Man fails in bid for €190,000 compensation over loan involving 'most unusual conveyancing transaction' with solicitor

Man fails in bid for €190,000 compensation over loan involving 'most unusual conveyancing transaction' with solicitor

A man who claims his former solicitor misappropriated a €190,000 mortgage loan in what a judge described as a "most unusual conveyancing transaction" has lost his challenge to the Law Society's refusal to pay him compensation in that entire sum.

Mr Justice Garrett Simons stressed, "crucially", the Society has "not closed the door" on Patrick O'Donovan Junior, as it had said he can reapply for compensation on the basis of fresh evidence, including if Allied Irish Banks ultimately pursues him for the full €190,000 or agrees to repayment of a lesser sum.

The Society drew a distinction between monies already repaid by Mr O'Donovan under the loan and the outstanding balance, the judge noted.

It had measured the "loss" sustained by Mr O'Donovan at some €18,822, monies actually paid by him under the mortgage, and disputed he was entitled to compensation in the outstanding balance of the mortgage loan.

The judge ruled the Society's decision should be upheld for reasons including Mr O'Donovan had not shown, on the "limited" material put by him before the Society, it was not unreasonable or irrational for it to conclude he had not yet sustained a loss in respect of the remaining unpaid balance of the mortgage loan.

While the distinction the Society drew between monies paid under the mortgage and contingent liability for the balance was "certainly a fine one", the rationale seems to be there is a possibility at least part of the debt might be written down and that is neither irrational nor unreasonable, he held.

While AIB had initiated proceedings in 2015 against Mr O'Donovan over the debt, those have not progressed beyond the summons being served and it was "not unreasonable"" for the Society to consider a compromise might be reached.

Mr O'Donovan had also not shown the Society misinterpreted the provisions of the Solicitors (Amendment) Act concerning compensation payments, he held.

Earlier in his judgment, delivered this week, he said the claim arose from "a most unusual conveyancing transaction".

It seemed Mr O'Donovan, of The Square, Dunmanway, Co Cork, had in 2008 intended to buy lands from Alexander Gibbons, then a solicitor practising at Kent Street, Clonakilty, Co Cork, but who was struck off in May 2012.

Mr O'Donovan had arranged a loan from AIB to buy the lands but claimed Mr Gibbons improperly drew down the loan monies and misappropriated those for his own use.

Mr O'Donovan argued he remains personally liable to AIB for the entire loan and this represented the extent of the "loss" he had sustained as a result of the solicitor's alleged dishonesty.

The judge said the parties to the land sale were under the mistaken impression the lands were owned by Mr Gibbons and he had acquired title to them from Mr O'Donovan's parents some years earlier.

Mr Gibbons had carried out the development of a dwelling house on the lands and then purported to sell them to Mr O'Donovan in 2008, the judge said. No written agreement was ever entered into between the parties, he added.

Notwithstanding Mr Gibbons himself was to be the vendor of the lands, he nevertheless purported to act as solicitor for the purchaser - Mr O'Donovan - in the conveyancing transaction.

This was "self-evidently a conflict of interest" and should not have happened, the judge said.

It appeared from Mr O'Donovan's affidavit of July 2018 Mr Gibbons advised him to apply for €190,000 loan facilities from AIB to assist with purchase of the property. Mr O'Donovan had sworn he signed all of the relevant documents and Mr Gibbons then negotiated release of the loan monies into his firm's client account by offering a solicitor's undertaking to the bank in a letter dated September 29, 2008.

The sale of the property proceeded in circumstances where it transpired the solicitor never held proper title for it and the loan monies were never returned to Mr O'Donovan who now has a potential liability of €190,000 to AIB, the judge said.

After judicial review proceedings challenging the Society's refusal of two applications by Mr O'Donovan for compensation, it reconsidered the matter and in July 2018, allowed Mr O'Donovan a partial payment of €18,822, representing payments by him under the mortgage loan, but refused to pay the full balance.

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