Liquidator at Bloxham loses case against Irish Stock Exchange

The High Court has found "no reliable evidence" of any conspiracy behind the decision to terminate liquidated stockbroking firm Bloxham's membership of the Irish Stock Exchange Ltd (ISE).

Bloxham liquidator Kieran Wallace had brought proceedings against the ISE alleging that the termination meant the firm would lose some €6 million in expected benefits from a proposed ISE restructuring, known as Project Chrysalis, intended to allow corporate members to benefit from its €45 million reserves. That restructuring has not yet happened.

In his judgment, Mr Justice Peter Charleton ruled there was "no reliable evidence" that the December 2012 decision to terminate Bloxham's membership arose from a conspiracy or was engineered so as to financially benefit other ISE member firms, as opposed to being for the benefit of the ISE as a whole.

The situation of Bloxham was “unfortunate” and the benefit that might have gone to the credit of the liquidation was lost, but that was a consequence of the liquidation.

The Central Bank was entitled to have concerns it was expected to put up with a restructuring project in circumstances where a member of the existing exchange company promoting that project had gone into liquidation in the "deeply unfortunate circumstances that afflicted Bloxham".

Bloxham had ceased trading on the exchange for more than six months when its membership was revoked; had closed down its clearing arrangements with the relevant agency; had transferred all its stock exchange business to Davy; was insolvent; had been expelled from the London Stock Exchange in October 2012; and financial irregularities were being investigated by the Central Bank, he noted.

There was “literally no prospect” of Bloxham returning to active membership of the ISE.

There was also no evidence of any pushing around or manipulation of the ISE's head of regulation Daryl Byrne, to whom the decision to revoke Bloxham's membership was delegated, Mr Justice Charleton added. He came across as "honest, straightforward and seriously meticulous".

The revocation of its membership arose after the Central Bank suspended Bloxham in late May 2012 from trading as a result of concerns about its financial position.

The judge noted that financial accounts to December 2011 for Bloxham had been signed off and showed some €6.25 million in financial assets available for sale. That was thought to be the surplus accumulated to Bloxham within the ISE but, in fact, the sum available on distribution would be about half as a result of the need to properly capitalise the new exchange firm.

The court had been told by Pramit Ghose of Bloxham that, on May 23rd, 2012, Bloxham's then head of finance and compliance Tadhg Gunnell had revealed there were financial irregularities that had been hidden over years, Mr Justice Charleton added.

While the matter was not gone into in detail, it seemed positive assets of €3 million were in fact negative liabilities in that sum, with a consequent difference of €6 million.