Dowling and Others v The Minister for Finance

• Jurisdiction: Ireland
• Judge: Mr. Justice Charleton
• Judgment Date: 21 February 2013
• Neutral Citation: [2013] IEHC 75
• Court: High Court
• Docket Number: [No. 239MCA/2011]
• Date: 21 February 2013

[2013] IEHC 75

THE HIGH COURT

[No. 239MCA/2011]

Dowling & Ors v Min for Finance

IN THE MATTER OF IRISH LIFE AND PERMANENT GROUP HOLDINGS PLC AND IN THE MATTER OF IRISH LIFE AND PERMANENT PLC

AND IN THE MATTER OF AN APPLICATION FOR THE SETTING ASIDE PURSUANT TO SECTION 11 OF THE CREDIT INSTITUTIONS (STABILISATION) ACT 2010 OF THE DIRECTION ORDER WHICH WAS MADE ON THE 26 TH JULY 2011 PURSUANT TO SECTION 9 OF THE CREDIT INSTITUTIONS (STABILISATION) ACT 2010 AND ANCILLIARY ORDERS

BETWEEN

GERARD DOWLING, PADRAIG MCMANUS, PIOTR SKOCZYLAS AND SCOTCHSTONE CAPITAL FUND LIMITED

APPLICANTS

AND

THE MINISTER FOR FINANCE

RESPONDENT

RSC O.15 r13

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S11(2)

HAUGHEY, IN RE 1971 IR 217

HAUGHEY & MULHERN v MORIARTY & ORS 1999 3 IR 1

BARLOW & ORS v FANNING & UNIVERSITY COLLEGE CORK (UCC) 2002 2 IR 593 2003 1 ILRM 29

FINCORIZ SAS v ANSBACHER & CO LTD UNREP LYNCH 20.4.1987 1987/2/592

YAP v CHILDRENS UNIVERSITY HOSPITAL TEMPLE STREET LTD 2006 4 IR 298 2006 IEHC 308

BUPA IRELAND LTD v HEALTH INSURANCE AUTHORITY (NO 1) 2006 1 IR 201 2005 IESC 80

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S2

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S7

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S63

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S11(1)

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S11

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S11(3)

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S7(2)

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S11(4)

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S47

DPP, PEOPLE v T (J) 1988 3 FREWEN 141

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S11(5)

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S11(6)

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S53

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S64

CARROLL v RYAN & ORS 2003 1 IR 309 2003 2 ILRM 1 2003/8/1753 2003 IESC 1

HOGAN & WHYTE JM KELLY: THE IRISH CONSTITUTION 4ED 2003 786

RIORDAN v AN TAOISEACH & ORS (NO 2) 1999 4 IR 343 1998/37/13940

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S7(4)

CARMODY v MIN FOR JUSTICE & ORS 2010 1 IR 635 2010 1 ILRM 157 2009/8/1838 2009 IESC 71

Company Law – Financial institutions - Shareholdings - Direction order - Challenge of decision - Joinder of parties - Case management - Constitutionality - Substantial grounds - Credit Institutions (Stabilisation) Act 2010 - The Constitution of Ireland 1937 - The Constitution of Ireland, 1937 - Rules of the Superior Courts 1986

Facts: Permanent TSB Group Holdings plc and Permanent TSB were a holding company and related bank respectively that had received a cash injection of €2.7 billion in 2011 following a decision of the respondent due to the economic recession at the time. It was the applicants” submission that the respondent”s decision, made pursuant to the Credit Institutions (Stabilisation) Act 2010 (the ‘2010 Act’), was unreasonable and had resulted in a severe drop in the value of shares they held in the holding company. This was despite the fact that the holding company had held an extraordinary general meeting in July 2011 and voted against the planned intervention of the respondent.

In these proceedings, three motions were brought by the parties. The first motion was brought by Permanent TSB Group Holdings plc and Permanent TSB plc to be joined as notice parties. Permanent TSB Group Holdings plc and Permanent TSB plc claimed they were entitled to be joined as notice parties to proceedings pursuant to O. 15, r. 13 of the Rules of the Superior Courts 1986 and s. 11 (2) of the Act of 2010 and under the inherent jurisdiction of the Court. The second motion was for the matter to be managed along with a related set of proceedings. The third motion was for the applicants to be allowed to amend their pleadings so as to challenge the constitutionality of certain provisions of the 2010 Act. It was their contention that s. 11(1) of the 2010 Act among others, which only allowed 5 working days to challenge the direction order of the respondent, was contrary to The Constitution of Ireland, 1937 and the European Convention on Human Rights by restricting access to justice.

