The Supreme Court has described as "understated" a finding by the High Court that businessman Philip Lynch gave "hopelessly confused and unreliable" evidence concerning the circumstances leading to a €25 million loan being issued to buy development lands in Waterford.
Mr Justice Donal O'Donnell made the comment when dismissing Mr Lynch's appeal aimed at stopping Allied Irish Banks pursuing him to pay a judgment obtained in 2011.
With continuing interest it came to €26 million, after failure to repay the loan to him, his family and developer Gerry Conlan to buy 86 acres at Kilbarry. In 2011, the land was valued at less than €5 million.
However, the three-judge court allowed the appeal of Mr Lynch’s wife Eileen and four adult children – Judith, Paul, Philippa and Therese – to the extent of finding they are entitled to trial of an issue whether the bank is entitled to pursue them for the judgment.
All the Lynches previously argued enforcement of the judgment would have potentially “catastrophic” consequences.
Mr Justice O’Donnell said the development deal appeared very attractive in 2007 as it was estimated to quickly produce about €20 million profit for the Lynches with apparently no risk attached.
Before there could be any real risk, there would have to be a total collapse in Irish property values and a “dramatic and total destruction” of the wealth of Mr Lynch and Mr Conlan, but it seemed unlikely that would occur. “We now know better,” the judge said.
The judge said the High Court finding that Mr Lynch gave “hopelessly confused and unreliable” evidence that he would not have gone ahead with the deal unless the loan was non-recourse appeared “amply justified and, if anything, understated”.
Looked at realistically, the Lynches’ claim against AIB, particularly Philip Lynch’s, always had remote prospect of success given the terms of the loan documents, the judge found.
Their real claim, if their evidence was accepted, was against those who they alleged had failed to properly advise them, or had advised them wrongly, he said.
He disagreed with the High Court that the LK Shields law firm owed no duty of care to the Lynches when advising on the loan facility agreement. The firm was negligent because a solicitor with the firm mistakenly told the Lynches the loan was a non-recourse loan when in fact it was recourse, he ruled.
However, Mr Justice O’Donnell added, it would be an “injustice”, given the particular circumstances of this case, to find LK Shields must indemnify the Lynches against AIB’s claim.
There was, he found, no reliance on the legal advice and therefore any damage suffered was not caused by the solicitor’s error. The loss by the Lynches was rather caused by a combination of the property collapse and the fact that despite their having had constant advice, little or no attention was paid to the borrowing terms.
Mr Justice O’Donnell said there was a significant difference between Mr Lynch’s position and that of his wife and children as the family were brought in late for Mr Lynch’s “understandable, private wealth-management purposes”.
“It might not be unduly harsh to conclude that persons who stood to gain very significant amounts of wealth for little risk or involvement do not deserve particular sympathy if the transaction turns unexpectedly sour and the undeserved profit turns into an undeserved liability,” he said. “Harsher things have been suffered by many individuals in recent years.”
Summary judgment against all of the Lynches was granted in December 2011.
The High Court was previously told that Mr Conlon accepted he had no defence to a similar judgment being entered against him unless Mr Lynch won his appeal.
