Collins v Minister for Finance

JurisdictionIreland
CourtSupreme Court
JudgeDenham C.J.,O'Donnell J.,McKechnie J.,Clarke J.,Dunne J.,Charleton J.
Judgment Date16 Dec 2016
Neutral Citation[2016] IESC 73
Docket NumberAppeal No. 553/2013,[S.C. No. 553 of 2013]

[2016] IESC 73

THE SUPREME COURT

The Court

Denham C.J.

O'Donnell J.

McKechnie J.

Clarke J.

Dunne J.

Charleton J.

Appeal No. 553/2013

Between
Joan Collins
Plaintiff/Appellant
AND
The Minister for Finance, Ireland

and

the Attorney General
Defendants/Respondents

Procedure – Promissory notes – Constitutional law – Appellant seeking to challenge the lawfulness of procedures by which the first respondent agreed to issue promissory notes – Whether the Government exceeded powers conferred upon it by the Credit Institutions (Financial Support) Act 2008 in granting promissory notes

Facts: The plaintiff/appellant, Ms Collins, appealed to the Supreme Court from the judgment of the Divisional Court of the High Court, delivered on the 26th November, 2013, and from the order of that Court made on the 17th December, 2013, wherein the plaintiff’s claim was dismissed ([2014] IEHC 79). The plaintiff challenged the lawfulness of procedures by which the first defendant/respondent, the Minister for Finance, agreed to issue promissory notes in excess of €30 billion to the Irish Bank Resolution Corporation (IBRC) and the Educational Business Society (EBS). The plaintiff also challenged the validity of payments made under those procedures. The plaintiff grounded her challenge on the inability of Dáil Éireann to cede to the Minister wide powers to enter into these financial commitments and to pay monies under the said procedures.

Held by the Court (Denham CJ, O'Donnell Donal J, McKechnie J, Clarke J, Dunne J and Charleton J) that at issue in this appeal was, firstly, whether the Government exceeded powers conferred upon it by the Credit Institutions (Financial Support) Act 2008, in granting promissory notes to IBRC and EBS in 2010. The Court held that the case also raised, secondly, the issue whether the Oireachtas exceeded its powers and acted unconstitutionally in passing the 2008 Act in the context of the financial crisis which arose in that year, in giving powers to the Minister to commit public monies without a financial cap being placed on the amount. The Court held that this second issue fell to be considered in the light of the Constitution and especially Articles 11, 17.2 and 28 thereof. The Court held that given the unchallenged evidence as to how a promissory note operates, there was no difficulty in concluding that, the issuance of the promissory note was the provision of financial support at the time of its issuance. While differing from the Divisional Court as to the reasons, the Court upheld the conclusion that the issuance of the promissory notes in June and December of 2010 was not ultra vires the powers of the Minister. The Court noted that decisions made or approved by the current Oireachtas could significantly constrain the freedom of action of future Oireachtas. The Court held that it had no function in considering the wisdom of decisions taken by other branches of government, only the limited capacity to review that judicial review constitutes. The Court held that it was its function to ensure that the constitutional organ which has responsibility to make such decisions, whether they be wise or foolish, trivial or far reaching, is allowed to do so within the limits imposed by the Constitution.

The Court held that it would dismiss the appeal.

Appeal dismissed.

Judgment of Denham C.J. , O'Donnell J. , McKechnie J. , Clarke J. , Dunne J. and Charleton J. delivered on the 16th day of December 2016
1

This is a judgment to which all members of the Court have contributed.

2

At issue in this appeal is, firstly, whether the Government exceeded powers conferred upon it by the Credit Institutions (Financial Support) Act 2008, (‘the Act of 2008’), in granting promissory notes to the Irish Bank Resolution Corporation (‘IBRC’), and the Educational Business Society (‘EBS’) in 2010. The case also raises, secondly, the issue whether the Oireachtas exceeded its powers and acted unconstitutionally in passing the Act of 2008 in the context of the financial crisis which arose in that year, in giving powers to the Minister for Finance (‘the Minister’) to commit public monies without a financial cap being placed on the amount. This second issue falls to be considered in the light of the Constitution and especially Articles 11, 17.2 and 28 thereof.

