Court told report found 'acts of dishonesty'

A report into the practice of a solicitor and property developer whose assets have been frozen by the Law Society because of concern about his property dealings disclosed "acts of dishonesty" by the solicitor relating to client monies, the High Court has heard.

Michael Lynn, practising as Capel Law, and said to have a portfolio of 105 properties, including about 40 properties overseas, is alleged to have taken out multiple mortgages on several properties with a number of major Irish banks, with alleged loan liabilities of more than €26 million.

The Law Society's regulation of practice committee expressed the view last week that a report of an investigation by an authorised officer with the society into Mr Lynn's practice disclosed acts of dishonesty by Mr Lynn in relation to client monies.

Solicitors Account regulations prohibit payments out of client accounts for the purpose of a solicitor's personal transactions.

The committee decided that, "in order to protect client monies and to prevent any further misappropriation", immediate steps would have to be taken and directed that an application be made to the High Court.

Mr Lynn, who failed to attend before a meeting of the committee on October 9th last but was represented at that meeting by his solicitor, Giles Kennedy, was in court yesterday when the proceedings by the Law Society against him came before the President of the High Court, Mr Justice Richard Johnson.

Proceedings in which the society secured interim orders freezing Mr Lynn's accounts were heard in private last Wednesday but, yesterday, Mr Justice Johnson granted an application by Shane Murphy SC, for the society, for the case to be heard in public.

On the undertaking of Mr Lynn that he would not practise as a solicitor, Mr Justice Johnson said he would not suspend Mr Lynn's practising certificate.

However, the judge said he wished to make very clear that his decision not to suspend was being made solely because suspension of the practising certificate might cast doubt over whether Mr Lynn could avail of his total insurance cover of about €11 million to meet any claims against him. The judge said he would not suspend until the insurance situation was clarified.

Earlier, James Gilhooley SC, for Mr Lynn, said Mr Lynn's solicitor, Mr Kennedy, had arranged a meeting this Friday with a syndicate of banks with a view to seeing what measures could be taken to ensure orderly repayment of liabilities.

Mr Lynn was prepared to co-operate fully and hoped, if there was an orderly disposal of properties, to be able to meet his liabilities.

A great deal of work needed to be done to identify the properties and accounts and it would be difficult to swear an affidavit outlining those details quickly, counsel added.

Mr Justice Johnson said that if a person owned properties, they normally knew the addresses. Counsel said there are 105 properties.

The judge said this was a serious matter and he would adjourn it to next week. He would measure good faith in accordance with the progress achieved by then.

Mr Gilhooley said Mr Lynn was consenting to most of the orders sought by the Law Society against him, including that he disclose all information about his assets and bank accounts. He said there were 35 to 40 properties outside Ireland in nine countries, including China, Dubai and England.

Counsel said Mr Lynn had concerns about the insurance implications of his practising certificate being suspended. He had insurance cover for about €11 million up to December 31st next and this had implications for meeting claims of negligence against him. If his certificate was suspended, the insurance companies might refuse to meet claims.

Mr Gilhooley said that Mr Lynn was prepared to make his files and documents available to the society but was concerned that the society would keep this material in one place and not disperse it. Mr Murphy said there might be practical difficulties with that but the society would use its best endeavours.

The judge continued orders freezing 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. Mr Lynn is also restrained from disposing of assets within his possession, control or power of procurement, including the assets of Proper T Capel Ltd and Kendar Holdings Ltd.

The court also ordered that AIB Bank and Bank of Ireland provide information about any aspect of the financial affairs of Mr Lynn's practice.

The Law Society brought its proceedings against Mr Lynn under the Solicitors Acts on foot of a report of an authorised officer appointed on September 20th last to investigate Mr Lynn's practice. The officer reported a minimum accounts deficit on August 31st, 2007 of €702,830 but in an affidavit said she believed the actual deficit on the clients account "is much more than this".

The officer also reported that Mr Lynn had apparently drawn down loans since January 2007 which totalled €26.37 million. She said the files relating to the various different loans had been requested but Mr Lynn had failed to provide the documents.

His books of account were "totally unreliable".

The officer referred to one loan of €4.9 million drawn down and lodged to Mr Lynn's client account on May 25th, 2007. Within days, the monies were withdrawn, with €2.27 million transferred abroad to purchase a property and €1.5 million lodged to his personal bank account in Bank of Ireland.

Mr Lynn had also purchased a house in Howth for €5.5 million, financed by a loan from ACC. She said Mr Lynn had given ACC's solicitors sums debited to accounts which were not Mr Lynn's ledger accounts.

She said substantial sums were also transferred to the bank account of Kendar Holdings Ltd, which was held in the same AIB branch as Mr Lynn's client account. There appeared to be "free flow" of funds from the client bank account of Mr Lynn to Kendar's account.

The officer said it appeared loans were drawn down and lodged to his client account with monies withdrawn within days and transferred abroad to purchase properties or lodged to his personal bank account. She said Mr Lynn had many personal transactions through the client account and had apparently purchased about 40 properties in the past year, all financed by loans.

The officer said many of the properties are registered in the name of another company, Propert T Capel Ltd, of which Mr Lynn and his wife Bríd Murphy are shareholders and directors. Mr Lynn had a multitude of personal transactions and personal ledger accounts in the accounts of the practice. He also operated under the name of Overseas Property Law.