The known deficit in the client account of a Dublin law firm whose accounts were frozen by the High Court rose to €1.7 million the week before it agreed to stop practising, court records show.
In the months after the Law Society first started investigating Thomas Montgomery & Son Solicitors in Dún Laoghaire, the known deficit in the client account rose from an estimated minimum of €1.141 million in October 2022 to €1.691 million last month, prompting the Law Society to take legal action.
Filings submitted in court reveal the deepening financial deficit at the law practice as the Law Society attempted to discover the degree to which client funds were affected.
The increase in the deficit forced the Law Society, the regulatory body for solicitors, to apply to the High Court on February 22nd last, securing orders including the freezing of the practice’s bank accounts and preventing the firm’s partner, William Montgomery, from disposing of assets.
High Court president Mr Justice David Barniville accepted a voluntary undertaking from Mr Montgomery not to practise as a solicitor. He practised in partnership with his late son, David Montgomery, as Thomas Montgomery & Son Solicitors from offices at 5 Anglesea Buildings in Dún Laoghaire.
David Montgomery died on October 10th last, days after Jim Ryan, an accountant employed in the Law Society’s regulation department, produced a report that showed a client account deficit of at least €1.141 million relating to several clients.
Mr Ryan found a deficit of €475,000 on the file of one client, businessman Connie Kelleher, a one-time finance manager of Dún Laoghaire-based State agency Bord Iascaigh Mhara.
The accountant said the money had been used, without Mr Kelleher’s authority, to pay off a €475,000 mortgage to lender Everyday Finance arising from a mortgage that David Montgomery, William Montgomery and Mr Montgomery’s wife Annie had obtained from AIB in 2012.
Following David Montgomery’s death, his solicitor told Mr Ryan that Mr Montgomery “had alone created the deficit” and that neither his father William nor his brother Iain, another solicitor in the practice, were aware of it.
According to Mr Ryan’s affidavit to the court, the Law Society engaged with William Montgomery and other solicitors and staff between October and February to attempt to determine the scale of the deficit and to reduce it through contributions and proceeds from the Montgomery family and property sales.
David Montgomery’s wife Ciara agreed to contribute €400,000. In December, the Law Society expressed concerns that only €247,500 from a life insurance policy valued at €650,000, which had been fully pledged to the firm to reduce the deficit, would be available to the practice.
The court was told the known deficit increased to €1.3 million in October and again to €1.575 million by January. At a February 9th meeting, the Law Society was told that a further deficit on an estate account had been discovered, pushing the known deficit at the practice to €1.691 million.
The Law Society decided to seek a series of court orders against the practice last month after it emerged that further funds would not be forthcoming to reduce the deficit.
Mr Ryan said the Law Society regulation of practice committee had shown “great forbearance in admittedly very unusual and tragic circumstances for Mr William Montgomery and his family.”
“Regrettably, the time afforded has not resulted in the reduction and clearance of the deficit,” he told the court.
“In fact, it is apparent that the known deficit has now increased and the assurances that were given to the committee in October 2022 to rectify the deficit have not come to fruition and have in many instances evaporated and no longer hold any currency.”
Mr Ryan told the court that the Law Society had “an overriding duty” to protect clients of the firm, the public and the “maintenance of the reputation of the solicitor’s profession”.
The case will come before Mr Justice Barniville again on April 25th.