The High Court has directed Danske Bank A/S, trading as National Irish Bank, and two solicitors to provide further evidence in a dispute over an undertaking to secure a mortgage on land in Rathnew, Co Wicklow. The court found that the solicitors had breached the undertaking but did not decide how much compensation, if any, they must pay.
The bank’s special-summons proceedings sought compensation for the breach, claiming €2,586,338.13. The undertaking, given in June 2006, concerned a 7.2-acre Rathnew property and required the solicitors to ensure the borrowers executed mortgage security before the loan proceeds were negotiated, and then to register the mortgage and hold the title documents for the bank pending compliance.
The bank advanced the borrowers €1.526 million under a May 2006 loan agreement. A later agreement in October 2006 provided a further €1.366 million and included the Rathnew property among the proposed security. In June 2007, the bank learned that the borrowers had sold all 7.2 acres, although the later loan agreement had referred to a sale of 4.5 acres. The sale proceeds were €4.25 million. The judgment records that the borrowers made an unsolicited €600,000 payment to the bank, which it accepted.
The solicitors did not provide a mortgage over the Rathnew property. The judge said there was “absolutely no doubt” they had breached the undertaking when they acted in the sale. The solicitors had apologised, and the Law Society’s Complaints and Client Relations Committee had made a formal finding of breach in 2009, adjourning consideration of any sanction pending the court proceedings.
The solicitors argued that the bank should have sought repayment when it learned of the sale, had failed to mitigate its loss, and still had security over other properties. They disputed that the bank’s loss had crystallised. The judge noted that the bank’s evidence included account balances but no statements of account.
The court held that the case was not suitable for deciding compensation on the affidavits then before it. The bank had other security, and further evidence and submissions were needed to assess compensation without making an oppressive order. But the judge declined to send the case directly to a plenary hearing, saying the court should retain its supervisory role over proceedings to enforce a solicitor’s undertaking.
The bank was directed to deliver points of claim and supporting affidavits and documents within two weeks. The solicitors must then deliver points of defence and supporting affidavits within two weeks of receiving the claim. The parties may seek voluntary discovery on the timetable set by the court. The case was listed for review on 11 July 2011.