The High Court awarded ACC Bank €2 million in damages against solicitor Brian Johnston, finding that this sum represented the loss directly attributable to his negligence in a 2006 lending transaction. The judgment did not decide how much, if anything, two third parties must contribute or indemnify Johnston for that award.
The ruling, delivered by Mr Justice Clarke on 22 September 2011, dealt with damages after earlier judgments had determined liability. The court had found Johnston negligent for allowing loan money to be released without the security required by the facility letters. It had also found Joseph Traynor and Seamus Mallon liable in the third-party proceedings, with judgment in default against Traynor. The extent of any contribution or indemnity remained for later determination.
ACC had claimed €8,485,460, based on four loans to Mr Tiernan, funding costs and estimated recoveries. The bank said the loans would not have been made but for Johnston’s negligence. Johnston disputed causation, while Mallon argued that the underlying loan was poor and that damages should be limited to the value of the security that should have been put in place. Both also argued that ACC had failed to mitigate its losses.
The court rejected the mitigation arguments. It found no basis to conclude that ACC could have recovered more from Mr Tiernan, and said attempts to trace or recover the money from recipients would have faced serious legal and practical difficulties.
The court found that the Castlewarden lands offered as security were worth about €3.3 million to €3.5 million when the loan was made, far below the €7 million value ACC believed and the €4.6 million contract price. After estimated realisation costs, the security was worth about €3 million at the time. Allowing for the time likely to pass before enforcement, the court assessed the recoverable security value at about €2 million.
Clarke J rejected Johnston’s causation argument, including because it was inconsistent with the position he had taken in the earlier third-party proceedings. On the damages calculation, the judge held that although the transaction would not have proceeded without Johnston’s negligence, ACC’s decision to make a poor loan was not itself within the specific task Johnston had been retained to perform. The direct loss from his negligence was the absence of security, so awarding more than its value would compensate ACC for losses attributable to the lending decision and the fall in land values.
The court gave Mallon an opportunity to consider whether to continue his application to amend his third-party defence to allege that Johnston should have pleaded contributory negligence against ACC. The judge made no decision on that application and said further evidence and argument would be needed if Mallon pursued it. The extent of any contribution or indemnity from Mallon or Traynor also remained outstanding.