U2 drummer Larry Mullen and his partner have sued their former accountants claiming they have suffered significant loss of more than €11 million due to alleged unsuitable investment advice.
The alleged advice related, among other matters, to a €3 million investment in a 'European hotel fund' and a €4.5 million loan for an investment in Romania, it is claimed.
In addition to at least €7 million investment losses, the couple claim they have incurred further significant liabilities related to loans issued in connection with the investments and bank funding costs.
The case relates to agreements dating from late 2000 under which Mr Mullen and his partner Ann Acheson allege they retained Gaby Smyth and Company accountants and/or Gaby Smyth as a sole trader in relation to their financial, taxation and investment affairs.
Under those agreements, the defendants were to identity suitable investment opportunities in circumstances where the couple had advised on several occasions they had a conservative and low risk approach to investing, it is claimed.
Among various claims, the couple allege they were told in November 2007 that a fund known as the ‘European Hotel fund’ was suitable with “very little risk or downside”.
That fund involved a high degree of risk and this was evident from an information memorandum prepared by Goodbody Stockbrokers and PreGroup in October 2007, the couple claim.
The memorandum stated the investment “involves a high degree of risk” and investors should ”be able to withstand the total loss of their investment” but the memorandum was not drawn to the couple’s attention, they claim. It is claimed the couple invested €1 million in that hotel fund in December 2007 and a further €2 million in June 2009.
It is further alleged Gaby Smyth Accountants and/or Gaby Smyth continued to record the value of the European Hotel Fund as €3.625 million in the couple's accounts until December 21st 2011. This was despite the existence of financial statements, filed in the Companies Registration Office on September 2010, providing for a 52 per cent write down on the cost of that investment. Further financial statements filed in September 2011 provided for a further 48 per cent write down on that cost, it is claimed.
The case also relates to a €500,000 investment by the couple in a property in Timisoara, Romania and the couple allege they got a €350,000 loan for that investment. They claim they got a further loan from Ulster Bank of €4.5 million on joint and several terms with two other parties, one of whom they didn't know, in relation to that investment.
They allege the firm and/or Gaby Smyth failed to advise them of the identities of the other person to whom the Ulster Bank loan was being provided and failed to advise them of the different contributions being made by the other investors.
They were not told the contribution from the investor whose identity was completely unknown to them was “significantly smaller” and were also not advised that their interest, and the interest of the two other investors, was held on trust by a named individual, it is alleged.
A further €1.2 million was invested in a property fund, the Orion property fund, managed by Liberty Asset Management, it is claimed. A €1.2 million loan from Ulster Bank financed that investment, it is alleged.
The couple also claim they got a €2 million loan from Ulster Bank around January 2006 for the purposes of a €3 million investment in the Crystal property fund, also managed by Liberty Asset Management.
They are claiming damages, including exemplary damages, for breach of contract and/or breach of collateral contract, negligence, breach of duty, negligent misrepresentation and/or negligent misstatement. The claim is also for restitution or, alternatively, damages for unjust enrichment.
The action has been brought by Mr Mullen and Ms Acheson, with an address in Howth, Co Dublin, against Gaby Smyth and Company Accountants; Gaby Smyth as a partner in the firm and/or a sole trader carrying on business at Merrion Road, Ballsbridge; and Jill Percival and Pat Cleary, as alleged partners or former partners in Gaby Smyth and Co. The latter two defendants say they had no involvement in the advice and should not be sued, the court heard.
When it came before Mr Justice Brian McGovern at the Commercial Court today, he refused an application by Douglas Clarke BL, for the couple, to fast-track it in the court’s list.
Paul Gardiner SC, for the defendants, argued there had been culpable delay in progressing the case since it was initiated in late July 2013 while Mr Clarke argued delay arose from the failure to deliver a defence.
The judge found the overall delay was such as to deprive the action of fast-track procedures. His decision means the case will proceed in the normal High Court list.