Businessman Philip Lynch has lost his Supreme Court bid to stop Allied Irish Banks pursuing him for repayment of a €26m judgment obtained over failure to repay a loan made to him, his family and developer Gerry Conlon to buy development lands in Waterford.

Mr Lynch previously argued enforcement of the judgment would have potentially catastrophic consequences. The lands at issue were valued around 2011 at between €3m and €4m, the courts previously heard.

The three judge Supreme Court today found Mr Lynch himself is liable for the €26m. However it cleared the way, if the parties decide to pursue the option, for a new trial of an issue concerning whether the judgment should also be enforced against his wife Eileen and four adult children: Judith, Paul, Philippa and Therese.

Mr Justice Donal O’Donnell said there was an significant difference between the position of Mr Lynch and that of his wife and chidlren in relation to the transaction.  Mr Lynch was the party to whom the transaction was brought, it would not have been possible without his significatn wealth and they were only introduced at a very late stage for Mr Lynch’s own“understandable, private wealth management purposes”.

AIB had no interest in the other members of the family but a last minute change by the bank — in loan documents concerning the issue of recourse for repayment — was capable of causing confusion. The judge said it did cause confusion and led to the other family members being exposed to potential liability for €25m.

In the particular circumstances of the case, there was an issue whether it would be equitable to permit AIB to enforce the judgment against the other family members "or at least to do so without having first pursued execution of the judgment against the principal borrowers", namely Mr Lynch and Gerard Conlan.

“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 unexpectecdly sour and the undeserved profit turns into an undeserved liability,” the judge said.

“Harsher things have been suffered by many individuals in recent years,” he added.

However, he said, it must be recognised that the key feature which gave rise to the potential liability of Eileen Lynch and her children was “the tax driven requirement” they should not only be parties to the land transaction but should also be treated as borrowers of the loan. It was the failure to address or appreciate the legal consequences of that step in the transaction which exposed them to liability in the first place.

The fact now is that the family, whose net worth may be limited, face a “potentially ruinous” personal liability of which they were not advised, and which the bank had never sought or relied upon fron a commercial perspective but only obtained to facilitate enforcement of the loan against Philip Lynch and Gerard Conlan, he said.

In those circumstances, there may be “a residual question” whether it was equitable to permit AIB to enforce the judgment against the other members of the family, the judge said. To that limited extent, he would set aside the judgment obtained against the other family members and leave it to the sides to consider if there was any merit in pursuing that issue further.

Summary judgment against all of the Lynch family was granted by Mr Justice Micheal Peart in December 2011 on foot of his earlier finding of liability for the loan.

The High Court was also previously told Mr Conlon accepted that High Court decision meant Mr Conlon had no defence to a similar judgment being entered against him unless Mr Lynch won his appeal.

The AIB loan at the centre of the case was made in February 2007 to buy development lands in Waterford.  The High Court  rejected the family's arguments they were not liable to AIB and also dismissed their claims they were entitled to be indemnified for the loan by two law firms — Matheson Ormsby Prentice Solicitors and LK Shields Solicitors — arising from advice and information given concerning the transaction.

The High Court found the family genuinely but mistakenly believed the AIB loan was a non-recourse loan, meaning the bank’s recourse was confined to the lands.