Court clears way for couple to sue IBRC over fund

A couple have claimed €250,000 savings used for part of a €1 million investment with the former Anglo Irish Bank was the first part of the fund to be eaten up in fees and costs before the entire investment was wiped out in the global property collapse.

Retired businessman Denis O'Callaghan and his wife Martina have been given High Court permission to apply to lift the statutory bar on suing Anglo's successor, Irish Bank Resolution Corporation (IBRC), over the failed investment fund.

The couple, of Abbot's Hill, Malahide, Co Dublin, allege Anglo mis-sold the investment and failed to disclose crucial information about it to them. They says they used €250,000 of their own savings and €750,000 in borrowings from Anglo for the investment called the European Geared Property Fund.

'Joint venture'
Anglo represented that the fund had been created to generate profit from the perceived robustness of the European commercial property sector, it is claimed. The fund initially targeted investment in 10 properties that were sourced and secured by several "joint venture" partners.

The fund “performed disastrously in the wake of the collapse of the global property market and our investment is now effectively worthless”, Mr O’Callaghan said in an affidavit.

Anglo arranged for all or most of the borrowings of those associated with the investment fund and Anglo got a margin of 1.5 per cent over the costs of the funds, he also said.

Arrangement fees
Anglo charged arrangement fees for the purchase of the properties and the deals also involved interest swap contracts which were also charged at a fee, he added.

“The huge impact of the initial outlay of fees was to effectively cost 31 per cent of our investment at the outset”, Mr O’Callaghan said. The entirety of their equity was “eaten up in fees and costs” resulting in them relying exclusively on the growth of that portion of the investment, for which they had borrowed, to generate a return.

None of this was ever explained to them, for the “obvious reason” that Anglo was generating income from both sides of the transaction in a “massive conflict of interest”, he claimed. The fundamental risk factors associated with the investment were not disclosed, he also alleged.

The president of the High Court, Mr Justice Nicholas Kearns, yesterday granted the couple permission to apply to lift a statutory stay on the bringing of proceedings against IBRC, brought in by the 2013 IBRC Act putting the bank into special liquidation.