A High Court judge has ruled ACC Bank is liable for more than €4.76 million damages to a property developer over losses suffered by him because of the bank’s negligence in losing title deeds to certain properties.
The decision clarifies issues relating to the duty of care owed by banks to customers.
The court’s damages award to Jerry Beades will be set off against ACC’s agreed entitlement to repayment of loans of some €6.27 million made by it to Mr Beades and his company, Fairlee Properties Ltd. Final orders in the case, including costs orders, will be made at a later stage.
Ms Justice Mary Finlay Geoghegan today delivered judgment in proceedings by the Bank for loan repayments brought against Fairlee, of Richmond Road, Fairview, and its directors Jerry Beades and Niall Ring.
The defendants counter-claimed for some €30 million losses allegedly suffered arising from the Bank’s actions including its admitted loss of title deeds of properties. The case against Mr Ring, and his counterclaim, was settled at an earlier stage.
The defendants also alleged ACC overcharged more than €300,000 in interest between 2000 and 2004 before it lost the title deeds but, when the case opened last October, the Bank agreed to deduct the disputed €300,000 figure from the amounts sought.
The bank initially sought judgment for a total of €7.18 million but the figure due was subsequently agreed at €6.7 million.
In her decision, the judge said ACC advanced loans to Fairlee in 2000 and 2001 to enable it buy properties at Richmond Road, Fairview, on securities including a first fixed charge over a Richmond Avenue property. The bank kept the title deeds to the properties.
Fairlee’s loans were in arrears from at least March 2003, the relationship between ACC and Mr Beades deteriorated and ACC was not prepared to loan further monies.
Fairlee sought finance elsewhere and reached an arrangement with Bank of Scotland Ireland sufficient to pay off ACC. In June 2004, it sought the title deeds from ACC as the BOSI loans could not be drawn down without those. ACC could not locate the deeds until April 2006 but in the interim began a process of reconstituting them.
In July 2006, ACC provided an indemnity to BOSI which in turn granted some loans to the defendants. After Mr Beades visited ACC’s parent company, Rabobank, in the Netherlands in April 2006, ACC gave Fairlee an additional €3 million interest free loan.
The judge ruled ACC owed a duty of care to the defendants to take care of the deeds in such a way they could be produced on request and found it had breached that duty between June 2004 and April 2006. She also found the Bank must have known the defendants, as property developers, would be directly affected and would be likely to suffer injury if the bank could not produce the deeds when requested.
The damage suffered by Mr Beades was reasonably foreseeable by the Bank and it was fair and reasonable to impose liability on the Bank, as mortgagee or chargee, she held.
She also ruled steps taken by the Bank between June 2004 and April 2006 did not alter its liability to the defendants but the interest free loan granted by it did reduce the actual amount of damages due.
In light of her findings, the judge ruled Mr Beades was entitled to some €4,769,472 damages from the Bank. The damages allow for a €4.4 million reduction in probable profits on a development of 48 apartments on the Richmond Avenue site due to the delay in securing the deeds and consequent delay in starting the development.
If the deeds were available, it was probable the development would have completed by January 2007 at a market value of €18.4 million but it will not now be complete until mid-2009, with consequent reduction of market value to some €14 million, she held.
The damages award also includes losses of some €240,000 caused by Mr Beades having to sell three other properties below market value to address his cash flow difficulties caused by not having the title documents to give as security for commercial borrowing.
The judge also found ACC had a liability for Mr Beades lost of use of probable profits on the Richmond Avenue development from mid-2007 because the reduced probable profits came within the scope of its duty of care to Mr Beades. She said she would deal with that particular liability by not awarding the Bank interest on the loan amount outstanding and by not awarding any interest on the counterclaim amount.
The judge further ruled Fairlee’s own counterclaim for losses, as opposed to Mr Beades claim, must fail because it had not established the sole ground of that counterclaim - that it would have sold the Richmond Road property in 2005 to two named parties.
