Ulster Bank is being sued for investment losses of as much as £570m (€693m) in a claim lodged with the High Court in London. Some 85 investors based in the Republic are behind the claim, which alleges that Ulster Bank and co-defendant Evans Randall, an investment management company, mis-sold a £466.6m (€567m) investment in London’s Canary Wharf complex.
The lead plaintiff is Brendan McEneaney, who is severely disabled following a road traffic accident and invested some of the damages he received. He is understood to have lost £200,000 (€242,000) as a result of the investment – the minimum permitted investment in the scheme.
According to the claim, Ulster Bank and Evans Randall knew that at the time of the transaction completion, October 2008, the property was no longer worth the purchase price. The valuation had been undertaken in September 2007 and the claim alleges that the defendants knew the property crash had caused the value to have fallen substantially by the time the deal was completed.
The property, 5 Canada Square, had been sold by Ulster Bank’s parent, Royal Bank of Scotland, to Evans Randall in June 2007 for £452m (€549m), some £14.5m (€17.6m) less than the amount paid at deal completion 16 months later. The claim states that the investors were unaware of this.
It is alleged that Ulster Bank and Evans Randall knew that statements regarding the property valuation “were not true and their conduct was not lawful by completing and closing the transaction when they knew full well that the claimants…. would suffer loss”.
The claim also alleges that Ulster Bank and Evans Randall breached their duty not to mislead investors and sold an investment that was “manifestly unsuitable and likely to cause the claimants loss”. The court papers call on Ulster Bank to prove that it was not subject to a conflict of interest in which it was motivated by concern about the solvency of the RBS Group.
In addition, the claim states that representations made by Evans Randall were “untrue”. Investors, it is alleged, were told by Ulster Bank that the investment would generate a return of “at least 20% plus interest annually”. The papers also claim Ulster Bank projected a substantial profit through re sale “as the property would probably be sold off for a big profit within three years and make over one third or half of the original investment”, according to an alleged statement made on behalf of the bank and quoted in the claim.
The investors were allegedly chosen by Ulster Bank’s wealth management division from amongst its richest customers in the Republic. Personal investments ranged from a minimum of £200,000 (€242,000) to, in some cases, more than £1m (€1.21m) each. Collectively the investors raised about £40m (€48m) for the project, with other finance raised by equity and borrowings. The claim against Ulster Bank and Evans Randall alleges that the two knew that the bank loans were already in breach of their covenants through the increase in the loan to value ratio even at the time the deal was completed.
One person close to the litigation says that the total value of the claim could be as much as £570m (€693m). The investors are seeking the return of their entire £40m (€48m) investment, plus the writing-off of around £20m (€24m) to £30m (€48m) of outstanding personal loans taken out with Ulster Bank to assist financing those investments. Around £500m (€604m) is being sought as damages arising from loss of expected profits.
Third party investors in litigation are understood to be interested in backing the claim, to enable the case to proceed without the investors putting more of their own funds at risk. Discussions are taking place between the investors’ legal representatives and third party investors.
Ulster Bank said it was unable to comment on a current legal case. A spokesman for Evans Randall said: “We are reviewing the claims in detail with our legal advisers, since neither the claimants nor their lawyers raised these matters with us before issuing proceedings. Whilst sympathetic to losses made by investors during the economic downturn, we can see no basis for any suggestion that Evans Randall might have any liability in this regard.”