€3m paid for forestry land ‘mad’, says KBC Bank

A price of €3m paid by developer John Kelly for 18 acres at Oylgate, Co Wexford, which included “a mixture of forestry and flooding” was “mad”, KBC Bank, which advanced several loans to the developer, argued before the Commercial Court.

Mr Collins was making closing arguments in a hearing where KBC is seeking over €20m damages from solicitors BCM Hanby Wallace, now Byrne Wallace, over what Mr Justice Brian McGovern found were “very serious” failure to ensure it had securities in place for substantial loans advanced to Mr Kelly and struck-off solicitor Thomas Byrne.

The bank had sought security on 30 properties but only got security on three.

Mr Justice McGovern previously directed KBC was entitled to recover the full amount of the loans advanced, plus certain costs and stamp duty but minus the 2008 value of the three secured properties, about €900,000 received from Mr Kelly, the value of the Oylgate site, and certain costs.

The judge heard this week that agreement has been reached on the damages to be paid except for a dispute over the valuations likely to have been placed in 2008 on the Oylgate lands and a convenience store in Rathmines, Dublin.

In evidence, a valuer for the bank said the appropriate 2008 prices were €275,000 and €2m. A valuer for the firm said the appropriate prices were €2.5m and €4.5m.

The judge heard closing arguments on the valuations issue yesterday and reserved judgment.

Paul Gallagher SC, for the firm, argued the bank had failed to adopt a consistent position on the valuations as it had essentially accepted as reasonable a €5.3m value placed in 2005 on the Rathmines property. That property later sold for €4.25m and in all the circumstances the €4.5m price advocated by the firm as the appropriate 2008 valuation was reasonable, he said.

In relation to Oylgate, the court was entitled to have regard to the verbal €3m valuation given in 2008 which was accepted by the bank, he said.

Last March, Mr Justice McGovern found the breach of duty by the firm to KBC was “egregious” because, along with failure to ensure proper security was in place, the firm deliberately misled the bank by either suggesting security was in place or the funds would not be released to the borrowers until security was in place.