BCM Hanby Wallace face €17.7m bill on loan advice

 

A HIGH Court judge has awarded KBC Bank some €17.7 million in damages against Dublin law firm BCM Hanby Wallace (now Byrne Wallace).

The award was 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 credit-worthiness of Mr Byrne or developer John Kelly, Hunter’s Moon, Kilquade, Co Wicklow, before agreeing to advance loans of some €9 million and some €16 million 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 level of damages was to be reduced by sums representing the 2008 value of the three secured properties, some €900,000 received from Mr Kelly, the value of a site at Oylgate, Co Wexford, and certain costs.

KBC had sought some €25 million 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 in Rathmines, Dublin: a car showroom when it was bought.

The judge reserved judgment on those until yesterday when he gave judgment assessing the total damages at €17,694,130. He adjourned the making of formal orders to allow the sides to consider his judgment and the figures.

A valuer for the bank had argued the appropriate 2008 prices for the Oylgate lands and Rathmines property were €275,000 and €2 million respectively. A valuer for the firm disagreed and said the appropriate Oylgate price was €2.5 million and €4.5 million for Rathmines.

Having analysed the evidence, the judge assessed the values at €2.25 million in August 2008 (Oylgate) and €3.4 million in June 2008 (Rathmines). That meant a reduction in the total damages sought by the bank.