The Supreme Court has sent a Bank of Ireland claim against solicitor Daniel Coleman back to the High Court to determine what financial loss, if any, flowed from his breach of a mortgage undertaking.
The case arose from a €250,500 loan advanced in September 2003 to John Lane for the purchase of property at Banane, Meelin, Newmarket, County Cork. Coleman, practising as Coleman & Company, acted for the borrower and gave the bank a solicitor’s undertaking intended to ensure that the borrower obtained good title and that the bank received a first legal charge over the property.
Coleman released the loan funds without first obtaining the duly executed mortgage required by the undertaking. He accepted that the borrower’s title and the bank’s security had not been perfected as promised.
The borrower later fell into arrears. By April 2006, €258,620.83 was due, including €27,794.65 representing more than 18 missed monthly repayments. The bank sought to invoke the High Court’s inherent supervisory jurisdiction over solicitors and argued that Coleman should repay the entire €250,500 advance plus interest.
The High Court refused that relief. The Supreme Court agreed that automatic repayment of the full loan would have been inappropriate. Mr Justice Geoghegan noted that the bank itself had lent on an overvaluation of the property, meaning the security would have been worth substantially less than the loan even if Coleman had fulfilled his undertaking promptly.
However, the Supreme Court disagreed with the conclusion that no compensation should be considered while the transaction remained capable of completion. By the time of the appeal, title had in fact been put in order and the bank’s security registered.
The court held that Coleman’s breach had nevertheless been serious and inexcusable. If the bank suffered loss directly because it could not enforce its security during the period of default, or suffered other losses flowing from the breach, Coleman could be ordered to make those losses good.
The appeal was therefore allowed to that extent and the case remitted to the High Court for assessment of compensation.