The High Court declared that John Kelly is the full beneficial owner of Oilgate, a property in County Wexford, but refused his claim for compensation over an unpaid mortgage on a Dublin property. The court found, on the balance of probabilities, that Kelly had directed his solicitor, Thomas Byrne, to delay repaying the loan.
Mr Justice Clarke delivered the judgment on 13 April 2011 in proceedings concerning two transactions. One involved refinancing 45–50 James’s Street, Dublin, where IIB agreed to lend €9 million. Byrne undertook to use the loan proceeds to clear Kelly’s existing Educational Building Society (EBS) mortgage, then more than €6 million, but the loan was not repaid. Kelly sought €6,118,690 in damages, principally as money had and received, as well as a declaration concerning ownership of Oilgate.
Byrne argued that Oilgate was beneficially owned by a partnership involving himself, Kelly and Kelly’s life partner, Mary O’Connor. The judge found that the evidence did not establish a partnership material to Oilgate’s ownership. The written 2001 agreement related to specified projects that did not proceed and did not mention Oilgate. The court therefore declared Kelly the property’s full beneficial owner.
The central dispute over the EBS loan was whether Kelly had authorised Byrne not to pay it from the IIB funds. Byrne admitted that he breached his undertaking. He said Kelly knew the funds were being used for other pressing purposes; Kelly denied authorising the non-payment.
The judgment described Byrne’s practice of delaying compliance with undertakings and using funds from later transactions to meet earlier obligations as a “lawyer’s version of a Ponzi Scheme”. It also noted that the financial records were unreliable and the forensic accounting exercise inconclusive. The court’s decision on the dispute therefore turned on its assessment of the witnesses and other evidence.
The judge found that Kelly knew in general terms that Byrne was using this approach to generate short-term cash and agreed with, if not encouraged, Byrne’s unlawful practices. He concluded that Kelly directed Byrne not to repay EBS at the time because other payments were more pressing. The judge did not accept Kelly’s explanation that he had failed to notice substantial monthly EBS payments continuing for nine months after he believed the mortgage had been repaid.
The court said Kelly’s direction did not excuse Byrne’s conduct as a solicitor, but it meant Byrne could resist an order to compensate Kelly for the money. Kelly received the Oilgate ownership declaration and no other relief.