not getting anything like the usual level of co-operation which she would normally obtain in the context of an investigation. Secondly, she found Mr Kennedy's personal attitude towards her to be aggressive and obstructive. On the various accounts of these meetings furnished by both Ms Foley and Mr Kennedy, I find Ms Foley's account of the tone and atmosphere of these meetings to be the more convincing. By contrast, I found Mr Kennedy's' evidence on virtually all aspects of his dealings with Ms Foley, his replies to questions asked, both in the context of her investigation and during his evidence before this Court, to be evasive, lacking in precision and anything but convincing.

On the 15 July an incident occurred in the course of the investigation when a client, Mr Denis Carkery, called by appointment to Mr Kennedy's office at a time when Ms Foley was actually inspecting one of his particular files. He had supposedly attended on other business but had been informed by Mr Kennedy that a Law Society Inspector was actually on that day reading his personal file. Mr Kennedy came down to the office where she was working and advised that Mr Carkery was in his office and was very annoyed. He asked her repeatedly did she wish to meet with Mr Carkery and she advised him that she did not. She felt that Mr Kennedy really enjoyed intimidating her on this occasion. She was down in the basement and the only way out of the premises was up past Mr Kennedy's office.

On the same occasion, Mr Kennedy indicated that other clients might be coming in, including a Mr Sugrue who was on her original list of 19 files and a Ms Harte.

The background was that these and possibly other clients, were apparently coming in to take their files away. Subsequently, on the 19 July 1993 Mr Carkery did in fact request all of his files and papers. The file of Natasha Harte v Dublin Corporation had been requested on the 8 July 1993.

On the 16 July 1993 Mr Connolly wrote to Mr Kennedy requiring him to attend the next meeting of the Compensation Fund Committee on the 22 July 1993. On the same date, Mr Kennedy telephoned Mr Barry Galvin, then a Council member of the Law Society to express his concern about the steps the Law Society was taking and his alarm at the number of files that had been called up. Mr Kennedy claimed that Mr Galvin confirmed to him that Aisling Foley had a list prior to her attendance at the office and that the files she called up were from that list. According to Mr Kennedy, he informed Mr Galvin that the files were targeted and that there was a clear pattern to the manner in which the Inspector was looking at the files.

Mr Galvin for his part has quite a different recollection of this telephone conversation with Mr Kennedy. His recollection, which I accept, is to the effect that Mr Kennedy was concerned that some individual members of the Council of the Law Society might "have it in for him" and that he, Mr Galvin, was able to reassure Mr Kennedy that that was not in fact the position.

From his own description of these conversations both with Mr Galvin and Ms Foley, I am quite satisfied that Mr Kennedy was well aware within days of the inception of this investigation that the question of fraudulent claims was in fact being looked at by the Law Society Accountant in addition to a thorough 'Root and Branch' investigation of the books and accounts of the practice which was proceeding simultaneously and which came across evidence of many apparent irregularities.

In advance of the Compensation Fund Committee meeting, Mr Kennedy wrote a detailed letter to Mr Edward Mc Ellin, then chairman of the Compensation Fund Committee, reciting the entire history of the investigation to date and enclosing an article from the Irish Independent dated 6 July 1993 entitled:-

"Law Body hits bogus claims".

Clearly in enclosing this article, Mr Kennedy felt it might flush out and clarify certain undisclosed aspects of the investigation.

He also took issue with the contention of Mr Connolly in his letter dated 16 July 1993 that there had been obstruction of the investigation.

The meeting of the Compensation Fund Committee took place on the 22 July 1993 and, Mr Kennedy attended with Counsel and a stenographer.

Counsel on behalf of Mr Kennedy emphasised that there was no deficit arising on the Solicitors client account and that the solicitor had nothing to hide with respect to his client account. He expressed his concern on the question of client's privilege. A number of clients had expressed the view that they did not wish their private files to be reviewed by any person other than their own solicitor.

In turn it was pointed out to Mr Kennedy and his Counsel that a number of files had not been produced although requested. Mr Kennedy stated that as we had seven thousand clients and each client had a file reference and when there could be various cases within that reference number, this represented a large number of clients. A large number of the files had been closed off and a number of them were not retained in his office building. All files currently available had been made available to the investigating accountant.

Mr Kennedy complained that the investigating accountant should have commenced her enquiry by seeking a meeting with him and enquiring as to how his accounting and filing systems operated. He was also concerned that photocopies of documents had been taken from files unknown to him.

While the Committee considered the submissions, Ms Foley resumed her investigation on the 26 July seeking various Carkery files which became available on the 28 July.

At that point in time, the evidence discloses that approximately 300 files had been sought and two thirds had been produced. Mr Kennedy appears from correspondence to have been awaiting some form of ruling from the Compensation Fund Committee on the submissions made to the effect that the inspection was 'not authorised under the Account Regulations'. Mr Kennedy sent to Mr McEllin on the 26 July two further letters from clients Derek Bias and Elaine Bias in which both clients objected to anyone but their own Solicitor reading their file. However, on the 28 July, 1993 Mr Connolly wrote to Mr Kennedy in the following terms:-

"The Committee, having noted your submission, determine that the investigation should continue and noted your agreement to make all files available to the Society's 'Investigating Accountant".

However, it appears the die was cast at this stage in the sense that the Law Society had determined because of the Applicant's perceived lack of co-operation, to make an application for an injunction and so notified Mr Kennedy on the 29 July, 1993.

Mr Connolly wrote:-

"In view of the manifest difference of view and the fact that your conduct was clearly obstructing the investigation by the Society, we are now obliged to take the view that the only proper course is to apply to the High Court for an injunctive relief against you so as to allow us to continue the investigation of your practice without interference and obstruction. We propose to make this application today and will communicate further with you in due course."

On the 29 July, 1993, Mr Justice Costello, following a hearing at which the Applicant was represented and at which submissions on his behalf were made, ordered that the Applicant do produce forthwith to the Respondent's authorised servants or agents all documents, records and files maintained and within the possession and control of the Applicant. It was further Ordered that the Applicant be restrained from communicating information in any form concerning the investigation by the Respondent, that the Applicant be restrained from interfering with or obstructing the investigation, that he be restrained from distributing any file without first giving notice to the Respondent and that he keep intact all files, records and documents of the practice.

While I will return to the reasoning of Costello J at a later stage he stressed his view of the role of the investigating accountant appointed under the Accounts Regulations as follows:-

"It seems to me that the Accountant is entitled to look at all of the files, that no part of the file can be kept aside. The information that then comes to light may or may not have anything to do with the Regulations, that only when the full file is being investigated can the relevance of the information be ascertained. This means that for the purpose of the Regulations all files can be investigated and that any information which is being retained will then be the subject matter of a report."

While the Society had argued before Costello J that it also had the power to investigate the affairs of the particular Solicitor under its general supervisory powers, apart altogether from the Regulations, the Judge made no Order or finding in relation to any such supposed power.

Thereafter the Respondent appointed Miss Annalie Healy, Chartered accountant, to assist Ms Foley in the investigation of the practice in order to expedite matters and the Applicant was so advised on the 3 August, 1993.

In total approximately 400 files were requested during the entirety of the office stage of the investigation which continued until the end of August, 1993. I do not accept that the Applicant's contention that over 900 files were demanded.

In cross-examination Ms Foley accepted that at the outset of her investigation she did not, (apart from one telephone call to secure the return of the books) contact or involve Mr Kennedy's reporting accountant. She did not feel this to be a departure from usual practice. Generally, however, she would introduce herself to the Solicitor or principal of the firm which she accepted she did not do in this case.

Insofar as the number of files sought was concerned, this would vary from practice to practice. If matters appeared to be in order, possibly 20/30 files might be looked at. She had never prior to this particular inspection called for a similar number of files. She had never before had the experience of having a member of a Solicitor's staff sit with her throughout her work. She clearly gave the Court to understand that her work was made as difficult and uncomfortable as possible.

She totally disagreed with suggestions put to her in cross-examination that she felt hostility towards Mr Kennedy because of the way she had been treated, specifically on the 15 July when Mr Carkery was in the office. She also denied that in pursuing third party verification of one particular item from one of Mr Kennedy's principal UK based clients, she was herself pursuing a personal 'agenda' against Mr Kennedy.

In any event, she finished up her investigation in August at the end of that month, as did Miss Healy.

She completed and delivered her report in September 1993 which was in the form of two booklets, together with a list of specific questions relating to the two booklets.

On the 27 October, 1993 this information and documentation was furnished to Mr Kennedy with a covering letter of even date directing his attention to the queries in relation to certain matters and seeking his comments and explanations thereon.

It is apparent from a reading and perusal of this interim report that an extensive enquiry into books and accounts of the Defendants' practice took place between June and August, 1993.

I will confine myself to indicating headings under which apparent irregularities of a financial nature were identified from the books and accounts by Ms Foley:-

(A). Failure to account for a sum of £17,600 received by the office in 1983 in respect of the proceeds of sale of a particular property.

(B). Application of client funds to discharge other client liabilities without apparent general or specific authorisation.

(C). Irregularities concerning undertakings given to the Bank of Ireland at Dublin Airport.

(D). Delays in payment of Counsel's fees and other professional fees following receipt of same.

(E). Apparent Reduction in the amount of payment of such fees by approximately 10% of the sum actually received by the Applicant's office in certain instances.

(F). Payments made to third parties for services which were never given, so as to facilitate in a fraudulent manner bonus payments to Mr Ralph McConn, a legal executive in the firm, in some 30 cases.

(G). An unexplained transfer of £75,000 from a particular client account on 18 August 1993, which said funds were repatriated to the same account shortly afterwards, in circumstances which demanded an explanation but where no explanation was given.

It is quite clear that examination and investigation of these matters took up a very considerable amount of time, and included queries which gave rise to a great deal of acrimony and resentment, in particular in relation to third party verification of certain instructions from an insurance company and also in relation to an admittedly improper request by the Respondent for sight of a professional case file which the Applicant was handling for a certain Solicitor who had brought a case against the Respondent in respect of which a judgment of the High Court was then awaited.

There was agreement during the hearing before me that the effort and energy expended in the compilation of information divides approximately 50/50 as between what might be described as irregularities within the accounts on the one hand and fraudulent claims on the other.

While obviously a percentage is not determinative of the question as to the dominant purpose of the investigation, it is none the less an important assessment because there is some degree of agreement about it, not only by the parties but also by the Applicant's main expert.

Much of the interim report does relate to the information gathered by Ms Foley in relation to fraudulent claims. Her investigation of files included reading files which were not in fact personal injury claims at all, but at times consisted of criminal prosecutions and other unrelated matters. However, at the end of the day, I too agree that both the work effort and time components of the inquiry are incapable of any other assessment than 50/50 as between financial irregularities and fraudulent claims.

While it is not for this Court as already stated to make any pronouncement on the merits of either aspect of this investigation, it is essential that the Court records that the investigation uncovered evidence of fraud and fraudulent activities within the Applicant's practice in which Mr McConn and perhaps also Mr Murphy, the then head book keeper, were involved.

This fraudulent activity, which is not denied by Mr Kennedy (he claims to have been unaware of the practice), consisted of making payments to third parties in respect of services which they had never provided which said monies were then funnelled back to Mr McConn who thereby escaped liability for tax on such payments. Both individuals have since left the Applicant's practice. Mr McConn received some £24,000 in this manner over a period of 3 years. Significantly these payments were stated in evidence to be bonus payments made to Mr McConn in respect of client referrals and new business introduced by or through him.

PLEADINGS AND ISSUES

Proceedings were commenced by the Respondent by Plenary Summons on the 29 July 1993, upon which date the Respondent sought and obtained the Order of Costello J already referred to.

At paragraph 3 of its Statement of Claim delivered on the 23 August 1994, the Respondent contended that, pursuant to the powers conferred by the Solicitors Act, 1954 and 1960 and the Regulations made thereunder, and in particular the Solicitors Accounts Regulations of 1984, it was empowered to approve and appoint an accountant for the purpose of ascertaining whether or not the regulations had been duly complied with. Where such appointment is made, the Solicitor the subject matter of the investigation is required by the regulations to produce at a time and place for so doing, books of account, bank statements or pass books, statements of account, vouchers, files and any other necessary documents, including accounting statements prepared under Regulation 31(1) of the aforesaid Solicitors Accounts Regulations for the inspection of the accountant and as further required to afford to such accountant all other facilities which the said accountant may consider necessary for completing an inspection and report to the Plaintiff on the results of the investigation.

Paragraph 4 claimed as follows:-

"Further or in the alternative, the Plaintiff is the body responsible by statute for the admission, enrolment and control of Solicitors of the Courts of Justice, is entitled to carry out all such other general inquiries and investigations as it may deem necessary and appropriate for the proper supervision of the Solicitors profession either at the time it is exercising its powers pursuant to the provisions of Regulation 29 of the Solicitors Accounts Regulations (No 2) of 1984 in respect of any specifically authorised investigation where matters or irregularities come to the attention of the Investigating Accountant other than are strictly within the ambit of the investigation under the Solicitors Accounts Regulations aforesaid or to exercise its general supervisory powers as either ancillary and additional to or separate from its powers pursuant to the aforesaid regulations."

Paragraph 8 of the Statement of Claim recites that the Applicant sought to, and did, obstruct the investigation and further gave notice of the said investigation to clients of the practice for the purpose of obtaining objections from such clients to the inspection of their files by the investigating accountant.

It was further claimed that the Applicant failed to comply with his statutory obligations to the Law Society under the Solicitors Acts or the Solicitors Accounts Regulations and failed to co-operate with the investigating account, Aisling Foley.

