A COMPANY director has sued Allied Irish Banks accusing it of exposing him to losses of at least €2.3 million over alleged negligence and reckless lending relating to a property development.
Michael Fogarty, Moneyquid, Killeigh, Co Offaly, and his company, Rocktop Developments Ltd, have brought the action over guarantees provided by them on loans made by AIB in 2006 to two other men – Tony Browne and Michael Maloney (the borrowers) – relating to a development at Caisleán Cúirt, Thurles, Co Tipperary.
Among a range of claims, it is alleged the bank was made aware a sub-contractor was allegedly asked by Mr Browne to provide false invoices to AIB so as to provide a pretext to draw down additional funds from AIB, but the bank continued to advance funds without due care.
Mr Fogarty also claims the bank was aware of the alleged misapplication of loans. He further alleges the bank allowed the borrowers to retain the proceeds of house sales rather than insist they be used to discharge the loans.
In an attempt to mitigate his losses, he reached an agreement with AIB in July 2008 under which Rocktop, at AIB’s insistence, borrowed €6.2 million from the bank out of which €4.5 million was paid to discharge the debt owed by the borrowers and €237,000 was paid to discharge the debt of Engtek Ltd.
Mr Fogarty claims the remaining €1.4 million was used by him and AIB to complete the development. The bank, as security for the €6.2 million loan, held mortgages over that development and another property, Birchgrove House, Roscrea.
Mr Fogarty accepts he and Rocktop have a liability to AIB which he claims has been substantially increased by the bank’s own actions or omissions.
He anticipated he and Rocktop would have a liability of €2.5 million after housing sales had completed when, were it not for the bank’s handling of matters, that sum would be just €250,000.
The action was admitted to the Commercial Court yesterday by Mr Justice Peter Kelly.
In an affidavit, Mr Fogarty said he carried on an engineering business with Tony Browne and Michael Maloney through Engtek Ltd until December 2005 when he resigned as a director of Engtek under a termination agreement which provided, among other matters, for transfer of interest in properties owned by all three men.
Without legal advice and after a meeting of five or 10 minutes at AIB Roscrea on August 15th, 2006, Mr Fogarty said he agreed to guarantee the repayment by Mr Browne and Mr Maloney of their liabilities to the bank, subject to a limit of €4.5 million and limited to his interest in Birchgrove House.
He understood the guarantee would relate only to the €4.5 million advanced and AIB would insist the conditions of the loan facility be met by the borrowers.
Once he signed the guarantee, he claims AIB recklessly advanced monies to the borrowers, knowing or not caring that the loans had no rational connection with the value of the works being carried out.
