Investors lose case against IBRC

MARY CAROLAN

An investment agreement between Anglo Irish Bank and 50 wealthy Irish people to buy and renovate two New York hotels meant "you're on your own" rather than "Anglo would mind them", as the investors argued, a Supreme Court judge has said.

In 2006, Anglo solicited Century Homes co-founder Gerard McCaughey and the other investors from among its "best customers" as people with a net worth of €5 million, or incomes exceeding €500,000 a year, and they were unlikely to be "innocents abroad", Mr Justice Adrian Hardiman said.

He ruled yesterday that the terms of a “commitment agreement” signed by the investors and/or a “black brochure” concerning the investment created no liability for the bank, now IBRC, to Mr McCaughey “for anything short of direct lies or fraudulent concealment”. He also upheld findings that no case of fraud was established.

The “breathtakingly broad” terms drafted by the bank in the investment agreement stated the investors had all the material they wanted concerning the proposed investment, were not relying on any representations, had made their own decisions based on their own appraisals and may not have been given complete information but still wished to proceed, he said.

The brochure referred to the investment as “high-risk” and to 10 risk factors, although not a zoning risk, and stated that prospective investors should consult their own advisers.

The brochure also referred to renovation costs of about $25 million, although those increased to up to $90 million in 2007 and $102 million by 2009, beyond the capacity of the fund.

Mr Justice Hardiman yesterday delivered the three-judge court's judgment upholding the High Court 's dismissal of the "pathfinder" action by Mr McCaughey over the investment project backed by Anglo's private banking arm, involving the Beekam Tower and Eastgate Tower hotels.

Mr McCaughey, Sandymount , Dublin, and Manhattan Beach, California, sued Anglo and the Anglo-owned Delaware-based Mainland Ventures Corp over the Anglo Irish New York Hotel Fund, a private equity investment. He was one of 50 people who invested an average of $1 million in the hotels fund.

The ruling has adverse implications for 22 similar actions.

The bank denied all claims against it or that it owed any duty of care at all to the investors.

The investors had lost their entire investment although the bank retained a substantial asset, Mr Justice Hardiman noted. He agreed with the High Court that the “commitment agreement” meant the bank had exempted itself from liability for anything “short of direct lies or fraudulent concealment”.