It was further contended that the Applicant had failed to afford the said accountant access to all appropriate files and documents including unrestricted access to the computer records of the practice and further failed to carry out such third party verification of transactions arising within his practice as he was requested so to do.

The Statement of Claim then sought the relief which was the subject matter of the Injunction Application on the 29 July 1993 before Costello J.

Significantly, no appeal was brought by the Applicant from the Ruling of Costello J, so it is a matter of some importance to consider what implications may arise from this fact alone, particularly having regard to the fact that the Applicant's judicial review application was not brought until the end of April 1996, almost three years later. On the occasion in question, as already stated, the Applicant was represented by Counsel who cited legal authority on the client privilege aspect of the case only to Costello J.

At p 6 of the transcript, Costello J, stated as follows:-

"It seems to me to be perfectly clear that the Regulations impose a statutory duty on a Solicitor to produce all files in his power and possession. It seems to me that he is not entitled to place any conditions on the way in which the Inspector will examine the files and he is not entitled to retain any portion of the files or to obstruct the Inspector from investigating and examining the files. So I am prepared to hold that the Solicitor has not been complying with the regulations due to a misinterpretation of the Regulations. This view of Regulation 29 gains support from Regulation 23 which refers to the Accountant's Report and is part of part V of the Regulations. Regulation 23 specifically excludes the obligation to disclose a client's entire file. Such an exemption is not contained in Regulation 29. It seems to me, therefore, that the Solicitor has not been acting correctly and that the Accountant of the Society is entitled to a mandatory injunction in the terms of paragraph A.

I reached this conclusion bearing in mind the decision in the Parry Jones case and the application in different circumstances of the principle in that case to the position under the Income Tax Acts in England in the later Report in ex parte Taylor [1992] 2 All ER 409. What we are considering here, it seems to me, is the contractual obligation of confidentiality which a Solicitor has towards his clients. That contractual obligation is in fact over-ridden or is subject to the law of the land, and the law of the land in this connection is contained in the Statutory Instrument to which I have referred. I therefore propose to grant a mandatory injunction in the terms of paragraph A."

At the outset of the present hearing, Counsel on behalf of the Respondent argued that Judicial Review was a discretionary remedy and that delay in the instant case provided a basis for denying the Applicant relief on the various points raised in the Judicial Review. It is true to say that issues raised in the Judicial Review which go to the delegation by the Law Society of its functions, alleged inexperience and inadequacy of qualification of the investigating accountant and other issues (hereinafter referred to as "the ancillary issue" were never raised by the Applicant on the hearing before Costello J, who seems to have confined himself solely to the one legal issue of client privilege.

I think this submission is mistaken, because the Applicant made clear from the outset, virtually within a matter of days, that he contested the adequacy of the Statutory procedures for the particular format of this investigation ('the main issue') and the ancillary issues also. I feel that due to the limited time and notice, he had no real opportunity of addressing issues other than privilege at that hearing.

The time and attention of the Applicant from June 1993 onwards was almost entirely consumed in his engagement with the requirements of the Respondent, firstly in responding to the initial list of queries raised by Ms Foley on the 27 October 1993. A response to these financial queries was furnished by him on the 31 December 1993. Further queries were raised on the 11 January 1994 and a response to these queries was furnished on the 21 January 1994. A further response to outstanding queries was furnished on the 25 February 1994 and again in May 1994.

A supplementary investigation report was compiled by Ms Foley and Mr Jim Dobson on the 9 December 1994 to which a response was furnished. A further report was compiled on the 19 December 1995 to which a further response was made by the Applicant.

I cannot therefore find that the Applicant has been dilatory in pursuing his case in any way as would preclude him from arguing his case for a Judicial Review, except in respect of the point of privilege, upon which, as already indicated, the High Court had pronounced definitively on the 29 July 1993. That ruling however cannot determine the main issue and in fact is itself an issue to be determined as a consequence of deciding the main issue.

The Judicial Review proceedings raised many grounds upon which relief was sought which appear sufficiently from the detailed submissions made on the Applicant's behalf which are dealt with later.

However, the main contention of the Applicant may be summarised as follows:

Any investigation by the Law Society of one of its members must be confined to the terms of the Regulations and there is no inherent power to go beyond the regulations themselves. Specifically, the Charter of the Law Society does not confer any additional powers upon the Society in the matter of investigating particular members.

An investigation is only authorised for the purpose of ascertaining compliance with the Regulations. Accordingly, the Regulations are not to be interpreted as permitting a clandestine investigation of a Solicitor's practice for the purpose of determining whether or not fraudulent claims are being processed through the practise. Any such inquiry, it is submitted, would require specific statutory authority, impinging as it does not merely on client rights of privilege and confidentiality but also those of the Solicitor concerned, including his right to privacy.

The Applicant seeks Declarations to this effect and an Order quashing the decision of the Respondent to authorise the investigation in the form it took. The Applicant also seeks damages for wrongful use of a Statutory Power.

The ancillary issues may be identified as follows:-

1. The provisions of the Solicitors Act 1954, and in particular Section 66 thereof, did not permit delegation by the Respondent of this particular form of inquiry to the Compensation Fund Committee.

2. The investigating accountant was not duly approved and appointed by the Respondent as required by the Regulations.

3. An investigating accountant for the purpose of the Solicitors Accounts Regulations is required to be an independent accountant 'in practice', whereas Ms Foley was an employee of the Respondent and as such incapable of acting independently.

4. The said investigating accountant, Ms Aisling Foley, did not have the necessary qualifications or experience to render herself eligible for approval and appointment for the purpose of an investigation under the Solicitors Accounts Regulations.

THE ROLE OF THE INVESTIGATING ACCOUNTANT

In the course of the hearing evidence was given by three accountants.

Mr Paul Mulcahy, the Applicant's accountant, is a certified public accountant and Bachelor of Commerce. The Applicant became a client in 1987. He has been reporting accountant for the Applicant's firm from that time onwards. He had not worked as an investigating accountant.

He identified a work programme for reporting accountants published in April 1991 by the Institute of Chartered Accountants in Ireland, to be used in conjunction with Miscellaneous Technical Statement M 2 (which is a joint statement of the Institute of Chartered Accountants in Ireland and the Incorporated Law Society of Ireland published in March, 1985 in relation to the Solicitors Accounts Regulations).

Essentially the work programme sets out procedures for the reporting account when examining the records of a Solicitors practice in order to establish compliance with the 1984 Regulations.

The programme is divided into nine parts to include

(1) Introduction and Planning

(2) Payment into Client Accounts

(3) Withdrawals from Client Accounts

(4) Trust Bank Account

(5) Payments to the Solicitor

(6) Client Bank Account Reconciliations

(7) Clients Ledger Balances

(8) Overall Review and General Matters

(9) Accountant's Report.

Part 9(3) provides:

"The Accountant in the Accountant's Report is required to express his opinion as to whether the Solicitor(s) has complied with the relevant provisions of the Regulations during the accounting period being reported on. Trivial breaches of the Regulations due to clerical errors or mistakes in book-keeping, all of which were rectified on discovery, need not be disclosed in the Report. Serious irregularities brought to light during the accountant's examination must be noted as qualifications in the Accountant's Report. The Accountant must disclose details of matters about which he has been unable to satisfy himself and, the reasons, therefore in the FIRST SECTION on the back of the Accountant's Report. In the SECOND SECTION on the back of the Accountant's Report the Accountant must disclose details of matters in which the Solicitor(s) has not complied with the Regulations. The circumstances giving rise to any proposed qualification should be discussed with the Solicitor(s) by the accountant prior to issuing a qualified Accountant's Report. Reconciliation differences should be explained in the THIRD SECTION on the back of the Accountant's' Report. The Accountant's' Report should be sent direct to the Law Society with a copy to the Solicitor."

Mr Mulcahy pointed out that this is a work programme and not an audit exercise. He conducted an analysis of tests required to be performed under the work programme, 83% of the tests required to be performed related to financial records, 9% related to legal records consisting of clients files and 8% related to other matters whereby the accountant was obliged to acquaint himself with the Regulations.

Essentially, according to Mr Mulcahy, a reporting accountant compares the client bank balances, balances on client ledger control accounts and a print-out of client listing balances. In the context of that exercise he would spot check perhaps twenty-five or thirty files from two thousand five hundred active files. In looking at a file, he would only do so for the documentation which supports an individual financial transaction. He would have no interest in the file per se, or in the merits or otherwise of claims.

In evidence I was told that Mr Kennedy's files, one of which was produced in Court, are divided up into various wallets or sections, one of which is devoted to financial records and others of which are devoted to correspondence, medical reports, Counsels opinions and other matters. However, in at least one case, (Rogers) the financial records were not so confined or contained, and were spread throughout the file, which was not divided up. He completed the client ledger control account in September of 1993 and was surprised that Ms Foley completed her work without it or without contacting him apart from the one occasion in June, 1993 when she sought the return of the books and accounts from him. He was also surprised that she had not interviewed the principal of the firm prior to commencing her work to discuss, inter alia, the number of Solicitors in the firm, the nature of the practice, the systems and procedures in operation in regard to financial transactions.

He felt that if in the course of an investigation one found something amiss, the Solicitor should be told of the problem. If then one does not obtain the necessary co-operation, the accountant can withdraw. He believed the standards in the Applicant's practice were good. The practice had a Book-Keeper and an Accounts Assistant. He noted that the Applicant kept office monies in the client account to cover any possible problems, what is known as a 'client security account'.

He described a meeting with Mr Connolly in the Law Society on the 31 January 1994 on an unrelated matter. During the course of conversation, Mr Mulcahy said that Mr Connolly informed him that the Applicant was, in Mr Connolly's view, an irritable and abrasive character and went on to say, and I quote, the Society had "no problems with the financials", but that they had problems of another nature with Mr Kennedy which he (Mr Connolly) did not go into.

Mr Connolly denied ever making these comments to Mr Mulcahy and I find it impossible to determine which of the two witnesses is truthful on this point. However, given the confidential nature of that meeting, I was somewhat surprised that Mr Mulcahy should have relayed his account of this exchange to the Applicant, particularly having regard to the fraught state of relations between the Applicant and the Respondent as of that time.

He agreed that if as an investigating accountant you came across fraud, it would "stop you in your tracks", because it undermines the validity of everything in the accounts. He agreed that if an investigating accountant found evidence of something illegal, there was an obligation to get to the bottom of the matter.

Mr Mulcahy accepted that under the miscellaneous technical statements (MT2) the reporting accountant was obliged to follow best practice and particularly was obliged to take into consideration relevant procedures set out in published Auditing Standards and Guidelines.

Specifically, he accepted that in conducting an investigation or audit, an accountant would be bound by the principles, procedures and guidelines contained in Statement of Auditing Standards on Fraud and Error published by the Auditing Practices Board (SAS 110). While this was published in 1995 it had a precursor and there is no suggestion that any of its principles or guidelines were not appropriate to 1993.

The introduction to the SAS acknowledges the responsibility of an auditor to consider fraud and error in an audit of financial statements. Having identified a matter which could cause a misstatement in the financial statements, auditors are concerned to establish the circumstances giving rise to that matter and whether such misstatement was an error or occasioned by fraudulent conduct.

Various portions of SAS 110 were put to Mr Mulcahy, and he agreed that all of them would be applicable in the course of an investigation.

In this context "fraud" includes "intentional misrepresentations affecting the financial statements by one or more individuals among management, employees or third parties". It can also include the "recording of transactions without substance".

SAS 110 states that it is not the auditor's function to prevent fraud and error, but auditors plan, perform and evaluate their audit work in order to have a reasonable expectation of detecting material misstatements in the financial statements arising from error or fraud. Audit procedures must be so designed so as to have reasonable expectation of detecting misstatements arising from fraud or error which are material to the financial statements.

Accordingly auditors are alert throughout the conduct of an audit to audit evidence indicating unusual events or actions such as (a) control overrides (b) unusual transactions (c) insubstantial responses to audit enquiries, delays or vague representations (d) unusual accounting judgments.

SAS 110 contains procedures to be followed when there is an indication that fraud or error may exist as follows:-

"29. When auditors become aware of information which indicates that fraud or error may exist, they should obtain an understanding of the nature of the event and the circumstances in which it has occurred, and sufficient other information to evaluate the possible effect on the financial statements. If the auditors believe that the indicated fraud or error could have a material affect on the financial statements, they should perform appropriate modified or additional procedures.

30. The extent of such modified or additional procedures depends on the auditor's judgment as to:

(a) the types of fraud or error indicated;

(b) the identity of the persons involved;

(c) the likelihood of the occurrence of fraud or error;

(d) the likelihood that a particular type of fraud or error could have a material effect on the financial statements, possibly including those of prior years, and

(e) the extent of which it is realistic to expect that further procedures are likely to clarify the position.

Unless circumstances clearly indicate otherwise, the auditors cannot assume that an instance of fraud or error is an isolated occurrence. If necessary, the auditors adjust the nature, timing and extent of their substantive procedures

31. When evaluating the possible effect of dishonest or fraudulent conduct on the financial statements, the auditors consider its potential materiality. This includes an evaluation of

(a) the potential financial consequences, such as fines, penalties, damages, threat of expropriation of assets, enforced discontinuance of operations and litigation;

(b) whether the potential financial consequences require disclosure, and if so the adequacy of any disclosure;

(c) whether breaches of laws and regulations may be involved or

(d) whether the potential financial consequences are so serious as to call into question the view given by the financial statements.

