FIRST ACTIVE turned itself into a shadow director of a building group, forced the company's owner out of any managerial role in the business and "deceived" him into selling the group's best asset, it was claimed before the High Court in Dundalk yesterday.
Developer Brian Cunningham is suing First Active and a receiver appointed by the bank to his construction business, the Cunningham Group, in 2003. The bank provided loans of £30 million (€38 million) to three developments - in Salthill in Galway, Finglas and on the Malahide Road in Dublin.
Opening the case for Mr Cunningham, Hugo Page QC said his client was a successful developer but this changed when he started to bank with First Active in 1999. He said the bank "exerted control" over Mr Cunningham, "forced him out of any managerial role" and as a result his projects failed.
He said First Active "deceived" Mr Cunningham into selling Finglas shopping centre, the group's best asset, in August 2002 on the condition that the bank would fund his other developments in Salthill and on the Malahide Road. "The bank broke that promise," said Mr Page.
Mr Cunningham's project on the Malahide Road incurred a loss of €10 million and the Salthill development was sold under value to a developer who later made a substantial profit on it.
Mr Cunningham agreed to a loan facility on August 16th, 2002, which included a clause that First Active could demand at any time repayment of its loans without providing a reason. The Cunningham Group now claims that this condition was inserted without it being drawn to its attention.
The court heard that in January 2000, First Active believed Mr Cunningham's plan to create a new village in Finglas was "one of the most exciting developments in Ireland". It would cost £30 million to buy the site, up to £202 million to develop it and the project had a gross development value of £310 million.
First Active began expressing concerns in June 2000 that the Cunningham Group was taking on too many new projects without completing existing ones and could face a potential "overtrading situation".
The bank encouraged Mr Cunningham to appoint "high-profile members of the business community to advance the group's interests". He appointed four board directors, including former taoiseach Albert Reynolds.
Relations between Mr Cunningham and First Active started to sour. The group was "kept on a tight financial leash" by First Active and its projects were being delayed due to a "lack of funding" by the bank, Mr Page said.
Mr Page also said there was a £500,000 shortfall from the sale of a property in Dublin. He said the group's solicitor, Michael Lynn, had used part of this to pay disbursements, including his own legal fees, and this may be an issue between the group and Mr Lynn.
The case continues today.
