Kearney v J&E Davy, T/A Davy
| Jurisdiction | Ireland |
| Judge | Mr. Justice Quinn |
| Judgment Date | 02 November 2022 |
| Neutral Citation | [2022] IEHC 606 |
| Year | 2022 |
| Court | High Court |
| Docket Number | Record No. 2021/3509 P |
[2022] IEHC 606
Record No. 2021/3509 P
THE HIGH COURT
Judgment of Mr. Justice Quinn delivered the 2 nd day of November 2022 (Discovery of Documents)
. This judgment relates to applications for orders for discovery of documents pursuant to O. 31, r. 12 (1) issued respectively by the plaintiffs and the defendants.
. The plaintiffs sought discovery of 47 categories of documents, many of which had multiple sub-categories. As against all of the defendants, twenty-four categories of documents were sought. As against the first named defendant only, a further seven categories of documents were sought. As against the seventh named defendant only, a further 16 categories of documents were sought.
. The defendants sought from the plaintiffs eight categories of documents, most of which included a number of subcategories.
. At the time of hearing the motions for discovery, the parties had reached agreement as to many of the categories sought and the applications regarding certain categories were withdrawn. There remained for decision by this court contests regarding three of the categories of documents sought by the plaintiffs and one category sought by the defendants.
. The first plaintiff was the owner of subordinated floating rate notes in Anglo Irish Bank, being 22.6 million units due 2016, and 5 million units due 2017, all referred to as “the bonds”. He had borrowed €18.45 million in 2009 from Anglo Irish Bank to fund the purchase of the bonds. His loans were later sold to Stapleford Limited. In 2014 the plaintiff sought to sell the bonds and was put in contact through an advisor, Mr. Tom Brown of LeBruin Private, with the seventh named defendant Mr. Tony O'Connor who it is said was at the time a “member and employee of the first named defendant (Davy)”.
. The plaintiff first met Mr. O'Connor on 14 October 2014. He claims that in that meeting Mr. O'Connor represented to him that he was a financial advisor with Davy and that Davy and its servants and agents, including he, Mr. O'Connor, had the expertise to advise the plaintiffs in relation to the sale of the bonds and to act as the plaintiffs' agent in securing the sale of the bonds at the best price.
. The plaintiff claims that based on these representations and assurances, he decided to instruct Davy for the purpose of obtaining advice and to act as his agent in the sale of the bonds.
. The plaintiff claims that in addition to agreeing to act as his adviser and agent in the sale, Davy advised him to take out a loan to deal with or discharge his liability to Stapleford which held security over the bonds. The plaintiff says that in reliance on this advice, he entered into a loan agreement with an entity referred to as the “O'Connell Partnership”. The terms of the loan agreement were that the O'Connell Partnership agreed to lend a sum of €2.36 million for the purpose of enabling the plaintiffs to settle the Stapleford debt.
. It is also a term of the loan agreement that in consideration for the advance of the loan, the plaintiff would transfer the bonds to the O'Connell Partnership or its nominee for a net payment of €3.022 million which would be made to the second named plaintiff, Kilmona Holdings Limited. The transfer of the bonds would be effected on the release of the security held by Stapleford.
. The loan agreement said to reflect these terms was entered into on 14 November 2014 between the plaintiffs and the O'Connell Partnership.
. Each of the second to seventeenth named defendants was a member of the O'Connell Partnership. The defendants say that this was not a partnership, but a “consortium” established for the purpose only of this transaction.
. In the statement of claim, the plaintiffs describe each of the second to seventeenth named defendants as being at all material times “a member and employee of the first named defendant and a partner in the partnership which traded and was known as the O'Connell Partnership”. Although the defendants assert that the O'Connell Partnership was not a partnership in the legal sense, they do not deny that they were all members of the “ consortium”. Nor is it denied that they were “members” or “employees” of Davy.
. It is also admitted by the second to seventeenth named defendants that while they acquired the bonds in a single transaction entered into in the name of the consortium, each of them individually owned a certain number of the bonds.
. The second to seventeenth defendants say that insofar as they had any other involvement in the events the subject matter of the proceedings, they acted exclusively in their capacity as employees or officers of the first defendant, Davy.
