Court refuses order against MMI brokers

The High Court has found there is no evidence to support the making of restriction orders against three directors of the collapsed stockbroking firm, Money Markets International (MMI) Stockbrokers Ltd, which was wound up in 1999.

Mr Justice John McMenamin also noted yesterday that the liquidator of the company had accepted there was no issue in relation to the honesty of the directors of the company, particularly Oisín Fanning, who was managing director and chairman of the company until August 1998.

No single factor was identified in the evidence which constituted "a smoking gun" or indicated misconduct, the judge held.

MMI, Mr Justice McMenamin added, experienced a series of difficulties during May 1998. MMI's primary business was a high-risk and speculative one - investment in oil stocks - and all involved, including MMI's clients, were aware of that.

Each of the respondent directors - Mr Fanning, Colm O'Reilly and Timothy Murphy - took steps to protect the interest of investors at risk of detriment to themselves, he found.

The fact MMI had invested deeply in Dana Petroleum in 1997 and 1998 would not, per se, constitute irresponsibility, particularly in the light of MMI's previous profitable experience with Tullow Oil and in light of a series of "unfortunate events" which were "neither singly nor collectively foreseeable", the judge said.

He was not persuaded that the directors were irresponsible in not foreseeing or allowing for what befell the company. The series of misfortunes would be difficult "for even the most perspicacious of directors to anticipate".

There was no evidence that the conduct of the directors could be regarded as so incompetent as to amount to irresponsibility, he found. The conduct of the directors was not the causative factor in the insolvency of the company or any deficiency in assets which, in any case, ultimately occurred after the respondents had resigned.

Mr Justice McMenamin also held it was not irresponsible of the respondents to permit a deficit in client funds held by the company in September 1998.

Nor did the evidence show unsatisfactory communication with the Central Bank before June 4th, 1998, he said. Rather, the evidence showed the company apprised the bank of its difficulties in a timely manner and in accordance with its regulatory obligations.

He also noted that proceedings brought by the liquidator against a number of MMI directors alleging fraud, breach of trust and conversion were discontinued in March 2000.

Cater Allen Nominees Ltd Accounts had accepted that neither Mr Fanning nor any other director had misapplied or misappropriated any of the funds standing to the credit of its accounts.

Mr Justice McMenamin was giving judgment on proceedings brought by the MMI Stockbrokers liquidator Tom Kavanagh, on foot of his legal obligations under the Companies Act 1990, against the directors of the company.

Mr Kavanagh was appointed in December 2002 and later brought proceedings under the Companies Act against 10 people involved with the company.

Because MMI was insolvent at the date of its winding-up, the judge noted the liquidator was obliged under court practice directions to seek to have the directors of the company restricted under section 150 of the Companies Act.

Because the company was wound up before the coming into effect of the Company Law Enforcement Act 2001, the liquidator could not seek to be relieved by the director of corporate enforcement from bringing such an application.

Various directors of the company sought a preliminary declaration from the High Court that they had acted honourably and responsibly and, in July 2006, an order was made dismissing the liquidator's application against six directors.

The application was adjourned against Peter O'Byrne for personal reasons and the court went on to consider the application in relation to - Mr Murphy, Mr Fanning and Mr O'Reilly, who were primarily responsible for the operation of the company's stockbroking business.

Mr Fanning was managing director and chairman of the company until August 1998, Mr Murphy was MMI's head of stockbroking and, after August 1998, its managing director, and Mr O'Reilly was the company's senior dealer.