EVIDENCE HAS concluded in the long-running action by businessman Philip Lynch and his family aimed at preventing Allied Irish Banks pursuing them for repayment of a €25 million loan issued to them and developer Gerry Conlan to buy development lands in Waterford.
The action opened at the Commercial Court before Mr Justice Michael Peart on March 9th. It resumed after the courts’ Easter vacation yesterday to hear evidence from banking expert Vincent Fennelly.
The sides have now been given time to provide written legal submissions and the judge will hear oral submissions on May 26th and 27th after which he is expected to reserve judgment.
Mr Lynch and his family brought proceedings against AIB and two firms of solicitors – LK Shields and Matheson Ormsby Prentice – aimed at preventing the bank pursuing them over the €25 million loan that was taken out in February 2007.
The family claims they always understood the loan was non-recourse.
AIB denies that claim and is counterclaiming for €25 million judgment orders against the Lynchs and, in separate proceedings, against Mr Conlan.
Both law firms deny negligence in how they dealt with the loan.
Mr Fennelly, who worked with Bank of Ireland for 20 years and was a “core” member of its credit committee, provided a witness statement at the request of LK Shields.
It was clear to him the Waterford loan was a recourse loan and he believed that should also have been clear to the average borrower, Mr Fennelly said.
An experienced borrower would know 100 per cent funding for a land bank deal such as this was highly unlikely, he said.
Irish banks were reluctant in 2007 to provide non-recourse loans, particularly for highly speculative land bank deals, and non-recourse lending was almost exclusively limited to investment property transactions, he added.
Mr Fennelly said there was no way he would have approved the loan to Mr Conlan alone if Mr Lynch pulled out of the deal and nor did he believe AIB would have approved the loan in such circumstances.
AIB’s approach when dealing with the loan facility, including the fact it inserted and then deleted a clause providing for recourse to Mr Lynch and Mr Conlan, “did not help” matters, he added.
Cross-examined by Brian O’Moore SC, for the Lynchs, Mr Fennelly agreed he was aware of e-mails from solicitors stating the loan was recourse to land only.
When counsel suggested a
€45 million valuation for the Waterford lands informed AIB’s approach to this loan, Mr Fennelly said a credit committee is conservative.
If AIB had adhered to specific advice from its solicitors as to how the loan facility should have been handled, there would have been “no absence of clarity”, Mr Fennelly agreed.
The “to-ing and fro-ing” did give rise to confusion and there was a very tight time frame within which to consider the final loan terms, he said.
In his view, a non-recourse loan facility was “never on offer”, Mr Fennelly said.
