Supreme Court: Stockbrokers must provide credit union with reports of ISE investigation

The Supreme Court has ruled that the stockbrokers J & E Davy must provide Waterford Credit Union with reports of an Irish Stock Exchange investigation.

Chief Justice Frank Clarke overturned the Court of Appeal judgment which held that J & E Davy would not have to provide these reports.


Waterford Credit Union is suing Davy over the investment in bonds worth €5.3 million, which were invested between January 2005 and August 2006. Waterford Credit Union states that it would not have invested in these bonds if Davy had not advised it invest.

It is suing the stockbrokers for misrepresentation and breach of contract, and alleges that Davy secretly profited. It further alleges that Davy failed to disclose that it was acting as a principal in the sale of the bonds. Davy refutes these allegations.

Waterford Credit Union’s case is that it acted in reliance on Davy’s representations and advice with regard to suitable bonds in which the credit union could invest its monies and that, as a result, over €5 million of its monies were invested in certain perpetual Constant Maturity Swap bonds throughout the course of 2005 and 2006.

It is alleged that the credit union was advised and was led by Davy to believe that these were bonds which guaranteed the capital sums invested and which complied with the Trustee (Authorised Investments) Order 1998.

The credit union claims that it subsequently discovered that the bonds in which Davy invested its funds did not comply with the 1998 Order, did not guarantee the capital sum invested and did not provide for a definite maturity date in the future.

An Irish Stock Exchange investigation in 2009 found that Davy had breached business rules. The Exchange said that the investigation related to the sale of a number of perpetual Constant Maturity Swap bonds to some of Davy’s credit union clients. The stock exchange found the breaches related to ensuring that the bonds were in full compliance with the Trustee (Authorised Investment) Order 1998.

Davy commenced a process with the credit unions involved in which the vast majority of credit unions accepted a negotiated settlement to deal with loss of value of the bonds, at a cost of more than €35 million.

Court proceedings

Waterford Credit Union brought proceedings after it claimed it discovered the bonds it had invested in did not comply with the Order.

In 2018 the High Court made orders that both sides make discovery of certain documentation in advance of the trial, including two Irish Stock Exchange investigation reports.

In particular, the Irish Stock Exchange statement’s reference to a proposal to credit unions of “a comprehensive arrangement which addressed performance issues with the bonds” was, the trial judge held, “strongly indicative of systemic issues, rather than of a disparate collection of distinct and unique problems in the defendant’s dealings with each of a number of specific credit unions”.

In these circumstances, the trial judge was satisfied that it was reasonable to suppose that the reports contain “information which may, either directly or indirectly, enable the plaintiff to advance its own case or damage the case of the defendant”.

Davy appealed to the Court of Appeal.

The trial judge criticised Waterford Credit Union’s solicitor for failing to admit a breach of an implied undertaking which was provided in the normal course of discovery in the separate E-Services Proceedings against Davy, being that the requesting party is not to use information obtained through discovery for any other purpose. The solicitors failed to admit to the breach over the course of more than two and a half years.

In the Court of Appeal, Mr Justice Michael Peart overturned the High Court, “in order to prevent Davy suffering a litigious disadvantage” and to mark “in a meaningful way” the serious breach of an undertaking made by solicitors in separate proceedings to which the credit union was not a party.

Mr Justice Peart cited Alterskye v Scott [1948] 1 All E.R.469 and Home Office v Harman [1983] A.C. 280 in concluding that, in order to protect its own process from abuse and to ensure the proper administration of justice and fairness of procedures between the parties to the litigation, a court should take such steps as may be open to it to ensure that discovered documents are not used other than in connection with the proceedings in which they were discovered.

Waterford Credit Union appealed to the Supreme Court. Davy cross appealed.

As the reports pertain to an investigation to which Waterford Credit Union was not a party, Davy submitted that, at most, the documents related to the underlying dispute rather than the legal action and that these were circumstances which have previously led the courts to refuse to order discovery in Framus Ltd v CRH plc [2004] 2 I.R.20 and BAM PPP PGGM Infrastructure Cooperatie UA v National Treasury Management Agency [2015] IECA 246.

Further, Davy argued that its conduct in respect of other credit unions could not show wrongdoing in its dealings with Waterford Credit Union, and that discovery of the Irish Stock Exchange reports would, at best, allow the plaintiff to “advance relatively weak inferences” which would be prejudicial to Davy.


Chief Justice Clarke held that the Court of Appeal erred in depriving Waterford Credit Union of the discovery of documents determined, by both courts below, to be both relevant and necessary.

The Court of Appeal had refused the discovery as a means of imposing a sanction for a breach of that implied undertaking given in other proceedings in which Waterford Credit Union was not a party.

Chief Justice Clarke dismissed Davy’s cross appeal, and ordered that discovery of the report should be made.

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