Bank of Valletta property fund investors lose reimbursement battle

A legal battle between Bank of Valletta and hundreds of people who invested in its La Valette Multi-Manager Property Fund has come to an end, with an appeals court ruling in favour of the bank 

2011: investors convened by stockbroker Paul Bonello to prepare for legal action
2011: investors convened by stockbroker Paul Bonello to prepare for legal action

A lengthy legal battle for hundreds who invested in Bank of Valletta’s La Valette Multi-Manager Property Fund has finally come to an end – and one they did not desire – as an Appeals Court ruled in favour of the bank.

A final few appeals – around 28 – filed by Bank of Valletta ended with the Court overruling a previous decision by the Arbiter for Financial Services, which had decided in favour of the investors.

The same had happened back in December 2019 and January this year, when more than 400 similar cases filed by stockbroker Paul Bonello of Finco Treasury Management and law firm Refalo Zammit Pace in July 2016 on behalf of disgruntled investors, were also ruled in favour of the bank.

In all instances, the Appeals Court ruled that a settlement agreement signed between the bank and property fund investors in May 2011 was not a matter of review for the court in terms of the EU’s Unfair Contract Terms Directive.

“Let’s be clear, the court did not say that BOV did not act against the fund’s prospectus or that the bank had performed well,” Bonello told MaltaToday. “The Court felt that the settlement was not a consumer contract and therefore not governable by the Unfair Contract Terms Directive.”

This is now the end of the road for 400-plus investors who had sued BOV after losing their savings when they had purchased shares in the supposedly low-risk La Valette property fund for up to €1.1650 per share plus initial charges.

But the Malta Financial Services Authority fined BOV six times between 2011 and 2012 for misselling the fund to inexperienced investors.

The bank was also sanctioned for breaching its own investment restrictions when it invested €17 million in the ill-fated Belgravia European Property Fund.

Some 2,300 investors accepted the bank’s offer of 75c per share and waived legal action against the bank should the MFSA find BOV had breached fund conditions.

The rest took the case to the Arbiter for Financial Services claiming that the 75c share offer by the bank in 2011 was insufficient. In February 2018, the Arbiter found BOV guilty of misselling and breaking investment restrictions and ordered the bank to repay more than €3.4 million plus legal interest to the investors.

The Arbiter ruled that the bank’s take-it-or-leave-it offer of 75c per share prohibited the complainants from negotiating the terms of the contract they were about to sign and that the offer was in breach of consumer rules.

But the bank appealed the Arbiter’s decision and the Court ruled in its favour. These last cases, adjudicated between 16 September and 11 November, were originally brought against the bank by individual investors who were not part of the class action filed by Bonello.

In some cases, the loss in investors’ savings was significant.

Mario Ciantar, for example, had invested €18,000 in the fund. He had accepted €7,741.30 from the bank in settlement, but then sued for €10,098.61. He had only earned €149.66 in dividends from his investment.

Anthony Cassar had invested €17,280 and had recouped only €7,362.99. He earned no dividends and had filed a claim for €1,884.79.

Emmanuel Vella had invested €40,001.92 in the fund, earned €2,301.37 in dividends and had obtained €28,600.22 in the settlement with BOV. He had sued for the remaining €10,098.61.

Pauline Abela earned €619.92 in dividends on her €18,937.64 investment. The bank paid her back €11,969.01 and she had sued for €6,384.71.

A vast majority of those who invested in the La Valette Multi-Manager Property Fund, losing most of their investments and savings, are now in their 60s and 70s.