The Supreme Court has allowed an appeal by Seamus Maguire & Co Solicitors in a dispute with Allied Irish Bank over a solicitor’s breach of an undertaking, and sent the damages question back to the High Court for reassessment. It did not set a new damages amount.
The appeal concerned the compensation due after solicitor Fergal Dowling failed to use loan funds as promised to discharge an existing mortgage over Moongate, a property in Co. Wexford. The Supreme Court accepted that the undertaking had been breached and that the solicitors’ firm was liable to compensate AIB. It held that the damages should be compensatory and should reflect the value of the security AIB lost close to the breach, rather than the property’s much lower value by the time the loan was called in or the case was tried.
AIB had advanced €2,992,500 to the solicitors’ client account in June 2007 for a €3 million loan to Alan and Noreen Hynes. The transaction required the existing Anglo Irish Bank loan, then about €2.2 million, to be discharged so AIB could obtain first security over Moongate. The court found that the funds were instead directed to a separate property purchase in Dalkey. AIB did not learn that the Anglo mortgage remained in place until December 2008.
The High Court had ordered the firm to repay all sums paid into its client account on foot of the loan, together with interest. In allowing the appeal, the Supreme Court rejected that measure. It said AIB should recover the value of the security it was deprived of, assessed at a time shortly after the undertaking was breached, with appropriate allowance for realisation costs, the outstanding debt and any value in the security AIB actually held. The court said it lacked the evidence to calculate those matters itself.
The Supreme Court also said that, on the record before it, it was unnecessary to decide whether the court’s supervisory jurisdiction over solicitors can ever support damages beyond compensation. It concluded that such an award would not be appropriate here if the compensatory damages were calculated on the basis it set out.
The reassessment will require the High Court to consider evidence about Moongate’s value around the time of the breach and the value, if any, of AIB’s security behind Anglo’s existing charge. The Supreme Court’s decision leaves the amount of damages unresolved.