DAVY Stockbrokers has failed to halt a High Court action against it by a credit union over an alleged loss of €900,000 arising from advice about a €2 million investment bond.

Bandon Credit Union in Cork claims Davy misrepresented to it in 2004 that the Anglo Irish Bank Floating Rate Note Corporate Fund was capital guaranteed. It claims that when it was entitled to call for repayment of the capital sum in July 2009, the bond issuer had invited holders to sell them back at a considerable discount.

So as to reduce its losses and acting on advice from Davy and an independent source, it sold the bond back at a loss of €900,000.

Bandon then wrote to Davy in January 2010 threatening legal action if compensation was not forthcoming. Davy responded that it would defend the matter and the allegations were unfounded.

Bandon, which had a relationship with Davy going back to 1997-98, issued a High Court summons against the firm on July 15th, 2010, outlining a number of claims, including misrepresentation, negligence, breach of trust and breach of contract.

A draft statement of claim was not served on Davy until July 29th 2011 – outside the one-year deadline prescribed by court rules.

Last October, the credit union secured a High Court order – on an ex-parte (one side only represented) basis – giving it another six months to serve the papers but Davy then applied to set aside that extension of time.

Mr Justice George Birmingham ruled yesterday that the interests of justice were best served by declining Davy’s application to set aside the October extension.

The judge noted Bandon had its draft statement of claim ready for service on Davy in March 2010 but an “unfortunate development” occurred whereby the draft was emailed by Bandon’s solicitor for approval to a particular individual within the credit union via an inactive email address.

With no response, four more emails were sent but Bandon only learned in July 2011 the solicitor was attempting to communicate through an incorrect email, the judge said. Had this not happened, Davy would have been served with the court papers within the prescribed one-year period.

The judge said he was unconvinced by Davy’s arguments it would be prejudiced by delay in bringing the case, particularly in relation to witnesses and documentation. Although it was Davy policy to shred documents after six years, the stockbroker had been informed of Bandon’s grievances in January 2010, he also noted.