Court rules Lynch family entitled to further hearing on loan

High Court ruled that AIB entitled to €26m judgment orders against them

Thu, Jul 24, 2014, 01:00

The Supreme Court has ruled that the wife and children of businessman Philip Lynch are entitled to a further hearing to determine whether AIB is entitled to €26 million judgment orders against them over an unpaid development loan.

The High Court had ruled that Mr Lynch, his wife Eileen and adult children – Judith, Paul, Philippa and Therese – were all liable for the €25 million loan advanced to the Lynch family and developer Gerry Conlan to buy 86 acres at Kilbarry, Waterford.

The proposed development was expected to lead to a €20 million profit but the lands in 2011 were valued at less than €5 million.

The High Court later ruled that AIB was entitled to judgment for €26 million against the Lynches but a stay applied pending appeal.

Last January, the Supreme Court dismissed Mr Lynch’s appeal on all grounds but said his family were entitled to argue that it would not be equitable to allow the bank to enforce the €26 million judgment against them or, at least, to do so without first pursuing execution of that against Mr Lynch and Mr Conlan.

The matter then returned to the Supreme Court.

Issues of credibility

Mr Justice Donal O’Donnell yesterday delivered that court’s ruling. To a large extent, he said, the entire case in both the High Court and the Supreme Court turned upon issues of credibility in which, for whatever reason, no distinction was made between Mr Lynch and his family.

As the central issue in the case was resolved against Mr Lynch, and consequently “disastrously” against his family, the Supreme Court considered the justice of the case entitled AIB to judgment against Mr Lynch but also required his family have an opportunity to either argue AIB was not entitled to judgment against them or, at least, not entitled to immediate judgment.

The court also ruled that AIB was entitled to costs against Mr Lynch and his family. It placed a stay on the costs order against the family pending a decision on whether they had an equitable defence against enforcement.

Costs ruling

Arising from the family’s unsuccessful bid for indemnities against law firms LK Shields and Matheson Ormsby Prentice (MOP), Mr Justice O’Donnell ruled LK Shields was entitled to 75 per cent of its costs in both courts while MOP was entitled to all its High Court costs and 75 per cent of its Supreme Court costs.

That costs order was intended to reflect the fact the Lynches had succeeded on an important issue of law which was the central issue in their appeal, the judge said. The Supreme Court had upheld their claims that LK Shields owed a duty of care when advising them on the €25 million loan facility agreement, that it breached that duty and was negligent because a solicitor with the firm mistakenly told the Lynches it was a non-recourse loan.

The court however ruled that LK Shields was not required to indemnify the Lynches against AIB’s claim after finding there was no reliance on the legal advice and any damage suffered was not caused by the solicitor’s error.

It found MOP had no duty of care to the Lynches to ensure they were aware of a change in the loan documents which lead to AIB having recourse to all the Lynches.