THREE SOLICITORS being pursued by Anglo Irish Bank for €63 million over personal guarantees of €165 million on unpaid loans to a property group have advanced a “far-fetched” defence to the bank’s claim, Anglo has argued at the Commercial Court.
The defence includes allegations that senior Anglo executives gave assurances the guarantees would never be relied upon.
Denying the solicitors’ defence was “incredible”, their counsel Bernard Dunleavy said it would not help the court to rely on the “general probabilities” as to how “normal” bank managers would behave in relation to seeking guarantees over multi-million loans.
It appeared to have been “normal practice” for Anglo to extend liability of €21 million each to clients without anyone in the bank so much as lifting the phone to them concerning their guarantees, Mr Dunleavy said.
Mr Justice Peter Kelly has reserved judgment on Anglo’s application for €21.4 million summary judgment orders each against Dermot O’Donovan, Michael Sherry and Aidan Frawley, all partners in the Limerick-based firm Dermot G O’Donovan Partners.
The application arises over personal guarantees provided by the solicitors related to €165 million in loans to companies and partnerships linked to the Limerick-based Fordmount property group.
A fourth partner in the O’Donovan firm, Thomas Dalton, consented on Tuesday to summary judgment against him for €21.4 million.
Anglo has brought separate summary judgment proceedings for €86 million against Michael Daly, Fordmount’s managing director, but that case has been sent to a full hearing after another judge ruled Mr Daly had an arguable defence on grounds including that senior Anglo executives told him his guarantees over loans would never be relied on.
Mr Daly has claimed he was seen by senior Anglo executives as a “favoured developer” and had easy access to Seán FitzPatrick and David Drumm. He claims Mr Drumm told him some €500 million was available to him for developments in Germany and €150 million for developments here.
Maurice Collins, for Anglo, yesterday denied the solicitors’ claims the bank had continued to advance monies to the Fordmount group despite knowing or suspecting there was fraud or misconduct of affairs at the group. The solicitors claim they had no knowledge or involvement in the alleged fraud or misconduct, and that the bank exposed them to liabilities.
Mr Collins said Anglo asked the firm Cooney Carey to review Fordmount finances in 2008 and it was only after that firm reported in June 2009 that any issue of fraud arose. A receiver was appointed in December 2009.
Mr Collins rejected arguments that the solicitors had a defence on grounds senior Anglo executives made representations to Mr Daly that their guarantees were a “meaningless” “form-filling exercise” and would never be relied upon by the bank.
These defendants were experienced solicitors who executed the guarantees so substantial funds would be advanced to the Fordmount group for business from which they hoped profits would be generated, Mr Collins said. They had received some €1 million.
Correspondence from the solicitors to the bank related to the guarantees was also inconsistent with the claims they were now making.
Mr Dunleavy, for the solicitors, said while the claims they were making concerning how their guarantees were executed might seem “extraordinary”, they had to be seen in the context of how Anglo operated before nationalisation.
The bank had failed to produce affidavits from any of the senior executives alleged to have made the representations about the guarantees to deny those representations had been made.
He argued the solicitors had no knowledge of the circumstances in which Anglo became concerned about fraud or misconduct of affairs at Fordmount. The business of that group had been run in a “ragged and haphazard” manner and while his side sought a copy of the Cooney Carey report from Anglo, it had not received it.
Mr Dunleavy argued that summary judgment should not be entered, and the action should go to a full hearing.
