The property developer Patrick Kearney has filed a statement of claim in the High Court detailing his case against the stockbroker Davy and 16 of its former employees. The 25-page document details what Kearney believes occurred in relation to the Davy bond scandal, a controversy that resulted in a Central Bank rebuke and fine, triggering a decision by the company to put itself up for sale.

Kearney has appointed barristers Martin Hayden and Eamon Marray and law firm Clark Hill to represent him in the action, a case that both the stockbroker and the 16 former employees say they intend to defend.

Kearney’s statement of claim is broken into a number of sections and begins with the circumstances in which Anglo bonds with a face value of €27 million were sold by the stockbroker in 2014, before giving further details about how the matter was settled previously with Davy in 2015.

Kearney’s barristers then move on to the Central Bank’s fine of Davy in March of €4.1 million before explaining why their client believes he is entitled to sue the stockbroker again in addition to suing a group of its employees based on the findings of its regulator – despite having previously settled an action against the stockbroker. Each section, while written in legal language, is worth considering in turn.

If it proceeds, the case promises to see some of the most powerful figures in Davy called to provide evidence including its former chief executive Tony Garry, former deputy chair Kryan McLaughlin, and it’s then head of wealth management Brian McKiernan, who are all parties to the action being taken by the Belfast-based developer.

Kearney’s statement of claim reveals some new details of what occurred – including more on the mysterious former Central Banker who Davy executives claimed told them they had “nothing to be concerned about”.

It also shows Kearney’s concern that Davy made no effort to tell him what the “government’s position” was in relation to his Anglo bonds, and whether if he held out could he be expected to be paid out in full. 

Kearney also shows how he believes the alleged “scheme” was hatched by Davy employees to benefit themselves at his expense. He also claims that if he had known Davy staff were both his “agents” who he believed he had instructed and paid a fee to get the “best price” for him and the purchasers of his bonds he would have “terminated” his contract with Davy and “obtained the professional services of another licensed financial advisor and agent to sell the Bonds”.

Both Davy Stockbrokers and all of its 16 employees named in Kearney’s legal action have denied any wrongdoing. Arthur Cox, who is acting for Davy, has described the action as “entirely opportunistic” and without basis.

The bond trade

Patrick Kearney’s statement of claim states that he sought to sell his Anglo bonds in August/September 2014 and that he was put in touch with Davy employee Tony O’Connor in order to do so. According to the statement of claim, Davy was “a licensed financial advisor and agent which held itself out as having the necessary expertise to advise and act a professional agent in the sale of financial instruments, including the Bonds which the Plaintiffs were seeking to sell.”

Kearney said he met O’Connor on October 1, 2014, and that he believed Davy and O’Connor “had the necessary expertise” to advise him on selling his bonds and “securing the sale of the Bonds at the best price”. After this meeting, Kearny’s claim states the developer instructed Davy to act for him and that O’Connor subsequently confirmed that Davy would “furnish advice” to him and act as his agent “in securing the sale of the bonds at the best price”. Kearney claims that Davy also advised him to “arrange and enter into a loan agreement,” which the stockbroker told him was for his benefit in “dealing with and discharging” a liability to a creditor which held security over his Anglo bonds.

Kearney said he was advised by Davy to deal with was the O’Connell Partnership, and he said he entered into an agreement with this partnership on November 14, 2014. According to his statement of claim Davy “agreed to advise and act as agent in the sale of the bonds,” for Kearney and that it would “at all times act in [Kearney’s] best interests, and that furthermore, [Davy] was not conflicted in any way, nor advising or assisting in any manner third parties who had an interest in how the said bonds would be valued or honoured.” 

Kearney’s claim set out 15 points that he believes Davy agreed to either expressly or implied. These included that Davy would “act in the best interests” of Kearney, and “comply with the duty of loyalty” it had to him as a client, and that it had agreed to “obtain the best price for the bonds.” The claim also maintains that Davy agreed not to act “dishonestly,” or in a manner that created a “conflict of interest” where its employees would “put their personal interests before the interests” of Kearney when selling his Anglo bonds.

