A prima facie case of fraud against J & E Davy has been established by Belfast property developer Patrick Kearney and his firm, a High Court judge has said.
In a judgment, Mr Justice Michael Twomey said it seems from the pleadings before the court and the evidence contained in a Central Bank of Ireland report that the fraud allegations are “very far removed from being mere assertions”.
The judge made the comments in a ruling on a pre-trial application in a case taken against the stockbroker by Mr Kearney and his property investment company, Kilmona Holdings Ltd.
In his action against Davy and 16 of its former employees and senior management, Mr Kearney, of Bedford Street, Belfast, claims Davy made a windfall profit of some €25 million from bonds it sold on his behalf in 2014.
He claims Davy, while acting as his agent in the sale to what he was assured was a third party, had in fact sold them to the O’Connell Partnership, which was made up of the group of 16 Davy employees.
He claims he learned about the alleged concealment after Davy was last year fined a record €4.1 million by the Central Bank due to the way in which the stockbroker sold his bonds.
The claims are denied.
On Wednesday, the judge rejected Davy’s pre-trial application asking the court to direct that Mr Kearney provides further details about the alleged fraud against it. The stockbroker claimed it needed adequate replies in respect of specified particulars in order to properly defend the action.
Mr Justice Twomey said it seemed to the court that the plaintiffs have established a prima facie case of fraud against Davy and that Davy has a reasonable picture of that alleged fraud.
He noted the details provided by the plaintiffs included the names of people alleged to have made fraudulent representations, the substance of the alleged fraudulent statements, and the specific and approximate dates of when these were made.
However, he stressed this does not mean Davy may not have a defence to these allegations and he said the prima facie finding is “still some way from establishing, on the balance of probabilities, that the defendants are guilty of fraud”.
The defendants say the firm owed no fiduciary duty to Mr Kearney and Kilmona as they were allegedly “execution-only” clients, the judge noted. They also say there was no secret profit for which account has to be made to the plaintiffs and that Mr Kearney was aware the purchaser of the bonds comprised Davy employees.
The judge also noted the plaintiffs have relied extensively on the Central Bank report in its claim, which counsel for Davy submitted is inadmissible. He said it was not necessary for the court to decide on the admissibility or otherwise of the report at this stage.