The official liquidator of Money Markets International Stockbrokers Ltd (MMI) is to ask the High Court for leave to adjourn an action alleging fraud against the MMI directors pending investigations into the alleged debiting of £1.9 million (€2.41 million) from the account of a Jersey Island company, Cater Allen Nominees Ltd, and the alleged crediting of that amount to the benefit of two directors of MMI - Mr Oisin Fanning and Mr John Curran - and more than 20 people associated with these directors.
Mr Justice Kelly will be asked by liquidator Mr Tom Kavanagh this week to adjourn proceedings - listed for March 21st - alleging fraudulent conversion against the MMI directors. Pending the outcome of his investigations, the liquidator does not want to proceed at this stage with an application to discontinue the proceedings alleging fraud.
Yesterday, Mr Bill Shipsey SC, for the liquidator, told Ms Justice Laffoy it was "troubling" that Cater Allen, a client of MMI, did not have sufficient monies in its account regarding the alleged £1.9 million transaction. Cater Allen had £1.4 million in the account, leaving some £500,000 owing, he said.
However, there was no acknowledgment to date from Cater Allen that this sum was due and owing and, even if there was an acknowledgment, Cater Allen was seeking to maintain its entitlement to sue MMI and the directors for gross negligence and misconduct of Cater Allen's affairs, counsel said.
The liquidator has claimed that Cater Allen had initially portrayed itself as the victim of unlawful conduct by the MMI directors and had said its account should never have been debited because it never received the amounts involved. But recently, the liquidator has claimed, Cater Allen seems to be adopting the position that the transfer of the monies was bona fide and authorised by it. Solicitors for Cater Allen have said, in correspondence, that their client was satisfied with transfers from its accounts of sums of £200,000 sterling, (€328,785) £551,462.69 sterling and £385,445.57.
Mr Shipsey said, apart from that very general statement, no one, least of all Cater Allen, has said what "satisfied" meant. There was no suggestion that value was received regarding the payments or that they were authorised by Cater Allen. This was not a matter the liquidator could "just let go without a resolution".
The liquidator wanted a full explanation regarding the position Cater Allen was now maintaining. Something had happened since last January which had led to that position. He was seeking an adjournment until investigations were completed or at least further advanced and until they could say whether Cater Allen was acknowledging liability in the sum of £500,000.
Last week, Mr Shipsey said Mr Kavanagh's view was, in light of Cater Allen's present "mystifying" position, that the liquidator's proceedings against the MMI directors alleging fraudulent conversion and breach of fiduciary duty would be difficult to maintain.
He outlined his position during a hearing of his application for directions as to the future of the proceedings against the directors. The application was adjourned to yesterday to allow lawyers for the liquidator consider submissions made on behalf of Prudential Bache, the London-based stockbrokers which acted as agent for MMI for US securities and claims to be owed £320,000, and to procure further information for Ms Justice Laffoy.
When the hearing resumed yesterday, Mr Shipsey handed the judge a document outlining the liquidator's estimate of the ultimate costs of the liquidation. The judge had asked for those details.
Counsel said the liquidator was not proceeding at this stage with his application for directions. Instead, Mr Kavanagh was seeking leave to apply to adjourn the proceedings against the directors - listed for March 21st next - so further investigations could be carried out into the matters relating to Cater Allen.
The alternative course was to discontinue the proceedings on the basis there would be no determination of costs issues pending investigation of the matters outlined.
Ms Mary Finlay SC, for Prudential Bache, supported the proposal to seek an adjournment of the action against the directors. Ms Finlay said it appeared the liquidator was in a position to establish there was wrongdoing, in the sense of forged entries and rewriting of books regarding the certification of at least two transactions. It seemed the liquidator was in a position to prove wrongdoing which amounted to breach of fiduciary duty. The difficulties related to proof of loss as a result.
Her clients had told the liquidator, in light of the debiting of £1.9 million from the Cater Allen account, which account held some £1.4 million, that there was a prima- facie loss in the company. In her client's view, in any action against the MMI directors, the liquidator should get as far as shifting the onus of proof on to the directors to prove the loss - of some £500,000 - does not exist. To prove that, the directors would have to bring in Cater Allen.
If the High Court did not consent to adjourn the liquidator's action against the directors, her client's preference was that the action against the directors should proceed, counsel added. Mr Denis McDonald, for the Central Bank, said the way forward proposed by the liquidator was sensible. It could not be said there was no case against the directors and it was appropriate to adjourn the matter to allow investigations proceed.
Ms Justice Laffoy granted leave to the liquidator to apply to Mr Justice Kelly for an adjournment. If this was refused, the judge said the liquidator could re-enter his application for directions before her.