. On 14 November 2014, Mr. O'Connor informed the plaintiff that Davy had identified a potential purchaser for the bonds. The plaintiff claims that he was informed that the purchaser was a client of Davy, based in the UK, which was interested in purchasing the bonds. He claims that when he asked for the identity of the purchaser, he was informed that this was confidential information and Mr. O'Connor refused to disclose the purchaser's identity.
. The plaintiff claims that he was informed that the best price likely to be obtained for the bonds was 20.25 cent per unit and that the Davy client was offering to purchase the bonds at that price, namely a total sale price of €5,589,000. It is alleged that Mr. O'Connor, as servant and agent of Davy, advised the plaintiff that it was unlikely that a better price would be obtained.
. The plaintiff says that when he was informed of this price, he made other inquiries and that he was informed by another financial service provider, Cantor Fitzgerald Private Clients, that the amount being offered was below the market price achievable for the bonds. He says that he disclosed this to Mr. O'Connor, who insisted that higher prices were not achievable. The plaintiff claims that Mr. O'Connor actively dissuaded him over the course of 13 and 14 November 2014 from seeking to have the bonds sold at a higher price and advised him that he should proceed with the sale to the Davy client.
. The plaintiff claims that acting on the advice of Davy, he decided not to pursue a higher price and agreed to accept the advice of Davy to sell the bonds to its client for the total sum of €5,589,000.
. The plaintiff says that neither Davy nor Mr. O'Connor or any of the defendants disclosed to him at the time that the purchaser was, not an external client of Davy, but the members of the O'Connell Partnership who were all members and employees of Davy, being the second to seventeenth named defendants. He characterises this as a “ surreptitious purchase of the bonds” by the defendants (paragraph 18 of Reply and Defence to First Defendant's Defence and Counterclaim).
. All these allegations are denied by the defendants. It is denied that Davy itself became an advisor or agent of the plaintiff. It is said that Davy agreed to provide an execution only service, and certain limited ancillary services to the second named plaintiff in relation to the transaction, as evidenced by the terms of an “ account opening pack”. It is said that there was no fiduciary relationship between Davy and the plaintiffs, and that Davy gave no advices to the plaintiffs.
. The defendants say that the plaintiffs were advised in the transaction by Mr. Tom Brown and/or LeBruin.
. The defendants also plead that the structure whereby the O'Connell Partnership would advance a loan to the plaintiffs for the purpose of settling the debt with Stapleford was formulated not by Davy or any of the defendants, but by the plaintiffs' advisor, Mr. Brown.
. They plead the doctrine of ex turpi causa non oritur actio, asserting that the plaintiff unlawfully concealed from and/ or misrepresented to Stapleford his intentions regarding the bonds and the price available for them.
. The seventh named defendant, Mr. O'Connor who is represented separately from the other defendants, makes very specific allegations as to the manner in which the transaction came about and which he says prohibits the plaintiffs from maintaining this action by reason of the operation or the doctrine of ex turpi causa sua non orito actio. He alleges that, in the course of communications during October and November 2017, Mr. Brown informed him that Mr. Kearney owed a debt of approximately €18 million to Stapleford, which Stapleford had acquired from the liquidators of IBRC and that Mr. Kearney's objective was to reach a settlement with Stapleford for an amount in the region of €2.5 million to €3 million which Mr. Brown believed had been achievable based on initial discussions with Stapleford. Mr. O'Connor says that Mr. Brown believed that the plaintiff, despite having access to significant funds, had represented to Stapleford that he had no money and that he would require a loan to settle his debt, and that he was also engaged in negotiations to settle his indebtedness, in an amount exceeding STG£300 million, to a Cerberus entity.
. Mr. O'Connor alleges that Mr. Kearney's debt to Cerberus was close to being settled but that the Stapleford debt had to be addressed first. This in turn, Mr. O'Connor alleges, led to the transaction proposed by Mr. Brown and which led to the loan and purchase agreement made on 14 November 2014, the terms of which were as follows:-
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(a) That the O'Connell Partnership would lend the sum of €2.36 million to Mr. Kearney to enable him to settle his debt with Stapleford.
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