Kearney’s claim also maintains that Davy should have disclosed and obtained written consent from Kearney if was planning to buy his bonds from him; that it would act in accordance with its regulatory duties; and that Davy and its servants agents would not “act in a fraudulent and deceitful manner such as to cause financial loss and damage” to Kearney or have their “personal interests compete” with his “using the knowledge which they gained from their position as agent” of Kearney in order to secure “personal financial benefit or gain”. 

Davy, Kearney claimed, also agreed not to use “confidential information” obtained from him in order to sell his bonds “for the purpose of procuring for themselves or its partners and employees a financial benefit or windfall” which they would not have obtained without being his agent. Kearney also states in his claim that Davy should have told him of “any and all” financial gain it or its staff made from selling his bonds. Kearney’s claim also maintained that Davy would comply with its Central Bank obligations.

Kearney’s statement of claim then outlines how he opened an account in Davy and how he placed his bonds in a custodial account there. In doing so Davy, according to Kearney “agreed to apply a ‘best execution policy’ to achieve what its standard terms and conditions described as ‘the best possible result for our clients’.

Kearney states that Davy “at no time” disclosed the identity of the purchaser of his bonds other than that they were clients of the stockbroker. Davy, Kearney claims “never explained or disclosed” how it was selling his bonds – and that O’Connor, when asked about who was buying them, replied that it was “confidential.” The claim also states that Davy “never explained that it was not selling the bonds on the open market and was in fact selling the bonds off-market, to its own partners and employees.”

Davy, his claim alleges, initially valued the bonds at between 20 cent and 30 cent in the euro, before telling Kearney it had a buyer on November 14, 2014, and that this was one of its clients. The price this unnamed client was prepared to pay was 20.25 cent in the euro or €5.589 million. After this Kearney asked another financial advisor to get him a price for his Anglo bonds, and this third party said that Davy was buying his bonds at a price “below the market price achievable for the Bonds”.

O’Connor, according to the statement of claim, advised Kearney that the “higher prices were not in fact achievable”. The claim states that O’Connor did not advise Kearney to accept the higher offers but “in fact actively dissuaded [Kearney] on the 13th and 14th November 2014 from seeking to have the Bonds sold at a higher price” and told him instead to proceed with the agreed sale as he maintained it had already been agreed. According to Kearney’s claim “at no time” did O’Connor tell him that he himself along with the other employees of Davy were buying his bonds via the O’Connell Partnership.

Based on O’Connor’s advice, Kearney said he decided not to “pursue a higher price,” and he said O’Connor/Davy “failed to advise, identify or establish what the Government’s position was likely to be in relation to honouring the Bonds at full value, thereby affording [Kearney] the opportunity to consider realising the actual par value thereof”. 

Kearney ends this section of his claim by noting that Davy charged him a commission of €207,000 for having “advised and acted” for him and this fee was deducted from the sale proceeds of his bond. 

The 2015 Proceedings

Patrick Kearney’s claim then makes 12 points about his previous settlement with Davy in 2014. His claim explains how he sued Davy on July 30 2015 “seeking damages for negligence, breach of contract, breach of fiduciary duty, misrepresentation…” in relation to the loss he believes he suffered by selling the bonds in an off-market deal. In December 2015 settlement talks took place in the Westbury Hotel and thereafter in the Merrion Hotel. Kearney was present at the first meeting along with his advisor Alan Mains, and Tony Garry, the chief executive of Davy at the time of the Anglo bond deal, also attended. At this meeting, Kearney said he asked Garry if Davy had “any association or connection with or involvement in The O’Connell Partnership”. Garry, according to Kearney, told him Davy had no association or connection with the O’Connell Partnership who he described as a client of Davy that could not be named for client confidentiality reasons.

Tony Garry.

According to Kearney “Mr Garry was supposed to attend in the company of [Davy’s] Compliance Officer,” but this person never appeared and instead he was accompanied by Barry Nangle, the head of Davy’s bond desk. At this meeting, both Garry and Nangle denied any wrongdoing by Davy. They said Davy “had engaged a consultant who had recently retired from the Central Bank,  to review [Davy’s] role in the sale of the Bonds to The O’Connell Partnership and that the consultant had advised [Davy] that [Davy] had nothing to be concerned about.”

