Law Society investigates deficit of at least €1.1m in Dublin law firm’s client account

The Law Society has secured court orders freezing bank accounts linked to a Dublin law firm after an investigation uncovered an estimated deficit of at least €1.1 million in its client account.

The regulatory body for solicitors brought High Court proceedings last month against William Montgomery who had been practising in partnership with his late son David Montgomery as Thomas Montgomery & Son Solicitors from 5 Anglesea Buildings in Dún Laoghaire.

The case came before High Court president, Mr Justice David Barniville, on Thursday when he directed the production of client records by the practice as part of the Law Society’s investigation.

At an earlier hearing, on February 22nd, Mr Justice Barniville made a series of orders including directions freezing assets and bank accounts linked to the Montgomery law practice.

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An order directing William Montgomery not to dispose of any assets was also granted.

In legal filings in the case, the court was told that David Montgomery, a practising solicitor since 1995, was managing partner at the firm from 2005 until his death on October 10th last.

He was previously investigated by the Law Society resulting in a High Court order in February 2015 prohibiting him from being a signatory on the firm’s client account or having access to clients’ money without the prior consent of the society.

Investigating accountant Jim Ryan, for the Law Society’s regulation of practice committee, examined the practice’s books over four days, from October 3rd to 6th last and produced a report on October 7th identifying an estimated deficit of €1.141 million in the client account.

Mr Ryan was appointed by the society’s registrar of solicitors and director of regulation in May 2022 to attend the firm’s premises to investigate the practice’s compliance with regulations.

He found that the office and bank accounts had not been reconciled to the accounting date of April 30th, 2022, because the year-end routine for 2021 had not been completed and the opening balances for 2022 had not been brought forward in the accounts of the practice.

According to Mr Ryan’s affidavit to the court, he met David Montgomery on the morning of October 3rd last and was told there was an overall deficit of about €800,000 in the client account with Mr Montgomery identifying certain files and transactions as the sources of the deficit.

Mr Ryan later estimated the minimum deficit at €1.141 million, comprising an estimated deficit of €475,000 on the file of a client named Connie Kelleher, a further €565,649 deficit on the estate of a William Daly and debit balances totalling €109,935 for various other clients.

Mr Ryan said David Montgomery told him at the start of his investigation that the €475,000 deficit in Mr Kelleher’s account arose from Mr Montgomery repaying a €475,000 mortgage that he, William Montgomery and William’s wife owed to the lender Everyday Finance.

The investigating accountant said Mr Kelleher’s money was used in December 2020 without his authority to discharge a mortgage that two partners of the firm and Mr William Montgomery’s wife had obtained in 2012 and that Mr Kelleher’s account remained in deficit by October 2022.

Mr Ryan found that the €565,649 deficit in Mr Daly’s probate arose mainly from two payments.

The first was a payment of €457,500 to the Revenue Commissioners in March 2020 paying stamp duty on the purchase of lands by FPS Film Production Solutions, an unrelated client.

The land was purchased by film producer Kieran Corrigan and John Dolan, two major clients of the practice, for a film and television studio in Ashbourne, Co Meath.

A second payment out of the Daly probate was €100,000 made for two other clients of the firm in February 2020. In addition, there was an overpayment of €8,159 on the Daly estate.

Among the €100,935 debit balances was a €66,729 sum in a commercial litigation case that David Montgomery was “at a loss to explain how it occurred”, Mr Ryan told the court.

He sent his interim investigative report to Sean Allen, Mr Montgomery’s solicitor, on October 7th.

Four days later, Mr Allen wrote to the Law Society advising that Mr Montgomery had passed away on October 10th. In his letter, he confirmed that he was instructed by the late Mr Montgomery, before his death late on the evening of Sunday, October 9th, that the deficit was in fact €1.316 million.

Mr Allen’s letter said that David Montgomery “had alone created the deficit” and that neither his partner William Montgomery or his brother Iain were aware of or allowed the deficit to arise.

The letter stated that William Montgomery had been a partner in the firm “in name only” and had been “shielding” at home due to the Covid-19 pandemic and his wife’s serious ill-health.

Later in October, Mr Allen told the Law Society that, to clear the deficit in the client account, David Montgomery’s widow Ciara and her brother, solicitor Ronan McGoldrick, would provide €400,000 in funds and Mrs Montgomery would assign a life insurance policy valued at €650,000.

It was further agreed that William Montgomery and his wife Annie would sell the law practice’s offices at Anglesea Buildings which, it was estimated, would realise at least €600,000.

In December, Mr Allen told the Law Society’s regulation of practice committee at a meeting that funds paid into the client account would reduce the deficit by more than €777,000.

He said that only €247,500 of the €650,000 policy would be available to reduce the deficit at the policy was assigned to a bank.

He told the committee that €772,000 from the Anglesea Buildings sale and a possible €200,000 in litigation fees would be available by Christmas or early in the new year to reduce the deficit.

The chair of the committee said it was “gravely concerned” about allowing a practice to continue to operate with a deficit and that the significant reduction in the expected money from the life policy “fundamentally changed the landscape” as not all the money would be available.

At a subsequent meeting on January 26th, Mr Allen informed the committee that the known estimated deficit at the firm had grown to €1.575 million.

A solicitor representing William Montgomery told the meeting that clarification was required as to the increased estimated deficit and this would take some time as the figure had not been verified and could be more or less.

The solicitor told the meeting that Mrs Montgomery, David’s widow, had lodged €400,000 to the practice but that he “did not think it was appropriate for her to continue to clear a deficit when the exact figure for the deficit was not ascertained.”

Mrs Montgomery was also advised not to give up the €247,000 available from the life policy.

The committee was told by her senior counsel that Mrs Montgomery had “no knowledge” as to how the deficit had occurred and while she would like to do her best to ensure the firm could survive, “she could not be expected to make further contributions that may or may not effective against the deficit” and would pause further payments until it was known what the deficit was.

Later, the Law Society issued proceedings against William Montgomery practising as Thomas Montgomery & Son Solicitors on February 17th seeking 30 orders from the court in its initial application under the Solicitors’ Acts as it continued to investigate matters at the practice.

On Thursday, Mr Justice Barniville adjourned the case until April 25th.