The Supreme Court has sent two major professional negligence cases involving KBC Bank Ireland back to the High Court for reconsideration of whether the bank's own lending decisions contributed to losses on loans to John Kelly and solicitor Thomas Byrne.
The High Court had awarded KBC €9,983,585.34 in the Kelly proceedings and €7,710,545.16 in the Byrne proceedings against BCM Hanby Wallace.
The solicitor firm had been instructed to ensure that security required by KBC was in place before loan funds were released. Instead, it accepted undertakings from Byrne's firm without authority from the bank. Those undertakings were not honoured. Of security intended over 30 properties, first legal mortgages or charges were ultimately obtained over only three.
BCM Hanby Wallace did not appeal the findings that it had been negligent or the decision to assess the cases on the basis that the loans would not have been advanced if the firm's duties had been performed.
Its appeal concerned contributory negligence. The firm argued that KBC had itself failed to investigate adequately the borrowers' financial standing, income, assets and reliability before approving the loans.
The High Court had described KBC as "somewhat careless" but rejected contributory negligence because it regarded the solicitors' failures as the proximate cause of the loss.
Mr Justice Fennelly held that this causation analysis was wrong. If KBC failed to exercise reasonable care when assessing the borrowers, and proper checks would have caused it to refuse the loans, that failure could also have been an effective cause of the loss.
The Supreme Court did not itself decide that KBC was contributorily negligent or determine any reduction in damages. Those issues require findings on evidence and were remitted to the High Court.
The court also clarified that the earlier High Court judgment should not be read as finding intentional dishonesty or deliberate deception by individual partners or solicitors at BCM Hanby Wallace. No allegation of fraud had been made.