Such an evaluation may require the assistance of the entities directors, legal advisers, bankers or other advisors.

32. As the assessment of the effect of dishonest or fraudulent conduct may involve consideration of matters which do not lie within the competence and experience of individuals trained in the audit of financial information, it may be necessary for auditors to obtain appropriate expert advice . . . in order to make their assessment of the possible effect on the entity's financial statements.

34. Depending on the circumstances, the methods which auditors may decide to adopt to document their findings include taking copies of records and documents and making minutes of conversations. When discussing with management findings which indicate the possibility of fraud, they ensure so far as possible that there is no communication with any person who may be implicated in the events which they are investigating.

42. In determining an appropriate representative of the entity to whom to report occurrences of apparent fraud or material error, the auditors need to consider all the circumstances. With respect to apparent fraud, the auditors report the matter to the appropriate higher level of authority within the entity which they not suspect of involvement in the fraud. If the auditors suspect that members of senior management, including members of the board of directors, are involved, it may be appropriate to report the matter to the audit committee. When no higher authority exists, or the auditors are precluded by the entity from obtaining sufficient appropriate audit evidence to evaluate whether fraud or error which is material to the financial statements has, or is likely to have occurred, or if the auditors believe that the report may not be acted upon or are unsure as to the person to whom to report, they may wish to obtain legal advice."

The appendices to SAS 110 include examples of conditions or events which may increase the risk of fraud or error occurring which include, inter alia, weaknesses in the design and operation of the accounting and internal control system, unusual transactions and problems in obtaining sufficient appropriate audit evidence.

Mr Mulcahy accepted that the report prepared by Ms Foley in September 1993 did disclose financial irregularities. However, there was no deficit on the client account.

Mr Terence O'Rourke then gave evidence. He is a Chartered Accountant and between 1992-1998 was partner in charge of professional standards in the leading firm of accountants, KPMG. He is very highly qualified and well experienced and was a most impressive witness.

He is very familiar with the role of investigating accountants and has participated in a great number of investigations of all kinds. He was aware that the Law Society had become much more strict since 1990 in their interpretation of the Regulations. Things which in the past might have been regarded as trivial or not material came to be viewed differently at around that time by the Law Society.

Mr O'Rourke was referred by Mr Gilhooley to the Guide to Professional Ethics, published by the Institute of Chartered Accountants, and he quoted with approval the fundamental principles set out therein requiring members to act with integrity, objectivity, competence, due skill, care and diligence and with proper regard for technical and professional standards. These obligations correspond with the ethical principles which govern auditors professional responsibilities as set out at paragraph 14 of the Auditing and Reporting Statement of Auditing Standards (SAS 100).

He felt it would be difficult for Ms Foley to be objective as she was an employee of the Law Society. He did not feel this invalidated her work, but was a factor which would have to be taken into account in assessing how objective any report might be.

Paragraph 2.13 of Statement 20 of the Guide to Professional Ethics provides:-

"Members should not accept or perform work which they are not competent to undertake unless they obtain such advice and assistance as will enable them competently to carry out the work".

He felt, however, it was sensible of the Law Society to employ in-house accountants from an economic and efficiency point of view. He pointed out that the Central Bank employs its own inspectors to do its investigations on certain occasions, although to outside firms of accountants are brought in to do specialised work.

In Mr O'Rourke's view, a routine or simple investigation under the Solicitors Account Regulations is one carried out to assess compliance with the regulations. It would follow the work programme already referred to. It basically involves checking a number of files for that purpose. One does not work solely from the records to the files, but in both directions. Essentially, a routine investigation is a double check or repetition of the reporting accountant's job.

However, on occasions an investigating accountant in order to ascertain compliance may have to dig a great deal deeper than a reporting Accountant particularly where the investigating accountant is sent in with specific instructions or on foot of a complaint.

The financial inquiries undertaken by Ms Foley as set out in part A of her October 1993 report were all, in his view, quite appropriate matters to have raised under Article 29. Those under Part B, relating to possible fraudulent claims, he found unusual, because they would not normally arise on testing for compliance with the Regulations.

He pointed out that his firm would not be happy to accept the brief or commission given to Aisling Foley insofar as his firm would not have the expertise or competence to assess legal matters. They could collect information, but could not make judgments on such material.

An investigating Accountant's duty is to be more focused and more 'in depth' than an audit accountant. The standard required of a reporting accountant relates only to clients monies and does not require the formation of an audit opinion as to a true and fair view. An audit exercise would take into account the possibility of fines and penalties and any threat to the continued existence of the entity.

On coming across evidence of fraud, Mr O'Rourke indicated he would probably take legal advice before pursuing that line of enquiry further.

In so far as disclosure of an interest in fraud was concerned, he felt there was no hard and fast rule. He would prefer to disclose it. Everything depends on the circumstances of the particular case. He agreed it might not be disclosed to a person suspected of complicity in the particular activity if it would defeat the purpose of the investigation but the barrier in this regard was quite high. However, he felt that if pressed as to the true nature of his enquiry, he would not lie about it.

In conducting any perusal of files, it would be his policy to do so on a minimum invasion basis, seeking only such documentation which would establish if the regulations had been complied with.

A targeted investigation might, of necessity, turn up several hundred files, it all depended on the remit.

Significantly, Mr O'Rourke felt a 50/50 apportionment was the appropriate division of time spent by the investigating accountants between financial and non-financial queries.

In relation to the possibility of fraudulent claims of which an investigating accountant might have prior awareness, Mr O'Rourke, stated that an accountant in such circumstances might also be concerned that those problems might extend into irregularities in the accounts. Against such a back drop, one might well undertake a very extensive exercise in relation to the accounts.

As to the manner of the investigation, he felt the investigating accountant should as a matter of practice speak to a person in charge to find out what the systems and controls in the practice were and how they operated. A failure to do so would indicate either a mistrust of the principal or on the other hand might have the effect of impairing the quality of the report.

He did not feel that somebody with the level of experience of Ms Foley would be put in charge of a similar investigation by his firm unless subject to review by somebody more experienced, probably a manager or partner who would look over the whole issue. He also felt that professional etiquette demanded that the investigating accountant would contact the Applicant's reporting accountant. It was unusual and strange not to do so as the reporting accountant is invariably in possession of a great deal of knowledge about the financial systems and operation of the practice.

Under cross-examination he accepted that the unhappy claims experience of the Law Society in the late 1 980s and early 1990s would inform the approach of an investigating accountant and require the pursuit of enquiries in the most rigorous fashion. He further agreed that when selecting cases in the course of an investigation an investigating accountant would pick those cases which come to the surface for some reason. In this regard, he agreed that the Lillicrap case would have given this investigation a particular focus, although if asked to go beyond testing for compliance with the regulations, he would have had to get legal advice. He further agreed that when something was found to be seriously amiss or wrong, that fact could flag another matter or series of matters which might also be wrong. Whether in those circumstances the investigating accountant goes on to look at other cases depends on the purpose of the work.

He agreed that under the regulations, regulation 7 requires that only "proper" payments be made on behalf of clients. He agreed an investigating accountant would look to see if a person receiving a particular payment was entitled to receive it. He would seek documentation supporting the propriety of that payment. The accountant would become a great deal more sceptical where any suggestion of fraud arose in this context. He agreed that monies produced by fraudulent claims, if paid out in fees to a solicitor, could not be said to be payments "properly" made.

He admitted there were, to his knowledge, no independent firm specialising in the investigation of Solicitors' accounts. He further agreed there was no such thing as absolute independence in the case of an accountant conducting an audit because it could always be said that the client pays his fee.

In so far as the question of objectivity and independence went, he agreed it was a most important matter for the person conducting the enquiry to be independent from the accounts, and accepted that a Law Society employee would be free from any possible criticism on this account.

When pressed, he also agreed that falsification of entries in records should set "alarm bells ringing". He said that an investigating accountant would then have to find out all about it and might have to start looking at other areas and doing more work. The fact that the principal of the firm stated he knew nothing about it would be an extra worry, because it would suggest that the controls and operation in the practice were being circumvented or were not working. You would have to ask yourself in such a situation whether or not you could trust anything in the books.

To find evidence of fraudulent payments on 30 files would be a very serious matter. He would also be concerned about the movement of funds off a client ledger card on the very day when a print-out of that page of the client listing had been sought by the investigating accountant in August 1993. That left a nil balance on printing the page that day, and Mr O'Rourke stated he would not be inclined to ask for sight of a file with a nil balance, that he would only check a very small number of such files. To be informed of such a development would alert his suspicions to do more work on other files. The more matters one found which looked serious or not satisfactory, the more digging one would do.

Finally, he felt, that an accountant undertaking this form of investigative work would require a good few years experience before he or she could be regarded as sufficiently competent to do such work on his own.

Mr Charles Russell gave evidence on behalf of the Respondent.

He is a Chartered Accountant who provided advisory services for the Law Society for many years, particularly in relation to newly qualified Solicitors in terms of bookkeeping and financial requirements.

He set up practice on his own in 1993, directing his services mainly at Solicitors of whom he numbers 17 as clients at present. He provides accountancy assistance and legal accountancy software for his clients.

He agreed there were three different roles for accountants, the first being that of the reporting accountant, the second being that of an auditor under the Companies Act and the third being that of an investigating accountant.

In his opinion the duty of an investigating accountant is determined by his instructions. He felt he would have had no problem taking on the brief given to Aisling Foley.

His understanding of the Solicitors Accounts Regulations was that they existed for the protection of client funds and by extension the protection of the Compensation Fund of the Law Society also.

In the course out of carrying out an investigation, there was an arithmetical balancing exercise involved, but more importantly an investigating accountant would have to be satisfied with the financial integrity of the Solicitors practice, that there was nothing in the practice to put the clients funds at risk.

Back in the early and mid 1980s, the Regulations were interpreted as a simple balancing operation whereby the reporting accountant extracted a list of client balances, reconciled bank accounts and got an overall client account whereupon his work was complete. Times had changed since then and much more exacting standards were now imposed on Solicitors. Now when investigating if an accountant comes across something which throws doubt on the overall integrity of the figures, he cannot pass from it.

Mr Russell indicated that a reporting accountant would go to the files for two reasons, firstly to verify financial transactions in terms of the preparation of the accounts and payments made out of client accounts and lodgments into client accounts. Secondly, one would select a sample of files, a random selection, to ensure that the financial details appearing on those files are reflected in the books of accounts. In this regard, he confirms Mr O'Rourke's evidence as to procedures.

Asked what he would do if he came across evidence of illegal activities or fraudulent claims, Mr Russell stated that an investigating accountant would have to consider . . . "Does this put clients funds at risk or the financial integrity of the overall practice, is that called into question, is there a potential claim and by extension from that is the Compensation Fund Committee of the Law Society at risk?"

Asked if one came across clear evidence of organised bogus claims, what would he consider his obligation to be, having been appointed under Regulation No; 29, Mr Russell indicated he would report back to the Law Society his findings and tell them there was exposure in terms of potential claims against the particular practice.

He also felt he would have to interpret his obligations in the light of what the Law Society would instruct him to do. He might have to ask the Law Society if he had power to conduct such an investigation.

In a situation where he came across evidence of illegal activity, he would imagine qualifying the accounts and saying there was significant uncertainty as to the accuracy of the truth and fairness of the accounts.

If he had doubts as to the authority of his employer to conduct a particular line of enquiry, he would want some kind of indemnity in carrying it out.

In any event, in coming across evidence of fraudulent activities in a practice, it was his opinion that an investigating accountant could not possibly walk away from such a situation. He felt the accountant would have to get to the bottom of it and make a report. In the case of an investigating accountant employed by the Law Society, there was nobody else to report to as the Law Society in that situation is both the employer who is giving the instructions and also the regulatory body who is taking care of the general welfare of the Solicitors profession.

In cross-examination he was asked if he was in a position to form a view as to whether or not a claim is fraudulent. He replied that if a file appeared to be in order he did not think he would have any further involvement with it or any need to check it any further. He accepted he was not competent to evaluate medical or engineering reports. He had never acted as an investigating accountant in a legal practice in the fashion in which the particular investigating accountant's work was being discussed in the instant case. He felt he would have used experts to help in evaluating some of the evidence that was available on file in the various cases.

Equally he accepted he had never read Counsels opinions in files when working as a reporting accountant. It would be no part of his brief as a reporting accountant. As an investigating accountant, however, what he would have to read would depend on the instructions he had received. If he had been asked to look at specific aspects of a case he would then need to go beyond the financial directions. He would not undertake any enquiry which fell outside his competence. The more detached and remote from the books and accounts a particular instruction might be, the less comfortable and more awkward it would be for an investigating accountant in that situation.

If asked to confirm that whether or not his inspection was a routine inspection under the Accounts Regulation well knowing that this was not true, he felt he would have to be careful how he answered. He felt he would have to try and buy time and take further instructions and possibly legal advice also.

INFERENCES FROM ACCOUNTANCY EVIDENCE

While certain differences of emphasis obviously exist as between the three expert witnesses, there is agreement on the most fundamental points of relevance to the present proceedings.

All three experts recognise different duties and obligations arise depending upon the instructions given to an accountant in any particular situation and the nature of the task he is required to perform.

The lowest threshold of duty is on the reporting accountant, who essentially carries out an arithmetical exercise which he confirms by spot checking through a very limited number of files for corroboration and vouching documentation in respect of specific financial transactions. An investigation on the other hand, particularly one Where there are, for whatever reason, special concerns on the part of the investigating or regulatory authority, can and indeed must be more extensive and thorough, with the result that a far greater number of files 'might require to be looked at and a much more thorough investigation made.

