Businessman Philip Lynch and his family are liable to Allied Irish Banks for a €25 million loan issued to them to buy development lands in Waterford, the Commercial Court has ruled.
Mr Justice Micheal Peart today dismissed claims by Mr Lynch, his wife Eileen and four children - Judith, Phillipa, Therese and Paul - they are not liable for the €25 million loan made to themselves and developer Gerry Conlon in February 2007.
The Lynch family claimed they always understood the loan would involve AIB having no recourse to them individually for payment and its recourse would be limited to the lands. The court heard the current value of the lands has been estimated about €4 million while in 2007 values as high as €80 million were suggested.
In a lengthy judgment today, the judge found the family had failed to make out a case against AIB such as disentitled the bank to repayment. He also rejected the family's claims they are entitled to be indemnified against the AIB claim by two law firms - Matheson Ormsby Prentice Solicitors and LK Shields Solicitors - over alleged negligent advice concerning the loan.
"The family have only themselves to blame for the predicament in which they find themselves," the judge found.
He said Mr Lynch appeared to have paid little attention to the loan transaction until "very late in the day". While that was Mr Lynch's style, according to his evidence, it was unfortunate he regarded such a large transaction as "a minor matter" in the overall context of his business activities, the judge said.
If Mr Lynch had not relegated the loan to such a low level of importance, he may have considered it wise, as the transaction was nearing the point at which a final decision had to be made to proceed or not, to communicate with Mr Conlon and to ensure the loan requested and being approved was a non-recourse loan, the judge said.
Had certain steps being taken, they would have avoided a situation whereby Mr Lynch's daughter Judith Whelan unwittingly signed the family up to a loan which, the judge was satisfied, she genuinely believed, on the basis of wrong advice from LK Shields, to be non-recourse and which all the family believed was non-recourse until early 2009.
The judge said he was satisfied, in circumstances including that LK Shields was never told the Lynchs had asked Mr Conlon to apply for a non-recourse loan, that LK Shields had no liability to the family over the loan.
The judge has adjourned the matter to December 16th to allow the sides consider his judgment. That hearing may also address the issue of who is liable for the costs, expected to be several million euro.
The loan at the centre of the case was issued to the family and Mr Conlon to buy 86 acres at Kilbarry, Waterford, for development. The bank has brought separate proceedings against Mr Conlon over the loan which will be dealt with later.
The final loan document was signed on February 8th 2007 by Judith Whelan on behalf of the family, the court previously heard. An earlier draft facility contained a special condition providing for recourse to Philip Lynch and Mr Conlon but that special condition was removed from the final loan facility with the effect, AIB claimed, of giving it recourse to all borrowers for the €25 million.
