Judge rejects First Active fraud claim

THE CUNNINGHAM Group of building companies has lost a central element in its marathon legal action against First Active after a judge yesterday rejected a claim of fraud against the bank in its dealings with the group.

Mr Justice Frank Clarke ruled that Galway developer Brian Cunningham’s group had failed to establish a prima-facie case against the bank or against a receiver sent in by the bank to take over the group in 2003, which was necessary to allow the trial on alleged fraud to continue.

The action, which involved a large number of linked cases, began last year.

The judge only finished hearing evidence and submissions from the Cunningham side earlier this month.

The case included a number of unsuccessful efforts to get fugitive lawyer Michael Lynn to testify from abroad for the group.

Mr Lynn had acted for Mr Cunningham in the run-up to the receivership.

Yesterday, Mr Justice Clarke said he wanted to make it clear he was dismissing the “most contentious” part of the case, which was an allegation of fraud against First Active.

He made the ruling following applications by First Active for a direction for “non-suit” after all evidence on the Cunningham side had ended. The next step would have been to hear evidence from the other side.

It was alleged in the case that loans totalling some €30 million were issued between 1999 and 2002 to the Cunningham Group for three projects, including a site in Salthill, Galway, and a revamp of Finglas town centre in Dublin.

It was put into receivership after defaulting on loans, although Mr Cunningham claimed the debt could have been brought under control if two flagship construction projects were completed.

In the proceedings, Mr Cunningham claimed First Active acted as a shadow director of the Cunningham Group and that it extinguished his power over his companies and conspired to damage his personal interests and those of the group. He alleged that First Active forced him to sell a key asset with development potential of £310 million (€393 million) in 2002 before reneging on a promise to fund two additional developments.

Mr Cunningham’s case was also against receiver Ray Jackson, who was sent in by First Active.

First Active and the receiver denied the claims. First Active denied it or its officers devised and implemented a fraudulent scheme to strengthen the bank’s security.

In his ruling yesterday, Mr Justice Clarke said he would defer dealing with other aspects of the case, in relation to debentures on some of the property involved, until later this week.