Banks failed to check credit ratings of lawyers
Friday October 26 2007
Solicitors Michael Lynn and Thomas Byrne had been successfully sued for failure to pay debts and had appeared in 'Stubb's Gazette' before they embarked on a multi-million euro remortgaging spree.
Both solicitors were deemed "risky" creditors and had judgments registered against them.
However, their credit profiles were never checked by a panoply of banks who are now pooling information in a desperate bid to ascertain how much money is owed to them by Mayo-born solicitor, Michael Lynn.
Almost 50 lawyers appeared yesterday before Mr Justice Richard Johnson, the President of the High Court, to see if they could recover some €50m believed to have been borrowed by Michael Lynn.
The lawyers represented 10 banks; a receiver; the solicitor's insurer; his wife; and the first of hundreds of small investors seeking to ensure that their mortgages and titles to their homes are are safe.
The banks are concerned about who will have priority for payment in relation to situations where multiple mortgages have been taken out on the same properties.
The 10 financial institutions who believe that they were stung by Mr Lynn include Bank of Ireland and its subsidiaries; Allied Irish Bank; Ulster Bank; ACC Bank; National Irish Bank; IIB Homeloans; Bank of Scotland (Ireland); Irish Nationwide; First Active; and Permanent TSB.
Baffled
All believed their mortgage loans with Mr Lynn were secured and Ulster Bank revealed that they had some 18 properties mortgaged with Mr Lynn, but experts are baffled that the solicitor's credit profiles, and that of Thomas Byrne, were not investigated before millions were handed out to the dishonest duo.
"Appearing in Stubb's Gazette is a huge black mark against your professional reputation," said James Treacy, managing director of BusinessPro, who publish the debt weekly.
"I cannot understand why the banks did not carry out the necessary checks, as they normally wouldn't touch someone who appeared in it, unless they had tidied up their affairs."
Yesterday, it also emerged that Irish Nationwide, who are attempting to secure mortgages they issued to Michael Lynn, have also issued High Court proceedings against Thomas Byrne, whose whereabouts remain unknown.
Proceedings by First Active plc and Allied Irish Banks plc against Mr Lynn are listed to come before the Commercial Court today.
PIBA, the country's largest group of independent brokers, last night called for an end to self-regulation for accountants and solicitors within the insurance and investment sectors.
"The cases involving solicitors Michael Lynn and Thomas Byrne will cause a general review of the regulation of solicitors but it must spell the death knell for self regulation when they act directly in the insurance market,'' said Diarmuid Kelly, PIBA chief executive.
Thomas Byrne is currently being investigated by the Law Society.
Earlier this week, IIB Bank plc secured court orders restraining him reducing his assets below €9m. It is believed Irish Nationwide is owed more than €10m by the aspiring property developer.
When proceedings concerning Mr Lynn came before the court yesterday, the Law Society, which has shut down Mr Lynn's practise, said it needed more time to complete its investigation into Mr Lynn's practice.
Risk
Shane Murphy SC, for the society, said the investigation was ongoing and indicated a risk that different financial institutions may have claims over the same properties.
The society said it needed to complete the process of getting information and was seeking a two week adjournment to preserve the "status quo".
The President of the High Court agreed to adjourn the proceedings to November 8 to facilitate information exchange and said the information should outline the names of any other solicitors authorised, or who purported to be authorised, by Mr Lynn's practice to give undertakings.
He added that the information about the various properties should be available to the banks "at the press of a button".
Paul Burns SC, for Mr Lynn, said his client had no difficulty with most of what was proposed by the court but, in relation to preparing affidavits, the Law Society had all his client's documents.
Lawyers also appeared for an individual who had dealt with Mr Lynn in connection with the purchase of a property in August 2006.
He said Mr Lynn had given undertakings to his client's solicitor but his side had been unable to register title to the property.
Mr Lynn's wife, Brid Murphy, was represented separately.
Her counsel said she had an interest in two properties, the couple's "family home" at St Alban's Road, Sandymount, Dublin 4, and another property with an address at Thomond Road.
Both properties were in the joint names of the couple, counsel said.
AIG Insurance, Mr Lynn's insurers, also attended the proceedings. An earlier hearing was told Mr Lynn has total insurance cover for €11m.
It is feared his liabilities will greatly exceed that figure and they have been estimated at amounts between €26m and €50m.
Martin Ferris, a receiver appointed by two banks over companies associated with Mr Lynn, was also represented in court.
John Gleeson SC, for IIB Homeloans, said there clearly was an "information deficit", not only for IIB but all the other financial institutions, in relation to Mr Lynn's dealings.
- Dearbhail McDonald and Aodhan O'Faolain
