KBC Bank wins €17.7m damages against law firm

A High Court judge has awarded KBC Bank €17.7m damages against Dublin law firm BCM Hanby Wallace, now Byrne Wallace over “most serious” failures to ensure the bank had security for substantial loans advanced to a property developer and struck-off solicitor Thomas Byrne.

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

Mr Justice Brian McGovern previously found the breach of duty by the firm amounted to “a deception” because it was aware the required security was not in place but led the bank to believe it was. This was not about a single act of negligence but “multiple failures” repeated across four separate loan transactions, he ruled.

He rejected arguments of contributory negligence by KBC in failing to properly check out the creditworthiness of either Mr Byrne or developer John Kelly, Hunter’s Moon, Kilquade, Co Wicklow, before agreeing to advance loans of €9m and €16m to them respectively on dates from 2005 to 2007. The bank was entitled to rely on assurances from professionals retained by it, he said.

KBC, he ruled, was entitled to damages on a “no transaction” basis — it would not have made the loans if the solicitors had told it the necessary security was not in place. KBC was entitled to recover the full amount of the loans advanced, plus certain costs and stamp duty, he directed.

He also ordered the damages sum was to be reduced by sums representing the 2008 value of the three secured properties; €900,000 received from Mr Kelly; the value of a site at Oylgate, Co Wexford; and certain costs.

KBC had sought €25m damages. The sides later reached agreement on most of the damages but clashed over valuations likely to have been placed in 2008 on the Oylgate lands and on a convenience store property in Rathmines, Dublin, a car showroom when it was purchased.

Mr Justice McGovern gave judgment assessing the total damages recoverable at €17,694,130 and adjourned the making of formal orders to allow the sides consider his judgement and the figures set out.

Having analysed the evidence, the judge assessed the value of the Rathmines property as €3.4m in June 2008 and the value of the Oylgate lands as €2.25m in August 2008. That decision meant a reduction in damages sought by the bank.

Mr Kelly paid €3m for the Olygate lands in November 2007. In August 2008, the judge concluded their value was €2.25m to allow for a falling property market at that time.

While it was easy with hindsight to see how inflated and “wildly extravagant” the €3m price was in 2007, and the €2.25m figure in August 2008, they represented the market value of the lands at the time, he found.