Firm claims agreement with EBS terminated because of refusal to mis-sell financial products

A financial services company has claimed before the High Court that its agreement to operate three branches of the Educational Building Society (EBS) was terminated over a refusal to engage in the alleged mis-selling of financial products.

The claims, which EBS denies and says are without foundation, were made on behalf of Betty Martin Financial Services Ltd (BMFS,) which for many years has operated EBS branches in Athlone, Lucan and Longford under an arrangement known as a "Tied Branch Agency Agreement.'

It has brought proceedings over EBS's decision to terminate their agreement, which the Court heard will result in another financial services entity taking over the operation of the EBS branches next month.

BMFS, represented by Declan McGrath SC and Keith Farry Bl, claims the purported termination, which it claims is invalid and done for no good reason, will result in the collapse of its business.

The decision will also impact negatively on BMFS's staff and damage its the reputations of its directors. BMFS also claims it was informed that agreements would only be terminated by EBS in cases of gross misconduct.

In proceedings before Mr Justice John Jodan BMFS is seeking an injunction preventing EBS DAC from terminating the agency agreement between the parties that allows the plaintiff to operate the three branches.

BMFS wants the injunction to be put in place until the full hearing of the dispute has been determined.

EBS, represented in court by Ciaran Lewis SC and Mark Dunne Bl, denies all of BMFS's claims, says it entitled to terminate the agreement, and opposes BMFS's application for an injunction.

It claims the complaints of alleged misselling was only made by BMFS after EBS decided in 2017 to terminate the agreement with the firm.

In a sworn statement to the court BMFS director Mr Declan Martin, whose late mother Betty set up the company during the 1980s, said the firm started having difficulties from 2010 onwards with EBS Regional Manager Tim Gleeson.

He said Mr Gleeson, who denies the claims, asked BMFS to allegedly “undertake commercial activities that were unprofessional, unethical and against Central Bank Rules and guidelines. "

He said that Mr Gleeson allegedly pressurised BMFS to get customers to answer a Central Bank approved questionnaire to new or potential customers.

The questionnaire is designed to ensure customers are put into the correct products, guided by their risk appropriateness and appetite.

Customers who achieve a low score on the questionnaire are categorised as low risk and should only invest in deposit accounts, a product which a bank makes little or no profit from.

Customers with a higher score, indicating they have a greater risk appetite and understanding of the risks of investing, are allowed to open other accounts and invest in more risky products which Mr Martin said EBS would have increased earnings from.

Mr Martin said BMFS refused to sell high-risk products to unsuitable customers.

In May 2017 he said a termination notice was served on BMFS for no reason. Mr Martin said this was served because he would not bow to demands to mis-sell products.

He said he disclosed his concerns concerning Mr Gleeson to EBS's MD Des Fitzgerald, who withdrew the termination notice and directed the matter be investigated.

An investigation was conducted by EBS parent AIB which found in February last that Mr Martin's allegations were not substantiated. Mr Martin claims the investigation was not done in accordance with fair procedures and the outcome predetermined.

Following the investigation, another termination notice was issued by EBS to BMFS.

Mr Martin claims the notice unlawful on grounds including it was done without a bona fides commercial reason.

In a replying affidavit, Mr Fitzgerald said Mr Martin's allegations are without foundation and said Mr Martin made no complaints about the alleged misselling until after the 2017 termination notice was issued.

The agreement with BMFS was lawfully terminated and in accordance with the agency agreement the parties had entered into, he added.

An independent investigation of Mr Martin's claims was conducted and concluded there was no evidence to support the mis-selling allegations, he said.

Mr Fitzgerald said Mr Martin's complaints were "taken seriously" by him and were "fully considered" by the investigation team.

He also said the application should be dismissed on the grounds it is an abuse of process, and the applicant had delayed in bringing its proceedings.

Mr Tim Gleeson in his affidavit also rejected all of Mr Martin's "untoward allegations" against him and he never encouraged the misselling of financial products to customers.

The hearing continues.