Dowling and Others v Minister for Finance and Others

• Jurisdiction: Ireland
• Judge: Mr Justice Michael Peart
• Judgment Date: 28 June 2012
• Neutral Citation: [2012] IEHC 436
• Court: High Court
• Date: 28 June 2012

[2012] IEHC 436

THE HIGH COURT

Record Number: No.116 MCA/2012

Dowling & Ors v Min for Finance & Ors

IN THE MATTER OF IRISH LIFE & PERMANENT PLC, AND IN THE MATTER OF THE CREDIT INSTITUTIONS (STABILISATION) ACT 2010, AND IN THE MATTER OF AN APPLICATION BY THE MINISTER FOR FINANCE FOR A DIRECTION IN RELATION TO IRISH LIFE & PERMANENT PLC PURSUANT TO SECTION 9 OF THE CREDIT INSTITUTIONS (STABILISATION) ACT 2010 AND ANCILLARY ORDERS

Between:

Gerard Dowling, Padraig McManus, Piotr Skoczylas, Scotchstone Capital Fund Ltd, John Paul McGann, Georg Haug, Tibor Neugebauer, and J. Frank Keohane

Applicants

And

The Minister for Finance

Respondent

And

Irish Life & Permanent Plc

Notice Party

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S9

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S11

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S11(1)

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S11(3)

DOWLING & ORS v MIN FOR FINANCE & ORS UNREP FEENEY 2.3.2012 2012 IEHC 89

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S7(2)

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S9(8)

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S7

TREATY FOR THE FUNCTIONING OF THE EUROPEAN UNION ART 260

ADAM v MIN FOR JUSTICE 2001 3 IR 53

RSC O.84

COMPANIES ACT 1963 S31

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S53

O'NEILL v RYAN (NO.3) 1990 ILRM 140

MADDEN v ANGLO IRISH BANK CORPORATION 2005 1 ILRM 294

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S61

FOSS v HARBOTTLE 1843 2 HARE 461

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S9(2)

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S7

STATE (KEEGAN) v STARDUST COMPENSATION TRIBUNAL 1986 IR 642

O'KEEFFE v AN BORD PLEANÁLA 1993 1 IR 39

MEADOWS v MIN FOR JUSTICE 2010 2 IR 701

O-A(O O) & ORS v MIN FOR JUSTICE UNREP 28.1.2011 2011/42/12108 2011 IEHC 78

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S63

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S33

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S11(4)

RSC O.8

BEHAN v GOVERNOR & COMPANY OF THE BANK OF IRELAND UNREP MORRIS 14.12.1995 1996/1/105

CHAMBERS v KENEFICK 2007 3 IR 526

MOLONEY v LACEY BUILDING & CIVIL ENGINEERING LTD 2010 4 IR 417

O'KEEFFE v G & T CRAMPTON LTD UNREP PEART 17.7.2009 2009/45/11311 2009 IEHC 366

AN INQUIRY UNDER THE COMPANY SECURITIES (INSIDER DEALING) ACT 1985 1988 1 AC 660

DUNNES STORES (IRELAND) LTD v RYAN 2002 2 IR 60

COMPANIES ACT 1990 S19

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S11(2)

EC REG 407/2010

EC REG 407/2010 ART 3(5)

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S52

EUROPEAN COMMUNITIES (REORGANISATION & WINDING UP OF CREDIT INSTITUTIONS) REGS SI 198/2004

EUROPEAN COMMUNITIES (REORGANISATION & WINDING UP OF CREDIT INSTITUTIONS) REGS SI 48/2011

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S4

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S2(5)

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S2

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S110(5)

CENTRAL BANK & CREDIT INSTITUTIONS (RESOLUTION) ACT 2011 SCHED 2 PART 5

R v LONDON BOROUGH OF BRENT (EX PARTE GUNNING) 1985 84 LGR 168

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S7(4)

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S7(1)

