Danske Bank is entitled to summary judgment for €3.47 million against a former partner in Bloxham stockbrokers, the High Court has ruled.
A one month stay applies on execution of that judgment against Niall Tinney. He was a partner in Bloxham from 2006 until its liquidation in 2012 over breach of the Central Bank's regulatory minimum capital requirement.
Mr Justice Paul McDermott rejected arguments Mr Tinney had an arguable defence centring on what he alleged the bank, as banker for the purposes of a 2011 restructuring of Bloxham, knew, or should have known, about alleged fraudulent behaviour of another partner, Tadhg Gunnell.
Mr Tinney claimed he agreed to participate in the restructuring, which involved guaranteeing a loan made by National Irish Bank (now Danske) to Tinney Investment Services (TIS), a company set up by him, on foot of "knowingly misstated accounts" which, he alleged, were prepared by Mr Gunnell.
The judge said there may have been wrongdoing by Mr Gunnell, or negligence and breach of duty as alleged against Deloitte concerning its auditing of the Bloxham accounts but the court was not satisfied sufficient evidence had been produced to argue the bank knew, or should have known, or any fraud or misrepresentation by Mr Gunnell, or negligence and breach of duty by Deloitte in auditing Bloxham’s accounts.
There was no evidence the bank did anything more than provide the finance sought by the partners for the restructuring, he said. Fraud is not alleged against the bank, he noted.
Sworn statements from Mr Tinney lacked detail in certain “important respects”, including about how and why the restructuring was proposed. There was “little or no information” from Mr Tinney on the extent of his knowledge and engagement in the affairs of Bloxham over the relevant period, he added.
The court was not informed as to how, or by whom, the loss of €5 million or the failure to obey the Central Bank regulatory minimum requirement was discovered at Bloxham about May 23rd, 2012, the judge said.
There was also no detail or description of the fraud allegedly perpetrated by Mr Gunnell and no details of the alleged professional negligence against Deloitte.
Danske sought judgment under the September 2011 guarantee by Mr Tinney to discharge liabilities of TIS under a facility letter of January 2011. When he failed to pay a demand of May 2012, the bank took legal proceedings.
In his judgment, Mr Justice McDermott said Bloxham retained the firm Delaney, Locke & Thorpe to advise them on restructuring and a presentation was made to Mr Gunnell which recommended each partner form an incorporated unlimited liability company which would then join the Bloxham partnership. Seven partners, including Mr Tinney, did so.
The judge said Bloxham became aware on May 23rd 2012 the firm’s capital position had been overstated by more than €5 million and circumstances suggested Bloxham was in breach of its obligations to hold regulatory capital of €5.6 million.
On May 31st, Kieran Wallace was appointed provisional liquidator and was later confirmed as official liquidator and administrator.
The judge noted Mr Tinney relied on an Irish Times report of October 17th, 2015 stating the Central Bank was concluding an investigation into actions of Deloitte, auditors of Bloxham, because they allegedly failed to make known errors in the accounts prepared by Mr Gunnell. It was also alleged the Chartered Accountants Regulatory Board intended to launch an investigation once the Central Bank investigation is concluded.
The bank denied the claims against it, said it was not a party to the misstatement in Bloxham’s accounts and had no knowledge of the alleged fraudulent misrepresentation by Mr Gunnell.
Mr Tinney's reliance upon "conjecture and assertions", "reports in a journalist's copy" and the hearsay claim in a separate case of another partner, Peter Costigan, whose affidavit was not produced, did not provide a basis to find Mr Tinney had an arguable defence to summary judgment, the judge held.
