Former Davy employees made €9m profit from 2014 bond sale, court hears

Sixteen former Davy employees are being sued individually, alongside the stockbroking firm, for alleged fraud, deceit and breach of fiduciary duty
Former Davy employees made €9m profit from 2014 bond sale, court hears

High Court reporters

A group of former employees of J&E Davy stockbrokers made a profit of €9 million from the onward sale of bonds they sold in 2014 on behalf of businessman Patrick Kearney, their counsel has told the High Court.

Lawyers for the 16 former Davy employees, who are being sued individually alongside the stockbroking firm, said there was no need to disclose certain information sought regarding the profits made by the onward sale of the Anglo Irish Bank bonds as they have already admitted this figure in correspondence with Mr Kearney.

In Commercial Court proceedings, Mr Kearney, a Belfast-based property developer, and his firm, Kilmona Holdings Limited, claim Davy and 16 former employees and senior management made a windfall profit of some €25 million from the onward bond sale.

He claims Davy, while acting as his agent in the sale to what he was assured was a third party, had in fact sold them to a consortium comprised of 16 Davy staff members, known as the O’Connell Partnership.

The court heard the claims are fully and unambiguously denied.


At the High Court on Wednesday, Marcus Dowling SC, with Stephen Byrne BL, representing 15 of the 16 former employees, said the group collectively made a profit of some €9 million from the onward sale. Counsel for the 16th employee indicated his agreement with Mr Dowling’s submissions.

A suggestion the plaintiffs cannot trust this provided figure is “completely groundless”, as it is a “truthful number”, Mr Dowling said, arguing against his client being required to disclose to the plaintiffs what his side say are irrelevant and unnecessary materials.

Mr Dowling also said it was an “ironic twist” that Mr Kearney was claiming now that he did not know who purchased the bonds.

In his action, Mr Kearney claims he learned about the alleged concealment of the partnership composition after Davy received a record fine of €4.1 million by the Central Bank last year for market rule breaches due to its failure to identify whether a conflict of interest existed in the transaction.

Mr Kearney says in pleadings that he was assured the partnership was an independent client of the stockbroker and, had he known then what he knows now, he would have refused to settle his previous 2015 legal action against Davy, in which he claimed his bonds were sold at an undervalue.


However, Mr Dowling said Mr Kearney’s lawyer wrote to the Central Bank in March 2015​ complaining the people on the other side of the transaction were either Davy clients, Davy itself or Davy employees.

Martin Hayden SC, for Mr Kearney and Kilmona, said his clients have been consistent in making a distinction between knowledge about the lenders and knowledge about the bond purchasers.

Mr Kearney is seeking a wide range of documentation from the individual defendants relating to their involvement in the partnership’s resale of the bonds. He also wants, from Davy itself, documents exchanged between the firm and the Central Bank which informed the financial regulator’s investigation into the 2014 bond trade.

These are sought in circumstances where there is dispute between the parties about the admissibility of a Central Bank statement, published in March 2021, explaining its rationale for fining Davy €4.1 million.

The plaintiffs are seeking to prove a claim of fraud, deceit and breach of fiduciary duty on the part of the Davy defendants, Mr Hayden said. The claims are denied, and the defendants say the firm owed no fiduciary duty to Mr Kearney and Kilmona because they were “execution-only” clients.

Mr Hayden’s client is also seeking materials that would speak to any advisory relationship Davy may have had with the government around the time of the Anglo bond sale.

Imogen McGrath BL, for Davy, said there was “no evidence” Davy advised the State as to the value of the bonds. She objected to “extraordinarily broad and unanchored” disclosure of correspondence between her client and the Central Bank and the government, citing issues of confidentiality.

The plaintiffs, she said, are relying on the Central Bank’s 2021 statement. If this ends up being inadmissible, as Davy contends it is, then all the documents exchanged between Davy and the regulator would also be inadmissible, she submitted.

The various discovery motion hearings before Mr Justice Michael Quinn will continue on Thursday.

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