The High Court has found "no reliable evidence" of any conspiracy behind the decision to terminate liquidated stockbroking firm Bloxham's membership of the Irish Stock Exchange Ltd.
Bloxham liquidator Kieran Wallace had brought proceedings against the ISE alleging the termination was not made for proper purposes and meant the firm would lose some €6m expected benefits from a proposed restructuring of ISEL, known as Project Chrysalis, intended to allow corporate members benefit from its €45m reserves. That restructuring has not yet happened.
In his judgment, Mr Justice Peter Charleton ruled there was "no reliable evidence" the December 2012 decision to terminate Bloxham's membership arose from a conspiracy or was engineered so as to financially benefit other member firms of the ISE as opposed to being made for the benefit of the ISE as a whole.
The situation of Bloxham was "unfortunate" and the benefit that might have gone to the credit of the liquidation was lost but that loss was a consequence of the liquidation, the judge said.
"Furthermore, in terms of realism, how long was this situation expected to go on?" the judge asked.
“The Central Bank was entitled to have concerns it was expected to put up with a restructuring project in circumstances where a member of the existing exchange company promoting that project had gone into liquidation in the "deeply unfortunate circumstances that afflicted Bloxham".
Bloxham had ceased trading on the exchange for more than six months when its membership was revoked, had closed down its clearing arrangements with the relevant agency, had transferred all its stock exchange business to Davy, was insolvent, had been expelled from the London Stock Exchange in October 2012 and financial irregularities were being investigated by the Central Bank, he noted.
There was "literally no prospect" of Bloxham returning to active membership of the Irish stock exchange, the judge added.
There was also no evidence of any pushing around or manipulation of the ISE's Daryl Byrne who took the decision to revoke Bloxham's membership, the judge said. Mr Byrne had come across as "honest, straightforward and seriously meticulous".
The revocation of Bloxham's membership of the exchange arose after the Central Bank suspended Bloxham in late May 2012 from trading as a result of concerns about its financial position.
The judge noted financial accounts to December 2011 for Bloxham had been signed off and showed some €6.25m financial assets available for sale.
That sum was then thought to be the surplus accumulated to Bloxham within the ISE but, in fact, the sum available on distribution would be about half of that as a result of the need to properly capitalise the new exchange company.
In addition, on trawling through Bloxham's accounts, payments to directors and profits were misstated by the financial controller and, unfortunately, nobody within the firm noticed and nor did the auditors, the judge said.
In May 2012, "disaster struck" and the court had been told by Pramit Ghose of Bloxham that, on 23 May, Bloxham's then head of finance and compliance Tadhg Gunnell had revealed there were certain financial irregularities that had been hidden over years, the judge said.
Apparently, in the accounts referred to, payments out to partners had been put on the positive side of the balance sheet and liabilities incurred were similar credited, the judge said.
While the matter was not gone into in detail, it seemed positive assets of €3m were in fact negative liabilities in that sum with a consequent difference of €6m, he added. Crisis meetings took place and on 28 May, the ISE had suspended Bloxham's membership.
The judge was previously told Mr Wallace was bringing the action solely for the benefit of the firm's creditors, including National Irish Bank, owed €8.5m, and the Revenue Commissioners, owed €2.3m.
The €6m which Bloxham stood to gain from implementation of Project Chrysalis represented a difference between a 10 per cent and 40% dividend, it was stated.