3

This is an appeal by Joan Collins, TD, the plaintiff/appellant, herein referred to as ‘the plaintiff Ms. Collins’, from the judgment of the Divisional Court of the High Court (Kelly, Finlay Geoghegan, and Hogan JJ.), delivered on the 26th November, 2013, and from the order of that Court made on the 17th December, 2013, wherein the plaintiff's claim was dismissed; [2014] I.E.H.C. 79. The Minister for Finance, Ireland and the Attorney General are the defendants in these proceedings and the respondents to this appeal and are referred to collectively as ‘the defendants’ or ‘the State’.

5

The plaintiff challenges the lawfulness of procedures by which the Minister agreed to issue promissory notes in excess of €30 billion to IBRC and EBS. The plaintiff also challenges the validity of payments made under those procedures.

6

The plaintiff grounds her challenge on the inability of Dáil Éireann to cede to the Minister wide powers to enter into these financial commitments and to pay monies under the said procedures.

Background
7

A statement of facts was agreed between the parties and is set out in an appendix to the judgment of the Divisional Court of the High Court. Hence it is not now necessary to set out the facts in detail once again.

8

In simple terms, however, the issues in this case arise because in 2010 both Anglo Irish Bank and the Irish Nationwide Building Society (‘Anglo/INBS’ which in 2011 became the IBRC), which at that time were effectively in State ownership, and the EBS, were in substantial need of capital; although in the case of the EBS this was to a much lesser extent. Anglo/ INBS and EBS were participants in the Bank Guarantee Scheme established under the Act of 2008 and approved by the Dáil. The requirement for capital arose because of the regulatory requirement to maintain so called Tier 1 Capital. The potential prospective deficit in such capital itself arose from the substantial writing down of assets transferred at considerably less than book value to the National Assets Management Agency. The Central Bank was prohibited from providing Emergency Liquidity Assistance (ELA) funds because under European law such funds could not be advanced to institutions which were insolvent. It was necessary, therefore, to provide capital to both Anglo/INBS and EBS so that they could maintain solvency and thus access ELA. However, due to the parlous position of the State finances in 2010, and the scale of the capital required, the most obvious methods for providing capital were not available to the State, as the financial markets were effectively not accessible to Ireland at that point, and the issuance of government bonds to the institutions would have had a knock-on and highly damaging effect on the cost of public borrowing. It was not possible, therefore, to simply either advance monies, borrow monies on the open market, or to issue bonds to the institutions. Therefore, the State issued long-term promissory notes to both institutions. However, unlike government debt, which normally involves periodic repayment of interest with a single repayment of capital at the end of the term, the promissory notes were required to be amortising, providing for the regular repayment of both capital and interest. In the case of Anglo/ INBS the State advanced €30.6 billion in promissory notes during 2010. The terms of the notes required repayments on an annual basis until 2031 of €3.06 billion every year between 2011 and 2024, decreasing until the promissory notes were completely repaid in 2031. In the case of EBS a promissory note was issued by the Minister of €250 million which required annual repayments of €25 million until 2024 and a final payment in 2025. In 2013 the promissory notes in favour of Anglo/INBS, (which by then was the IBRC and was being wound up) were cancelled in exchange for long-term government debt issued to the Central Bank, which was by that stage the effective owner of the notes. As of 2010 these promissory notes required annual repayments in excess of €3 billion. These figures are, in ordinary terms, enormous. It should be added for contextual purposes that the Estimates for 2011 presented to the Dáil provided for total State expenditure of €49 billion. Also the Government introduced €625 million into EBS by way of special investment shares in 2010 alone. The total quantum of liability under the Credit Institutions Support Scheme reached, at one stage, contingent liabilities of in excess of €35 billion.

9

The requirement for annual payments on the promissory notes of such magnitude became a focus for political controversy and raised two related issues which can be said in broad terms to be constitutional in nature, and with which, in essence, these proceedings are concerned. First, it was said that the repayment on the promissory note made in 2011 was an enormous item of State expenditure in that year, yet was not itself the subject of any approval by the Dáil. In effect, therefore, the case made by the plaintiff Ms. Collins is that the State spent over €3 billion in 2011 over which the Dáil had no control. Second, the requirement to make an annual payment in excess of €3 billion had itself a significant impact on budgetary decisions which were made by the Government and required to be approved by the Dáil. The Dáil has an important traditional constitutional function in raising funds and making expenditures. Again, however, although the requirement to make a repayment of in excess of €3 billion had a necessarily significant impact on all subsequent decisions made by the...

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