The High Court dismissed a former solicitor’s claim that Eugene and Seamus McKenna misled him into believing ACC Bank had agreed that proceeds from house sales in Fiddown could be used for other projects. The court also found that the McKennas had established a shortfall in their client account, but deferred deciding the amount of any loss.
In a judgment delivered on 9 July 2013, Mr Justice Birmingham said Butler had acted for the McKennas in connection with their construction and development work, including a project to build 37 homes on a site at Fiddown, Piltown, Co Kilkenny. ACC Bank provided three tranches of finance for the project, totalling €4.585 million.
Butler had given undertakings to the bank that net proceeds from residential unit sales would be paid towards the borrowers’ debt. He also confirmed, in connection with the final tranche, that 21 unconditional sale contracts were in place for a minimum total consideration of €3.49 million. The judgment records that those undertakings were not complied with. Undertakings to individual purchasers concerning releases were also not complied with.
Butler’s claim was that the McKennas, particularly Seamus, falsely told him ACC had agreed that some sale proceeds could be diverted to other projects. Seamus McKenna denied making that claim. The judge said Butler remained obliged to honour his undertakings unless ACC released him. He concluded that the probabilities did not support Butler’s account and dismissed his claim.
The McKennas’ counterclaim alleged that Butler’s failure to honour the undertakings caused them loss and that a deficit had arisen in their client account. Their accountant, Tom Murray, estimated the shortfall at €1,026,390.62. The judge noted that Murray’s report relied on documents supplied by the McKennas and their solicitors, and that he had not independently verified the information or carried out an audit. Butler provided explanations for selected transactions but no accountancy evidence.
The judge said a complete forensic review might show a significantly smaller shortfall than Murray estimated. However, he concluded there was a shortfall and that the counterclaimants succeeded. The court had agreed to determine liability first and defer the calculation of loss. The judge said he would discuss with counsel and Butler arrangements for assessing its extent; the judgment did not set a final damages figure.