400-plus investors sue ACC over bonds

MORE THAN 400 people who invested in various “Solid World” bonds and investment products are suing ACCBank over alleged failure to secure any return on their investments, the Commercial Court heard yesterday.

While the geared tracker bonds were capital guaranteed, the vast majority of the investors – 430 out of 432 – took out loans with ACC to buy the bonds. They are claiming losses arising from interest repayments on the loans. ACC has taken debt-recovery proceedings against 37 plaintiffs.

Maurice Collins SC, for ACC, applied yesterday to have key issues in a representative number of the cases determined by the Commercial Court with the intention of having the court’s decision on those cases binding on most of the actions. ACC is part of the Dutch Rabobank group.

Michael Cush SC, for a number of plaintiffs, said some of the cases were fact specific but his side was prepared to select a specific number of cases and see if agreement could be reached that the outcome of those would be binding on others.

Mr Cush said it was “not entirely correct” to say the cases were about failure to make any gains on the investment in the bonds. Many plaintiffs had borrowed from ACC so as to invest in the bonds and there were issues about interest on those loans, he said.

Mr Justice Peter Kelly said he would only transfer the proceedings to the Commercial Court if there was agreement the court’s decisions would be binding on a sufficient number of cases.

The judge has adjourned the proceedings for six weeks to allow the sides an opportunity to see if a representative number of cases may be selected for court determinations binding on a considerable number.

Most of the plaintiffs, almost 300, are represented by solicitors Lavelle Coleman while a number of other legal firms represent the remainder, the court heard. Some of the actions are also brought against financial intermediaries who allegedly sold the bonds to a number of investors.

Five plaintiffs had made complaints about the bonds to the Financial Services Ombudsman but these were rejected.

ACC said the return of the capital amount of the bond was guaranteed by ACC and the interest rate, calculated at maturity, was dependent on the share price performance of a basket of 12 large company shares over the March 2004 to February 2010 period of the bond product. Due to the share performance, no gain was ultimately obtained, ACC said.

ACC claims that before investing in the bond, investors were given a number of documents including an investment application form and a risk-warnings document.

The bank says the complaint about the bond appears to be primarily of “mis-selling”, an allegation the transactions were unsuitable for the particular investor and that the bank wrongfully and in breach of various duties caused entry into the transaction. Negligent misrepresentation is also alleged.

ACC contends that the bond product was properly sold and did not contain any unfair terms.