Dowling v Minister for Finance

• Jurisdiction: Ireland
• Court: Court of Appeal (Ireland)
• Judge: Mr. Justice Gerard Hogan
• Judgment Date: 02 October 2018
• Neutral Citation: [2018] IECA 300
• Docket Number: [C.A. Nos. 46 & 47 of 2018],Neutral Citation Number: [2018] IECA 300 2018/47
• Date: 02 October 2018

IN THE MATTER OF IRISH LIFE & PERMANENT GROUP HOLDINGS PLC

AND IN THE MATTER OF IRISH LIFE & 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 ANCILLARY ORDERS

BETWEEN:

GERARD DOWLING, PADRAIG MCMANUS, PIOTR SKOCZYLAS

AND

SCOTCHSTONE CAPITAL FUND LIMITED

APPELLANTS

- AND -

THE MINISTER FOR FINANCE

RESPONDENT

- AND -

PERMANENT TSB GROUP HOLDINGS PLC

AND

PERMANENT TSB PLC

NOTICE PARTIES

[2018] IECA 300

Hogan J.

Irvine J.

Hogan J.

Baker J.

Neutral Citation Number: [2018] IECA 300

Record No. 2018/46

2018/47

THE COURT OF APPEAL

Domestic administrative law – Direction order – Credit Institutions (Stabilisation) Act 2010 – Appellants seeking to challenge the validity of the mechanism whereby a company was recapitalised by ministerial order – Whether the opinion or actions of the respondent were unreasonable in law

Facts: The appellants, Mr Dowling, Mr McManus, Mr Skoczylas and Scotchstone Capital Fund Ltd, who were shareholders of the company, sought, in effect, to challenge the validity of the mechanism whereby Irish Life and Permanent Group Holdings plc (ILP) was recapitalised by ministerial order (known as a direction order) in July 2011. The proceedings generated a range of interlocutory applications, a number of which were ultimately determined by the Supreme Court. The first substantive judgment was delivered by the High Court (O'Malley J) in August 2014. O'Malley J made a reference to the Court of Justice pursuant to Article 267 TFEU concerning aspects of the Second Company Law Directive. The Court of Justice ultimately delivered judgment on the 8th November 2016. A further judgment was delivered by O'Malley J on the 31st July 2017. O'Malley J dismissed the appellants' case and they then sought to appeal against that decision. In a further reserved judgment delivered in December 2017 O'Malley J ruled that the appellants did not require the leave of the High Court to appeal to the Court of Appeal against her decision of July 2017. Separate proceedings challenged the constitutionality of the Credit Institutions (Stabilisation) Act 2010.

Held by Hogan J that neither the opinion of the respondent, the Minister for Finance, as reflected in the directions order or the actions which he took by virtue of that order had been shown to be unreasonable in law; it followed, therefore, that the appellants were not entitled to the relief sought and, specifically, the order sought pursuant to s. 11 of the 2010 Act setting aside the direction order.

Hogan J held that he would dismiss the appeal.

Appeal dismissed.

JUDGMENT of Mr. Justice Gerard Hogan delivered on the 2nd day of October 2018

1 Where the State makes an enormous investment in the public interest in a failing institution on a compulsory basis and where these actions have been found by the Court of Justice not to contravene EU law, in what circumstances (if any) can this decision be challenged as unreasonable on domestic administrative law grounds? This is perhaps the principal question which is posed in this highly complex appeal. Before considering any of these questions, it is, however, first necessary to sketch out the factual background.

The background facts

2 In this appeal the appellants, who are shareholders of the company, seek, in effect, to challenge the validity of the mechanism whereby Irish Life and Permanent Group Holdings plc ('ILP') was recapitalised by ministerial order (known as a 'direction order') in July 2011. As one might, perhaps, expect, the proceedings to date have been complex and have generated a range of interlocutory applications, a number of which have ultimately been determined by the Supreme Court.

3 The first substantive judgment was delivered by the High Court (O'Malley J.) in August 2014: see Dowling v. Minister for Finance (No.1) [2014] IEHC 418. In that case O'Malley J. made a number of important factual findings, but, critically, she made a reference to the Court of Justice pursuant to Article 267 TFEU concerning aspects of the Second Company Law Directive. The Court of Justice ultimately delivered judgment on the 8th November 2016: see Case C-41/15 EU:C:2016: 836. It will be necessary in the judgment to refer in greater detail to both the first High Court judgment (and the findings of facts made therein) and the judgment of the Court of Justice.

