Ulster Bank is set to challenge an ombudsman's ruling on a fund that cost 480 investors €5 million next month.

The bank is challenging a ruling by the Ombudsman for Credit Institutions, Joe Meade, that it failed to communicate properly with the investors in the fund. Ulster Bank plans to challenge this ruling.

The issue was raised in the High Court yesterday, and the matter was adjourned for two weeks to give the bank time to file an affidavit responding to the defence lodged by the Ombudsman to the original claim.

The ombudsman, Joe Meade, said yesterday that the matter is likely to go to a full hearing in the High Court in May.

He said that that it would be mentioned in two weeks, but added that that would not be final hearing of the case.

The case dates back to November 2004, when the 480 investors in a share portfolio fund were told that its value had dropped by 14.6 per cent.

The main reason behind the loss was that the fund was unable to write off previous losses against tax liabilities.

In 2002, it made provision for a "deferred tax asset".

This is where tax on future gains can be written off against past losses. The value of the write off is calculated as part of the fund. However, as the fund failed to make the expected gains, and also suffered because investors redeemed their money.

Administrators Ulster Bank Investment Funds Ltd had to write off the entire value of the deferred tax asset.

The move cost the 480 investors an average of over €10,000 each, or a total of €5 million.

Ulster also had difficulty with a number of other investment funds during the same period. However, these were not the subject of the ombudsman's ruling that the bank is challenging.

An appeal brought by Irish Nationwide is also scheduled to be heard in May.

This hearing will take place in the Commercial Court, a division of the High Court. The ombudsman ruled against penalties that Irish Nationwide imposed on a client for paying off a commercial mortgage early.

Irish Nationwide is seeking a ruling from the court declaring that the ombudsman did not have the legal powers to do this, and that thus his ruling should be overturned.