Belfry Funds Litigation – An Overview

The Commercial High Court has recently seen the settlement of approximately 300 sets of multi million euro proceedings brought by various Plaintiffs regarding investments made in the ill-fated Belfry investment funds between the years of 2002 and 2006, such funds having been promoted and sold by Allied Irish Banks. The various proceedings commenced in 2014. Due to the large volume of Plaintiff investors, it was agreed that eight cases would be utilised as ‘pathfinder cases’ that would ultimately determine the outcomes for all investors. These eight cases were further reduced to one sole case which was due to be heard before the Commercial High Court in July for a ten-week period before settlement was ultimately agreed.

Background

The cases arose following investments made between 2002 and 2006. Following the collapse of the funds, proceedings issued in 2014 against AIB and various other Defendants who were involved in the management of the Belfry funds. All Defendants vehemently denied the allegations made against them and maintained that the Prospectuses selling the products of investment in the Belfry funds clearly outlined the nature and risk involved in the investment.

Statute of Limitations

In April 2017, the High Court considered the issue of the claims being potentially statute barred as they exceeded the six-year period required to bring such claims, ultimately finding that the claims were not statute barred. This decision was then challenged and brought to the Court of Appeal in 2019, which saw a halt to the proceedings as the eight cases ‘pathfinder cases’ were deemed to have been statute barred. However, in December 2020, the Supreme Court overruled the Court of Appeal decision and endorsed the original High Court decision which allowed the eight cases to proceed.

Fraudulent concealment

A particular argument pitted against Gore & Grimes’ clients in this litigation was the allegation of fraudulent concealment in relation to Loan to Value clauses in the loan agreements entered into by the funds. The Plaintiffs in this case alleged that the Defendants were guilty of such concealment as they allegedly failed to identify the gravity of the investment risk to the investors. This allegation was important for the investors to pursue as it tied into the Statue of Limitations debate. As governed by the Statute of Limitations Act 1957, the period of limitation of an action which has been concealed by fraud does not commence until the fraud has been uncovered[1]. This differs from the general rule which requires action to be taken within six years from the cause of action accrued[2]. This issue was greatly discussed in the Court of Appeal decision, as outlined above. Gore & Grimes denied and rebutted this argument on behalf of our clients at every stage of this litigation and this allegation was ultimately formally withdrawn in court by the Plaintiffs.

Conclusion

This case proved to be a significant, high-profile, litigation matter which travelled through the various jurisdictions of the Superior Courts of the Irish Judicial System.  The outcome was the result of many years of hard work resulting in the protection of our clients’ names and integrity.  The judge praised the parties and their advisers for their “extraordinary work” that resulted in all the cases being settled.

For more information please contact: Helena O’Brien, David Martin, Harry Caulfield

Media

Irish Times coverage – 8 July 2021

[1] Section 71(1)(b) of the 1957 Act

[2] Section 11 (2)(a) of the 1957 Act