Three brothers of the Cosgrave Property Group and one of their companies are claiming more than €250 million damages from Ulster Bank over alleged mis-selling of financial derivative instruments or "swaps" under which some €370 million is allegedly outstanding to the bank.
Peter, Joseph and Michael Cosgrave allege breach of fiduciary duty and deceit arising from the selling of the instruments which, they contend, were unsuitable for them. The bank denies those claims and contends the swaps were "standard" swaps, known as "vanilla" swaps, with no particularly complex or unusual features.
The bank says almost €370 million is outstanding under the instruments, effective on dates from 2005, and allegedly secured on a large number of commercial and residential properties, mostly in Dublin 4 and 8, including office blocks at Georges Quay, Dublin; West End Commercial Village; West Pier Offices, Dun Laoghaire; Meridian Point, Greystones; 18 apartments at Camden Lock, Ringsend; and a property on Shrewsbury Road, Dublin.
The bank claims the agreements were entered into to hedge interest rate exposure relating to a bilateral loan agreement between the group and the bank, plus a syndicated loan agreement between the group and a syndicate of lenders led by the bank.
The action was initiated in January by the brothers and a group company, Romford Luxembourg Holdings.
The bank successfully applied to Mr Justice Peter Kelly today to have the hearing fast-tracked in the Commercial Court. Michael Howard SC, for the Cosgraves, said his side wanted mediation of the dispute.
If any mediation fails, the case will proceed to hearing.
Maurice Collins SC, for the bank, argued the claims was unsustainable and also contended nine of the disputed instruments were entered into more than six years ago, with the effect the legal time period within which they could be challenged had elapsed.
In their proceedings, the Cosgraves and Romford claim the various derivative or swap agreements were mis-sold and they are claiming damages for alleged breach of fiduciary duty and under the tort of deceit.
They claim any sum, amount, charge or cost associated with the swaps are not secured or charged on the properties and any demand served under the swaps is ineffective and unlawful.
The bank claims the case is unsustainable because the transaction documents contain acknowledgements by the plaintiffs the bank was not advising them but rather providing them with an “execution only” service.
While the plaintiffs allege they did not understand and had no experience of swap transactions, the information available to it suggests otherwise, the bank claims.
The first tranche of swaps entered into in 2005 was part of an overall refinancing arrangement and the plaintiffs also had interest rate hedging arrangements with Morgan Stanley, Bank of Ireland, EBS and Permanent TSB, the bank claims.
This showed, prior to entering into the swaps with the bank, they had significant experience of interest hedging arrangements, it claims.
It alleges Davy stockbrokers assisted the Cosgraves in relation to the 2005 refinancing.
It also claims the brothers hired Patrick Keogh, a former director of corporate banking with AIB, in 2007 and after that the bank principally dealt with him concerning the Cosgraves' interest rate hedging strategy.