4 Following the delivery of the judgment of the Court of Justice, the present case was then resumed in the High Court when a further judgment was delivered by O'Malley J. on the 31st July 2017: see Dowling v. Minister for Finance (No.2) [2017] IEHC 520. In that second judgment O'Malley J. dismissed the applicants' case and they then sought to appeal against that decision. In a further reserved judgment delivered in December 2017 O'Malley J. ruled that the applicants did not require the leave of the High Court to appeal to this Court against her decision of July 2017: see Dowling v. Minister for Finance (No.3) [2017] IEHC 832. Separate proceedings challenging the constitutionality of the Credit Institutions (Stabilisation) Act 2010 ('the 2010 Act') have yet to be determined by the High Court. This issue of constitutional validity does not, of course, form any part of this appeal and naturally I express no view on that question.

5 Before considering any of the legal issues which arise on this appeal, it is first necessary to say something about the structure of the 2010 Act and the background to the making of the directions order. As it happens, the 2010 Act has been amended significantly by the Central Bank and Credit Institutions Resolution Act 2011. As the directions order was made by the High Court pursuant to the provisions of the 2010 Act (as that was the relevant legislation then in force when that application was made), it is unnecessary to consider the potential impact (if any) of the amendments subsequently made.

The 2010 Act

6 The 2010 Act was enacted by the Oireachtas on 21 December 2010. The recitals to the 2010 Act in their own way bear eloquent testimony to the extent of the crisis which the State was then facing:

'Whereas there is a serious disturbance in the economy of the state;

And whereas measures are necessary to address a unique and unprecedented economic crisis which has led to difficult economic circumstances and severe disruption to the economy;

And whereas there is a continuing serious threat to the stability of certain credit institutions in the State, and to the financial system generally;

And whereas it is necessary, in the public interest, to maintain the stability of those credit institutions and the financial system in the state;

And whereas it is necessary, in the interests of the common good, to continue the process of reorganisation, preservation and restoration of the financial position of Anglo Irish Bank Corporation limited begun with the Anglo Irish Bank Corporation Act 2009;

And whereas the functions and powers conferred by this Act are necessary to secure financial stability and to effect a reorganisation of certain credit institutions;

And whereas it is necessary to amend the European Communities (Reorganisation and Winding-up of Credit Institutions) Regulations 2004 (S.I. No. 198 of 2004) to implement Directive 2001/24/EC of the European Parliament and of the Council of 4 April 2001 to preserve or restore the financial position of certain credit institutions;

And whereas the considerable financial support provided by the State to certain credit institutions has helped those institutions to meet their financial and regulatory obligations;

And whereas the State wishes to provide for the performance of the functions conferred by this Act in order to achieve the financial stabilisation of those credit institutions and their restructuring (consistently with the state aid rules of the European Union) in the context of the national recovery plan 2011—2014 and the European Union/International Monetary Fund programme of financial support for Ireland;

And whereas the common good requires permanent or temporary interference with the rights, including property rights, of persons who may be affected by the performance of those functions;

And whereas the urgent reorganisation of certain credit institutions is of systemic importance to the State;

And whereas it is necessary to maintain public confidence in, and enhance, the protection of deposits in credit institutions generally;

And whereas it is desirable to promote and facilitate investment by persons other than the state in credit institutions to reduce their reliance upon State support;

And whereas because certain credit institutions in the State are parties to contracts and other arrangements governed by the law of a state other than the State; be it therefore enacted by the Oireachtas as follows:'

7 Section 4 of the 2010 Act provided that the objects of the 2010 Act were:

'(a) To address the serious and continuing disruption to the economy and the financial system and the continuing serious threat to the stability of certain credit institutions in the State and the financial system generally,

(b) To implement the reorganisation of credit institutions in the State to achieve the financial stabilisation of those credit institutions and their restructuring (consistently with the state aid rules of the European Union) in the context of the National Recovery Plan 2011-2014 and the European Union/International Monetary Fund Programme of Financial Support for Ireland,

......

(e) To protect the interests of depositors in credit institutions,

(f) To address the compelling need:

(i) to facilitate the availability of credit in the economy of the State.

(ii) to protect the State's interest...