The High Court has found solicitor Brian Johnston negligent in four transactions involving loans by ACC Bank to borrower Francis Tiernan, but deferred deciding how much ACC is entitled to recover.
In a judgment delivered on 1 June 2010, Mr Justice Clarke found that Johnston breached his duty of care and retainer by releasing funds without ACC’s express permission to proceed on undertakings from Tiernan’s solicitors, Traynor Mallon. The court found that ACC had required a first legal charge over land at Castlewarden and, absent authority to use another method, the transaction should have been completed through a three-way closing.
The dispute concerned three facilities agreed in July 2006, including a €7 million facility for the Castlewarden land, and a further €1.01 million facility agreed in January 2007. The documents available to ACC and Johnston showed a €7 million purchase price. Evidence at trial indicated the actual price was €4 million; the judge found the contract provided to them had a forged and altered front page. He said there was no suggestion either ACC or Johnston knew, or ought to have known, of the true price.
The purchase did not complete. Tiernan never acquired title to Castlewarden, so ACC was not registered with the first legal charge it had required. The court said much of the money passed to Traynor Mallon had not been applied as promised and its destination was unclear. The separate proceedings between Johnston and Traynor Mallon had not yet been heard.
Johnston said ACC officials had authorised him to release the original loan funds and later €630,000 for stamp duty on the basis of undertakings. ACC denied this. The judge rejected Johnston’s account on the balance of probabilities, finding he had not received the authorisation he claimed. He also found the later release of €1 million under the fourth facility negligent: Johnston had not seen evidence that the Castlewarden transfer had been executed and had not made clear to ACC that he was relying on Traynor Mallon’s assurance.
The court treated the case as one in which, absent the negligence, the transactions would not have proceeded. It found ACC had not established a loss from being unable to use the funds in the intervening period, and said the value and likely recoverability of the loans still had to be assessed. It adjourned the damages question until a further hearing alongside the third-party proceedings, when the value of the loans and any possible recovery could be considered. ACC was to bear additional costs arising from that further hearing.