MMI Stockbrokers' fraud action faces collapse after adjournment motion fails

The liquidator of Money Markets International Stockbrokers Limited (MMI) will apply to the High Court on Monday to discontinue his action alleging fraud against seven former directors of MMI. The move comes after a High Court judge yesterday refused liquidator Mr Tom Kavanagh's application to adjourn the action. All seven former directors - Mr Oisin Fanning, Mr John Curran, Mr Paul Boucher, Mr Colm O'Reilly, Mr Tim Murphy, Mr Cian Kelly and Mr Peter O'Byrne - have strongly denied the allegations of fraud. They had opposed the application to adjourn the action against them, arguing their reputations have been severely damaged by extensive publicity given to the liquidator's claims and that they required an early hearing to vindicate their good names.

The liquidator had claimed that sums totalling some £1.9 million (€2.4 million) were debited in four transactions, without authorisation, from an IBI Nominees account and another held by Jersey-based Cater Allen Nominees Ltd and credited to the benefit of two directors - Mr Fanning and Mr Curran - and 20 others associated with these.

The liquidator claimed there were insufficient funds in the Cater Allen account to meet the transactions and the Jersey company owed £430,000.

In refusing the adjournment application yesterday, Mr Justice Kelly noted that, following his appointment as liquidator in March 1999, Mr Kavanagh had been in correspondence with Cater Allen, a client of MMI.

As a result, the liquidator took the view that certain activities of the defendants regarding dealings with Cater Allen were fraudulent and, suing in the name of the company, took proceedings in October 1999.

The liquidator knew he needed evidence from Cater Allen to substantiate his case and contended, in the adjournment application, that there had been a change of attitude on the part of Cater Allen towards the defendants, which had struck the liquidator like a bolt from the blue and created a large hole in the case. The liquidator wanted to adjourn the action so he could plug that hole.

The first thing to note regarding the alleged change of attitude was that, at no stage prior to the liquidator taking the proceedings or after it, had Cater Allen made any claim of fraud against the defendants. Whatever differences or disputes Cater Allen had with the defendants, the company had not characterised these as fraudulent.

Before the action began, the liquidator had asked Cater Allen 11 questions and the company replied on October 15th last. Cater Allen was not asked to confirm if it or its employees would give any evidence at the hearing alleging fraud. The action was taken on October 22nd.

Cater Allen later made it plain it was making no charge of fraud against the defendants. In December last, it said it was satisfied regarding a £200,000 transaction which formed part of the alleged fraud and, on January 28th last, it expressed satisfaction with two other transactions forming the bulk of the claim.

On the evidence before him, the judge found there was no change of attitude on the part of Cater Allen. It had never alleged fraud. That claim was the liquidator's. An elementary step would have been to seek an assurance of Cater Allen's co-operation as neither the company nor its employees could be forced to come and give evidence in the action but there was no such attempt before the action started.

Before the proceedings were started, the liquidator was alert to a possible problem with Cater Allen, especially regarding Mr Sam Nolan, who had dealt with the MMI account in Cater Allen. This should have caused concern but did not. On December 13th 1999, Cater Allen's legal representative in Jersey had said Cater Allen had no claim in the liquidation.

Mr Justice Kelly said the liquidator should not have been surprised at events as they had now transpired. He had not confirmed prior to the proceedings whether Cater Allen felt itself defrauded and not established the loss necessary to found a claim for damages.

The liquidator had proposed a number of steps to mend his hand, the judge said. These included an examination of Mr Nolan under Section 245 of the Companies Act. However, this could be done only with the concurrence of Mr Nolan and the liquidator's view that Mr Nolan would voluntarily come here to be examined was "a triumph of hope over experience" and bordered on the "fanciful".

In his 25 years at the Bar, the judge said he had never met an official of an offshore bank or trust company who had volunteered to come to Ireland and be examined about a company in liquidation.

The liquidator had said that, if Mr Nolan would not come, there would be an application to have him examined in Jersey. But this would take some time and the judge could not see how his answers to questions regarding Cater Allen's attitude could help the liquidator's case.

The liquidator had also proposed to seek discovery of documents in Jersey to support his claim of a change in attitude by Cater Allen. Even if there was such a change of attitude, and papers were discovered, they would not be admissible in evidence here.

Another proposal was for the liquidator to sue Cater Allen for £430,000. The judge said there must be a doubt whether all those monies were due and it was too late to institute such action now.

The last proposal was to have Mr Adrian Lynch, a bookmaker, of Kilkee, Co Clare, examined about Cater Allen. The judge said this would be of little assistance to the liquidator and could, in any case, have been done at any time over the past year.

Mr Justice Kelly said the case had been listed for some time and he would have been slow to adjourn it. When one also considered the position of the defendants, against whom serious allegations had been made, which attracted extensive publicity, the case for refusing the liquidator's application was overwhelming.

The defendants had been wisely advised not to engage in an interminable exchange of affidavits at the interlocutory stage of the proceedings and instead sought an early trial. They had complied with strict time limits and answered extensive interrogatories. They were entitled to give their side of the story. Any adjournment would not be short and it would be wholly unjust to grant it.

Following the ruling, Mr Bill Shipsey SC, for the liquidator, said he would apply to Ms Justice Laffoy on Monday for directions to discontinue. The judge said if the case was not discontinued, he would hear other motions in the case on Monday afternoon. He awarded costs of the adjournment application to the defendants against the plaintiff company.