A stockbroking firm being sued by a credit union over the way €5.3 million was invested will have to hand over reports of an Irish Stock Exchange (ISE) investigation, the Supreme Court has ruled.
On Tuesday, in a written judgment on behalf of a five-judge court, Chief Justice Frank Clarke overturned a Court of Appeal (CoA) decision that J & E Davy would not have to provide the reports to Waterford Credit Union (WCU).
The credit union is suing Davy over the investment in certain bonds, between January 2005 and August 2006, which it says did not guarantee the capital sum and provided no maturity date.
Bonds
Waterford Credit Union claims it would not have invested in these bonds had Davy not advised it to do so. It claims, among other things, misrepresentation, breach of contract, that Davy made a secret profit, and failed to disclose it was acting as a principal in the sale of the bonds. Davy denies the claims.
The legal action followed an investigation by the ISE which in 2009 found breaches of business rules by Davy stockbrokers. The ISE stated publicly the investigation related to the sale of a number of perpetual Constant Maturity Swap (CMS) bonds to some of its credit union clients.
The ISE found the breaches related to the completeness of disclosure of certain information to the credit unions about the bonds and in relation to ensuring the bonds were in full compliance with the Trustee (Authorised Investment) Order, 1998.
As a result, Davy commenced a process with the credit unions involved in which most of the credit unions accepted a negotiated settlement to deal with loss of value of the bonds. That cost Davy more than €35 million,the ISE said in its statement following the investigation.
Waterford Credit Union brought proceedings after it claimed it discovered the bonds it had invested in did not comply with the Trustee (Authorised Investments) Order of 1998.
In 2018 the High Court made orders that both sides make discovery of certain documentation in advance of the trial. That included two ISE reports of its investigation which Davy claimed were not relevant to the issues in this case. Davy appealed arguing the High Court erred.
Last year, the appeal court ruled, while the ISE reports were relevant to the issues in the case, it refused to order their discovery to ensure Davy does not suffer litigious disadvantage.
Documents
Waterford was granted a further appeal to the Supreme Court while Davy cross appealed. Chief Justice Clarke ruled the Court of Appeal was in error in deciding it would be appropriate to deprive Waterford of discovery of documents determined to be both relevant and necessary.
The appeal court did that, he said, as a means of imposing a sanction for a breach of an implied undertaking given in other proceedings in which it (Waterford) was not a party.
He dismissed Davy’s cross appeal on the basis both the High Court and the Couert of Appeal came to a sustainable decision to the effect the documents in question were relevant and their discovery was necessary.
He proposed the parties agree the order which should be made including any question of costs. In the event of disagreement, they will be invited to exchange correspondence setting out their position on any matters in dispute, he said. The court will then, if necessary, make a determination of any issues arising, he said.
