O'Donohue v AIB Mortgage Bank Plc

• Jurisdiction: Ireland
• Judge: Mr. Justice Paul Gilligan
• Judgment Date: 26 May 2017
• Neutral Citation: [2017] IEHC 344
• Court: High Court
• Docket Number: [2017 No. 2583 P.]
• Date: 26 May 2017

[2017] IEHC 344

THE HIGH COURT

Gilligan J.

[2017 No. 2583 P.]

BETWEEN

VINCENT O'DONOGHUE

PLAINTIFF

AND

AIB MORTGAGE BANKS PLC,

MINISTER FOR FINANCE OF IRELAND, GOVERNMENT OF IRELAND,

IRELAND

AND

ATTORNEY GENERAL

DEFENDANTS

Practice & Procedure – Banking & Finance – Art. 6 of the Constitution – Injunction – O. 19, r. 28 of the Rules of the Superior Courts – Striking out of proceedings – No reasonable cause of action

Facts: The plaintiff sought injunction for restraining the defendants from disposing all or part of their shareholding in the first named defendant/bank. The defendants ('State defendants') also sought an order pursuant to o. 19, r. 28 of the Rules of the Superior Courts for striking out the plaintiff's claim on the basis that it disclosed no reasonable cause of action. The plaintiff's main contention was that the disposal of shareholding by the State defendants was contrary to the interests of the common good.

Mr. Justice Paul Gilligan refused to grant injunction to the plaintiff. The Court held that it had no jurisdiction to interfere in the matters pertaining to political economy as the executive had the sole discretion to deal with such matters. The Court dismissed the plaintiff's proceedings against the bank as the statement of claim filed by the plaintiff disclosed no cause of action against the bank. The Court also dismissed the plaintiff's proceedings against the State defendants as the plaintiff failed to point out any specific statute, which acted as a bar for the State defendants from selling their shareholding. The Court held that the power to dismiss a case should be exercised rarely depending upon the circumstances of the case.

JUDGMENT of Mr. Justice Paul Gilligan on the 26th day of May, 2017

1 The plaintiff in these proceedings describes himself as a gentleman who resides at 67 Church Street, Dublin 7.

2 The plaintiff claims by way of interlocutory relief:-

• An order restraining the defendants or any of them from taking any steps in pursuit of the disposal of all or part of the Government of Ireland shareholding in the first named defendant bank.

3 In the statement of claim as delivered on 29th March, 2017, the plaintiff sets out that Allied Irish Bank plc (AIB) is the largest retail commercial bank in Ireland with 2.3 million retail and business customers. It has the largest bank distribution network in Ireland with 297 locations, 982 ATM points, and a strategic partnership with An Post and its 1,100 Post Offices.

4 The plaintiff is of the view that AIB is a bank that is too big to fail. The plaintiff contends that AIB is congenitally incapable of operating in a lawful, responsible and compliant manner and instances difficulties encountered by AIB in respect of the Insurance Corporation of Ireland, John Rusnak, Faldor, non-resident deposit accounts, foreign exchange overcharging, the 2009 bailout, and tracker mortgage overcharging.

5 The plaintiff contends that in private ownership, AIB will serve only one master and have a singular focus being the relentless pursuit of profits for shareholders, the majority of whom will be foreign institutional investors who have little or no regard for the interests or wellbeing of the citizens of Ireland.

6 The plaintiff is concerned that a disposal of the State shareholding in AIB will leave the citizens of Ireland at the mercy of a privately owned virtual banking duopoly which will expose them to exploitation and overcharging and undermine the urge of national policy agenda to resolve the deepening housing crisis and that such an outcome would be unconscionable and contrary to the common good.

7 The plaintiff relies extensively on Article 6 of the Constitution of Ireland which provides:-

'(1) All powers of government, legislative, executive and judicial, derive, under God, from the people, whose right it is to designate the rulers of the State and, in final appeal, to decide all questions of national policy, according to the requirements of the common good.

(2) These powers of government are exercisable only by or on the authority of the organs of State established by this Constitution.'

