AIB ‘had full recourse’ to family for loan

A SOLICITOR has told the Commercial Court the final terms of a €25 million loan issued by Allied Irish Banks to buy development lands in Waterford gave the bank full recourse to businessman Philip Lynch and his family for repayment of that sum.

Ronan McLoughlin, of Matheson Ormsby Prentice solicitors (MOP), denied that a message left by him for another solicitor just hours before the loan facility was signed indicated it involved no recourse to the Lynch family.

He said he dealt in 2006 and 2007 with conveyancing aspects of the transaction in which 86 acres at Kilbarry, Co Waterford, were acquired by developer Gerry Conlan and the Lynchs.

The terms of the final loan facility letter issued by AIB on February 8, 2007, and signed that day by the Lynch family, gave the bank full recourse to Mr Lynch, his wife Eileen and their four children for the €25m, Mr McLoughlin said.

While he dealt with conveyancing matters related to the transaction for all the purchasers, including the Lynchs, Mr McLoughlin said he regarded his primary client as Mr Conlan. He always understood the Lynchs were being advised by LK Shields solicitors on all other aspects of the deal, he said.

He was giving evidence in the continuing action by the Lynch family aimed at preventing AIB pursuing them over the €25m loan which, they claim, they always understood was non-recourse.

Their proceedings are against AIB, MOP and LK Shields. AIB denies the loan was non-recourse and is counter-claiming for €25m judgment orders against the Lynchs. Both law firms deny negligence or that the family is entitled to an indemnity from them in relation to any judgment secured by AIB.

Cross-examined by Michael McDowell, counsel for the Lynchs, Mr McLoughlin agreed he told LK Shields the Waterford deal closing date was February 8, 2007, when it was really February 12. He agreed Mr Conlan’s side was aware of the real closing date.

He wanted the parties to concentrate their minds as all sides were dragging their feet, he said. Contracts had been exchanged since April/May 2006, a 28 day completion notice was about to run out and there was a danger of losing a very profitable deal and a €5m deposit.

He said he was informed by Derek O’Shea of AIB at 6.40pm on February 7, 2007, the bank was removing a special condition in the loan facility letter which had confined its recourse to Philip Lynch and Mr Conlan. He understood from Mr O’Shea that AIB was taking this step because it wanted to have recourse to all borrowers — the Lynch family and Mr Conlan.

Mr O’Shea told him the special condition was being removed on advice from A&L Goodbody, solicitors for AIB, that its inclusion could cause enforcement difficulties for AIB, he said.

Mr McDowell said A&L Goodbody had said they provided no such advice and Mr O’Shea, in an affidavit in other proceedings, had said he himself decided to remove the special condition after receiving a call from Richard Godsil, an agent of Mr Conlan’s, querying the inclusion of that condition.

Mr McLoughlin said Mr O’Shea had not said anything to him about a call from Mr Godsil and he did not know if or when that conversation happened.

After speaking to Mr O’Shea, he left a message for a solicitor in LK Shields saying he had been informed AIB was deleting the special condition. Nothing he said in that message could have conveyed a view all the borrowers were excused from liability, he said.

Earlier yesterday, Mr Justice Michael Peart refused an application by the family to dismiss AIB’s counterclaim.

The case continues.

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