Who this former Central Banker was, and what exactly he was advised to examine, has not yet emerged. Having listened to Garry and Nangle’s assurances, Kearney decided to settle his action on February 12, 2016. This settlement according to Kearney’s new statement of claim was compromised by a number of factors.

The first was that representations by Davy employees during these talks were “made deliberately and falsely in the knowledge that [Kearney] would rely on same and were done for the purpose of fraudulently concealing from [Kearney] the true identity of the O’Connell Partnership, being made up of members and employees of [Davy].”

The O’Connell Partnership Kearney claims was set up by a group of Davy employees for the purposes of “conspiring” against him to “obtain a secret profit and windfall, to which the true beneficiary was” the group of Davy employees. Kearney said he was “unaware” how much these employees later made from his bonds. But he was certain of one thing Davy and its 16 employees had “individually and together, conspired to wrongfully deprive” him “of the true, full and proper value of the Bonds for their own profit and gain.”

The Central Bank investigation

Patrick Kearney states in his claim that the “first time” he realised who the O’Connell Partnership was in March 2021 when the Central bank published the findings of its investigation into the transaction. It was only at this point that the full scale of what occurred became evident to Kearney. He realised that the man he thought of as his advisor – Tony O’Connor – was in fact part of the O’Connell Partnership along with the men who had negotiated his 2015 settlement – Tony Garry and Barry Nangle. What occurred Kearney claims was a “fraudulent enterprise” where he was to be the loser as his bonds were bought at “an undervalue” in order to secure for 16 Davy employees a “substantial financial windfall.” This windfall Kearney said could never have been obtained if Davy was not appointed his fiduciary agent” and but for “their fraudulent enterprise, fraudulent concealment and deception.”

The “refusal” by O’Connor to tell Kearney who was buying his bonds when “requested to do so,” and the “subsequent denial” by Garry and Nangle in December 2015 that Davy had any connection with the O’Connell Partner was part of what Kearney alleges was a “fraudulent concealment enterprise.”

The “egregious breaches and wrongdoing” engaged in by Davy and a group of its employees was “substantially confirmed in the findings made by the Central Bank” against it according to Kearney. The O’Connell Partnership was not, Kearney claims, a client of Davy as he was told but rather “in reality, an alter ego of the senior management.” Kearney also pleads that Garry and Nangle’s “conduct of insisting on settlement negotiations directly between themselves” and Kearney “without the involvement of the parties’ respective legal representatives constituted a continuation of [Davy’s] fraudulent enterprise and concealment.” This was done, Kearney claims, in order to “hide” from him what happened and was “motivated by personal self-interest.”

Barry Nangle.

According to the statement of claim, neither Garry or Nangle disclosed during these settlement talks that they were among the Davy 16 – and Kearney said he only found this after the Central Bank fined Davy in March 2021. Kearney then sets out how he believes Davy and members of the O’Connell Partnership were in breach of their contractual and fiduciary duties to him by advising him to sell his bonds at an “undervalue” among other issues. These issued included “acting in breach of their duty to act honestly and not to create a conflict of interest with the Plaintiffs interest…Acting in breach of its duty to make full disclosure to the Plaintiffs.” 

Kearney’s position is he claims that if Davy had from “the outset” explained who was buying his bonds he would have “terminated” his contract with Davy and “obtained the professional services of another licensed financial advisor and agent to sell the Bonds.” Kearney alleges the “fraudulent enterprise” against him began when the O’Connell Partnership bought his bonds and continued when the defendants of his action “through their ongoing fraudulent acts and concealment, misrepresentations and assurances,” proceeded to settle with him. Kearney said that if Garry and Nangle had told him in December 2015 that they and 14 other Davy staff were among the O’Connell Partnership he would not have settled with them.

Kearney said when he discovered what occurred in March 2021 he wrote to Davy asking them to “admit their egregious wrongdoing” and pay him any windfall secured by its staff at a time when he claimed Davy was acting as his advisor and agent selling his bonds. Kearney said Davy had failed to respond to this request leaving him no choice but to seek “exemplary and/or aggravated damages.”