Philip Lynch's daughter denies constructing 'fake' loan story
Family 'shocked' to find bank was holding them liable for €25m
Published 17/03/2011 | 05:00
Businessman Philip Lynch's daughter denied that she and her father had constructed a "fake" story that AIB lent them €25m for a property investment in 2006 on the basis they could not be held personally liable to repay it.
"This isn't a story made up because of a fall in the property market," Judith Whelan told the court as her version of the terms of the loan was challenged.
Mrs Whelan, who signed the loan documents on behalf of her father, One51 chief executive Philip Lynch, his wife Eileen, daughters Therese and Philippa and son Paul, said she believed she was signing a non-recourse loan.
The family believed the bank could take the 86-acre site in Waterford if they failed to repay the loan and not pursue them. The bank disputes this.
Mrs Whelan said the family was "flabbergasted and shocked" to find themselves at odds with the bank when it issued new loan documents in 2009 that stated the family could be pursued individually for the money borrowed.
The only person in the Lynch family with the "wherewithal" to pay the interest, which amounted to hundreds of thousands of euro, was her father, she said.
"I was aware that Philip was willing to fund it. I didn't think of who had the liability to fund it," Mrs Whelan said.
"We were feeling an obligation for the interest for two years," she explained. The family intended to sell on the site after a few years in the hope of making up to €20m once the land was rezoned to clear the way for a shopping and residential development.
Paul Sreenan, representing solicitors LK Shields, the firm that advised the family on the transaction and is now being pursued in court by them, suggested that Mrs Whelan had equated the deal being of "no risk" to being the same as "non-recourse".
It was of no risk because the value of the land had more than doubled since it was rezoned and was then worth more than twice the amount they had borrowed. She denied this.
The family had to repay the interest on the loan, she said. The bank could pursue them if they failed to pay it, but the loan was non-recourse in relation to the total sum borrowed, Mrs Whelan stated.
"This is recourse isn't it?" Mr Sreenan suggested to her. "I am very worried about what recourse means now," she replied.
The case continues on Friday.