Stockbroker faces claims over 97pc fall in fund for solicitors
Published 19/01/2010 | 05:00
BLOXHAM Stockbrokers is facing court claims for almost €10m arising from allegedly negligent advice to invest in a bond which later fell by more than 97pc in value.
Two leading solicitors yesterday claimed they had suffered combined losses of more than €1.4m.
Their claims come after the Solicitors' Mutual Defence Fund (SMDF), the main insurance body for the country's 3,500 solicitors, last month brought proceedings against Bloxham over the same bond, alleging its ability to indemnify lawyers had been affected by more than €8m losses suffered after the bond's value fell.
Yesterday, Mr Justice Peter Kelly transferred to the Commercial Court list separate proceedings brought by LK Shields Solicitors and by Maurice Curran, a retired solicitor and former chairman of the SMDF, and his wife Noelle.
The various actions over the bond are to run together and the judge was told some Bloxham defendants were seeking indemnity on grounds they were not partners at the time of the alleged negligent advice.
In the Shields action, the firm claimed its approach to risk was consistent with that of the current chairman of the SMDF, Laurence K Shields.
It is claimed Mr Shields had close contact with Bloxham and relied on advice from the brokers when deciding in January 2005 to invest €1m in the same bond, which later fell by 97pc.
In the Currans' action, Mr Curran claims, relying on advice from Bloxham, he and his wife invested €400,000 in the bond in January 2005. It later emerged the investment had fallen by 97pc, he claims.
Mr Justice Kelly was told last month that Bloxham was suing Morgan Stanley in the UK for breach of contract relating to the bond but that claim is limited to €42.75 for every €100.
In an affidavit, Mr Shields said Bloxham represented to the fund in January 2005 that the bond was a suitable investment issued by Dresdner Bank but it was learned in 2008 the bond was not issued by Dresdner and was not suitable.
The fund was also unaware in 2005 there was a 'call option' exercisable by Morgan Stanley which compromised the integrity of the bond as a secure investment vehicle, Mr Shields said.
Tadhg Gunnell and Angus McDonnell of Bloxham had informed him on June 24 last that a "mandatory redemption event" had been exercised by Morgan Stanley with the result that the bond holders, including the SMDF, would only recover 3pc of their investment.
Bloxham, having acted for the SMDF since 1991, was fully aware the investment represented over 30pc of the SMDF's portfolio and of the implications of it for the fund, Mr Shields said. The fund's ability to conduct its business as an effective indemnifier of solicitors in Ireland was affected by the losses flowing from Bloxhan's negligence and breach of duty, he added.