Tom Barry, former head of AIB Corporate Banking, told the Commercial Court that most business lending by AIB, even at the height of the property bubble, was recourse lending. He did not believe AIB would contemplate a non-recourse loan for development land, including the Waterford lands.
The final AIB loan letter signed by the Lynchs’ and Mr Conlan on February 8, 2007, was a full recourse loan, Mr Barry said.
He would be “amazed” a solicitor would think it was non-recourse and believed no person with business experience could conclude that.
However, because an earlier draft loan letter included a condition stating AIB had recourse to Mr Lynch and Mr Conlan, that created potential for confusion, he said.
It would have been prudent for AIB, when deciding to remove that condition in its final loan letter, to have acted on advice from its solicitors to make clear the final letter involved full recourse to all borrowers, he said. If that had been done, there would have been “no confusion,” he agreed.
He also believed, if AIB was told Philip Lynch was withdrawing from the €25m deal leaving just Mr Conlan in it, this would have been a “significant negative” for the bank in deciding whether to lend the funds.
Mr Barry reviewed 13 other loans to some members of the Lynch family and concluded that Philip Lynch, his wife Eileen, son Paul and daughter Therese had engaged in recourse borrowing.
A €1m Bank of Ireland loan to Eileen Lynch to buy shares in One51 investment group was, in his view, high risk if repayment depended on shares. Shares in One51 were “highly illiquid” and had dropped from €6 a share in 2007 to €1 a share in 2010, he said.
Mr Barry noted documents discovered by AIB outlined Mr Conlan had loan exposure of some €226.6m to AIB in late 2006, €14.6m cash on deposit and a net worth stated to be some €190m.
He said he had concluded Mr Conlan typically borrowed from AIB on the basis of full legal recourse to himself.
Mr Barry gave evidence yesterday in the action by Mr Lynch and his family against AIB and two firms of solicitors — LK Shields and Matheson Ormsby Prentice — aimed at preventing the bank pursuing them over the €25m loan. The family claims they always understood the loan was non-recourse.
AIB denies that claim and is counterclaiming for €25m judgment orders against the Lynchs and, in separate proceedings, against Mr Conlan. Both law firms deny negligence.
Earlier, Laurence Shields, founder of LK Shields, said he was not personally involved in events in 2006 and 2007 leading up to signing of the €25m loan.
He agreed an email sent by a solicitor with LK Shields to the Lynchs on February 8, 2007, stated the loan involved no legal recourse to the Lynch family and Mr Conlan.
He denied, when the Lynch family had contacts with his firm in 2009 about the loan, his firm had a conflict of interest. He was not aware the family were in contact with other solicitors, he said.
The case, before Mr Justice Michael Peart, has been adjourned to May 3.