Solicitors firm sued by bank for €23m opposes claim

A FIRM of solicitors retained by a bank to act for it concerning substantial loans to property developer John Kelly and struck-off solicitor Thomas Byrne is being sued for €23 million over an alleged failure to ensure the bank had proper security related to those loans.

Among a range of claims, KBC Bank Ireland plc alleges the defendant firm — Byrne Wallace (formerly BCM Hanby Wallace) — accepted and relied on “defective” undertakings concerning security over certain properties from Mr Kelly’s then solicitor, Mr Byrne.

KBC Bank Ireland plc, formerly IIB Bank, claims the alleged negligence caused substantial losses to it as it was later unable to recover monies owed to it under the loans by selling the properties involved.

It is also claiming monies related to costs of legal proceedings over the loans, plus damages for alleged negligence, breach of contract and misrepresentation.

In opposing the bank’s claim, Byrne Wallace denies negligence, breach of contract or breach of duty. It also claims it was at all material times authorised by the bank to accept certificates of title and certain undertakings from Mr Byrne. KBC had not suffered the alleged losses and was not entitled to be compensated by the defendant as sought, it is also pleaded. The largest and most valuable of the properties to be secured was in fact secured, it is claimed.

The firm has also alleged contributory negligence by KBC. It claims KBC’s actions concerning the loans to Mr Kelly were contrary to normal and prudent standards of banking, reflected an “aggressive and target-driven lending style” and exposed KBC to undue levels of risk by virtue of weak credit analysis, poor due diligence and “target-driven haste”.

The action opened yesterday afternoon before Mr Justice Brian McGovern after some talks between the sides earlier.

The case arises from property-related loans made in 2005 and 2006 to Mr Kelly, with an address at Hunter’s Moon, Kilquade, Co Wicklow, and to Mr Byrne.

The bank claims it issued a €4.9m loan in July 2005 to buy a property at Upper Rathmines Road and later agreed to increase that facility to €5.9m. In 2006, it claims it provide another facility of €9m to Mr Kelly to refinance his existing facilities with the Educational Building Society relating to property at James Street, Dublin 8. A €9m facility was also issued to Mr Byrne, it is claimed.

Michael Collins, counsel for KBC, said the bank alleged it had suffered very significant losses as a result of negligence of the defendant solicitors. It was the bank’s case, if it knew the solicitors had accepted undertakings from Mr Byrne concerning security, the bank would not have proceeded with the transactions. The bank contended it had always operated in a “careful and prudent” fashion concerning lending, Mr Collins said.

While negligence was denied, there was little or no attempt to defend the actions of the defendant solicitors who had not disputed an expert report from A&L Goodbody outlining what should have been done, he said.