A hearing to determine how some €6.2 million in assets of the insolvent Cork stockbroking firm, W & R Morrogh, should be distributed has opened at the High Court. More than 2,500 claims against the firm, which collapsed in April 2001 with liabilities of more than €12.6 million, have been received.
There is not enough money to meet the claims and the decision on the distribution of the available funds is critical, said Mr Denis McDonald SC, for Mr Tom Grace, who is receiver of the firm and manager over its assets.
Uncertainty remained as to the amount of the deficit in the client bank accounts and it was unlikely this would ever be established, counsel said.
In light of irregularities discovered since Mr Grace's appointment, it was unlikely that at any time in the two years before April 2001, or perhaps a longer period, were sufficient funds available in Morrogh's accounts to meet its liabilities to clients.
Mr Grace has asked Mr Justice Murphy to decide how the assets should be distributed between the claimants. These include Mr David A Keane of Emmet Place, Youghal, Co Cork and Mr Paul Murray of Carrigmore, Golf Links Rd, Youghal, as executors of the estate of Hannah Agnes Keane, deceased, who are seeking €1.33 million. Other substantial claimants include a Co Cork couple - Mr Hugh and Ms Barbara Hall of The Glen, Cobh, who have claimed €333,131.
Anglo Irish Bank is claiming it is owed some €1.13 million on foot of a loan it made personally to Mr Stephen Pearson, one of the partners in the Cork firm, which loan was secured by share certificates in the London Stock Exchange. It has brought a separate motion to that effect which will be dealt with at the end of the hearing of the receiver's application, which latter hearing is expected to last a number of days.
Yesterday, Mr McDonald said it became apparent in 2001 that the Cork firm was very seriously insolvent. The Central Bank had brought a petition to have the firm wound up and Mr Grace appointed as receiver.
At the date of dissolution, the firm had two remaining partners, Mr Pearson and Mr Alexander Morrogh. In an affidavit, Mr Grace said the firm got into financial difficulty as a result of "various unauthorised transactions" conducted by Mr Pearson.
Mr McDonald said that when Mr Grace examined the books and records of the company, they were "less than satisfactory to say the least" and it emerged there was a very serious shortfall and not enough money to pay all clients.
The difficulty facing the receiver was how to distribute what monies were available. If a first-in, first-out approach was adopted, this would mean some claimants would get all their money back while others would be left with substantial losses. If a ratable distribution approach was adopted, all claimants would suffer some loss including those who would benefit from the first-in, first-out approach.
Mr McDonald said there were three categories of assets. The first was UK and Irish quoted securities held in certificated form in the name of Morrogh Nominees Ltd. The claims to such stock from clients of Morrogh exceeded the quantity of stock available.
The second category was electronically-held stock held to the order of W & R Morrogh together with the proceeds of compulsory offers for such stock and net dividends earned on such stock. Again, the claims to ownership of such stock exceeded the quantity of stock still held and the proceeds of compulsory offers for it.
The third category consisted of cash in client current and deposit accounts in both euro and sterling. The total monies in such accounts was not sufficient to discharge all the claims of clients.
Mr Grace said some proceeds of share sales were credited to another client ledger account of Morrogh and later diverted to another account to meet unauthorised losses or to compensate for monies misappropriated from particular clients.
Mr Eamon Marray told the judge he was representing Mr Stephen Pearson but believed it would be improper for him to express any views on the issues before the court and asked to be excused from the hearing.
Mr Michael Cush SC, for Anglo Irish Bank, said Mr Pearson was a respondent to the bank's motion claiming entitlement to certain monies but this would be taken after the receiver's application.