The duties of an investigating accountant are analogous to those of an accountant performing an audit. His instructions and remit may require him to go even further by way of in-depth investigation. He has to consider propriety and be alert to the possibility of fraud.

Some confusion and contradiction arose between the accountants in respect of disclosure, based largely on the fact that auditors are usually reporting to the directors of a company or, in an appropriate instance, to a sole trader, who in effect retains the accountant for the purpose of conducting the enquiry. That is not the situation here where the separate duties of reporting to a principal and disclosure to a third party must be distinguished because the investigating accountant is an employee of the Law Society and the person to whom any obligation of disclosure may exist can only be the target of the investigation.

As is clear from SAS 110, the duty of disclosure does not extend to a person or persons who may be suspected of complicity in fraudulent activities.

SAS 110 also confirms, as do the ethical guidelines, that an investigating accountant may retain the assistance of an expert in any area where he lacks appropriate expertise. It would seem to follow therefore, that, apart from discretionary considerations, an accountant is free to undertake such work if it is ancillary to his remit.

It equally follows from the foregoing that if an Accountant has or can himself acquire such expertise, it may not be necessary to enlist an additional expert or experts. It clearly must all depend on the complexity of the matter under investigation and the experience of the individual accountant concerned.

Paragraph 24 of SAS 110 indicates that the conditions which increase the risk of fraud and error include previous experience or incidents which call into question the integrity or competence of management or other staff. In this regard, it seems to me that a prior history of complaints about non-payment of Counsel's fees, as distinct from other complaints, would constitute a "condition" of this nature for the reason already mentioned and suggest to the investigating accountant to be alert for evidence of fraud or error.

It goes without saying that the particular instructions given to the investigating accountant may also demand that the accountant be alert for evidence of transactions of an improper nature. Quite obviously, false entries in the books and records would constitute evidence of fraud. Where such entries relate to fraudulent payments made to non existing third parties as a cover for under the counter payments to a legal executive dealing with litigation, it could hardly be disputed on the evidence in this case that such a finding would warrant further and wider investigation as indicated both in the Guidelines and in the evidence of Mr O'Rourke.

Equally, as pointed out by Mr O'Rourke, any prior suggestion to the investigating accountant that the practice might be involved in fraudulent claims would increase the concern of the investigating accountant that such fraud might be reflected in the books and accounts of the practice. It seems obvious that these fears and apprehensions on the part of the regulatory authority could work in either direction.

Equally, what cannot be in dispute in the context of the work of an investigating accountant under the Solicitors Accounts Regulations is his obligation to consider if misstatements in the financial records are occasioned by fraudulent conduct.

Accordingly, the fact that the word "fraud" appears nowhere in the Regulations cannot affect the obligation of the investigating accountant to have this consideration in mind in the course of his work.

APPLICANT'S SUBMISSIONS ON MAIN ISSUES

The power to investigate a Solicitors practice where there is suspicion that that practice may be involved in the making of fraudulent claims was expressly provided for by Section 7 of the Solicitors Act, 1960, and the only pre-condition to having such an inquiry was the formation of an opinion by the Disciplinary Committee that there was a prima facie case for enquiry.

Alternatively, it was open to the Law Society, if capable of forming an opinion of dishonesty on the part of the Applicant, to seek relief under Section 19 or Section 20 of the 1954 Act.

The Society could, for example, have served notice on the Applicant requiring production of all 'Rossi Walsh files" under Section 19.

The only inference that can be drawn from their failure to resort to any of these provisions is that they lacked any material or evidence whatsoever upon which to form such an opinion and decided instead to misapply the Solicitors Accounts Regulations for the purpose of conducting an unauthorised trawl through the files of the Applicant.

The only authority for the form of investigation actually undertaken by the Respondent was such as might be specified or inferred from the Solicitors Accounts Regulations, 1984. There is nothing in the Charter of the Respondent or any residual power by way of general supervisory power apart from the Regulations. Costello J expressly resiled from ruling to any other effect in July 1993.

While the Society has a regulatory function, and indeed a disciplinary function, it acts in the performance of its function in two distinct capacities. It acts in a private capacity under its Charter and in a public capacity as the authority on whom various statutory duties and powers are conferred by the Solicitors Acts. This was confirmed by Diplock LJ in Swain & Another v The Law Society [1982] 2 All ER 827. Thus its only control over the Applicant is that contained in the Acts and Regulations.

In the instant case it is submitted that it was the right and duty of the Applicant to claim clients privilege in respect of the files demanded by Ms Foley, that it is a gross violation of the constitutional, property and privacy rights of any citizen that his file be read by any person without a clearly expressed statutory right or an Order of the Court to that effect made after hearing evidence from all parties concerned. In the absence of clients consent, it is submitted that the Applicant had no alternative but to resist the demand for files when it became clear that the investigating accountant was interested in more than financial details of the type specified in the Regulations.

While Regulation 23 does preclude a reporting accountant from examining the entire file of a client as part of his annual inspection, it is true to say that Regulation 29 does not contain any such exclusion. However, while this was adverted to by Costello J in July 1993, it is submitted that the contrast between the two regulations is due to poor drafting and should not be construed as conferring a right of unfettered access to files by an investigating Accountant.

The information to which the investigating accountant is entitled is limited to material of a financial nature and there must be a minimum invasion of files for this purpose.

Anything that goes outside testing for compliance with the Solicitors Accounts Regulations is an unauthorised and improper purpose.

This was made clear in the decisions of the High Court and Court of Appeal in England in the case of Parry-Jones v The Law Society [1967] 2 All ER 248 (HC) and [1968] 1 All ER 177 (CA).

While both decisions held that clients legal professional privilege was not a valid ground of objection to disclosure of documents in the context of an inspection of a Solicitor's documents by the Law Society's investigating accountant, both decisions suggest the enquiry must be one properly within the scope of the investigation accountant's enquiry and solely for the purpose of the Account's Rules.

Buckley J in the High Court stated at p 252:-

"The rules cannot authorise the society to take any action which is not necessary for the purpose mentioned . . ."

At a later passage on the same page, he stated:-

"For the reasons which I have indicated, however, I am of opinion that the plaintiff cannot object to this [ie the production of documents which in litigation would be the subject of legal professional privilege], provided that the disclosure of the documents in question is truly necessary to enable the investigating officer to ascertain whether or not the plaintiff has complied with the accounts rules."

This approach was endorsed by Lord Denning MR, in the Court of Appeal when, in upholding the rule, he stated as follows at page 179:-

"In my opinion that rule is a valid rule which overrides any privilege or confidence which otherwise might subsist between solicitor and client. It enables the Law Society for the public good to hold an investigation, even if it involves getting information as to clients' affairs, but they and their accountant must themselves respect the obligation of confidence. They must not use it for any purpose except the investigation, and any consequential proceedings."

At an earlier point in the same page he had stated:-

"By enabling the council to 'take such action as may be necessary the statute imports that rules can be made whereby the council can look into the solicitor's books and supporting documents in order to see that the rules are complied with, even if it does mean disclosing the clients' affairs."

Accordingly it follows that if the regulations are used for an improper purpose, the claim of client privilege must prevail.

A statutory power must be exercised reasonably. It must not be used for an improper purpose.

This was emphasised by Henchy J in Cassidy v, the Minister for Industry and Commerce [1978] 1 IR 297. He stated at pp 310-11:-

"The general rule of law is that where Parliament has by statute delegated a power of subordinate legislation, the power must be exercised within the limitations of that power as they are expressed or necessarily implied in the statutory delegation. Otherwise it will be held to have been invalidly exercised for being ultra vires. And a necessary implication in such statutory delegation that the power to issue subordinate legislation should be exercised reasonably."

An essential requirement of reasonableness is that a prima facie case should exist before any investigation takes place under the Solicitors Accounts Regulations.

While no such requirement for a prima facie case is specified in the case of an inspection or investigation initiated by the Law Society itself, the same must be inferred from Regulation 29(3) which provides that before instituting an inspection on written complaint lodged with it, the Council shall require prima facie evidence that a ground of complaint exists. By analogy the same test must apply to its own investigation.

Plurality of purposes in the decision of an administrative authority creates problems which are discussed in de Smith's Judicial Review of Administrative Action (5th Ed, chapter 6). At pp 330-32 the author states:-

"If power granted for one purpose is exercised for a different purpose, that power has not been validly exercised . . . the person so authorised cannot be allowed to exercise the powers conferred on them for any collateral object, that is for any purposes except those for which the legislature has invested them with extraordinary powers.

The principle has been expressed in different ways. Sometimes it is said that decision makers should not pursue 'collateral objects', or that they should not pursue ends which are outside 'the objects and purposes of the statute'. On other occasions it is said that powers should not be 'exceeded' or that the purposes pursued by the decision maker should not be 'improper' 'alterior' or 'extraneous' to those required by the statute in question. It is also said that 'irrelevant considerations' should not be taken into account in reaching a decision. All these terms, of course 'run into each other' and 'overlap'.

However, the designation of a purpose as 'improper' is distinct because of its connotation of moral impropriety. In most cases where the term 'improper' has been employed, the decision-maker either knowingly pursues a purpose that is different from the one that is ostensibly being pursued, or the motive behind the decision is illicit (based for example on personal factors such as revenge or prejudice). Because, therefore, of its adverse moral imputation, the notion of improper purposes is more akin to that of bad faith (a notion which directly imputes motives involving dishonesty, fraud or malice) which is considered in Chapter 13 below as an instance of a ground of the unreasonable' exercise or abuse of power.

When a decision maker pursues a purpose outside the four corners of his powers, he mostly does so by taking an "irrelevant consideration" into account (the term relevant' referring to the purpose of the statute). The interpretation of purpose, and the relevance of considerations taken into account in pursuing that purpose, are therefore often inextricably linked. However, in some cases, neither the motive for the decision, nor the consideration taken into account in reaching that decision, are apparent. In such a case the purpose pursued is judged alone, without reference to the considerations by which it was influenced. The definition of purpose and the relevance of considerations must therefore be considered as separate aspects of the illegal decision."

It is strongly submitted from the evidence of Mr Connolly and Mr McEllin that the dominant purpose underpinning this investigation was the question of possible fraudulent claims. This is buttressed by the evidence whereby the Compensation Fund was described as being 'under siege' because of large claims coining in. In R v The Inner London Education Authority, Westminster City Council [1986] 1 All ER 19 it was held that a local authority in reaching a decision for a purpose authorised under their statutory powers had also pursued a second, unauthorised purpose which had materially influenced the making of the decision and was not merely a subsidiary object, the decision was invalid because an irrelevant consideration had been taken into account.

A passage from Glidewell J at pp 334 was referred to where he posed the following question:-

"This brings me to what I regard as being the most difficult point of the case, namely: if a local authority resolves to expend its ratepayers' money in order to achieve two purposes, one of which it is authorised to achieve by statute and for the other it had no authority, is that decision invalid?".

He proceeded to review authorities including Westminster Corporation v Tondon and North Western Railway Company [1905] AC 426, which suggested that a test for answering the question is, if the authorised purpose is the primary purpose, the resolution is within the power.

He also considered the views of learned authors, including Wade "Administrative Law" 5th Ed, 1982, p 388, under the heading "Duality of purpose" where Professor Wade says:-

"Sometimes an act may serve two or more purposes, some authorised and some not, and it may be a question whether the public authority may kill two birds with one stone. The general rule is that its actions will be lawful provided the permitted purpose, is the true and dominant purpose behind the act, even though some secondary or incidental advantage may be gained for some purpose which is outside the authority's powers."

Glidewell J in R v Inner London Education Authority [1986] 1 All ER 19, 35-36 also stated:-

"Professor JM Evans, in de Smith's Judicial Review of Administrative Action (4th Ecin, 1980) pp 329-332, comforts me by describing the general problem of plurality of purposes as a 'legal porcupine which bristles with difficulties as soon as it is touched'. He distils from the decisions of the Courts five different tests on which the reliance has been placed at one time or another, including:-

(1) What was the true purpose for which the power was exercised? If the actor has abused his power for the purposes for which it was conferred, it is immaterial that he thus was enabled to achieve a subsidiary object

(5) Was any of the purposes pursued an unauthorised purpose? If so, and if the unauthorised purpose has materially influenced the actor's conduct, the power has been invalidly exercised because irrelevant considerations have been taken into account'.

These two tests, and Professor Evans's comments on them, seem to me to achieve much the same result and to be similar to that put forward by Megaw J in Hanks v Minister of Housing and Local Government [1963] 1 All ER 47 at 55, [1963] 1 QB 999 at 1020 in the first paragraph of the passage I have quoted from his judgment. That is the part that includes the sentence: 'In the end, it seems to me, the simplest and clearest way to state the matter is by reference to 'considerations'. I gratefully adopt the guidance of Megaw J and the two tests I have referred to from de Smith."

The reference by Megaw J, to 'considerations' was contained at p 55-6 of his judgment in the following terms:

"In the end, it seems to me, the simplest and clearest way to state the matter is by reference to 'considerations'. A 'consideration', I apprehend, something which one takes into account as a fact when arriving at a decision. I am prepared to assume, for the purposes of this case, that, if it be shown that an authority exercising a power has taken into account as a relevant fact of something which it could not properly take into account in deciding whether or not to exercise the power, then the exercises of the power, normally at least, is bad. Similarly, if the authority fails to take into account as a relevant fact or something which is relevant, and which is or ought to be known to it, and which it ought to have taken into account, the exercise of the power is normally bad I say 'normally' because I can conceive that there may be cases where the facts are wrongly taken into account, or omitted, is insignificant, or where the wrong taking into account, or omission, actually operated in favour of the person who later, claims to be aggrieved by the decision."

