Last July 2012, Cortina-averse developer David Agar was reported to have won €30m in a settlement with Ulster Bank over the mis-selling of a financial product known as an “interest rate swap”. This settlement was understood to be the first and almost certainly the biggest in Ireland. Interest rate swaps are financial products designed to give certainty to borrowers about their interest bills – read more detail here. In the UK, over €2bn has so far been refunded to consumers through the Financial Services Authority and a slew of Irish banks are being investigated for mis-selling in the UK. In Ireland however, the Central Bank and the Financial Regulator seem reluctant to open a new Pandora’s Box in a sector which is still generally teetering even after the 2011 recapitalisations.
So, for the time being, it is left to individual borrowers to pursue their own cases for mis-selling of swaps.
Today, we learn via the Irish Times, that two related groups are suing Ulster Bank and its operating unit, First Active, both members of the Royal Bank of Scotland group, for the mis-selling of swaps in 2007. The basis for the applicants’ case appears to be that Ulster Bank had allegedly not complied with Central Bank rules on the conduct of investment business, and it is apparently alleged that one of the investors claims to have had only a basic knowledge of the products when purchased. The remedies sought by the applicants are reported to be the rescinding of the swaps’ agreements and compensation for any losses suffered or sufferable from alleged misrepresentations. It’s not clear how much they’re seeking but it is reported that there are “notional liabilities” of €65m involved in the swaps which might provide a sense of the scale.
There are 10 individual applicants in the case representing two partnerships which had developed property in Sandyford, south Dublin. The first partnership is the so-called “Colgan-Ryan partnership” which comprises David Colgan, Mark Colgan, Davis Colgan, Patrick Ryan, Ronan Ryan, Desmond Ryan, Deirdre Ryan and Padraic Ryan. They are reported to be suing over a swap instrument of June 2007, which expires next November, and another which has expired.
The second partnership is the so-called “Oval partnership” which comprises Patrick Ryan, David Colgan, Mark Colgan and Davis Colgan, and property developers Philip Monaghan and Finian McDonnell. They are reported to be suing over a May 2007 swap, which has expired.
The case was initiated on 22nd November 2012, and just like in the David Agar case, the applicants are represented by Downes solicitors in Dublin – tel 01 6762546, Dublin 2, there doesn’t appear to be a website . The case reference at the High Court is 2012/11840 P. Yesterday the case was transferred to the Commercial Court division of the High Court.
It is surprising that there have not been more swaps’ cases publicized, and given the Irish Statute of Limitations and the fact that our construction and property boom petered out in 2007, developers may have to be quick to make their case.
UPDATE: 16th January 2012. A UK firm of solicitors, Bond Pearce, has analysed what might be the first swap mis-selling case that went all the way through the UK courts. John Green and Paul Rowley v The Royal Bank of Scotland  EWHC 3661 (QB)