Monday 23 April 2018

Court rules developer knew rogue solicitor 'played system'

Dearbhail McDonald Legal Editor

DEVELOPER John Kelly knew rogue solicitor Thomas Byrne was "playing the system" in an elaborate "lawyer's version of a Ponzi scheme" that was used to fund both men's lavish lifestyles.

The High Court has ruled that Mr Kelly agreed, "if not encouraged", the unlawful activities carried out by the struck-off solicitor who may yet face criminal prosecution.

High Court Judge Mr Justice Clarke expressed surprise that no action has been taken to date against Mr Byrne despite his frank admissions to fraud.

He also hit out at the "lax attitude" of banks and their lawyers at the height of the property boom.

Mr Kelly, who famously flew in pop band Girls Aloud on a private jet for his step-daughter's 21st birthday, had sued Mr Byrne for damages of €6.1m. This was the amount he says Mr Byrne should have paid to the EBS as part of a transaction involving the refinancing of an EBS loan for properties in James Street, Dublin.

He also sought an order that he was the owner of a 16-acre development site in Oilgate, Wexford, which was bought for €3m as part of the refinancing deal in a €9m loan from IIB/KBC bank.

Yesterday, Mr Kelly was declared the owner of the Oilgate property -- but the High Court ruled that Mr Byrne does not have to pay his former biggest client €6.1m in compensation to repay the EBS loan.

Judge Clarke said Mr Kelly had directed the solicitor not to pay back a €6.1m loan to the EBS under a long-standing system where the men would delay the least pressing payment until "irresistible pressure came on".

The judge said it could be reasonably described as "a lawyer's version of a Ponzi scheme where any funds needed to pay off earlier investors are secured from later investors".


Judge Clarke also said that financial institutions seemed "to have been almost falling over themselves to secure the business of persons believed to be of high worth".

The banks were afraid of losing such valuable clients to rival banks, said the judge.

The case centred on two significant property transactions involving the two men who had been involved in property dealings over a 10-year period.

In the nine years before the solicitor's practice was shut down by the Law Society in 2008, some €110m on transactions had gone through Mr Byrne's practice account referable to Mr Kelly.

Judge Clarke said Mr Byrne's way of operating at the time seemed to be part of a practice involving property transactions at the height of the property bubble whereby financial institutions -- and their solicitors -- were slow in "chasing up" compliance of undertakings, such as Mr Byrne's undertaking to pay off the €6.1m EBS loan.

Mr Byrne had agreed a practice had developed with him where he would defer complying with undertakings until he came under pressure to do so.

Given the lax attitude of some financial institutions to following up undertakings, Mr Byrne would seek to set up another transaction -- where it might be hoped further undertakings would provide him with sufficient funds to comply with a previous undertaking.

Irish Independent

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