Law firm faces €25m bill for role in bank loans
A LAW firm is facing a damages bill of up to €25m over failures to ensure a bank had proper security for substantial loans made to property developer John Kelly and struck-off solicitor Thomas Byrne.
The High Court's Mr Justice Brian McGovern said the breach of duty by BCM Hanby Wallace to KBC Bank was "most serious" because the firm not only failed to ensure proper security was in place but 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.
The breach of duty amounted to "a deception" because the firm was aware the required security was not in place but led the bank to believe it was.
The loans were to have been secured on some 30 properties but were secured on just three, the judge added.
He rejected arguments by the firm of contributory negligence by KBC in failing to properly check out the credit-worthiness of either Mr Byrne or Mr Kelly before agreeing to advance loans of some €9m and some €16m to them respectively on dates from 2005 to 2007.
KBC, he ruled, was entitled to damages on a "no transaction" basis -- that it would not have made the loans and, therefore, not suffered the consequent loss if the solicitors had told it the necessary security was not in place. Issues related to the exact amount of damages have been adjourned.
The judge said the bank is entitled to recover the full amount of the loans, plus costs and stamp duty, but minus the 2008 value of the three secured properties, some €900,000 received from Mr Kelly, the value of another property in Co Wexford, and certain costs. The costs of the action are likely to amount to several million euro.