A FIRM OF solicitors has been ordered by the High Court to repay a loan of €3 million plus interest to Allied Irish Banks (AIB) after it failed to comply with undertakings given when the loan was made by the bank to one of its clients.
In a case that will have implications for future cases and for the professional indemnity insurance of all solicitors, Mr Justice Michael Peart found that the solicitors were liable for the full amount of the loan, obtained on a property valued at €3.9 million in May 2007 and now considered to be worth no more than €620,000.
The Co Wexford property at the centre of the case, known as Moongate, was owned at the time by a syndicate, with a mortgage of €2.2 million from Anglo Irish Bank.
Two members of the syndicate, accountant Alan Hynes and his wife Noreen, sought to buy the property and borrowed €3 million from the local branch of Allied Irish Bank, where they were well known. The bank accepted a valuation of €3.9 million from CBRE.
Séamus Maguire and Co Solicitors acted for Mr and Mrs Hynes, while a long-standing employed solicitor in the firm, Fergal Dowling, was directly responsible for dealing with the couple.
He completed a form of undertaking sent by the bank, had it signed by a partner in the firm and returned it. This document undertook to apply all the funds exclusively towards the purchase of the property. The €3 million, minus administration charges, was released to the solicitors.
The next day Mr Dowling obtained a bank draft for €2 million on this account and sent it, not to Anglo Irish Bank to discharge the mortgage on Moongate so as to have it transferred to Mr and Mrs Hynes, but to another firm of solicitors, Taylor and Buchalter.
These were acting for the vendors of a totally different property in Dalkey, Co Dublin, valued at €20 million, which a company controlled by Mr Hynes was also engaged in buying. The €2 million was a deposit on this property.
Mr Hynes’s firms went into examinership at the end of 2008.
Neither Mr Hynes nor Mr Dowling gave evidence in the case and Mr Justice Peart said: “Only they know between them what, if any, conversations took place between them in relation to the pressures mounting in relation to the deposit on the Dalkey site.”
However, he said he was entitled to conclude that the fact that the Moongate money was not paid to Anglo on drawdown was deliberate and not through oversight.
He said he had sympathy for the situation in which the defendants found themselves in as a result of the actions of an employee, but in all circumstances the firm was liable for the full amount of the loan and the interest due.
