Late MD of one firm linked to Dolphin Trust collapse was shadow director of another, court told

Collapsed Dolphin Trust received €150m from Irish investors.

The corporate headquarters of German Property Group, formerly called Dolphin Trust, in Langenhagen, Germany. File Picture

The late managing director of a firm linked to the collapsed Dolphin Trust — which received €150m from Irish investors — acted as shadow director to another firm which was an investment vehicle for pension investors, it has been claimed in Commercial Court proceedings.

Paul Dunne, who died in October 2020, had been MD of a firm which administered funds provided by Dolphin MUT 116 through the German Property Group, previously called Dolphin Capital and Dolphin Trust.

Dolphin was a German firm, founded by British-German businessman Charles Smethurst, which raised funds for investments in the development and renovation of listed buildings in Germany, including apartments.

It is estimated that between €650m and €1bn was invested in the property group from investors in countries including the UK, Russia, South Korea, and France, with some €150m coming from Irish investors.

Dolphin MUT 116 was the investment vehicle for pension investors while another Irish-registered firm called Dolphin MUT 103 dealt with individual investors.

Shane McCarthy and Ian Barrett of KPMG were appointed joint liquidators over Dolphin MUT 116 in April 2021, while Myles Kirby was appointed liquidator of Dolphin MUT 103.

On Monday, Mr McCarthy and Mr Barret sought to have a case that was brought last year against the estate of Paul Dunne, of Terenure, Dublin, consolidated with a second case they were now bringing against the firm Mr Dunne was MD of, Wealth Options Trust (WOTL) Ltd, a linked firm Wealth Options Capital (WOC) Ltd, and against two directors.

Those directors are Brian Flynn of Lions Gate, Glenvar Park, Blackrock, Dublin and Eanna McCloskey of Silver Birch Close, Mullfarm Estate, Dunboyne, Co Meath.

The joint liquidators claim Mr Flynn and Mr McCloskey were directors of WOTL and shareholders in WOC and Mr Dunne was MD of WOTL from 2004 until his death.

While Mr Dunne was a director of Dolphin MUT 103, the firm which dealt with individual investors, the joint liquidators claimed he was also a de facto director and/or shadow director of the pensions investment vehicle, Dolphin MUT 116.

Dolphin MUT 116 has liabilities of some €65.8m of capital and €34.4m of interest to maturity up to August 2021 to mostly pension investors, it is claimed.

Following the wind-up of Dolphin MUT 116, the liquidators’ investigation found the German property group was in financial difficulty for a number of years and there were numerous warning signs of this.

There was, among other things, evidence that misrepresentations were made by the defendant companies and directors to brokers in relation to Dolphin Trust product, the liquidators said.

They are seeking damages against them for negligence and breach of contract, and declarations including that they account for any gains made directly or indirectly from any breach of duty.

Mr Justice Denis McDonald agreed to consolidate both cases and admit them to the Commercial Court after hearing there was no opposition from most of the defendants.

However, Kelley Smith, counsel for the late Mr Dunne's wife Lesley and daughter, who are executrices of the estate, opposed the consolidation of the two cases.

She said proceedings had not been issued against her clients until two years after Mr Dunne's death when, for the first time, it was alleged he acted as a shadow director of Dolphin MUT 116. It put her clients in a very difficult position to defend the claims, she said.

Ms Smith also opposed entry of the case to the commercial list on grounds including delay and that a similar case against Dolphin MUT 103 was going through the normal High Court list.

Mr Justice McDonald said while he was mindful of what Ms Smith had said in relation to the difficulties for her clients, he said the Dunne estate should have access to documents in the case.

He adjourned to next week the making of directions on how the case should proceed.