The official liquidator of MMI Stockbrokers Ltd (MMI) has withdrawn his action alleging fraud against seven former directors of the company, the High Court heard yesterday. Costs of the entire proceedings to date, estimated at more than £1 million (€1.27 million), were awarded against MMI (in liquidation).
Liquidator Mr Tom Kavanagh, suing on behalf of the company, had instituted the proceedings last October and the action, expected to last three weeks, was listed for hearing on March 21st next.
The defendants were former MMI directors Mr Oisin Fanning, Mr John Curran, Mr Paul Boucher, Mr Colm O'Reilly, Mr Tim Murphy, Mr Cian Kelly and Mr Peter O'Byrne. All had strongly denied the allegations and opposed last week's unsuccessful application by the liquidator to adjourn the matter, stating they had been damaged by the liquidator's claims and the extensive publicity given to these and an early hearing was necessary to vindicate their good names.
Counsel for Mr Fanning claimed the liquidator had "no witnesses, no evidence and no case" and that the action against the defendants was dead.
It was also contended by Mr Brian O'Moore SC, for Mr Boucher, Mr Curran and Mr O'Byrne, that the proceedings were being driven by Mr Bob Holt, who became a director of MMI after the seven defendants sold their interest in the company in December 1998.
In the action, the liquidator claimed that sums totalling some £1.9 million were debited in four transactions without authorisation from an IBI Nominees account and another held by Jersey-based Cater Allen Nominees Ltd., and credited to the benefit of two directors - Mr Fanning and Mr Curran - and some 20 others associated with these. Mr Kavanagh claimed there was insufficient funds in the Cater Allen account to meet the transactions and that the Jersey company owed £430,000.
The liquidator required evidence from Cater Allen to substantiate these claims but Mr Kavanagh had claimed there had been a change of attitude by Cater Allen in the matter. This alleged change of attitude was the basis of his application to adjourn the action.
Last week, when refusing an adjournment, Mr Justice Kelly found there was no change of attitude on Cater Allen's part. At no stage prior to or after the liquidator instituting proceedings against the directors had Cater Allen alleged fraud, the judge said. Whatever differences Cater Allen had with the defendants, it had not characterised these as fraudulent.
He said Cater Allen had made it plain it was satisfied with the bulk of the transactions which were the basis of the alleged fraud and the liquidator should not have been surprised at the situation he now found himself in.
Mr Justice Kelly said the liquidator had not confirmed prior to the proceedings whether Cater Allen felt itself defrauded and had not established the loss necessary to found a claim for damages. He added the defendants were entitled to an opportunity to give their side of the story and an adjournment would be wholly unjust to them.
In light of the refusal to adjourn, Mr Bill Shipsey SC, for Mr Kavanagh, earlier yesterday applied to Ms Justice Laffoy for leave to bring an application to discontinue the action.
There was no objection from the Central Bank or Investors' Compensation Fund to the application.
Mr James O'Callaghan, for Prudential Bache, the London-based stockbrokers which acted as agent for MMI's US securities and claims to be owed £320,000, also said it was appropriate the course suggested by Mr Shipsey be followed. The liquidator had taken the case as far as he could. However, counsel added, the issue of whether Cater Allen owed money to the MMI client account remained to be resolved.
The matter then went before Mr Justice Kelly yesterday afternoon.
Mr Shipsey said he was seeking an order to discontinue the proceedings. He said there was also an issue regarding undertakings given by Mr Fanning and Mr Curran, which undertakings would have to be discharged. He said those defendants were considering seeking damages and asked that this issue be adjourned for mention for a week.
Counsel for the defendants sought the costs of the proceedings to date, including all reserved costs, and also asked that those clients who have undertakings be released from these and any remaining motions struck out.
Mr Justice Kelly said he would grant the application to discontinue. He said the defendants had no objection and that was hardly surprising. He awarded all costs of the proceedings, including reserved costs, against the plaintiff. He directed that all extant motions not yet heard be struck out and that the defendants who had given undertakings to the court be released from these.
The undertakings referred to were an undertaking by Mr Fanning not to reduce the unencumbered value of his assets below £936,816 and an undertaking by Mr Curran not to reduce his assets below a sum of £106,842.
Counsel for Mr Fanning and Mr Curran are to take instructions on whether their clients wish to pursue damages against the plaintiff and that issue was listed for mention on March 22nd.