HEANEY v IRELAND 1994 3 IR 593

CONSTITUTION ART 15

CONSTITUTION ART 15.2

CHARTER OF FUNDAMENTAL RIGHTS OF THE EUROPEAN UNION ART 17

TREATY OF THE FUNCTIONING OF THE EUROPEAN UNION ART 63.1

TREATY OF THE FUNCTIONING OF THE EUROPEAN UNION ART 63

TREATY OF THE FUNCTIONING OF THE EUROPEAN UNION ART 106.1

TREATY OF THE FUNCTIONING OF THE EUROPEAN UNION ART 65

COMPANY LAW

Insolvency

Direction order made to sell business of notice party - Application to set aside - Locus standi - Interpretation of Credit Institutions (Stabilisation) Act 2010, s 11 - Nature of application under s 11 - Nature of a direction order - Principles to be applied - Proportionality - Interpretation of âÇÿnecessary' under Credit Institutions (Stabilisation) Act, 2010, s 7 - Whether opinion leading to order not opinion any Minister acting reasonably would have made - Requirement to consult with Governor of Central Bank - Principles to be applied - Whether requirements under s 7 complied with - Whether applicants required notice in writing - Whether opinion vitiated by errors of law - Whether breach of constitutional rights - Whether lack of candour at ex parte application - State (Keegan) v Stardust Compensation Tribunal [1986] IR 642; O'Keeffe v An Bord Pleanála [1993] 1 IR 39; Meadows v Minister for Justice, Equality and Law Reform [2010] IESC 3, [2010] 2 IR 701 and Dunnes Stores Ireland Company v Ryan [2002] 2 IR 60 applied - Foss v Harbottle (1843) 2 Hare 461; Behan v Governor and Company of the Bank of Ireland (Unrep, Morris J, 14/12/1995); Chambers v Kenefick [2005] IEHC 402, [2007] 3 IR 526; Moloney v Lacey Building and Civil Engineering Ltd. [2010] IEHC 8, [2010] 4 IR 417; O'Keeffe v G &T Crampton Ltd [2009] IEHC 366, (2009) 16(9) CLP 208; In re an Inquiry [1988] AC 660; R v London Borough of Brent, ex parte Gunning [1985] 84 LGR 168 and Heaney v Ireland [1994] 3 IR 593 approved - Madden v Anglo Irish Bank [2004] IESC 108, [2005] I ILRM 294; Dowling v Minister for Finance [2012] IEHC 89, (Unrep, Feeney J, 2/3/2012); O'Neill v Ryan (No 3) [1990] 2 IR 200 and O-A(OO) v Minister for Justice, Equality and Law Reform [2011] IEHC 78, (Unrep, Clark J, 28/1/2011) considered - Adam v Minister for Justice [2001] 3 IR 53 distinguished - Rules of the Superior Courts 1986 (SI 15/1986), O 8, r 84 - European Communities (Capital Adequacy of Credit Institutions) Regulations 2006 (SI 661/2006) - European Communities (Reorganisation and Winding Up of Credit Institutions) Regulations 2011 (SI 48/2011) - Central Bank Act 1942 (No 22) - Companies Act 1963 (No 33) , s 31 - Building Societies Act 1989 (No 17), s 18 - Companies Act 1990 (No 33), s 19 - European Convention on Human Rights Act 2003 (No 20), s 1 - Credit Institutions (Financial Support) Act 2008 (No 18) - Anglo Irish Bank Corporation Act 2009 (No 1) - Credit Institutions (Stabilisation) Act 2010 (No 36), ss 2, 4, 7, 9, 11, 13, 28, 33, 50, 52, 53, 61 and 63 - Constitution of Ireland 1937, Art 15 - Council Regulation (EC) No 407/2010 of 11/5/2010, article 3 (5) - Council Implementing Decision 15/10/2013, article 5 - Council Implementing Decision 30/5/2011, recital (6) - Implementing Council Decision 2/9/2011 (2011/542/EU) - Directive 2001/24/EC of 4/3/2001, article 2 - Charter of Fundamental Rights of the European Union (2000/C 364/01), article 17 - Treaty on the Functioning of the European Union, arts 18, 63, 101 to 109 and 260 - Reliefs refused (2012/116MCA - Peart J - 28/6/2012) [2012] IEHC 436

Dowling v Minister for Finance

Facts: The applicants were shareholders in Irish Life & Permanent Group Holdings Plc ("ILPGH") who applied for an order to set aside a direction order under s 11(3) of the Credit Institutions (Stabilisation) Act 2010 issued on 28th March 2012 which required Irish Life & Permanent Plc ("ILP") to sell its life assurance business and subsidiaries to the Minister for Finance. ILPGH was the only member of ILP with 99.8% of its shares owned by the Minister. Under s 11(3) of the 2010 Act, a direction order can only be set aside if the court determines that there has been non-compliance with any of the direction requirements or if the Minister's opinion was found to be unreasonable or based on an error in law. It is the applicant's contention that the sale of ILP to the Minister is not necessary to recapitalise the company with alternative measures being available to him and the fact he failed to consider this made his opinion unreasonable.

It was contended by the Minister that under s 11(1) of the 2010 Act, only members of the relevant institution can apply to set aside a direction order. In this case, the relevant institution was ILP and therefore the applicants had no standing. The applicants contend that as ILPGH is the sole member of ILP, their shareholder interests will be affected by the directions issued as the Minister intended to purchase the company at an undervalue and then re-sell the company at a later date.

Held by Peart J that in determining whether the applicants had locus standi, the wording of s 11(1) of the 2010 Act was clear - the relevant institution is that which is referred to in the directions order and only members of that institution can seek to challenge it. In the present case, all of the applicants were minority shareholders in ILPGH and not ILP and whilst related, the direction order related solely to ILP. Whilst ILPGH was a shareholder of ILP and would have been a relevant institution under s 11(1), it would have had to do so in its capacity as a company and this right did not extend to its individual shareholders. There was no need to consider the intention of the Oireachtas when drafting the legislation as the wording is clear and unambiguous.

It was further held that whilst alternative methods of recapitalisation of ILP may seem attractive to the applicants that did not necessarily mean that the conduct of the Minister was disproportionate to the objective sought so as for it to be considered unreasonable or as a result of an error in law. The materials that would have been before the Minister were available to the court and on their consideration, it was evident that the opinion reached was not unreasonable on consideration of the principles of proportionality.

Finally, it was held that the Minister's opinion had not been based upon an error of law. There was some merit in the contention that the Minister's acquisition of ILP would effect a downward value in respect of the applicant's shares in ILPGH restricting the movement of capital contrary to Article 63.1 of the Treaty on the Functioning of the European Union. However, the severity of the economic downturn meant that this action along...