A COURT has found that AIB and its investment arm engaged in “negligent misrepresentation” of the terms of an investment product sold to Frank McBrearty jnr and his wife.
The couple had invested more than half of the €1.5 million compensation Mr McBrearty received from the Irish State with the bank.
Mr McBrearty, the son of Donegal publican Frank McBrearty snr, first came to public attention as the innocent victim of a murder charge in 1996. This led to the establishment of the Morris tribunal and revelations of Garda corruption.
A judgment released by the Northern Ireland Courts Service shows Mr McBrearty and his wife Patricia, and the defendants in the case AIB Group (UK) PLC, trading as First Trust Bank and First Trust Independent Financial Advisers Limited (IFA), brought writs against each other in this case in 2009.
The McBreartys claimed the defendants were guilty of breach of contract and negligence in the investment of €1 million. They claimed they were promised they “would walk away with the capital amount of €1,000,000 plus €80,000 and that the fund would increase by a minimum of 5 per cent per annum”, according to the judgment.
The McBreartys claimed damages of €342,000.
AIB sought to recover loans totalling €260,000, which the bank claimed the McBreartys owed it.
The couple had €800,000 to invest, however a loan of €675,000 from the bank allowed them to increase that figure to €1 million. In addition the bank gave an “inducement” of €80,000, bringing the fund to €1.08 million, which was invested in an offshore investment.
Some €700,000 was invested in two “guaranteed” funds in 2006 with the balance put into a “low to medium risk” fund.
In 2008 the couple complained to the IFA about their investment and the charges being levied.
One witness for the bank testified it had “ultimately” emerged the fund was not guaranteed “on account of the management and related fees”.
An IFA witness maintained the McBreartys’ contention that the investment had not been properly explained to them did not stand up.
Mr Justice McCloskey ruled it “was a term of the contract” between the McBreartys and the AIB (UK) and IFA that the latter would secure a 5 per cent annual return on the couple’s investment and that this would not be overtaken by their borrowings.
He said that, viewed through this prism the terms as set out “had the character of misrepresentations, made negligently, which were plainly intended to – and did – induce the plaintiffs to enter into . . . the investment agreement”.
Damages have not yet been measured. The case will be back before the court later this month.
He noted that the bank’s claim that it was owed €260,000 appeared to be uncontested and that a “balancing exercise” was required.
Mr McBrearty declined to comment on the matter last night. An AIB spokeswoman said the bank did not discuss individual customers.
Mr McBrearty received €1.5 million compensation in 2005 for wrongful arrest, libel and breach of constitutional rights.