Prima facie’ case of fraud established in Davy case, judge says

24th February 2022

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The property developer suing Davy and 16 of its former employees and senior managers has established a prima facie case of fraud, a High Court judge has said.

The significant comments were made in a ruling on a pre-trial application in the action being taken by Belfast businessman Paddy Kearney and his firm Kilmona Holdings Ltd.

Mr Kearney is suing for damages over the 2014 sale by Davy of Anglo Irish Bank bonds he held to a group of Davy employees known as the O’Connell Partnership (OCP).

The Belfast businessman maintains he was told the OCP was an independent client of Davy and only learned it was not when the Central Bank fined the stockbrokers €4.1m last year for breaching market rules in relation to a transaction involving its own staff.

The scandal prompted Davy to put itself up for sale.

In a pre-trial ruling, Mr Justice Michael Twomey rejected an application from Davy seeking further information from Mr Kearney regarding his allegations of fraud.

The judge said it seemed to the court that the plaintiffs had established a prima facie, or on the face of things, case of fraud and that Davy already had a reasonable picture of the allegations.

He said that based on pleadings and evidence contained in a Central Bank report, it could not be said plaintiffs were making wild or baseless assertions.

The judge said the names of people alleged to have made fraudulent representations and the specific and approximate dates of when these were made had all been supplied.

He also said that although there was a considerable sum of money involved, the case was not a complex one.

However, he stressed this was “still some way from establishing, on the balance of probabilities, that the defendants are guilty of fraud”.

In his action, Mr Kearney alleges the bonds were sold at an undervalue, depriving him and Kilmona of the best price, and that Davy made a windfall profit of €25m from the sale.

Details of the defence filed in the case were also outlined in the ruling.

The defendants say Mr Kearney and Kilmona were “execution-only” clients and therefore the firm owed no fiduciary duty to them.

They also claim there was no secret profit for which account has to be made to the Mr Kearney and Kilmona and that the plaintiffs were aware the purchaser of the bonds was made up of Davy employees.

Davy is also set to object to the admissibility of the Central Bank report.