Three solicitors being pursued by Anglo Irish Bank for more than €64 million arising from loans of €165 million to a Limerick property group have made out an arguable defence to the bank’s claim entitling them to a full hearing, a High Court judge has ruled.
Anglo had argued the three had no defence to its application for summary judgment orders for some €21.4 million each over loans made to companies and partnerships linked to the Fordmount property group.
The solicitors argued they had a defence on grounds including assurances were given by Anglo officials to the Fordmount group managing director Michael Daly their guarantees over certain loans would never be relied upon. They also claimed Anglo advanced loans to the group when it had concerns about how the affairs of the partnerships were being conducted by Mr Daly.
Mr Daly, who is being separately sued by Anglo for €84 million, has claimed he was regarded as a favoured developer by Anglo and was told by it he had access to loan funds of more than €650 million.
Anglo’s proceedings against Mr Daly will be heard early next year after Mr Justice Peter Charleton refused the bank summary judgment orders. The judge ruled Mr Daly had made out an arguable defence on grounds including senior Anglo executives told him his guarantees would never be relied upon.
Mr Justice Peter Kelly today gave his reserved judgment on Anglo’s application for the summary judgment orders against Dermot O’Donovan, Michael Sherry and Aidan Frawley, all partners in the Limerick-based firm Dermot G. O’Donovan & Partners.
A fourth partner, Thomas Dalton, previously consented to summary judgment against him in the €21.4 million sum.
Mr Justice Kelly ruled, because it was not “very clear” the three defendants have no case, they were entitled to a full plenary action. His decision was not “a warranty” as to the strength of the solicitors defence, “still less as to their ultimate prospects of success”, he added.
The full action will now be heard early next year in the Commercial Court and Anglo may seek to have it heard in tandem with the proceedings against Mr Daly.
In his judgment, the judge said all three defendants were experienced solicitors familiar with personal guarantees and their consequences. They had all sworn in affidavits they never had any doubt Anglo would not seek to enforce the guarantees.
There was no document or note indicating anyone from Anglo made such representations to them as there could not be since no official from the bank had, he said. The representations were made by Mr Daly who was never an officer or employee of Anglo.
The judge noted Mr Daly had said the guarantees would never be relied upon and were just “a box ticking exercise” for Anglo’s credit committee. The solicitors said they genuinely believed that and appeared to believe Mr Daly had a special status with Anglo. He had told them of being taken on several golfing trips by Anglo including one of “huge cost” involving travel on the Orient Express.
The judge noted Anglo had described the solicitors claims as incredible and said they could not have genuinely believed the guarantees were unenforceable. There were flaws in the defence advanced, he observed.
Were it not for the fact Mr Daly’s case had been sent to plenary hearing, the judge said he would be very inclined to refuse the defendants leave to defend. However, were Mr Daly to succeed there was a risk of an injustice being perceived to have been done to these defendants. Granting judgment now would also be ruinous to their own financial stability and have serious implications for their future professional lives.
In those circumstances, he refused summary judgment on the claims relating to the guarantees.
In also refusing summary judgment over loans to the partnerships, the judge noted Anglo had looked at how funds were provided to the partnerships and companies in the third quarter of 2008 and as a result appointed accountants Cooney Carey in March 2009 to carry out a review. That led to queries to which unsatisfactory answers were made.
Anglo argued it did not become aware of any issue as to fraud or unlawful activity until June 2009 by which time the bulk of the loans had been drawn down. In those circumstances, the defendants claim the bank advanced funds when it knew or suspected the group was the object of a fraud or unlawful activity appeared “incorrect”, he said.
However, the Cooney Carey report had not been provided to the court or the defendants and might have a large part to play in this aspect of the case, he said.