Held by Charleton J that in consideration of the first motion, it was necessary for the court to consider whether the submissions of Permanent TSB Group Holdings plc and Permanent TSB plc were necessary to reach a fair and complete decision. It was clear that the companies wished to be joined in order to resist the direction order being overturned or varied without their input. Since the decision was made at the holding companies extraordinary general meeting, a new regime had been installed that supported the direction order therefore if the companies were joined as notice parties, they would effectively be acting as co-defendants, arguing in support of the respondent. It was unnecessary for such a course of action to be taken as the 2010 Act allowed the respondent to override company law in order to save a financial institution. However, if the applicants were successful, the direction order could potentially be overturned or amended. In the circumstances where a substitution order was being considered, the views of the companies could potentially be beneficial. The companies were therefore added as notice parties but only for that specific purpose should it occur.

In terms of the third motion, it was held that a constitutional challenge could only be brought by a plenary summons on notice to the Attorney General and the Minister. The present proceedings had been initiated with an originating notice of motion. The appropriate course of action was deemed to be a refusal of the motion. It was then for the applicants to initiate fresh proceedings on the constitutionality of the 2010 Act by plenary summons if they so desired. This was to be done within three weeks. In terms of the second motion it was deemed desirable for the proceedings to travel along with the related set of proceedings as far as possible given the similarity between the facts.

Mr. Justice Charleton

1 Three motions have been brought before the Court. In the first motion, Permanent TSB Group Holdings plc and Permanent TSB plc seek to be joined as notice parties to these proceedings. The second motion is that these proceedings should be case managed and travel together with another related set of proceedings. In the third motion, the applicants seek to amend their proceedings to challenge the constitutionality of certain sections of the Credit Institutions (Stabilisation) Act 2010. A concise recital of the background facts will assist in understanding the decision that follows.

2 Permanent TSB Group Holdings plc is a holding company for shares in Permanent TSB plc. The latter is a financial institution which historically derived from a building society but was later, as I understand it, transformed into a bank. In common with other financial institutions, that bank lent very heavily and very unwisely during the years 2000 to 2008. All the parties to these proceedings accept that there was a degree of stress on the bank thereafter which arose partly from that situation and partly from the requirement of the Central Bank of Ireland for a secure level of liquidity in financial institutions in terms of their outstanding loans. A sharp disagreement arises among the parties as to what happened thereafter. In 2011, the Minister of Finance decided that it was necessary to rescue the bank through an injection of €2.7 billion. The applicants do not accept that it was appropriate to take this step. They argue that the money could have been sourced from elsewhere, that in consequence their shareholding value should not have been written down from (the figures given to me) around €0.33 per share to less than 1c per share, and that the powers vested in the Minister for Finance under the Act of 2010 enabling this step could not or should not have been taken in law or were based on an unreasonable opinion.

3 Notice of this proposed action was given by the Minister to the holding company. An extraordinary general meeting of the holding company was held on 20^th July, 2011. The meeting voted, using round figures, 60:40 against the intervention. Notwithstanding that, on 26^th July, 2011, the Minister applied to the High Court for the relevant order. This was granted thus changing the value of the shareholding of the holding company in the bank. Later, it appeared that more money was necessary and a further sum of €1.3 billion was injected into the bank using the same procedure pursuant to an application to the High Court on 20^th March, 2012. So that is €4 billion in all.

4 These proceedings were started on 3^rd August, 2011, as a challenge under s. 11 of the Act of 2010 against the earlier injection of capital by the Minister and the consequential diminution in shareholding value. Despite the wide rehearsal of the arguments relevant to that substantive challenge during the hearing of these motions, I express no view as to the merits of any argument on either side.

5 Permanent TSB Group Holdings plc and Permanent TSB plc claim an entitlement to participate in the proceedings as notice parties pursuant to O. 15, r. 13 of the Rules of the Superior Courts 1986; under the inherent jurisdiction of the Court; and under s. 11 (2) of the Act of 2010. Under the Rules, the Court may "at any stage of the proceedings … and on such terms as may appear to the Court to be just, order that … plaintiffs or defendants… who ought to have been joined, or whose presence before the Court may be necessary in order to enable the Court effectually and completely to adjudicate upon and settle all the questions involved in the cause or matter, be added."

6 Under s. 11 (2) of the Act of 2010, a wide discretion is given to the Court to "give … priority to an application … and … give such...