Director of Corporate Enforcement v Lacey

• Jurisdiction: Ireland
• Judge: Mr. Justice Roderick Murphy
• Judgment Date: 08 April 2011
• Neutral Citation: [2011] IEHC 172
• Court: High Court
• Date: 08 April 2011

[2011] IEHC 172

THE HIGH COURT

[No. 00269 COS/2005]

Director of Corporate Enforcement v Lacey

IN THE MATTER OF THE COMPANIES ACTS 1963 -2003

AND IN THE MATTER OF NATIONAL IRISH BANK LTD

AND IN THE MATTER OF NATIONAL IRISH BANK FINANCIAL SERVICES LTD

AND IN THE MATTER OF AN APPLICATION BY THE DIRECTOR OF CORPORATE ENFORCEMENT

BETWEEN

THE DIRECTOR OF CORPORATE ENFORCEMENT

APPLICANT

AND

JIM LACEY

RESPONDENT

COMPANIES ACT 1990 S8

COMPANIES ACT 1992 S10

COMPANIES ACT 1990 S160

COMPANIES ACT 1990 S160(2)

COMPANIES ACT 1990 S160(8)

FINANCE ACT 1986 S32

FINANCE ACT 1986 S37

FINANCE ACT 1986 S38

COMPANIES ACT 1990 S160(2)(B)

COMPANIES ACT 1990 S160(2)(D)

COMPANIES ACT 1990 S160(2)(E)

DIRECTOR OF CORPORATE ENFORCEMENT v SEYMOUR UNREP MURPHY 20.3.2007 2007/ 14/2919 2007 IEHC 102

GOWER & DAVIES PRINCIPLES OF MODERN COMPANY LAW 8ED SWEET & MAXWELL 2008

BARINGS BANK (NO 5) 1999 1 BCLC 433

VEHICLE IMPORTS, IN RE UNREP MURPHY 23.11.2000 2000/17/6574

NATIONAL IRISH BANK LTD & NATIONAL IRISH BANK FINANCIAL SERVICES LTD, RE; DIRECTOR OF CORPORATE ENFORCEMENT v CURRAN UNREP MURPHY 23.5.2007 2007/14/2823 2007 IEHC 181

FINANCE ACT 1986 S37

COMPANIES ACT 1990 S22

DIRECTOR OF CORPORATE ENFORCEMENT v BYRNE 2010 1 IR 222 2009 2 ILRM 328 2009/13/2999 2009 IESC 57

COUNTYGLEN PLC v CARWAY 1998 2 IR 540

C (V) v M (J) & M (G) 1987 IR 510

LO-LINE LTD, IN RE 1988 CH 477

CAHILL (OFFICIAL LIQUIDATOR) v GRIMES 2002 1 IR 372 2001

WESTMID PACKING LTD 1998 2 AER 124

DIRECTOR OF CORPORATE ENFORCEMENT v MCCANN 30.11.2010 2010/12/2830 2010 IESC 59

DIRECTOR OF CORPORATE ENFORCEMENT v MCGOWAN 2008 4 IR 598

BATH GLASS, IN RE 1988 BCLC 329

SEVEN OAKS STATIONERS LTD, IN RE 1991 CH 164

BARINGS PLC SECRETARY OF STATE FOR TRADE & INDUSTRY v BAKER (NO 5) 1999 1 BCLC 433

COMPANY DIRECTORS DISQUALIFICATION ACT 1986 S6 (UK)

KEANE COMPANY LAW 3ED DUBLIN 357

VEHICLE IMPORTS LTD UNREP MURPHY 25.11.2000 2000/17/6574

TRALEE BEEF & LAMB LTD, IN RE 2005 1 ILRM 34 2004 24 5615

KAVANAGH v DELANEY & ORS (TRALEE BEEF & LAMB LTD, IN RE) 2005 1 ILRM 34

FENNELL & MAGUIRE (JOINT LIQUIDATORS OF SPH LTD) v SHANAHAN & ORS UNREP FINLAY-GEOGHEGAN 25.5.2005 2005/25/5154 2005 IESC 152

