AIB has set aside €100 million to compensate investors affected by a failed series of boom-time UK commercial property funds, including clients who were not part of a settlement agreement with the lender last month after taking legal action.
The High Court was told on July 8th that AIB had settled 270 cases over investor losses from collapsed UK property funds, known as the Belfry Funds. The lead case, brought by 83-year-old investor Bernadette Goodwin, came before the court weeks earlier, but was adjourned to allow out-of-court settlement talks take place.
The cases concerned investments of between €100,000 and €400,000 each in the Belfry Funds, which the investors alleged were promoted between 2002 and 2006 by AIB and four directors of various companies in the Belfry Properties group.
Following collapse of the funds, the investors initiated claims in August 2014 seeking damages on grounds including alleged negligence in the operation of the funds. The settlement was reported at the time to equate to about half of what investors put into the funds.
AIB revealed in its interim report for the six months to the end of June, published on Wednesday, that it has set aside €100 million “in respect of potential liabilities” relating to the Belfry property funds investments sold to customers between 2002 and 2006. Some €25 million related to the settlement and legal costs associated with the litigated claims.
AIB chief executive Colin Hunt told The Irish Times that the bank will now carry out a “look back” over the cases of other Belfry investors who did not take legal action. It has set aside an initial €75 million provision to cover this.
“Where it’s necessary to do so, we will redress the impacted customers. I’m absolutely determined to bring an end to these legacy issues,” he said, adding that the bank would proactively look at Belfry investments on a case-by-case basis. “Where we have have erred, we will make a redress to those customers. There is no need for customers to take any action.”
Mr Hunt declined to comment on the reported terms of the settlement of the legal cases or what level of compensation other investors should expect.
While the first Belfry fund, established in 2001, was a big success for investors, five subsequent funds, which were leveraged up with loans, ran into trouble during the global financial crisis, when property values dropped. Some 2,500 AIB customers invested £214 million (€251 million) into the failed funds.
Investors who took legal action against the bank alleged that elements of the investment were misrepresented to them. They also claimed damages for breach of contract, negligence/breach of statutory duty, breach of fiduciary duty, negligent mis-statement and misrepresentation. The defendants denied the claims.
On consent, the allegations of fraudulent concealment made against the defendants were withdrawn as part of the settlement last month, the High Court heard at the time.