Building group loses its fraud claim against First Active

THE Cunningham Group of building companies has lost a central claim in its marathon legal action against First Active after a judge yesterday rejected a claim of fraud against the bank in its dealings with the group.

Mr Justice Frank Clarke found Galway developer Brian Cunningham’s group had failed to establish a prima facie case against the bank, or against a receiver sent in by the bank to take over the group in 2003, in order to allow the trial to continue.

The action, which involved a large number of linked cases, began last year and only finished hearing evidence and submissions from the Cunningham side the week before last.

It included a number of unsuccessful efforts to get fugitive lawyer Michael Lynn to testify from abroad for the group as he had acted for Mr Cunningham in the run up to receivership.

Yesterday, Mr Justice Clarke said he wanted to make it clear that he was dismissing the “most contentious” part of the case which was an allegation of fraud against First Active.

He was making a ruling following applications by First Active for a direction for “non-suit” after all evidence on the Cunningham’s side had ended and the next step would have been to hear evidence from the other side.

It was alleged in the case that loans totalling some €30m were issued between 1999 and 2002 to the Cunningham Group for three projects, including a site in Salthill, Galway, and a revamp of Finglas town centre in Dublin. It was put into receivership after defaulting on loans although Mr Cunningham claimed the debt could have been brought under control if two flagship projects were completed.

In the proceedings, Mr Cunningham claimed First Active acted as a shadow director of the Cunningham Group and that it extinguished his power over his companies and conspired to damage his personal interests and those of the group.

He alleged First Active forced him to sell a key asset with development potential of £IR310m (€393m) in 2002 before reneging on a promise to fund two additional developments. Mr Cunningham’s case was also against the receiver Ray Jackson who was sent in by First Active.

First Active and the receiver strongly denied the claims. First Active denied it or its officers devised and implemented a fraudulent scheme to strengthen the bank’s security.

In his ruling yesterday, Mr Justice Clarke said he would defer dealing with other aspects of the case, relating to debentures on some of the property involved, until later this week.

The judge said he was satisfied that the Cunningham Group had failed to establish a prima facie case against First Active and failed to establish a case on the balance of probabilities against the receiver.

He was not in a position to set out a reasoned judgement at this stage but would do so in January or February next.

The companies involved in the Cunningham Group were Moorview Developments, Salthill Properties and Valebrook Developments.

First Active’s decision to appoint a receiver was triggered by fears that the companies’ debts would outstrip their assets.