Banks to seek ruling for €12m against Lynn

Allied Irish Banks and First Active will ask the Commercial Court next week to enter judgment in a sum of more than €12 million against solicitor Michael Lynn, whose practice has been closed by the Law Society and whose apparent liabilities have been estimated as up to €70 million.

A third bank, Permanent TSB, will also apply on Tuesday to the Commercial Court in relation to dealings with Mr Lynn.

First Active told the court in an affidavit yesterday it was concerned that Mr Lynn may have sold on three properties which were part of security for loans advanced by it to him.

Mr Justice Peter Kelly told Gabriel Gavigan, counsel for Mr Lynn, yesterday that if his client indicated he did not propose to enter a defence to the banks' claims, the court would deal on Tuesday with the two banks' applications for judgment.

It seemed all the banks were "rushing for judgment" and seeing who would "get there first", the judge remarked.

Mr Gavigan said his client had been served with papers by AIB and First Active on Wednesday last but, because Mr Lynn was preparing for court proceedings brought by the Law Society against him, he had been unable to consider the affidavits in the banks' cases or give meaningful instructions.

Mr Gavigan said he could not, in those circumstances, say exactly what Mr Lynn's defence would be and he needed time to get instructions.

Mr Justice Kelly said he would deal on Tuesday with AIB's application for judgment against Mr Lynn for the sum of €7.1 million and with First Active's application for judgment in the sum of €5.1 million.

Earlier, the judge had consented to admit the proceedings, brought separately by the two banks, to the Commercial Court list, the commercial division of the High Court.

The two banks are among at least 10 financial institutions which had dealings with the solicitor. Earlier this week, the Law Society secured more time to complete its investigation into Mr Lynn's practice.

In its proceedings, AIB claims it had issued various loans to Mr Lynn secured on a number of properties but had recently discovered no mortgage or charge was put in place by Mr Lynn relating to the sums advanced.

It claims that in December 2004, it offered Mr Lynn an overdraft of €120,000 and a sum of €300,000 to restructure his existing loan and overdraft facilities.

Those facilities were secured over property at Derreckstown, Dunshaughlin, Co Meath, vesting in Mr Lynn's name.

It also claims that in August 2005, it loaned him some €5 million to refinance existing facilities held by him with other financial institutions amounting to €4.2 million relating to the purchase of investment properties, plus €800,000 in equity release against those properties. In February 2006, it loaned a further €1.5 million to Mr Lynn, it said.

Last week, the bank discovered no mortgage or charge was put in place in relation to the sums advanced. The bank said it had also operated a current account with Mr Lynn, which was overdrawn on October 17th last.

On that date, it had demanded repayment of some €6.5 million but nothing had been paid. It was now seeking repayment of some €7.1 million, being the sum due plus interest which continued to accrue.

First Active claims it advanced €5.18 million to Mr Lynn on December 23rd, 2005, and demanded repayment on October 18th last. However, no monies had been repaid. It was seeking judgment against Mr Lynn of €5.12 million plus interest.

In an affidavit, John Hunt, head of property finance with First Active, said the bank agreed in 2004 to make some €7 million loan facilities available to Mr Lynn and to another man for the purpose of buying commercial and residential properties.

In 2005, it was agreed Mr Lynn would buy out the interest of the other man in the properties and reschedule his debt to First Active. On September 9th, 2005, First Active had agreed to loan a further €5.18 million to Mr Lynn to buy out the interest, reschedule his debt and consolidate certain other borrowings.

Mr Hunt said that having regard to extensive publicity in the press and what the bank itself had discovered in recent days, it was extremely concerned about Mr Lynn's borrowings with it.

While security was executed in relation to properties referred to in facility letters of 2004 and 2005, the proper registration of that security in relation to seven properties had been delayed by the failure of Mr Lynn to deal with Revenue queries to produce land certificates, to comply with undertakings or with a certificate of title, Mr Hunt said.

Following press reports that Mr Lynn may have engaged in double mortgaging of properties, First Active was extremely concerned as it had released to Mr Lynn the title documents to five properties over which it holds security.

This concern was "well founded" when the bank learned last week that Mr Lynn had purportedly sold on three of the properties in question without discharging the sums due to First Active or the mortgages which remain on the properties, Mr Hunt said.

First Active had asked the Law Society, which has possession of Mr Lynn's files, to return title documents to it but remained "extremely apprehensive" as to what Mr Lynn has done with the title documents.

Once First Active is in a position to perfect its security over Mr Lynn's properties, it intended to seek possession of those properties over which it holds security, Mr Hunt added.

Mr Lynn, practising as Capel Law, is alleged to have taken out multiple mortgages on the same properties with several major Irish banks. His practice has been closed by the Law Society and his accounts have been frozen.

The freezing orders cover accounts in the name of Mr Lynn and various companies associated with him; Capel Law, Overseas Property Law, Kendar Holdings Ltd and Proper T Capel Ltd.

Michael Lynn's known bank debts

Anglo Irish Bank €13 million

IIB Bank €10 million

Irish Nationwide Building Society €10 million

Permanent TSB €10 million

Bank of Scotland (Ireland) €10 million

AIB €7.1 million

First Active €5.1 million

Borrowings for 2007 only (earlier borrowings, if any, are not yet known):

ACC Bank €3.78 million

National Irish Bank €1.33 million

Ulster Bank €600,000

TOTAL:€70.9 million

Thomas Byrne's known bank debts

EBS €12.5 million

Irish Nationwide Building Society €10.5 million

IIB Bank €9 million

Anglo Irish Bank €4 million

TOTAL:€36 million

Other institutions known so far to have provided loans to Mr Byrne:

Bank of Scotland (Ireland)

ICS Building Society

Ulster Bank

National Irish Bank