In the instant case, it is submitted on behalf of the Applicant that a major consideration, if not the major consideration, underpinning the decision to investigate Mr Kennedy's practice was the question of fraudulent claims.

Accordingly, the decision in the instant case to pursue an improper purpose must be quashed, either on the basis that the decision to investigate fraudulent claims was both an unlawful purpose and the dominant purpose or because it was an irrelevant consideration which was wrongfully taken into account.

Given that the full reasons for the decision to investigate the Applicant were never either minuted or communicated to the Applicant, it is submitted the following passage from de Smith (pp 346-7) is also relevant:-

"In cases where the reasons for the decision are not available, and there is no material either way to show by what considerations the authority was influenced, the court may determine whether their influence is to be inferred from the surrounding circumstances. In such cases the courts may infer either that an extraneous purpose was being pursued or that the exercise of discretion was unreasonable. The matter was succinctly put by Lord Keith who said that where reasons for a decision were absent 'and if all other known facts and circumstances appear to point overwhelmingly in favour of a different decision, the decision-maker . . . cannot complain if the court draws the inference that he had no rational reason for his decision."

The author also states at p 347:-

"If the influence of irrelevant factors is established, it does not appear to be necessary to prove that they were the sole or even the dominant influence. As a general rule it is enough to prove that their influence was material or substantial. For this reason there may be a practical advantage in founding a challenge to the validity of a discretionary act on the basis of irrelevant considerations rather than extraneous purpose, though the line of demarcation between the two grounds of invalidity is often imperceptible."

Once the Solicitor's books and accounts properly record and in accordance with the Regulations what is passing in and out, it is submitted that the question of the merits of a client's case is a wholly irrelevant consideration. The Accounts Regulations do not address audit considerations. There is no provision in the Accounts Regulations for dealing with contingent liabilities in any way. It is purely a judicial function to decide whether a claim is fraudulent. One cannot therefore bring the question of possible fraudulent claims within the ambit of the Accounts Regulations.

I was also referred to a decision of Higgins J delivered on the 23 June 1987 in the High Court in Northern Ireland in Re Murray's Application [1987] NIJB 12, where the Court held that in imposing punishment otherwise than under the relevant disciplinary procedures, the Chief Constable exceeded his powers and pursued an unauthorised purpose so that, in making his decision to transfer the Applicants and to change their duties, he took into account an irrelevant consideration and therefore his decisions were invalid.

While it is accepted that the work carried out by the investigating accountant could be divided 50/50 between investigation of the accounts on the one hand and fraudulent claims on the other, this is not conclusive of the test of "dominat purpose". The dominant purpose was clearly the investigation of fraudulent claims which is outside the authorised remit of an investigating accountant conducting an enquiry under the Solicitors Accounts Regulations. The word "files" must be constructed as only including documents necessary for the purposes of ascertaining or enforcing compliance with the Accounts Regulations.

If an investigating accountant comes across a matter suggestive of fraud, he must first decide whether it falls within the ambit of the Accounts Regulations or outside it. If outside the regulations, then he has no function. He is also limited by his expertise and could in no circumstances be described as qualified to assess medical reports, counsel's advices or possible fraudulent claims. It is not admissible for an investigating accountant to go off on a private detective mission either on his own initiative, or on instruction from his employer. It is not possible for an investigating accountant to retain an expert to supply any want of expertise, because the regulations contain no such provision.

There are no audit type functions associated with the work of a reporting accountant. Accordingly, an investigation under the regulations should not go beyond checking that the reporting accountant did his job thoroughly.

The investigation of fraud is not the business of the Law Society, but is a matter for the Garda Fraud Squad or possibly other agencies. The word "proper" in the Accounts Regulations, and in particular Regulation 7, means no more and no less than the application of clients' monies as defined by the accounts regulations. The propriety or legality of the activity which generated the particular moneys is not something the accountant is entitled to examine.

If an investigating Accountant stumbles across fraud, he can go no further than the parameters imposed by the regulations and merely qualify his report or report such matters to the appropriate agency.

Fair procedures also demand that the full scope of an investigation be disclosed to a solicitor investigated in this way. The Respondent is in a fiduciary position in relation to its members and fair procedures demand that the Law Society indicate the true purpose, or complete purpose, of any investigation. No wider issues of the type present here ever arose in the Parry-Jones case. Fair procedures also require that the Applicant have the benefit of the rights outlined in In re Haughey [1971] IR 217, and also Haughey v Moriarty unrep, Geoghegan J, 28 April, 1998 and unrep, Supreme Court, 28 July, 1998 [FL95], whereby the Applicant would have been given a fair and appropriate opportunity to make representations as to the scope of the proposed enquiry.

RESPONDENTS SUBMISSIONS ON MAIN ISSUES

The title to the Solicitors Accounts Regulations invokes both Section 71 of the Solicitors Act 1954 and "every other power enabling it". The quoted words can only refer to the Charter and would suggest that the Council of the Law Society has by virtue of its Charter general supervisory power over its members. It can do all things a natural person can do. In AG v Leeds Corporation [1929] 2 Ch 291 Luxmoore J stated at p 295:-

"The Corporation was incorporated by royal charter in the year 1627 in the reign of King Charles 1. The fact that it is incorporated by royal charter is of importance, because a corporation so constituted stands on a different footing from a statutory corporation, the difference being that the latter species of corporation can only do such acts as are authorised directly or indirectly by the statute creating it; whereas the former can, speaking generally, do anything that an ordinary individual can do."

Equally in Gray and Cathcart v The Provost of Trinity College [1910] 1 IR 370, 383-4, Ross J, stated as follows:-

"A corporation created by Charter is one indivisible entity. It has impliedly all the powers of a natural person, save such as are expressly reserved in the charter. It has inherent right to use a seal, even where there are no words of express grant. It can use the seal for all lawful purposes, that is, for all purposes within the scope of its powers. It is not now disputed that it can do so without the consent of every individual member of the corporation, provided such purposes are within the scope of its powers. This is settled by a long series of authorities, extending over four centuries of time."

As no power such as that exercised in the instant case was reserved in the Charter, it is free to act as it chooses within the law.

As there can be no doubt that the Council of the Society has a disciplinary function, the Charter should be interpreted in a broad and purposive fashion bearing in mind that the Council, even when dealing with disciplinary matters, does so for the benefit of all its members.

There is no issue of client privilege. The decisions in Parry-Jones make it clear that client privilege is no defence to a claim for inspection of documents made by the Law Society under the accounts rules. Further, these decisions indicate that the Law Society does not have to furnish reasons to a solicitor as to why the inspection is required. It is a point of some significance that, while the Irish regulations closely follow the terminology of the English regulations, the word 'files' is incorporated in the Irish text as something to which recourse may be had by an investigating accountant. This is a wider remit than exists under the English accounts rules.

The true question is whether or not the investigation is authorised within the regulations.

Since July 1993 the Respondent has accessed files on foot of an Order made for that purpose by Costello J and no appeal has been brought from that Order. Whatever about other issues raised in the judicial review, the finding of Costello J on the privilege point must be regarded as definitive in the absence of any appeal. On the occasion of the hearing before him, the Applicant was represented and legal authorities were cited to the Judge before be made the ruling in question.

The Respondent further relies on the case of Williams v Quebrada Railway Land and Copper Company 2 Ch [1895] 751 as an authority for the proposition that where fraud is alleged against a Defendant, communications between himself and his solicitor as to the subject matter of the alleged fraud are not privileged from production, there being no distinction in this respect between a crime and a civil fraud; and it is immaterial for this purpose whether the solicitor is or is not a party to the alleged fraud.

As Kekewich, J stated at pp 754-5:-

"It is of the highest importance, in the first place, that the rule as to privilege of protection from production to an opponent of those communications which pass between a litigant, or an expectant or possible litigant, and his solicitor should not in any way be departed from. However hardly the rule may operate in some cases, long experience has shown that it is essential to the due administration of justice that the privilege should be upheld. On the other hand, where there is anything of an underhand nature or approaching fraud, especially in commercial matters, where there should be the veriest good faith, the whole transaction should be ripped up and disclosed in all its nakedness to the light of the Court".

This view has been supported in Ireland in Murphy v Kirwan [1993] 3 IR 501 when the Supreme Court took the view that an exception to the general rule that legal advice was privileged lay in instances where persons have been guilty of conduct, of moral turpitude, even though it might not be fraud. The Court further held that a party seeking to defeat a claim to professional privilege by asserting malicious prosecution or abuse of the processes of the Court was required to support the allegations to such an extent that they were, in view of the Court, viable and plausible, although not to prove the allegations as a matter of probability or in accordance with the onus of proof necessary for the total hearing of the action.

An analysis of the Regulations shows that an investigating accountant, in contrast to a reporting accountant has a very wide and largely undefined remit. His function is not merely to double check the work of the reporting accountant. His duties are analogous to those of the audit accountant. The presence of the word "properly" in Regulation 7 in relations to payments of clients monies "properly" due must mean that an investigating accountant can look to the propriety of such transactions. The principles and guidelines of SAS 110 make it abundantly clear that an investigating accountant must keep the possibility of fraud or error to the forefront of his mind when conducting an audit type investigation.

The duties of an auditor were set out in Jackson and Powell "On Professional Negligence 3rd edition, Sweet and Maxell, London, 1992, at page 650-1 as follows:-

"The implications of an auditors duty to exercise reasonable care and skills are expressed in two classic statements by reference to which in many cases the parameters of an audit engagement have also been determined. The first is by Lindley LJ in Re London and General Bank (No 2) [1895] 2 Ch 673

'An auditor is not bound to do more than exercise reasonable care and skill in making inquiries and investigations. He is not an insurer; he does not guarantee that the books do correctly show the true position of the company's affairs; he does not even guarantee that his balance sheet is accurate according to the books of the company. If he did, he would be responsible for error on his part, even if he were himself deceived without any want of reasonable care on his part, say, by the fraudulent concealment of a book from him. His obligation is not so onerous as this. Such I take to be the duty of the auditor: he must be honest -- ie he must not certify what he does not believe to be true, and he must take reasonable care and skill before he believes that what he certifies is true. What is reasonable care in any particular case must depend on the circumstances of that case. Where there is nothing to excite suspicion very little inquiry will be reasonably sufficient, and in practice I believe businessmen select a few cases at haphazard, see that they are right, and assume that others like them are correct also. Where suspicion is aroused more care is obviously necessary; but, still, an auditor is not bound to exercise more than reasonable care and skill, even in a case of suspicion, and he is perfectly justified in acting on the opinion of an expert where special knowledge is required.'

The second classic statement is by Lopes LJ in Re Kingston Cotton Mill (No 2) [1986] 2 Ch 279:-

'It is the duty of an auditor to bring to bear on the work he has to perform that skill, care and caution which a reasonably, competent, careful and cautious auditor would use. What is reasonable skill, care, and caution must depend on the particular circumstances of each case. An auditor is not bound to be a detective, or, as was said, to approach his work with suspicion or with the foregone conclusion that there is something wrong. He is a watch-dog, but not a blood hound . . . He is justified in believing tried servants of the company in whom confidence is placed by the company. He is entitled to assume that they are honest and rely upon their presentation, provided he takes reasonable care. If there is anything calculated to excite suspicion he should probe it to the bottom; but in the absence of anything of that kind he is only bound to be reasonably cautious and careful'."

At pp 609-10 the authors point out:-

"The duties of an accountant will primarily depend upon the contract between him and his client. This will regulate the nature and extent of his task and the standard of its performance. It is particularly important to establish the nature of the task, for example whether it is an audit or some more limited accountancy function. The extent of the investigations required will be much greater in the case of the former than in the case of the latter."

Footnotes of importance at p 610 deal with special investigations. The authors refer to the case of McBride's Limited v Rooke & Thomas [1941] 4 DLR 45 as an authority for the proposition that more is required by way of examination in the case of a special investigation as, for example, into defalcations of a particular employee, that in the case of an audit.

The case of The Trustee of the Property of Appeal (A Bankrupt) v Annan Dexter & Co (1926) 70 Acct LR 57 is also referred to, and in particular Astbury J's description of a full audit at p 61:-

"As I understand the contention, it is said, and I think truly, that an auditor who is instructed to make a full audit of business books is responsible not only for getting out such accounts as the books when properly made up appear to show, but they are responsible for ascertaining the true position of the business whether disclosed properly by the books or not."

In Leeds Estate Building and Investment Co v Shevlzerd 36 Ch D 787, 802 it was held:-

". . . the duty of the auditor is not to confine himself merely to the task of verifying the arithmetical accuracy of the balance sheet, but to inquire into its substantial accuracy, and to ascertain that it contained the particulars specified in the articles of association (and consequently a proper income and expenditure account), and was properly drawn up, so as to contain a true and correct representation of the state of the company's affairs".

In Fomanto (Sterling Area) Limited v Selsdon Fountain Pen Co Limited [1958] 1 All ER 11, the issue was whether auditors engaged by patent licensers to ascertain the amount of royalties due from licensees were entitled to require production by the licensees as specimens or specifications of particular products in order to establish whether they were patented articles or not. The licensees contended that it was outside an auditor's function to determine whether or not an article was protected by patent. The House of Lords by a majority rejected this contention. Lord Denning considered generally an auditor's function:-

". . . What is the proper function of an auditor? It is said that he is bound only to verify the sum, the arithmetical conclusion, by reference to the books and all necessary vouching material and oral explanations; and that it is no part of his function to inquire whether an article is covered by patents or not, I think this is too narrow a view. An auditor is not to be confined to the mechanics of checking vouchers and making arithmetic computations. He is not to be written off as a professional 'adder upper and subtractor'. His vital task is to take care to see that errors are not made, be they errors of computation, or errors of omission or commission, or downright untruths."

