The late managing director of a company linked to the collapsed Dolphin Trust, which received €150 million from Irish investors, acted as shadow director to another firm which was an investment vehicle for pension investors, it has been claimed in Commercial Court proceedings.
Paul Dunne, who died in October 2020, was managing director of a firm that administered funds provided by Dolphin MUT 116 through the German Property Group, previously called Dolphin Capital and Dolphin Trust.
Founded by British-German businessman Charles Smethurst, Dolphin was a German firm that raised funds for investments in the development and renovation of listed buildings in Germany.
It is estimated that between €650 million and €1 billion was invested in the property group from investors in countries including the UK, Russia, South Korea and France, with some €150 million coming from Irish investors.
How does VAT in Ireland compare with countries across Europe? A guide to a contentious tax
‘I was a cleaner in my dad’s office, which makes me a nepo baby. I got €50 a shift’
Will we have a tax liability if Dad gives us his home while he is alive?
Finding a solution for a tenant who can’t meet rent after splitting with partner
Dolphin MUT 116 was the investment vehicle for pension investors. Another Irish-registered firm called Dolphin MUT 103 dealt with individual investors.
Shane McCarthy and Ian Barrett of KPMG were appointed joint liquidators over Dolphin MUT 116 in April 2021, while Myles Kirby was appointed liquidator of Dolphin MUT 103.
On Monday, Mr McCarthy and Mr Barrett sought to have a case brought last year against the estate of Paul Dunne, of Terenure, Dublin, consolidated with a second case they were now bringing against the firm Mr Dunne was MD of, Wealth Options Trustees Ltd (WOTL), a linked firm Wealth Options Capital (WOC) Ltd, and against three directors.
Those directors are Brian Flynn, Lions Gate, Glenvar Park, Blackrock, Dublin; Eanna McCloskey of Silver Birch Close, Mullfarm Estate, Dunboyne, Co Meath; and Dolphin founder Mr Smethhurst of Lindenstrasse, Pohle, Germany.
The joint liquidators claim Mr Flynn and Mr McCloskey were directors of WOTL and shareholders in WOC and Mr Dunne was MD of WOTL from 2004 until his death.
While Mr Dunne was a director of Dolphin MUT 103, the firm which dealt with individual investors, the joint liquidators claimed he was also a de facto director and/or shadow director of the pensions investment vehicle Dolphin MUT 116.
Dolphin MUT 116 has liabilities of some €65.8 million of capital and €34.4 million of interest to maturity up to August 2021 to mostly pension investors, it is claimed.
Following the wind-up of Dolphin MUT 116, the liquidators’ investigation found the German Property Group was in financial difficulty for a number of years and there were numerous warning signs of this.
There was, among other things, evidence that misrepresentations were made by the defendant companies and directors to brokers in relation to Dolphin Trust products, the liquidators said.
They are seeking damages against them for negligence, breach of contract and declarations including that they account for any gains made directly or indirectly from any breach of duty.
Mr Justice Denis McDonald on Monday agreed to consolidate both cases and admit them to the Commercial Court after hearing there was no opposition from most of the defendants.
However, Kelley Smith SC, for the late Mr Dunne’s wife Lesley and daughter, who are executrices of the estate, opposed the consolidation of the two cases.
She said proceedings had not been issued against her clients until two years after Mr Dunne’s death when for the first time it was alleged he acted as a shadow director of Dolphin MUT 116. It put her clients in a very difficult position to defend the claims, she said.
Ms Smith also opposed the case entering the commercial list on grounds including delay and that a similar case against Dolphin MUT 103 was going through the normal High Court list.
Mr Justice McDonald said he was mindful of what Ms Smith said in relation to the difficulties for her clients, but, he said, the Dunne estate should have access to documents in the case.
He adjourned to next week the making of directions on how the case should proceed.
