AIB 'ran away' from questions on €25m loan

BUSINESSMAN Philip Lynch and his family were given no opportunity to ask Allied Irish Banks why it failed to warn them, when signing up to a €25 million development loan with Gerry Conlan, they were “getting into bed” with a man who owed a quarter of a billion to the bank, the Commercial Court was told yesterday.

AIB’s failure to call any witnesses in the Lynch family’s action to prevent them being pursued over the loan meant the bank “ran away” from crucial issues concerning why the loan document was altered by AIB within hours of it being signed for the family on February 8th, 2007, Michael McDowell SC said. The Lynch family had no opportunity to ask AIB why it dealt only with representatives for Mr Conlan in the days leading up to the loan facility being signed and whether it owed duties to the family.

The family wanted to ask AIB witnesses why they did not ask if the family realised they were “getting into bed” with “a financier who was totally over-borrowed” and who would not have been loaned any more money unless Mr Lynch was involved in the €25 million deal to buy lands in Waterford, Mr McDowell added.

Their case was that AIB and two firms of solicitors, LK Shields and Matheson Ormsby Prentice (MOPs), were “grossly negligent” in relation to the loan. If the court found the family owed the money, they were entitled to be indemnified by the defendants.

The family contended they were induced into entering into joint and several liability to a bank on February 8th, 2007, as a result of “utter negligence” on that day by the defendants, “whoever was to blame for the sequence of events”.

It had been suggested Mr Lynch and his family “could not possibly” have believed the loan was non-recourse but two solicitors in LK Shields did believe that and told the family so. It was also “remarkable” that a solicitor in MOPs, who said he believed the final loan would be a recourse loan, appeared to have conveyed the exact opposite impression to a solicitor in LKS, Mr McDowell said.

He was making legal submissions to Mr Justice Michael Peart at the close of their action against the bank and the law firms.

Mr Lynch, his wife Eileen and four children claim they understood the loan was non-recourse and claim they relied on representations to that effect.

AIB claims the loan was full-recourse to all borrowers and is counterclaiming for €25 million judgment orders against the Lynches and, in separate proceedings, against Mr Conlan. The defendants deny the claims against them.

Evidence ended last month and the case was adjourned to yesterday when the judge began hearing legal submissions.

The court has heard the final loan facility document was signed by Judith Whelan, daughter of Mr Lynch, on behalf of the family. An earlier draft facility contained a special condition providing for recourse to Mr Lynch and Mr Conlan but that special condition was removed from the final loan facility.

AIB claims both the draft and final facility documents involved full-recourse to all borrowers, the family and Mr Conlan.

Mr McDowell said LK Shields was acting for the Lynch family and told them in writing a number of central things, including that the deal, if completed, would be on the basis of a non-recourse loan.

LK Shields’s position was it believed the advice given by it was true and that MOPs had told them that, he added. If there was no basis for such advice, this amounted to gross negligence as a person relying on it would face “a personal financial catastrophe”.