Currency speculation debt disputed by meat company

National Irish Bank "facilitated and encouraged" unauthorised foreign currency speculation in "vast" amounts by the former managing director of Purcell Brothers, a livestock export company. And it has left the firm facing a £6.4 million (€5.04 million) debt and the possibility of being put into receivership, it was claimed at the High Court yesterday.

Purcell claims it is not liable for the debt and NIB should carry the loss. It has applied to Mr Justice Kearns for an interlocutory order (continuing pending a full action between the parties) restraining NIB from taking any steps to enforce securities regarding Purcell's liabilities to the bank.

NIB denies the allegations and argues it is entitled to sue on the debt. It says the foreign currency transactions Mr Gerard Purcell, the firm's former managing director, engaged in, were an integral part of the company's business. The bank claims Mr Purcell was an experienced businessman who "knew what he was doing" and it was disingenuous for Mr Purcell to claim the transactions were not properly authorised.

Mr Purcell had "glossed over" the fact he had substantial foreign currency transactions with other financial institutions and he had told the Bank the potential losses on these other transactions were some £3 million.

The bank claims the litigation is a belated attempt to enable Purcell Brothers avoid its liabilities or to avoid reaching a responsible agreement on restructuring those liabilities. While the bank had indicated it would, if necessary, exercise its legal right to enforce its security in respect of Purcell's liabilities, this had to be seen in the context of serious negotiations aimed at restructuring the company's debt so it could continue to trade.

Opening the application yesterday, Mr Brian O'Moore SC for Purcell's, said that while Purcell Brothers Limited was only incorporated in 1992, the Purcell family had, through another company, been involved in the meat export business for almost half a century. The directors of the company were brothers Gerry and Patrick Purcell and their mother, Philomena. It employed 20 people and many others on a part-time basis, traded in Ireland, mainland Europe, Australia, Egypt and Lebanon, and farmers across the State supplied animals to its premises in Waterford and Kilkenny.

He said NIB effectively became the company's bankers in 1993. There was some requirement for foreign currency dealing in the course of Purcell's business but NIB had facilitated and encouraged unauthorised currency speculation by Mr Gerry Purcell. The company was claiming the bank gave Mr Purcell some £50 million of credit, "directed us to the roulette wheel and then ran it". He said Purcell Brothers business was not currency speculation and it was outside the company's powers to get involved in it. The bank knew that, he claimed, but still facilitated and encouraged the speculation at a level which would "astound" the court.

While the speculation was going on, Mr Purcell was managing director of the company but he had since been replaced by his father because he had engaged in speculation "behind the back of his family". Mr O'Moore said the company directors had only authorised that certain facilities be made available to conduct the legitimate business of the company regarding foreign transactions. The Memorandum and Articles of Association of the company did not permit currency speculation and these documents had been given to NIB's legal department in 1995 and the bank was aware of them. A company could do only what the law permitted.

Not only did NIB encourage the speculation, it also gave bad advice regarding particular transactions. If it was ultimately found that the transactions between NIB and the company were legitimate, there would be a claim for damages for negligence, counsel added.

If, at the main action, the court found Purcell's was liable for the £6.4 million sum, the bank would be paid, counsel said. Purcell's was still trading as a profitable concern and there were assets to meet the debt. There were already fixed charges on company assets in the bank's favour and NIB was well-secured. Putting in a receiver was the "death knell" for any company.

Mr Kevin Feeney SC, for NIB, outlined concerns about the reality of Purcell's financial position and said very relevant information had been withheld when the High Court had granted an interim order restraining his client taking any steps on foot of securities in its favour. He said the company had had an opportunity to paint a true financial picture and had not done so. There were specific question marks regarding the financial stability of the company which were not identified and not addressed and ran, potentially, to many millions of pounds.

As long as that situation continued, NIB could not entertain a suggestion by Purcell's that the interlocutory order could be granted, conditional on the existing securities of the Bank relating to certain of Purcell's assets being maintained, other assets being brought in and appropriate undertakings.

The hearing resumes today.