A Wicklow-based property developer is seeking close to €30m in compensation from AIG, an international insurance firm, for alleged negligence by Thomas Byrne, the disgraced solicitor. The claim is believed to be the largest ever made against a solicitor in Ireland.

John Kelly, who is being sued by several banks for almost €39m over loans he obtained through Byrne, a Dublin solicitor, is claiming millions in damages from the insurance giant which insured Byrne against professional negligence. Byrne engaged in multiple mortgage fraud.

Kelly, who last year hired pop stars Girls Aloud to play at his stepdaughter’s birthday party, alleges that Byrne acted in a negligent manner when handling property transactions on his behalf. The developer also alleges that Byrne’s activities caused his property empire to collapse and ruined him financially.

According to sources in the insurance industry, AIG is preparing to fight the claim on the grounds that the former solicitor voided his cover by engaging in deliberate acts of fraud. The High Court may be asked to decide on the matter.

Kelly is also suing Byrne for €6.1m. The case relates to the former solicitor’s handling of a disputed property deal in Co Wexford.

A counter-claim by Byrne against Kelly for ¤30m in damages, including claims for a beneficial interest in the Co Wexford property and other properties in Dublin and England, was struck out by the Commercial Court last Monday. Byrne is likely to appeal against that decision.

The former solicitor was struck off in May after an inquiry by the Law Society found that Byrne gave undertakings to numerous financial institutions relating to the same properties, maintained inadequate client accounts, and allowed properties to be used as securities for borrowings by people who did not own them.

Byrne did not challenge the disciplinary proceedings but has not been charged with any criminal offence by gardai.

Kelly became established as a property developer in the 1990s by building apartments in run-down parts of Dublin.

His business empire and property portfolio expanded significantly after he was introduced to Byrne, who oversaw his property transactions.

It is unclear if the two were business partners or enjoyed a solicitor-client relationship.

However, a report by KPMG Forensic, a financial consultancy hired by the Law Society to investigate Byrne’s financial dealings, found that about €14m in funds was transferred by Byrne to accounts held by, or related to, Kelly.

This money related to just four property deals which KPMG Forensic examined as part of its investigation.

Byrne’s lawyers claimed in court proceedings that Kelly “effectively controlled” Byrne’s legal firm and “hung like an albatross” around his neck.

Kelly has denied the allegations and claims that Byrne’s mishandling of property deals has destroyed his property empire and business reputation.

Several banks and financial institutions have already registered judgments against Kelly amounting to millions of euros, including the Educational Building Society and Ulster Bank.

The developer declined to comment.

AIG did not respond to calls last week.

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