- within Antitrust/Competition Law, Media, Telecoms, IT and Entertainment topic(s)
Last year, the High Court awarded a bank substantial damages
against a Dublin law firm for failing to ensure that proper
security was in place before releasing loan monies in respect of a
number of properties. The law firm has now successfully
appealed this decision to the Supreme Court on two grounds, namely
on the issue of contributory negligence and the trial judge's
implication of deception on the part of the solicitors.
In relation to the alleged deception, the Supreme Court stated
that the High Court's judgment "cannot and should not
be read as attributing any intentional dishonesty or deliberate
misleading to any partners or officers of the appellant
firm".
As regards the issue of contributory negligence, the Court
highlighted that lending banks have a duty to assess the
creditworthiness, soundness and - most importantly -
trustworthiness of the borrowers when reviewing potential loan
transactions. The Court noted that this obligation is
independent of any reliance on third parties such as a
solicitor. In this regard, banks should monitor risk through
robust and comprehensive credit analysis and approval processes in
line with the EC (Licensing and Supervision of Credit
Institutions) Regulations 1992.
The Court noted that when assessing liability for contributory
negligence, the law permits for more than one cause of loss.
In light of this, it determined that although the law firm's
negligence was a proximate cause of the bank's loss, it was not
the only effective cause. The Court held that the bank's
negligence, or want of care, was also an effective cause of the
loss because they had, like the appellant, caused loan monies to be
paid to parties who were unable to repay.
The Court distinguished between two types of contributory
negligence alleged against the bank. Firstly, their want of
care in making the decisions to lend; and secondly, their
failure to verify or supervise the performance of the law
firm's duties.
The Court concluded that the trial judge was mistaken in his
assessment of causation in absolving the bank of responsibility for
contributory negligence. It held that the bank failed to
exercise due care in making its lending decision. It further
noted that the bank was exclusively responsible for this decision,
which was an effective cause of the loss suffered by the
bank.
It was also noted that the High Court had never decided
whether, if the bank's acts had been a cause of the loss, the
bank would have been responsible for contributory negligence.
Therefore, in light of the Supreme Court's findings on
causation, the case was remitted to the High Court to decide
whether there should be a finding of contributory negligence on the
part of the bank and, if so, to apportion responsibility.
The issue of contributory negligence will now be reconsidered by
the High Court. It will decide whether and to what extent the
bank was contributory negligent.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
