A CREDIT UNION suing stockbroking firm J E Davy over some €5 million losses, allegedly suffered due to Davy’s advice to invest in certain perpetual bonds, may bring an additional claim that Davy failed to act honestly in not disclosing it was also the seller of some of the bonds involved and had made “a secret profit” on their sale.

E-services and Communications Credit Union Ltd has brought a motion seeking to amend its case to plead Davy failed to act honestly and fairly by not disclosing it was the vendor of at least some bonds, particularly the Juyske and Oko bonds, and leading the credit union to believe instead the bonds were being purchased from others.

The motion alleges Davy breached its fiduciary duty not to put itself in a conflict of interest position and was making a secret profit in relation to such sales.

When the motion came before Mr Justice Peter Kelly in the Commercial Court yesterday, Paul Sreenan SC, for Davy, said his side had sent a replying letter and also now had a replying affidavit.

After being told the sides believed they could “narrow the issues” between them and there may be no need to apply for an amendment of the proceedings, the judge agreed to adjourn the matter to Thursday.

E-services brought the motion after considering documents discovered by Davy last month, including a letter of October 12th, 2007, from Davy to Brian Healy, director of regulation and trading at the Irish Stock Exchange concerning Davy’s role regarding certain perpetual bonds.

Paula Downey, head of compliance with Davy, wrote in the letter that Davy was remunerated for its role in selling the Oko and Jyske bonds by buying the bond at a discount to the issue price.

“When I advised the exchange that we were part of a syndicate selling the bond, that was my understanding,” Ms Downey wrote.

“The principles of play were the same albeit that I now understood that our role was not formalised ie we did not appear on documentation.”

In its action, E-services, Dawson Street, Dublin, claims, acting on advice from Davy, it had between June 2004 and April 2005 invested some €12.9 million in various bonds including Nordea Bank Bond, Jyske Bank Perpetual Bond and Oko Bank Perpetual Bond but its investment had reduced in value to some €7.7 million.

It claims that loss is “entirely the responsibility” of Davy.

Davy’s chief executive officer Tony Garry has rejected the claim.