The official liquidator of Money Markets International Stockbrokers Ltd (MMI) told the High Court yesterday he was "mystified" by the apparent change of attitude by a Jersey-based company, Cater Allen Nominees Ltd.
The dispute centres on the alleged debiting of amounts of more than £1.9 million (€2.4 million) from the company's account and the alleged crediting of this amount to the benefit of two directors of MMI - Mr Oisin Fanning and Mr John Curran - and more than 20 people associated with them. Because of this alleged change of attitude, which the Jersey company, a subsidiary of Abbey National, denies, liquidator Mr Tom Kavanagh said his proceedings against the seven MMI directors alleging fraudulent con version and breach of fiduciary duty would now "be extremely difficult to maintain".
In an affidavit, Mr Kavanagh said Cater Allen, a client of MMI Stockbrokers, had initially portrayed itself as the victim of unlawful conduct by the MMI directors and had said its account should never have been debited because it never received the payments involved and had no knowledge of these.
Now Cater Allen seemed to be adopting the position that the transfers of the monies, which formed the basis of the liquidator's proceedings against the seven MMI directors, was bona fide and authorised by it.
It appeared Cater Allen was now retrospectively authorising the debiting of its account to the tune of £1.4 million while, at the same time, maintaining an astonishing entitlement to sue the directors and MMI for gross negligence and misconduct of Cater Allen's affairs, Mr Kavanagh said.
If Cater Allen was successful in that claim, the insurance company which provided professional indemnity cover would have to pay. The alleged negligence related principally to the sale of shares in Dana Petroleum.
In the light of this situation, Mr Kavanagh said he was applying for directions as to the future conduct of his proceedings and was seeking leave to discontinue those proceedings. In his view, the fraud claim would now be extremely difficult to maintain.
The action had been a bona fide one, commenced on the basis of investigations which he had carried out, including responses received from Cater Allen from which the firm had now "completely resiled [stepped back from]".
Mr Bill Shipsey SC, with Mr John Gleeson, for Mr Kavanagh, said his client did not believe he could continue the proceedings against the directors in light of Cater Allen's present position. The action was mainly against those who misapplied funds.
Counsel said this did not mean an end to the liquidator's investigations, which would now be directed more to Cater Allen. He suggested that, if certain transactions were authorised by Cater Allen, the liquidator could perhaps sue the company for the £500,000 it owed on its account because, he said, there was only £1.4 million in the account when the transfers were made.
Mr Mary Finlay SC, with Mr James O'Callaghan, for London-based stockbrokers Prudential Bache, which acted as the agent for MMI in US securities and claims to be owed £320,000, expressed concerns about the application to discontinue the proceedings against the directors.
She said it appeared that when the transactions in question took place, the amounts purportedly debited against Cater Allen's client account were in excess of the company's client fund.
Solicitors for Cater Allen were informed of the hearing but wrote to the liquidator stating they would not be attending as their client was not a party to the proceedings.
After hearing submissions, Mr Shipsey said he wished to have time to consider matters advanced by Ms Finlay. Ms Justice Laffoy adjourned the liquidator's application to Monday next.