AHERN, DIRECTORS DUTIES LAW & PRACTICE ROUNDHALL 2009

CITY EQUITABLE FIRE INSURANCE CO LTD, IN RE 1925 CH 407

COMPANY LAW

Directors

Disqualification - Duties - Delegation - Test to be applied - Whether wrongdoing necessary proof - Admissibility of findings in inspectors' report - Distinction between findings of facts and opinion - Special position of banks - Chief executive officer of bank - Findings bank opened bogus non-resident accounts - Monies undisclosed to revenue targeted by bank for investment - Investors assured funds would be kept hidden from revenue - Whether proper system in place - Supervision of delegation of reading internal audit reports - Whether respondent had notice of non-compliance - Whether respondent should have been aware of bogus non-resident accounts - Whether respondent ought to have known practice facilitated evasion of DIRT - Whether respondent bore responsibility for promotion of policies - Whether respondent responsible for deficiencies in operation of accounts - Whether respondent failed to manage charging of interest - Whether respondent responsible for system of recording time chargeable to customers - Whether inspectors' report flawed in its understanding of bank's management structure - Whether respondent breached his duty as officer of bank - Whether conduct of respondent made him unfit to be concerned in management of company - Cahill v Grimes [2002] 1 IR 372; Director of Corporate Enforcement v Byrne [2009] IESC 57, [2010] 1 IR 222; Re Wood Products Ltd: Dir of Corp Enforcement v McGowan [2008] IESC 28, [2008] 4 IR 598; Re Tralee Beef & Lamb Ltd: Kavanagh v Delaney [2008] IESC 1, [2008] 3 IR 347 applied; Re NIB Ltd: Director of Corporate Enforcement v Seymour [2007] IEHC 102, (Unrep, Murphy J, 20/3/2007); Re NIB Ltd: Director of Corporate Enforcement v D'Arcy [2005] IEHC 333, [2006] 2 IR 163; Re Barings plc [1999] 1 BCLC 433; Re Vehicle Imports Ltd (in Liquidation) (Unrep, Murphy J, 23/11/2000); Countyglen plc v Carway [1998] 2 IR 540; VC v JM & GM [1987] IR 510; In re Lo-Line Ltd [1988] Ch 477; Re Westmid Packing [1998] 2 All ER 124; Re Kentford Securities Ltd: Dir of Corp Enforcement v McCann [2010] IESC 59, [2011] 1 IR 585; Re Bath Glass Ltd [1988] BLCL 329; In re Sevenoaks Stationers Ltd [1991] Ch 164; Re SPH Ltd; Fennell v Shanahan [2005] IEHC 152, (Unrep, Finlay Geoghegan J, 25/5/2005) approved; In re City Equitable Fire Insurance Co [1925] Ch 407; Director of Corporate Enforcement v Curran [2007] IEHC 181, (Unrep, Murphy J, 23/5/2007) distinguished - Companies Act 1963 (No 33), s 297A - Finance Act 1986 (No 13), ss 32, 37 and 38 - Companies Act 1990 (No 33), ss 8, 10, 22, 150 and 160 - Disqualification order granted (2005/269COS - Murphy J - 8/4/2011) [2011] IEHC 172

Director of Corporate Enforcement v Lacey

Facts: The respondent was Chief Executive of a Bank for a period of six years. The applicant applied to Court to have the respondent disqualified from being appointed or acting as an auditor, director or other office, liquidator, receiver or examiner pursuant to the terms of s. 16) Companies Act 1990, as amended, arising from the findings of high profile inspection reports of National Irish Bank. Extensive affidavit evidence was considered by the Court detailing instances which had rise to alleged breached of duty by the respondent in his capacities.

Held by Murphy J. that the Court had identified a number of breaches of duty on the part of the respondents. The Court was satisfied that his responses themselves indicated a failure. He had failed to follow up on deficiencies notified to him. He had failed to react to the concerns expressly communicated to him. The breaches of duty by the respondent as Chief Executive and director were grossly negligent. The Court was satisfied that the applicant had discharged the appropriate burden. The respondent was unfit to be concerned in the management of a company, pursuant to s. 160(2)(d) and (e). The Court was obliged to make a disqualification order in respect of the respondent.

Reporter: EF.

1 JUDGMENT of Mr. Justice Roderick Murphy dated 8th day of April, 2011.

1. Background

2 2 1.1 Mr. Justice Blayney and Tom Grace F.C.A. were appointed Inspectors of National Irish Bank Limited ("the Bank") on the 30 ^th of March, 1998, pursuant to s. 8 of the Companies Act 1990. The terms of reference were to investigate and report on the affairs of the Bank relating to:-

3 (i) the improper charging of interest to accounts of customers of the Bank between 1988 and 30 ^th March 1988;

4 (ii) the improper charging of fees to accounts of customers of the Bank between 1988 and 30 ^th March 1998;

5 (iii) the improper removal of funds from accounts of customers of the Bank between 1988 and 30 ^th March 1998;

6 (iv) all steps and action taken by the Bank, its directors and officers, servants or agents in relation to the charging of such fees or interest or the removal of any funds without the consent of the account holders and their actions arising from the issues when discovered;

7 (v) the manner in which the books, records and accounts of the Bank reflected the foregoing matters;

8 (vi) the identity of the person or persons responsible for or aware of any of the practices referred to above;

9 (vii) whether other unlawful or improper practices existed or exist in the Bank from 1988 to 30 ^th March 1998 which served to encourage the evasion of any revenue or other obligation on the part of the Bank or Third Parties or otherwise.

10 On the 15 ^th June 1998, again on the application of the Minister for Enterprise, Trade and Employment, the Inspectors were similarly appointed to investigate and report on the affairs of the National Irish Bank Financial Services Limited ("NIBFSL"), relating to:

11 (a) The effecting of insurance policies through NIBFSL with: Clerical Medical Insurance Company Limited Scottish Provident International Life Assurance Limited Old Mutual International (Guernsey) Limited

12 (b) The role of NIBFSL, its officers, servants and employees in connection with the effecting of the said policies of insurance.

13 (c) The purposes behind the execution of the aforesaid policies of insurance.

14 (d) The knowledge of the management and board of directors of NIBFSL of the effecting of the said policies of insurance.

15 (e) The identity of the person or persons responsible for or aware of the effecting of or purposes behind the said policies of insurance.

16 Both Orders were amended on the 31 ^st July 2001. The effect of the amendments was to join the Bank in the Order of 15 ^th June 1998, and make it, as well as NIBSFL, the subject of that Order. The amendments also extended the list of insurance companies set out at (a) above to include CMI Insurance Company Limited, Clerical Medical and General Life Assurance Society and Clerical Medical Investment Group Limited.

17 Copies of the four Orders are set out at Appendices 1 to 4 of the report

18 3 1.2 By order of Shanley J. made the 13 ^th July, 1998, it was declared that persons (whether natural or legal) from whom information, documents or evidence were sought to the Inspectors under the Companies Act 1990, were not entitled to refuse to answer questions put by the Inspectors or to refuse to provide documents to the Inspectors on the grounds that the answers or documents may tend to incriminate him or her or it.

19 It was further declared that the procedures outlined by the Inspectors in their letter dated 4 ^th June, 1998 were consistent with the requirements of natural and constitutional justice.

20 The Supreme Court (O'Flaherty,...