Gorey businessman cannot pursue KBC for negligent lending

A businessman who owes KBC Bank more than €6.2 million cannot pursue an action alleging the bank engaged in negligent lending, the Commercial Court has ruled.

There is no cause of action here for reckless or negligent lending, Mr Justice Brian McGovern said.

James Osborne had no reasonable cause of action against KBC, his proceedings were "frivolous and vexatious", an abuse of process in effectively attacking a previous High Court decision against him, and out of time. the judge found.

The action must be dismissed, he ruled.

KBC secured summary judgment last December for some €6.2 million against Mr Osborne, Fort Road, Gorey, arising from loans linked to and secured on Gorey Retail Park in Co Wexford, after the High Court found he had no arguable defence to its claim. The bank has appointed receivers over the park where some 400 people were employed.

Alleged negligence

In February 2016, Mr Osborne initiated proceedings against KBC and other parties alleging negligence, breach of statutory duty and breach of contract in relation to the advancing of funds. Some €7million was advanced between 2002 and 2004 and the facilities were restructured in 2009.

He abandoned his claims against the other parties but sought to pursue claims against KBC alleging it completed a loan facility without taking appropriate steps to check whether there was a fire safety certificate.

KBC applied to have his case struck out on grounds including it demonstrated no cause of action.

Granting the bank’s application on Thursday, Mr Justice Brian McGovern said both sides agreed, when the monies were loaned to Mr Osborne, he and the bank knew there was no fire safety certificate in place.

Mr Osborne contended, when the local authority insisted on a fire safety certificate, he had to incur expense making the premises compliant with fire safety regulations, the judge noted. He alleged that expense caused him financial hardship, leading to his defaulting on loan repayments and ultimately to judgment being entered against him.

The only issue in this case was whether the bank’s failure to ensure there was such a certificate gave rise to a cause of action, the judge said. There was no contractual clause obliging the bamk to establish there was a fire safety certificate in existence before it completed the loan facility, he said.

Mr Osborne accepted there was no tort of reckless lending in this jurisdiction, raised issues of breach of contract and of statutory duty to get around that difficulty and also argued a claim based on negligent lending could be advanced.

‘Mere sophistry’

“This is mere sophistry,” the judge said. The concept of “recklessness” connoted a greater lack of care than negligence simpliciter and required a party be indifferent to the likely consequences of their act. If there is no cause of action for reckless lending, it followed there was no cause of action for negligent lending, he said.

Among various claims in his case, Mr Osborne alleged KBC gave investment advice and engaged in banking practices that, he alleged, led to his suffering substantial financial loss and destruction of his equity in properties in Gorey Retail Park.

KBC previously said its summary judgment application was part of an “enforcement strategy” it “reluctantly” decided to follow against Mr Osborne. He argued the business park is “extremely viable” with almost 100 per cent occupancy of retail units and expressed concern the bank’s approach and plans for sale would not realise its full value.