Lord Denning further held that in the same way as an auditor could take the advice of a lawyer concerning a problem within a legal sphere so also he could take the advice of a patent agent concerning whether an article was subject to a patent.

Messrs Jackson and Powell also state at p 615:-

"While it is probably an overstatement to say that the detection of fraud is of primary importance, it is apparent from both English and Commonwealth cases that the courts regard the detection of fraud as an important purpose of an audit. Moreover, in February 1990 the major accounting bodies in the United kingdom issued an Auditing Guideline specifically relating to fraud, entitled 'The auditor's responsibility in relation to fraud, other irregularities and errors.

This in fact was the precursor to SAS 110 already referred to. All these cases go to show that the limits of an auditors function are not to be narrowly interpreted. The auditor must go further and at times must go into areas which would not appear to be within his expertise and ascertain whether actual payments are lawful or permissible. If he needs to get advice on that, he is entitled to do so as the Guidelines demonstrate. By implication, if he has the necessary expertise himself it may not be necessary to retain an expert for that purpose.

If entitled to delve into such matters in the course of an audit, it cannot be improper to do in the course of an investigation where the duty to dig deeper is at a higher level.

Reliance can also be placed on the Canadian case of McBride's Limited v Rooke & Thomas [1941] 4 DLR 45 to highlight that an auditor's duties are heightened when special circumstances are drawn to his attention.

In that case it was held that auditors engaged to make a general audit of a company's books as required by the Companies Act, 1940, c 113, failed to discover for over three years the systematic method of committing thefts being carried on by an employee of the company by means of kiting, although the possibility of kiting had been drawn to their attention at the outset of their engagement and the thefts would have been discovered if such possibility had then been further investigated and they would also have been discovered had the auditors examined the company's bank deposit slips and the credit side of its cashbook, which they ought to have done but omitted to do. It was found that the auditors were negligent in not probing to the bottom the circumstances first calling their attention to the possibility of kiting, which would have resulted in the discovery of the thefts and the dismissal of the guilty employee, and hence they were answerable to the company for the amount of the theft subsequent thereto.

In another Canadian case, Guardian Insurance Co v Shari, [1941] 2 DLR 417 it was held that auditors engaged to make the statutory audit of a company's books required by Section 120 of the Companies Act, 1934 (Can) c 33 as distinct from a special investigation under a special contract, are entitled, in the absence of anything calculated to arouse suspicion, to presume the honesty of the company's employees and the efficacy of its internal control. In as much as a company's duplicate bank deposit slips were of no value for the purposes of a statutory audit, the auditors were not negligent in failing to examine them when there was nothing to arouse suspicion, although such an examination would have disclosed that the company's cashier had been defrauding the company over a period of years.

Accordingly, where suspicions are aroused, the accountant conducting an investigation has a clear obligation to explore that matter fully.

The investigation of fraud is not exclusively a judicial function. For example, a solicitor may find an employee has been engaged in dishonesty and may dismiss such person provided a fair hearing is given. The keeping of proper accounts is a disciplinary matter. Dishonesty within those accounts is also a disciplinary matter. The Law Society is the appropriate body to inquire and act. The fact that fraud is difficult to uncover is an irrelevant consideration, because fraudulent activity is by definition concealed. The true question is, if you are entitled to go in, are you restricted then from adverting to fraud and getting to the bottom of it? The Regulations themselves suggest that no restriction is to be placed on the investigating accountant under Regulation 29 in contrast to Regulation 23 which explicitly prevents a reporting accountant from looking at the entire file in any case. If it be required as part of one's general duties as an accountant conducting an audit or investigation that he be on the look-out for the possibility of fraud, how can the fact that one is instructed to be on the look out for a particular type of fraud be a matter which invalidates the investigation?

There is no sense in which the Law Society, in an effort to reduce fraudulent activity amongst its members, could even be said to be pursuing an unlawful or improper purpose once the entitlement to take fraud into account is present.

The dominant purpose test is not the correct test to apply, not least when on the evidence it is impossible to say which branch of the investigation represented the dominant purpose. Still less should the "irrelevant consideration" test be applied, when this approach of English administrative law has met with disapproval in the Irish Supreme Court in the case of People (DPP) v Howley [1989] ILRM 629.

In that case it was held by the Supreme Court that the Trial Judge was justified in concluding that the arrest of the appellant in respect of the scheduled offence of cattle maiming (under Section 30 of the Offences Against the State Act, 1939) was not in any sense a 'colourable device" to allow the Gardai an opportunity to question the suspect in relation to an alleged murder. The Court held in addition there was no requirement that an arrest under Section 30 must be predominantly motivated by desire to investigate a scheduled offence.

By this test there is only one question was there a genuine desire to investigate the books and accounts of the Applicant's practice or was that merely a "colourable device" to permit the investigation of fraudulent claims?

Walsh J, stated as follows as p 633:-

"In the event the learned trial judge came to the conclusion that the Garcia Siochana while they were also investigating into a greater or lesser extent a murder suspicion they were also genuinely seeking to detect the culprit in the cattle maiming offences. In my view, there is ample evidence on which he could have come to such a conclusion and that in fact is the conclusion he came to. Therefore I am satisfied that on the evidence the judge was justified in holding that the arrest in respect of the cattle maiming charge was not in any sense a colourable device and that it was a serious, genuine investigation of what itself was quite a serious offence. In my view, the first submission in this case must fall in so far as it seeks to establish that the detention for the first 24 hours was unlawful"

He went on to state as follows at p 635:-

"There is nothing in the decisions of any Irish courts to suggest that the lawfulness of the detention, or as indeed in this case the extension of the detention, is dependant upon the offence or the suspected offence which is the occasion of the detention being the dominant concern of the members of the Garda Siochana when, as the occasion arises, they may wish to question such detained person in respect of an offence or offences other than that in respect of which the detention order was made.

The English administrative law decision cited to the Court in the course of the 'appellant's submissions deal with instances where a power is given to carry out some particular works or to achieve some particular object envisaged by the statute the statute cannot be availed of to secure a different objective than that envisaged even though the one envisaged is also being carried as a cloak for the unauthorised activity. While in similar circumstances a court here might well arrive at the same conclusion in such an instance the subject matter of those decisions is so totally different from the point before this Court that in my view, they are of no assistance in this case. What is before this Court is a much more fundamental point, namely whether somebody has been deprived of his liberty in accordance with law or has been deprived of his liberty in circumstances which render unlawful the deprivation of liberty and that therefore he has been the victim of violation of his constitutional right to liberty. Either his detention is lawful or it is not. There is no intermediate decision. There can be no question of competing or predominant issues which can determine that question. If the arrest is not lawful it is not rendered so by the seriousness or importance of the offence being investigated and if it be lawful it is not rendered in anyway unlawful by the fact that the offence in respect of which the arrest is made is far less serious than some other offence also under investigation. What cannot lawfully be done is to arrest a person by virtue of the powers given in s 30 of the Offences Against the State Act simply to make him available for the investigation of some other alleged offence."

It is submitted that the 'colourable device' test adopted by the Supreme Court is preferable to the 'dominant purpose' test advocated on behalf of the Applicant. In the instant case the evidence goes no where near establishing that the investigation, in so far as it related to the books and accounts, was a mere colourable device. In fact, it uncovered a number of practices or payments which could be described as fraudulent. It is a sensible test because it means that an authority, carrying out a statutory function is not placed in the position of going in looking for one thing, but then having to back out and consider whether they can go in again in respect of another matter.

There was no question in the instant case of any agenda existing which was completely outside the scope of the Acts and Regulations such as one motivated by personal animosity towards the Applicant or for example one designed to disrupt his practice with a view to securing some commercial advantage for his competitors. These would all have been improper purposes properly so called.

Finally, if the Respondent is mistaken in the two submissions on the main issue, it is urged upon the Court, in exercise of its discretionary powers by way of judicial review, not to quash the decision to investigate the Applicant, because in effect there were two decisions which, although complementary of each other, are nonetheless severable.

No adjudication of any sort has been made in relation to the Applicant and it would not be an impossible task, albeit a difficult one, to sever from Ms Foley's report those portions which relate to the investigation of fraudulent claims, leaving for the further consideration of the Compensation Fund Committee the question of irregularities found upon the inspection of the books and accounts. The fact that the Compensation Fund Committee has referred the matter to the Disciplinary Tribunal is not a matter with which the Court should concern itself, because as yet no finding adverse to the Applicant have been made. It is still part of the information gathering process and any question of adjudication lies with the Disciplinary Tribunal in front of which the Applicant is free to call whatever evidence he wishes and to be represented. It is highly undesirable that the High Court operate a step by step judicial review of the proceedings in being.

On the question of disclosure, the Respondent relies on the evidence of Mr O'Rourke to the effect that there is no hard and fast rule. The question of disclosure, as is apparent from SAS 110, is a far from easy one to resolve. The question of reporting on the one hand and disclosure on the other must be kept separate and apart. SAS 110 makes abundantly clear that if you have a concern about the person under investigation, you do not disclose your concern to that person.

Further, at this information gathering stage of an investigation, there can be no question of In Re Haughey rights arising. Such rights can only be said to arise when the investigation falls to be dealt with by the Disciplinary Tribunal. No finding adverse to the Applicant has or can be made until that stage is reached.

The Applicant made the fullest submissions on the issue of client privilege and was aware within a very short time of the Respondents interest in the issue of fraudulent claims. He made all necessary submissions through Counsel before Costello J in July 1993.

CONCLUSIONS ON MAIN ISSUE

(A) Overview of the legislation

The Charter and subsequent legislation which has been referred to in some detail confirms that the Law Society is a body clearly entitled by law to regulate its own affairs and to make bye-laws and regulations for that purpose. It is quite clear that the authority of the Society extends in a special way to the discipline and control of its members. The title to the Solicitors Act 1954 actually refers to the "control of Solicitors" and Section 71 of that Act provides that regulations may be made with respect to the professional practice, conduct and discipline of Solicitors.

The whole purpose of the Solicitors Accounts Regulations is the protection of client's monies and, by implication, the Compensation Fund and the public generally. The Regulations set out to achieve this goal by requiring the maintenance of 'proper accounts" and accounting procedures. Given that Section 71 of the 1954 Act is invoked in the title, the Regulations must be taken as having as their objective the maintenance of proper standards of professional behaviour, honesty and integrity and not merely some robotic or arithmetical exercise devoid of considerations of propriety.

The disciplinary provisions of Sections 7, 19 and 20 of the Solicitors (Amendment) Act, 1960 are triggered by "dishonesty in connection with that Solicitors practice as a solicitor" or "conduct tending to bring the Solicitors profession into disrepute". Failure to maintain proper accounts may be indicative of misconduct under either heading so as to require disciplinary action.

Costello J in July 1993 left over to this hearing consideration of the question whether or not the Respondent has power to investigate a Solicitor under its general supervisory powers, apart all together from the Acts or Regulations.

Given the existence of statutes and regulations purporting to address matters of discipline in the most specific way, I do not see anything in the original Charter which could be relied upon as safe authority for the form of intrusive and extensive investigation undertaken in this case.

I was referred to a number of authorities, including Gray & Cathcart v Provost on Trinity College [1910] 1 IR 370 and AG v Leeds Corporation [1929] 2 Ch 291 as authorities for the proposition that a body incorporated by Royal Charter stands on a different footing from a statutory corporation, and can do anything that an ordinary individual can do. I cannot see these authorities as being of assistance, because an ordinary individual could not undertake this form of investigation into the affairs of another in the absence of enabling legislation or explicit internal rules or bye-laws by which as a member he had agreed to be bound.

Furthermore, the decision in Swain v The Law Society [1982] 2 All ER 827 emphasised the distinction in the private functions and capacities of the Law Society under its Charter and its public law functions conferred by statute.

As pointed out by Diplock LJ, at p 829:-

"When acting in its private capacity the Law Society is subject to private law alone. What may be done on behalf of the Law Society by the council in whom the management of the Law Society is vested by the charter, must fall within the wide description in the charter of the general purposes of the Law Society, viz, 'promoting professional improvement and facilitating the acquisition of legal knowledge'. Subject to this limitation, however, the Law Society acting in its private capacity can do anything that a natural person could lawfully do, with all the consequences that flow in private law from doing it; and in deciding how to act on behalf of the Law Society in this capacity the council's only duty is one owed to the Law Society's members to do what it believes to be in the best interest of those members; and for the way in which it performs that duty, the council is answerable to those members alone. Membership of the Law Society by solicitors is voluntary; it does not comprise the whole of the profession, your Lordships were informed that some 10% of practising solicitors are not members and over these the Law Society, acting in its private capacity, can exercise no coercive powers.

