Partners in stockbrokers facing claims for €10m over investment fund

VARIOUS partners in Bloxham stockbrokers are facing court claims for almost €10 million arising from allegedly negligent advice to invest in a bond that later fell by more than 97% in value.

Two solicitors yesterday claimed they had suffered combined losses of more than €1.4m over investment in the bond.

Their claims come after the Solicitors Mutual Defence Fund, the main insurance body for solicitors with 3,500 members, last month brought proceedings against Bloxham’s, alleging its ability to indemnify solicitors was affected by more than €8m due to losses suffered after the bond’s value fell.

Mr Justice Peter Kelly transferred to the Commercial Court list the separate proceedings by LK Shields Solicitors, and by Maurice Curran, a retired solicitor and former chairman of the MDF, and his wife Noelle.

The various actions are to run together. The judge was told some Bloxham defendants are seeking indemnity on grounds they were not partners in 2005.

In the Shields action, the firm claims its approach to risk was consistent with that of the MDF of which Laurence K Shields, a partner in the firm, is currently chairman. It is claimed Mr Shields had close contact with Bloxham’s in his capacity as chairman and relied on advice from Bloxham’s when deciding in January 2005 to invest €1m in the same bond which later fell by 97% in value.

In the Currans’ action, Mr Curran claims that, relying on advice from Bloxham’s, he and his wife had also invested €400,000 in the bond in January 2005. It later emerged the bond was not suitable for their requirements and the investment fell by 97%, he claims.

Mr Justice Kelly was told last month that Bloxham’s is suing Morgan Stanley in Britain for breach of contract relating to the bond but that claim is limited to €42.75 for every €100 invested in the bond.

In an affidavit in the MDF case, Mr Shields said Bloxham’s expressly represented to the fund in January 2005 the bond was a suitable investment issued by Dresdner Bank but the fund learned in 2008 that the bond was not issued by Dresdner and was not suitable.

The fund was also unaware in 2005, that there was a “call option” exercisable by Morgan Stanley that compromised the integrity of the bond as a secure investment vehicle, he said.

Tadhg Gunnell and Angus McDonnell of Bloxham’s informed him on June 24 last that a “mandatory redemption event” had been exercised by Morgan Stanley with the net result that bond holders would only recover 3% of their investment.

Bloxham’s, having acted for the solicitor’s fund since 1991, was fully aware the investment represented over 30% of its 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 Bloxham’s negligence and breach of duty, he added.

The bond was “not at all” the same one as that described by Bloxham’s and conformed in no material fashion with the investment goals of the fund, he said.