A solicitors’ insurer is seeking judgment for some €4.9 million allegedly outstanding under a 2011 settlement with Bloxham stockbrokers of proceedings over heavy losses suffered after investing in a bond which fell 97 per cent in value.

The Solicitors Mutual Defence Fund (SMDF) Ltd , now R&Q Ireland Company Limited by Guarantee, claims it lost almost all of its then reserves of €8.4 million due to negligence of Bloxham.

Its chairman, Patrick Dorgan, said in an affidavit it had to get a €5 million guarantee from the Law Society to protect its position, had ceased offering indemnity to solicitors in 2012 and is now in run-off.

It ultimately had to apply to the Law Society to fund a rescue package of up to €13 million and finalised a run-off agreement with R&Q in November 2016, he added.

The insurer has applied to the High Court for leave to re-enter proceedings, initiated in 2009 against Bloxham, which collapsed in 2012, for the purpose of seeking judgment for €4.9 million arising from the 2011 settlement.

As well as the re-entry application, the SMDF recently issued fresh proceedings for specific performance of the 2011 settlement agreement.

When the re-entry application came before Mr Justice Denis McDonald on Wednesday, it was resisted by lawyers representing five former Bloxham partners.

Gary McCarthy SC, with Hugh O’Flaherty, representing Arthur Quinlan, Stradbrook Road, Blackrock, Co Dublin, and Angus McDonnell, Ballymoney Park, Kilbride, Co Wicklow; Joe Jeffers, representing Pramit Ghose, St Mary’s Road, Ballsbridge, Dublin, and Martin Harte, Idrone Terrace, Blackrock, Co Dublin; and Andrew Walker, representing Anne Barrett, Shrewsbury Park, Merrion Road, Ballsbridge, all opposed re-entry.

‘Struck out’

It was argued a High Court order of January 31st, 2011, made when the settlement was announced, stated the proceedings were “struck out with liberty to re-enter”. The words “struck out” prevented any matter other than the original cause of action being re-entered, it was submitted.

The settlement agreement was not part of the original case and was not made a rule of court, it was argued.

The SMDF said the settlement was not made a rule of court for reasons including some Bloxham partners wanted its terms to remain confidential to avoid adverse publicity.

The court heard the case was listed for hearing on February 1st, 2011, but had settled between the sides on January 28th. The sides agreed the settlement could be mentioned at 2pm on January 31st, 2011, before a commercial court judge “where no media presence was expected”. Because a journalist was there, and another journalist was in a second commercial court, the 2pm mention was not possible. Solicitors were described in an email as “staking out” both courts for an opportunity to “discreetly mention” the matter and it was ultimately mentioned before Ms Justice Mary Finlay Geoghegan.

Re-entry application

Andrew Fitzpatrick SC, for the SMDF, disputed the words “struck out” meant the proceedings could not be re-entered for the purpose of seeking judgment. The liberty to re-enter meant the case could be re-entered for a purpose connected with the proceedings, he said.

Having heard the sides, Mr Justice McDonald reserved judgment on the re-entry application.

In an affidavit, Patrick Dorgan, chairman of the SMDF, said it changed its name in 2016 to R&Q Ireland Company Limited by Guarantee.

He said Bloxhams had been retained by the fund from about 1991 for investment advice and, in reliance on that advice, the fund invested some €8.5 million in January 2005 in a bond which later lost 97 per cent of its value.

The fund later issued proceedings against Bloxham. On foot of applications by various Bloxham defendants, Morgan Stanley & Co International plc, Saturns Investments Europe plc, Morgan Stanley Capital Services Inc and Deutsche Trustee Company Ltd were joined as third parties.

A settlement agreement was reached in 2011 with Bloxham under which €7.3 million was to be paid in instalments on specified dates from 2011 to 2016. It also provided the SMDF might get money under proceedings in England between various noteholders and the third parties.

He said some €3.3 million was paid up to 2012 under the settlement agreement, plus a further sum of €178,723 under the English proceedings. Because the settlement provided the fund would in circumstances of default, be entitled to obtain judgment against the relevant defendants for some €8.4 million, that left some €4.9 million due and owing, Mr Dorgan said.