It is quite otherwise when the Law Society is acting in its public capacity. The Solicitors Act 1974 imposes on the Law Society a number of statutory duties in relation to solicitors whether they are members of the Law Society or not. It also confers on the council of the Law Society, acting either alone or with the concurrence of the Lord Chief Justice and the Master of the Rolls or of the latter only, power to make rules and regulations having the effect of subordinate legislation under the Act. Such rules and regulations may themselves confer on the Law Society further statutory powers or impose on it further statutory duties. The purpose for which these statutory functions are vested in the Law Society and the council is the protection of the public or, more specifically, that section of the public that may be in need of legal advice, assistance or representation. In exercising its statutory functions the duty of the council is to act in what it believes to be the best interests of that section of the public, even in the event (unlikely though this may be on any long term view) that those public interests should conflict with the special interests of the Law Society or of members of the solicitors profession as a whole. The council, in exercising its powers under the Act to make rules and regulations and the Law Society in discharging functions vested in it by the Act or by such rules and regulations, is acting in a public capacity and what it does in that capacity is governed by public law; and, although the legal consequences of doing it may result in creating rights enforceable in private law, those rights are not necessarily the same as those that would flow in private law from doing a similar act otherwise than in the exercise of statutory powers"

Any aspect of a Solicitor's behaviour which may affect the public therefore falls within the realm of the Respondent's public law concerns and functions. They are addressed by legislation and subordinate legislation specifically enacted for that purpose.

Accordingly the main issue must be determined by reference to the provisions of the Acts and Regulations already cited.

(B) Privilege and Client Confidentiality

The Parry Jones decisions expressly recognised the Law Society's special position in relation to discipline among Solicitors and the decisions are the clearest possible authorities for the proposition that client's legal professional privilege is not a valid ground of objection to disclosure of documents properly within the scope of an investigating accountant's inquiry. This view is subject to two qualifications, firstly, that the disclosure of the documents in question is truly necessary to enable the investigating Officer to ascertain whether or not the Plaintiff has complied with the Accounts Rules and, secondly, the requirement that the Law Society do not use the material for any purpose except the investigation and any consequently proceedings.

Costello J took an identical view in July 1993 and no appeal has been brought from that ruling. It is a matter of some significance that under the Irish Regulations the Law Society are entitled to the wider comfort of "files" whereas Rule 11 of the English Solicitor's Accounts Rules referred only to "bank pass books, loose-leaf bank statements, statements of account, vouchers and any other necessary documents".

Accordingly, it may be seen that privilege is not the issue, but "authorisation". If the enquiry in the form it took is authorised for one reason or another within the Regulations, there can be no defence of client privilege or confidentiality. On the other hand, if it is not authorised, the issue does not require to be addressed at all.

(C) Requirements for Prima-Facie Case

The submission that a requirement for a prima facie case, exists before the Law Society can initiate its own investigation rests upon Regulation 29(3), where such evidence is required prior to the institution of an inspection in the case of a written complaint lodged with the Society.

No such requirement is to be found at Regulation 29(1) insofar as the Council acts on its own motion Ordinary canons of construction, and in particular the principle of expression unius exclusio alterius" must mean that no such requirement can be inferred or imported into a case where the Law Society wishes to carry out its own investigation, either routinely or otherwise, under the Accounts Regulations.

(D) Authority conferred by the Regulations.

The Regulations set out a number or arithmetical exercises which must be undertaken by a reporting accountant. Mr Mulcahy has identified some thirty-eight tests or exercises in this context.

No such agenda is marked off for the investigating accountant who may call for the "books of account, bank statements or pass books, statements of account, vouchers, files and any other necessary documents". Furthermore, the Solicitor "shall afford to such accountant all other facilities which the accountant may consider necessary for completing an inspection and report to the Council on the result of the investigation".

The only limitation is that stated at Regulation 29(1) which provides that the Council may approve and appoint an accountant for such purposes as hereinafter mentioned "in order to ascertain whether these Regulations have been complied with". (My emphasis).

Can this confine an investigation to a mere mathematical or book-balancing exercise?

Regulation 7 clearly suggests otherwise, because it provides that there may be drawn from a client account --

"(a) in the case of client's money --

(i) money properly required or a payment to or on behalf of that client;

(ii) money properly required for or towards payment of a debt due to the solicitor from the client whose money has been paid into that account or in reimbursement of money expended by the Solicitor on behalf of the client;

(iii) money properly required for or towards payment of the Solicitor's costs . . .". (My emphasis).

It is accepted on behalf of the Applicant that the sort of irregularity identified in this case by the investigating accountant in relation to the payments made to third parties in respect of non-existent services, which said payments were for the benefit of Mr McConn, do fall within the proper ambit of an investigation within the Accounts Regulations. However, it is suggested that there are limits: that the accountant can only explore within the limitations of his qualifications and expertise and the area under scrutiny cannot extend beyond what is set out specifically in the Solicitors Accounts Regulations themselves.

If the propriety of certain payments can be looked at, the question of dishonesty and fraud must surely be matters which the investigating accountant can look at, as otherwise the word '"properly" has no meaning whatsoever. It follows that the honesty or otherwise of the Solicitor under investigation must always be to the forefront of the investigating accountant's mind.

In this regard, I accept that a much higher duty is imposed on an investigating accountant than on a reporting accountant; or indeed an accountant carrying out an audit.

The word 'fraud" does not appear anywhere in the Regulations, nor does the "dishonesty". The authority or requirement to consider such matters derives from the general law and from the principles and guidelines by which accountants bind themselves, together with their instructions in any particular case.

If an investigating accountant does uncover fraud, the evidence shows he has the clearest obligation to get to the bottom of it and the only question is whether or not a line must at some point be drawn along the lines suggested by Counsel for the Applicant.

It seems to me that the question of expertise is not a sound reason for drawing such a line. Under the Ethical Guidelines, an accountant may call in an expert to assist in areas where he lacks expertise. An independent firm of accountants may be reluctant to undertake the particular remit because of lack of expertise in a particular area, but that goes to discretion rather than underlying principle.

I do not believe the issue of fraud can be contained and ring fenced because of the wording of the Regulations. If there is a reasonable degree of connectedness between one form of serious fraudulent activity to be found on the books and records of the Applicant firm, and another which is related, though not appearing on the books, then, on the basis of the expert evidence, it seems to me the investigating accountant is obliged to follow the trail to its conclusion, assuming at all times that the investigating accountant has the necessary instructions from his principal for that purpose.

The overwhelming view of the experts who gave evidence at this hearing is to the effect that where fraud is uncovered deeper and wider enquiries are necessary, because one instance of fraud may flag another. The discovery of fraud, involving the main litigation operative in the practice, extending as it did to thirty files and involving a sum of £24,000.00 over a period of three years in respect of client referrals, must be regarded as a matter of the utmost seriousness. Leaving altogether aside the other financial irregularities found by Ms Foley, some of which may or may not be found ultimately to have a fraudulent component, I believe that this particular history of admitted fraud is sufficient in itself to resolve the main issue before the Court.

Was there a reasonable connection between the fraud that was uncovered on perusal of the books and accounts and the fraudulent claims which were the subject matter of the Law Society's concern?

It seems to me there was. Firstly, Mr McConn dealt with personal injury litigation and the extended area of fraud investigated was entirely confined to the area of personal injury claims litigation. He dealt with the Lillicrap case and cases which had been referred to the practice by Mr Rossi Walsh and Mr Kealy. He was paid in a fraudulent manner for those referrals. An internal examination of the files would also inexorably lead from the business handled or transacted by this individual to the suspect claimants and the person referring them who was the subject matter of the Law Society's concern. There was no requirement to go outside the files to gather this information.

I take a particular case example cited to the Court where the fraudulent practice involving Mr McConn was at work. The case in question was that of Peter Uzell v Dublin Corporation. On the financial records, a complete conflict appears between the figures in the bill of costs, and those on the client ledger card and the internal invoice sent to the client. The client ledger card reveals payments of £800.00 to Brady's Garage, £200.00 to Geraldine Murphy and £1,000.00 "discharge of loan", none of which on the evidence were truthful entries. They were, on the contrary, false entries whereby under the counter payments were made to and received by Mr McConn as a reward for the introduction of new business.

The most cursory check against the name "Uzell" would have indicated that Mr Uzell had an address at Pearse House in Pearse Street, Dublin 2, as did one Michael Uzell, his brother, who pursued a personal injury claim which had been referred the office of Giles Kennedy & Co by Rossi Walsh. Given that the claim had been so referred, it is quite apparent that an investigation under either heading could, and probably would, have led even the most inexperienced investigator to the other avenue of inquiry. Any further inquiry would have brought to light the fact that Peter Uzell also had a claim against a Mr Fox, who was the driver of a car that collided with a taxi in Sandymount driven by Mr John Burke. Mr Burke in turn was a passenger and claimant in the Lillicrap v Glass case.

It can be seen therefore that the areas of possible fraudulent claims, which might appear from a distance to be separate and distinct from the fraud 'in the books', were in effect linked and overmarked by the same footprints.

Given that the evidence of the experts establishes that the duty and obligation of an investigating accountant is to get to the bottom of fraud, on what possible basis could Ms Foley turn away from that line of inquiry in a situation where one fraudulent activity led reasonably to another? The evidence establishes an accountant cannot merely turn away or pass from such matters.

The only objection which can perhaps be made is that Ms Foley commenced her investigation by putting the cart before the horse in looking first for evidence of fraudulent claims, rather than confining herself exclusively to the books and accounts until a point in time arrived where she had secured the "hard evidence" which provided the stepping stone to the issue of fraud permeating claims.

But if she would have reached this point in any event; can it be said to be a distinction of any importance?

In my view it cannot, particularly from the point of view of the obligations of this Court in the context of exercising its judicial review powers. In that regard, the statement of Barron J in Farrell v South Eastern Health Board [1991] 2 IR 291, 297, as to how the Court should exercise its discretion, seems entirely apposite:-

"Nevertheless it seems to me that once the applicant has been deprived of his frill rights as a member of the Board the resolution of the Board should not remain untouched. Undoubtedly, if the first applicant is clearly in the minority and if the facts show that notwithstanding whatever evidence the first applicant might bring forward as to the condition of the Clonmel hospital the majority still wish to pass the same resolution then it seems to me the court should not intervene". (My emphasis)

In the instant case I feel the facts show that the discovery of fraud in the books would in any event have led to consideration of fraud in the processing of claims, and for that reason the Court should not intervene.

The fact that Ms Foley may have had instructions to be on the alert and look for fraudulent claims does not in my view come within the description of "an improper purpose". If the Law Society, through its Counsel or members, are made aware of activities touching a Solicitors practice which could conceivably give rise to a claim on the Compensation Fund, how can it possibly be said that the Society cannot in such circumstances conduct an investigation under the Accounts Regulations when it may do so as a matter of routine when no such grounds for concern exist?

I was extremely impressed with the evidence of Mr O'Rourke who stated that an investigating accountant concerned about the possibility of fraudulent claims, would also be concerned that those problems might extend into irregularities in the accounts. It seems to follow from this evidence that similar inferences are open to be drawn in the other direction also, particularly if the same individual or the same area of litigation is involved.

For these reasons, I conclude that the inquiry as undertaken by Ms Foley, because of the discovery of fraud within the books and accounts which reasonably led to a consideration of the question of fraudulent claims, was an authorised investigation within the meaning of the Solicitors Accounts Regulations, 1984.

It follows therefore that the defence of privilege or client confidentiality fails. Firstly, on the authorities there can be no such defence if the examination in question is an authorised examination. Secondly, Costello J has ruled that the investigating accountant was entitled to inspect all the files in the instant case and no appeal from that ruling was brought, although the Applicant at the time was represented and full legal authority was cited to Costello J. Thirdly, the discovery of fraud vitiates any such defence and fraud was found in the instant case.

If I am incorrect in these conclusions, it then becomes necessary to consider and advert to other submissions which were made in relation to the main issue.

Under the "dominant purpose" submission, the Applicant contends that if the dominant purpose of the investigation was not authorised, he is entitled to have the Respondents decision quashed in its entirety. In fact, he submits he does not have to go that far, that it is sufficient to demonstrate the Law Society took irrelevant or improper considerations into account in making the particular decision.

In this regard, I am unable to formulate a view as to which of the two purposes was the dominant purpose in the instant case. While acknowledging the distinction between time and effort expended on the enquiry, and the purpose thereof. I cannot form any different view as between the underlying purposes than a 50/50 apportionment between them.

If that be so, the Applicant would have in such circumstances have failed to discharge the onus of proof of establishing his case on the balance of probabilities.

The Law Society clearly took into account the possibility of 'fraudulent claims" in initiating this investigation. It was a consideration, and a very important consideration.

However, before taking the view that the decision to investigate could be impugned because an improper consideration was taken into account, the Court would have to be satisfied that the accounts inspection in this case was no more than a "colourable device

If the time and effort expended on this particular investigation lends itself to a 50/50 apportionment between the books and accounts on the one hand and fraudulent claims on the other, and if the purposes can be similarly assessed, I do not see how the former part of the investigation could in such circumstances be described as a "colourable device".

I therefore adopt and approve as appropriate to the facts of the instant case the reasoning in DPP v Howley and do so with all the greater conviction because the "dominant purpose" test does not, in my view, provide anything like an ideal test for the sort of investigation which occurred in this case.

NON-DISCLOSURE/FAIR PROCEDURES

The full purpose of this investigation was not disclosed to the Applicant at the commencement of this investigation.

The Applicant was thus left in the invidious position of, initially at least, not knowing whether he or his clients were being investigated, or whether he was being targeted in some malicious fashion by elements within the Council of the Law Society. It was obvious from the start that this was not a routine investigation and, I have no doubt that the Law Society might, in hindsight, have done things differently, at least at the point where the Applicant demanded to know if there was a hidden agenda and when he sought to clarify the nature of that agenda.

