Philip Lynch is liable for €25m loan in failed case
Businessman's family had sued AIB and two firms of solicitors over a land deal in Co Waterford
Published 09/12/2011 | 05:00
BUSINESSMAN Philip Lynch and his family have been declared liable for a €25m loan to Allied Irish Banks for development lands in Waterford, which are now valued between €3m and €4m.
Mr Lynch, his wife Eileen and four children -- Judith, Phillipa, Therese and Paul -- had claimed they were not liable for the €25m loan made to themselves and developer Gerry Conlon in February 2007. The loan was issued to fund the purchase of 86 acres at Kilbarry, Co Waterford, where a shopping centre and retail development was planned.
In 2007, the land was valued at up to €80m and the Lynchs and Mr Conlon had intended that by developing them and selling them on, they would reap a €21m profit. But as the property market crashed soon after the purchase, those plans were abandoned.
The Lynch family had claimed they always understood this deal carried no risk for them because they had signed up to a non-recourse loan with AIB -- meaning that the bank could not pursue them individually.
The bank could take the land if the deal soured and could not go after them to repay any shortfall. AIB said the loan, organised by Mr Conlon, had been given on a fully recourse basis. Mr Conlon never asked for a non-recourse loan, the court heard.
Yesterday, Mr Justice Michael Peart accepted the bank's claim, saying the family had failed to show AIB had been negligent in how it dealt with them and that they should repay the loan.
He also rejected the family's arguments that they were entitled to an indemnity against the loan by two law firms -- Matheson Ormsby Prentice Solicitors and LK Shields Solicitors -- over alleged negligence and breach of duty of care concerning the transaction.
The firms, who were in Court 9 to hear the judgment, were visibly relieved at the outcome.
The case has been adjourned to December 16 when AIB is likely to seek judgment orders against the Lynchs, and the court will also deal with the bank's separate claim against Mr Conlon over the loan.
The judge found the Lynch family had received wrong advice from LK Shields, the firm founded by Lawrence Shields, who was a long-time family friend, about the loan letter.
A solicitor at the firm told them the loan letter was for a non-recourse loan. But as the firm was never told the Lynchs would only sign up to a non-recourse loan and hadn't been retained by them to advise on the financing of the deal, they could not be held liable for the €25m.
The long-running case is expected to have run up huge legal costs, with some experts estimating the bill could be as big as €5m.