Court refuses to strike out Kearney’s claim against former Davy employees

The High Court has refused to strike out a claim by businessman Patrick Kearney alleging former Davy stockbrokers employees misled him over the onward sale of bonds he had held in Anglo Irish Bank. 

 

Fifteen of 16 former employees, who are being sued along with Davy itself, had asked for the strikeout on grounds including that the case was bound to fail and/or was unsustainable. 

 

Mr Justice Michael Twomey said the 15 raised doubts over Mr Kearney’s claims that he was induced by a fraudulent misrepresentation to settle a previous case in 2015 over the bond sale. 

 

However, the judge refused to strike out the latest proceedings because, in this case, Mr Kearney alleged fraud. 

 

There existed, therefore, he said, “the possibility of clandestine activity on the part of the defendants, combined with [...] prima facie evidence of a lack of candour on the part of Davy, regarding the transaction in dispute.” 

 

There was a possibility there may be concealing of evidence which would come to light at the hearing of the case, he said. 

 

“For this reason, this court cannot say that it is ‘clear beyond doubt’ that Mr Kearney will not succeed, such that his proceedings should be struck out now, without a trial,” he said. 

 

The case arose after Belfast-based Mr Kearney and his company, Kilmona Holdings, approached Davy to sell his bonds, known as subordinated floating rate notes, held in Anglo Irish Bank. 

 

The bonds were sold for €5.3 million in November 2014 to the O’Connell Partnership, which was made up of 16 employees and senior management in Davy. 

 

Mr Kearney later learned the partnership comprised Davy employees. In 2015 he and his firm brought High Court proceedings alleging, among other things, his bonds were sold at an undervalue and that there was a conflict of interest on the part of Davy. 

 

That case was settled with Mr Kearney and Kilmona receiving €1.125 million. 

 

However, Mr Kearney and Kilmona brought new proceedings against Davy and members of the O’Connell partnership after Davy was fined €4.13 million by the Central Bank for regulatory breaches and failures to flag potential conflicts of interest arising from the Kearney/Kilmona bond transaction. 

 

Mr Kearney now claims that a further fraud took place in December 2015 when the previous case was settled, 

 

In particular, he claims that three of the personal defendants, Tony O’Connor, Tony Garry and Barry Nangle, fraudulently represented that Davy had no association or involvement in the partnership. This alleged misrepresentation took place in meetings held with those three men in Dublin’s Merrion Hotel on two separate days in December 2015, it is claimed. 

 

Mr Kearney is asking the court, among other things, to set aside the 2015 settlement and seeks damages over the sale of the bonds at an alleged undervalue. He also wants an account of what he says was a €9.3 million secret profit made by the partnership on their onward sale of the bonds. 

 

The defendants deny the claims. 

 

In the pretrial application seeking a strike out of the claims, it was argued, among other things, that the claims made by the Kearney/Kilmona side directly contradicted the case they (plaintiffs) had pleaded in 2015 and in a 2021 affidavit of Mr Kearney. 

 

There were inconsistencies in Mr Kearney’s allegation that he was induced into signing the 2015 settlement by fraudulent misrepresentation, it was claimed. These included that Mr Kearney did in fact know Davy employees were members of the O’Connell Partnership and therefore he could not have been deceived when he knew the truth. 

 

It was argued the 2015 settlement was signed on behalf of the partnership by Mr O’Connor and this was itself evidence Mr Kearney knew the partnership consisted of Davy employees. 

 

Mr Kearney and Kilmona opposed the strikeout application. 

 

On Wednesday, Mr Justice Twomey said while it is of course possible that Mr Kearney will not be able to successfully prove his claim, a significant factor against striking out these proceedings was the fact that it concerns an alleged fraudulent misrepresentation on the part of the defendants. 

 

He said that, critically, evidence has been provided, which may or may not be admissible at the trial, to substantiate a claim of fraud and that there was an alleged conflict of interest in Davy/among its employees regarding Mr Kearney. 

 

The Irish Times