8 The plaintiff takes the view that a sale of some or all of the State's shareholding in AIB is contrary to the interests of Irish citizens and of the common good and that in these circumstances the court on the application of a concerned citizen namely the plaintiff must act to ensure that such a potentially catastrophic decision does not take effect. In the grounding affidavit of Vincent O'Donoghue he refers to the various matters in the same terms as set out in the statement of claim and expresses the concern that steps are currently being taking to advance the disposal by the State of part of it's shareholding in the first named defendant bank and that unless an injunction is granted the disposal may occur before the within proceedings come on for hearing thereby rendering the proceedings moot. The plaintiff avers that he is aware that a consequence of any such order as he seeks is that he may be required to give an undertaking in damages and he confirms to this Court that he is aware of the significance of such an undertaking.

9 What has then occurred in this matter is that the defendants not only contest the right of the plaintiff to interlocutory relief pending the determination of these proceedings but in addition by way of notice of motion they seek an order pursuant to O. 19, r. 28 of the Rules of the Superior Courts dismissing the within proceedings and/or striking out the plaintiff's plenary summons and statement of claim as against the defendants on the grounds that they fail to disclose a reasonable cause of action and/or for being frivolous or vexatious and/or for being bound to fail. Further an order on the same terms pursuant to the inherent jurisdiction of the Court dismissing or striking out the proceedings.

10 Taking into account the urgency of the situation and allowing for the very substantial overlap not only in the content of the various affidavits as delivered but in respect of the submissions as made to the Court I dealt with both applications together.

11 In the replying affidavit to the plaintiff's application for interlocutory injunctive relief Desmond Carville on behalf of the State defendants avers and sets out in a substantial way the view of the State defendants. He has clarified that it is the second named defendant being the Minister for Finance and not the Government that owns approximately 99.87% of the issued share capital of AIB through the Ireland Strategic Investment Fund which was established by the National Treasury Management Agency Amendment Act 2014.

12 He avers that it has always been the policy of the Government to return AIB to private ownership when conditions permit and this is particularly referred to in the Program for a Partnership Government which set out Government policy across a wide range of topics and which was published in May 2016. It is envisaged that the Minister might sell up to 25% of his shareholding in AIB prior to the end of 2018 and the primary objective in the disposal of these assets would be in recovering the maximum amount of money possible for the Exchequer.

13 According to a recent valuation the value of the Minister's shareholding as of 31 December, 2016 is a sum in the region of €11.3 billion.

14 The proposal by the Minister to sell part of his shareholding in AIB will likely take the form of an Initial Public Offering (IPO) probably on the Irish and London stock exchanges. It is envisaged that the preparation for a transaction of this magnitude is specialised and complex and involves considerable financial expenditure and in the view of Mr. Carville who has to be regarded as an expert in these matters is not something that one can stop and start. If this Court were to grant the relief as sought by the plaintiff potential optimal market windows will be lost and a very considerable amount of public money will have been spent and wasted on an abortive process.

15 The Court observes the averment of Mr. Carville that the vast majority of the work underpinning the IPO is nearing completion and since capital markets appear to be currently receptive to an IPO of this nature it is absolutely imperative that the Minister maintains the upmost flexibility to initiate and execute an IPO in the first possible window of May-June 2017. Further opportunities to make such offerings in capital markets can suddenly close due to macro events or changed investor sentiment often without notice.

16 As a result of the financial crisis the Credit Institutions (Financial Support) Act 2008 was passed into law. The Government undertook to guarantee until the 28th of September, 2010 all of the otherwise unguaranteed deposit liabilities and private third party debt of participating institutions. AIB was named as a specific institution within the meaning of s. 6 by the Credit Institutions (Financial Support) (Specification of Institutions) Order 2008 and as a result very substantial investment was made in AIB but eventually the Minister through ISIF ended up owning approximately 99.8688% of AIB's ordinary shares as issued.

17 The Minister owns the said shareholding in AIB like any other shareholder and is entitled to sell or otherwise dispose of or deal in his shares as an ordinary incident of his ownership albeit in his capacity as the Minister for Finance.

18 Pursuant to the public record of the policy of the Government the proposal is to return AIB and all of the State's banking investments to private ownership when conditions permit and this is also in keeping with the expressed provisions of s. 6(4) of the 2008 Act.

19 It is clear that very substantial sums of money totalling many billions of euros of public funds have been invested in AIB since 2009. To date the State has...