The Respondent has not in the proceedings relied upon any apprehended fear of destruction of files or documents as a ground of defence to the judicial review proceedings, although that possibility was clearly apprehended, as is evident from the testimony of Mr McEllin, then Chairman of the Compensation Fund Committee.

Given that the experts are not unanimous about the duty of an accountant in such a situation, much depends on the nature of the accountant's instructions and the nature of the investigation trail. Standard auditing guidelines would suggest that disclosure should not be made to persons who may be suspected of involvement in any fraudulent activity. As Mr O'Rourke points out, there is no hard and fast rule, although he felt he could not lie if asked about the true purpose of the inspection.

There can be no doubt that this back drop of non disclosure at the very outset of this investigation has contributed greatly to the fraught progress of this enquiry from 1993 onwards and to that extent the initial behaviour of the Law Society's servants or agents must be deprecated.

However, I do not feel that non-disclosure invalidates the investigation for two reasons.

Firstly, the evidence does not establish that disclosure must be made in all cases, particularly where fraudulent activity is suspected. More particularly, the duty of disclosure under the accountancy standards is limited to those who may reasonably be regarded as having no involvement in any fraudulent activity. At the outset of this enquiry, it was impossible for the Law Society to know the extent, if any, to which any member of the Applicant's firm might be involved in fraudulent activities. Also, I am more than satisfied that within a matter of days, and certainly not later than the 5 July when the involvement of Rossi Walsh was discussed by Ms Foley with Mr Kennedy, that the Applicant was well aware that fraudulent claims, or the possibility thereof, was a matter in which Ms Foley had the clearest interest.

It is submitted on behalf of the Applicant that he was entitled to the protection of the panoply of rights enumerated In Re Haughey [1971] IR 217. However, I do not believe those rights can be said to arise at this stage of an investigation under the Solicitors Accounts Regulations.

Ms Foley's function as investigating accountant was primarily to gather information and to encapsulate this information in a report to be submitted to the Compensation Fund Committee. The Applicant, it seems to me can have no finding adverse to him made by any body other than the Disciplinary Tribunal who have not as yet considered the Applicant's case.

The investigation is conducted on foot of a statutory authority on foot of which an investigating accountant is entitled to look at all the files.

The decisions of Shanley J In re NIB High Court, unrep, 13 July, 1998, and Kelly J in In re NIB, High Court, unrep, 19 March, 1999 are definitive on the question of when Re Haughey rights arise, at least in the absence of special circumstances.

I also hold that the Applicant did in fact make submissions to Costello J in July, 1993 and same were sufficient to meet any requirements which may be said to arise under Haughey v Moriarty unrep, Supreme Court, 28 July, 1998, on the facts of the present case, if indeed any such right exists at all.

ANCILLARY ISSUES

(a) DELEGATION TO COMPENSATION FUND COMMITTEE

It is submitted on behalf of the Applicant that the power of enforcement or ascertainment of compliance with the Solicitors Accounts Regulations is devolved upon the Disciplinary Committee or Tribunal of the Law Society by virtue of the Solicitors Act, 1954.

Section 66, already cited, conferred upon the Society the power to make regulations in relation to Solicitors accounts and for the enforcement of compliance with such regulations.

Under the section, it was also possible to make regulations with respect to the following matters:-

"(d) enforcing compliance with the regulations;

(e) ascertaining whether the regulations have been complied with;

(f) the delegation by the Society to the Disciplinary Committee of any such power of enforcement or ascertainment."

The Law Society on the 16 October 1992 purported to delegate to the Registrars Committee and/or Compensation Fund Committee of the Society the various functions under regulations made, inter alia, pursuant to Section 66 of the Solicitors Act, 1954.

The same committee or committees were invested with the functions of considering complaints against Solicitors and instituting proceedings against Solicitors on behalf of the Society before the Disciplinary Committee for the time being or any Court.

It is submitted this regulation is ultra vires the Act having regard to the terms of the statute.

On behalf of the Respondent it was submitted, I think correctly, that the powers of enforcement or ascertainment remain with the Disciplinary Tribunal and that the Compensation Fund Committee have only a preliminary function prior to such enforcement or ascertainment.

Alternatively the Respondent claims to be entitled to rely on the provisions of Section 73 of the Solicitors Act 1954 which provides:-

"(1) The Council may appoint a committee for any purpose which the Council consider would be better effected by means of a committee and may delegate to the committee, with or without restrictions, the exercise of any functions of the Council."

It seems to me that any doubts that may be said to exist on the appropriateness of the delegation made on the 16 October 1982 are eliminated by the provisions of Section 73.

I conclude therefore that nothing contained in the resolution of the 16 October 1982 operates to oust or usurp the jurisdiction of the Disciplinary Committee/Tribunal.

(b) QUALIFICATIONS AND EXPERIENCE

The Solicitors Accounts Regulations at Regulation 21(3) provide as follows:-

"An Accountant (which shall where the context so admits or requires include a firm of accountants shall be qualified to give an Accountant's Report on behalf of a solicitor if --

(a) he is a member in practice of --

(1) The institute of Chartered Accountants in Ireland; or

(2) The Institute of Chartered Accountants in England and Wales; or

(3) The Institute of Chartered Accountants of Scotland; or

(4) The Chartered Association of Certified Accountants; or

(5) the Institute of Certified Public Accountants in Ireland; or

(b) he is a person (approved by the Society) who is considered by the Council to have adequate qualifications for experience in the auditing of accounts; and

(c) he has neither been at any time during the accounting period to which the report relates, nor subsequently, before giving the report, become a partner, clerk or servant of such solicitor or any partner of his; and

(d) he is not subject to a notice of disqualification under paragraph (4) of this regulation."

Neither side in these proceedings have suggested that any lesser qualification for appointment could apply to an investigating accountant than applies to a reporting accountant. 'Accountant' is not defined in the Regulations.

The relevant part of the Regulation is that contained at paragraph (b) which is relied upon by the Respondent. The Applicant argues that this is a mere 'grandfather clause' and that the investigating accountant must be a member in practice of one of the Institutes.

Aisling Foley, is a member of the Institute of Chartered Accountants. She did her professional training with the leading firm of Craig Gardiner and completed her final examinations in the Autumn of 1990.

She took up membership of institute in December 1992 being the same month in which she commenced her employment with the Law Society.

Having left Craig Gardiner's in 1991 she worked in industry for three different companies, one of which was a large manufacturing company, another a service company and the third a company engaged in financial work. Most of that work lay in the production of accounts.

While training with Craig Gardiner, she was involved in general audit practice where she progressed from being a junior on assignments to being a senior on the job and looking after staff.

Prior to investigating Mr Kennedy's practise, she had carried out 27 investigations of other Solicitors firms.

Prior to her appointment, she was interviewed by Mr Connolly and Marie Devereux, one of the other investigating accountants. Furthermore, following on her appointment, she went on her first inspection with one of the other investigating accountants who was experienced at the time.

She told the Court that there was a certain comparative element in this work in that the same exercise basically was conducted in different practices. She also attended all meetings of the Compensation Fund Committee dealing with the investigation of various Solicitors and was circulated with the reports of other investigating accountants.

The Court also received evidence from Ms Judy Fay, Secretary and Head of Membership Services in the Institute of Chartered Accountants. She confirmed that Ms Foley was admitted to membership on the 14 December 1992 at which time the Institute was satisfied that Ms Foley had sufficient audit experience. To obtain an auditing certificate, an Applicant requires to have 48 weeks audit experience either during the term of the training contracts or two years immediately after that. Ms Foley did have the requisite 48 weeks during the period of her training contract.

However, before an auditing certificate was issued, she would also have had to complete two years post-training contract experience in a practising firm and she never applied for an auditing certificate. This is one of the requirements to be a registered auditor.

An accountant in practice is somebody who is carrying on an independent practice on their own behalf.

She confirmed the Institute had no difficulty with members of the Institute acting as investigating accountants in the employment of the Law Society.

I am satisfied on the evidence that Ms Foley did have the requisite qualifications for approval and appointment as an investigating accountant in this case under Regulation 21(3)(b).

While some criticisms have been made of her lack of experience, it seems to me that in the particular area in which she was working, there was no other way of building up her experience other than through her participation in the work of the team of investigating accountants employed by the Law Society. There was no other firm or employer to whom she could turn to build up such experience. The Regulations give the Respondent a wide latitude and prescribe no minimum number of years of experience by way of threshold. In any event, I am satisfied that no great degree of experience or expertise is required to comply with the work instruction given to Ms Foley in relation to possible fraud in claims.

Whether if accompanied by a more experienced investigating accountant for the duration of this particular investigation she would have produced an interim report which differed in tone or content from the actual report is entirely a matter of speculation.

It seems to me she carried out her work with a high degree of competence and a sufficient level of impartiality and objectivity at all material times, and the interim report reflects these qualities.

(c) APPROVAL AND APPOINTMENT OF INVESTIGATING ACCOUNTANT

Ms Foley was employed by the Society through its Finance Committee.

It is submitted that in the instant case there is no evidence to suggest that her appointment to carry out this particular investigation was ever considered, still less approved, by either the Compensation Fund Committee or the Registrars-Committee, being the relevant committees to whom these particular functions were delegated.

Regulation 29(1) provides:-

"In order to ascertain whether these Regulations have been complied with, the Council either acting on it's own motion or on a written complaint lodged with it, may approve and appoint an accountant or such purposes as hereinafter mentioned"

Ms Foley took up her employment on the 8 December, and in effect, her employment was approved retrospectively by the Finance Committee on the 22 January 1993.

No issue turns upon the fact or legality of her employment.

It is submitted on the evidence that the approval and appointment of Ms Foley was not dealt with by the Compensation Fund Committee. It was left entirely in the hands of Mr Connolly who effectively approved and appointed Ms Foley for the particular investigation.

The Applicant referred to the evidence given by Mr McEllin to the effect that Mr Connolly would formally bring names of Solicitors before the Committee and the Committee would then resolve that they should be investigated under Regulation 29. The actual administrative detail of who was to be appointed was a matter for Mr Connolly. It all depended on the work flow of the team of Accountants, who was available, and it was purely an administrative matter for him.

The minutes of the Compensation Fund Committee meeting on the 15 April 1993 do not recite that any formal approval of any particular investigating accountant was given, and furthermore the memo to Aisling Foley from Mr Connolly dated 24 May 1993 purports thereby to actually appoint her accountant under paragraph 29 of the Solicitors Accounts Regulations, 1984.

This submission ignores completely the fact that Ms Foley was interviewed and assessed prior to her appointment as an employee and that she had conducted 27 investigations of various Solicitors practices prior to the instant investigation. If correct, this submission would require that the Compensation Fund Committee would have to devote time for the express consideration in every case as to whether or not one of its own experienced team of investigating accountants was a fit and proper person to carry out a routine or in-depth investigation of a particular practice.

It seems to me that Mr Connolly was not usurping any function of the Compensation Fund Committee, but was merely performing ministerial functions. He did not "approve" the investigation of the Applicant's practice, this was a decision of the Compensation Fund Committee. He did not "approve" or "appoint" Ms Foley to act as an investigating accountant, that had already been done by the Finance Committee and thereafter by obvious and necessary implication by the Compensation Fund Committee in relation to each of the 27 investigations undertaken by her. Mr Connolly did no more than assign one of the panel of in-house accountants to this particular investigation.

(d) REQUIREMENT OF INDEPENDENCE

The Applicant submits that it is apparent from the regulations that a reporting accountant, or investigating accountant, be independent. Such a person should be a member "in practice' a requirement which would guarantee independence.

Mr O'Rourke expressed the view that independence and objectivity is critical to the discharge of an accountant's function within the Solicitors Accounts Regulations.

That said, he stressed the efficiency and cost benefits of employing in-house accountants for the purpose of such investigations. He also pointed out that there were no independent firms in Ireland specialising in this form of work and further agreed that "independence from the accounts" was the most critical test.

The Regulations contain no provision precluding the Law Society from employing in-house accountants. Indeed, given the lack of expertise in the market, it would be remiss of the society not to protect its Compensation Fund by building up its own store of expertise in this area.

Mr O'Rourke did point up the shortcomings and limitations of an investigator employed in this way. There is a risk they may be less impartial and less objective than an accountant working in an independent firm.

This is undoubtedly true, and some of Ms Foley's work which touched upon files which were not personal injury claims does suggest an element of zeal which anindependent firm would be unlikely to pursue.

Nonetheless, looking at her interim report as a whole, it does not seem to me to be so prejudiced or lopsided as to attract the descriptions such as "unfair" or "unreasonable" or any other epithet which would impugn the validity of the Report.

I accept the submission of the Respondent that no independent firm of accountants can, on the strictest analysis, ever be said to exist, because any firm conducting an audit must at the end of the day turn for payment to the client.

In the absence of any specific requirements in the Regulations, it seems to me essentially to be a matter of assessing whether or not the investigating accountant, on a perusal of her work output, can be said to have acted with a sufficient degree of independence and objectivity and in my view Ms Foley met that criterion.

OUTSTANDING MATTERS

One final question remains: Has this Court any function to intervene in the matter of the reference by the Compensation Fund Committee of this matter to the Disciplinary Tribunal?

The Court has not as yet received any evidence in relation to events which took place between October 1993 and February 1996 when that referral was made.

Nevertheless, it has been indicated to the Court on behalf of the Applicant that a case would or might at some time be made to the effect that the proceedings from October 1993 onwards became tainted by malice. It was further submitted that a referral by the Compensation Fund Committee to the Disciplinary Tribunal was a decision amenable to judicial review.

I will therefore, in due course invite both sides for their views upon these remaining issues.