THE SOLICITORS Mutual Defence Fund, the main insurance body for solicitors, and a legal firm are not proceeding with actions in which they claimed €9 million against Bloxhams stockbrokers over alleged negligent advice concerning an investment bond which collapsed in value, the Commercial Court has been told.

However, claims by Bloxhams against US investment bank Morgan Stanley, a third party in both actions, remain active. Bloxhams is also among several Irish investors – about 90, including two orders of nuns – which are suing Morgan Stanley in the UK alleging breach of contract.

In the Solicitors Mutual Defence Fund case, it was claimed Bloxhams expressly represented to it in January 2005 that the Saturn Investment Europe bond was a suitable investment and was issued by Dresdner Bank. In 2008, the fund learned the bond was not issued by Dresdner and was not suitable. The bond’s value collapsed by 97 per cent, it was claimed.

The fund said it was unaware in 2005 of a “call option” exercisable by Morgan Stanley, which compromised the integrity of the bond as a secure investment vehicle. It claimed a “mandatory redemption event” exercised by Morgan Stanley in June 2005 meant bondholders, including the fund, would only recover 3 per cent of their investment.

Bloxhams, having acted for the fund since 1991, was fully aware the investment represented more than 30 per cent of the fund’s portfolio and of the implications of it for the fund, which has 3,500 members, it was alleged.

In the second action, solicitors LK Shields claimed its Laurence K Shields, a partner in the firm, had close contact with Bloxhams in his capacity as fund chairman and had relied on advice from Bloxhams when deciding in January 2005 to invest €1 million for the firm in the same bond.

Ms Justice Mary Finlay Geoghegan was told by Declan McGrath, for Bloxhams, that neither of the actions against 14 partners in Bloxhams was proceeding and could be struck out with liberty to re-enter.