Fingleton v Central Bank of Ireland

• Jurisdiction: Ireland
• Judge: Mr. Justice Noonan
• Judgment Date: 04 January 2016
• Neutral Citation: [2016] IEHC 1
• Docket Number: [2015 No. 508 JR]
• Court: High Court
• Date: 04 January 2016

[2016] IEHC 1

THE HIGH COURT

JUDICIAL REVIEW

Noonan J.

[2015 No. 508 JR]

MICHAEL P. FINGLETON

APPLICANT

AND

THE CENTRAL BANK OF IRELAND

RESPONDENT

Banking & Finance – The Central Bank Act 1942 – The Central Bank and Financial Services Authority of Ireland Act 2004 – Administrative Sanctions Procedure – Liability for administrative sanctions – Certiorari – Double construction rule – Biasness – Risk of unfair trial – Fair procedures

Facts: The applicant sought an order of certiorari for quashing the notice of inquiry served upon him by the respondent for ascertaining the role of the applicant in prescribed contraventions under s. 33 AO (2) of the Central Bank and Financial Services Authority of Ireland Act 2004 by the financial service provider while holding the position of a chief executive officer prior to his retirement. The applicant also sought a declaration to the effect that the said notice was ultra vires the powers of the respondent under the Central Bank Act 1942. The applicant contended that s. 33 AO (2) being a penal provision must be interpreted strictly and thus, the expression ‘persons concerned in the management of a regulated financial service provider’ appearing under that provision would not include former persons. The applicant also asserted that the admission of the alleged breaches by the said service provider and settlement with the respondent would run contrary to his right of fair hearing.

Mr. Justice Noonan refused to grant an order of certiorari and dismissed the application. The Court held that the term ‘person concerned in the management’ was a neutral term and referred to the persons engaged in the management of the regulated financial service provider at the time of the commission of the prescribed contraventions. The Court observed that the rule of double construction did not apply to the present case as the construction of said s. 33 AO (2) implying imposition of the penal sanction without limitation of time did not raise a constitutional issue. The Court opined that the time limitation was never an issue in a criminal proceeding and thus, s. 33 AO (2) could not be interpreted in favour of the persons charged under that section. The Court found that there was no real risk of unfair hearing to the applicant as the inquiry would proceed based upon the established prescribed procedures and the applicant had the benefit of the right to appeal to a higher forum. The Court held that the applicant was not entitled to challenge the constitutionality of the Act of 1942 as the concerned service provider was not a party to the present proceedings.

JUDGMENT of Mr. Justice Noonan delivered the 4th day of January 2016

Introduction

1 In these judicial review proceedings, the essential relief sought by the applicant is a declaration that a notice of inquiry dated the 9th of July, 2015, served upon him by the respondent is ultra vires the powers of the respondent pursuant to the Central Bank Act 1942 as amended and for an order of certiorari quashing the notice of inquiry. A number of ancillary declarations are also sought.

Relevant background

2 In 1971, the applicant joined Irish Nationwide Building Society (‘INBS’) as director and secretary. In 1974, the applicant became chief executive officer and managing director of INBS. He remained as managing director until the 26th of January, 2008, when he retired as a director. On that date, the applicant was appointed chief executive officer of INBS and he continued to hold that position and attend board meetings until his retirement on the 30th of April, 2009.

3 In the wake of the global economic crisis which commenced in 2008, INBS collapsed. In an affidavit sworn by Louise Gallagher, deputy head of the enforcement division of the respondent, on the 16th of September, 2015, Ms. Gallagher avers that the collapse of INBS resulted in a cost to the Irish tax payer in excess of €5 billion, although this figure is disputed by the applicant.

4 In her affidavit, Ms. Gallagher avers that a new enforcement directorate was set up within the Central Bank in 2010, at which time the respondent commenced an investigation of INBS and of certain persons concerned in its management. The investigation related to the period from the 1st of August, 2004, to the 30th of September, 2008. Ms. Gallagher says it was the most significant and extensive investigation ever conducted by the respondent and concerned multiple suspected breaches of financial services law and regulation by INBS over the said period. Ms. Gallagher avers that approximately 110,000 specific documents were identified during the investigation as relating to the suspected prescribed contraventions. She says the purpose of the investigation was to allow the respondent to decide whether there are reasonable grounds to suspect that INBS had committed a prescribed contravention(s) and whether certain persons concerned in its management had participated in the commission by INBS of a prescribed contravention(s). The investigation was conducted pursuant to the Central Bank of Ireland Act 1942, as amended, in particular by the Central Bank and Financial Services Authority of Ireland Act 2004 (‘the Act’).

5 On the 24th of February, 2011, all deposits of INBS were transferred to Permanent TSB and on the 1st of July, 2011, all remaining assets and liabilities of INBS were transferred to the Irish Bank Resolution Corporation (‘IBRC’). It would appear since the latter date, at the latest, INBS has not carried on the business of providing financial services.

6 By letter of the 17th of January, 2012, the respondent wrote to the applicant in a letter captioned ‘Notice of Commencement of Examination Pursuant to Part IIIC of the Central Bank Act 1942, As Amended (“the Administrative Sanctions Procedure”)’ informing the respondent that the applicant suspected that INBS, being a regulated financial service provider for the purposes of Part IIIC of the Central Bank Act 1942, as amended, may have permitted prescribed contraventions for the purposes of s. 33 AO (1) of the Act. The letter went on to state that the respondent considered it necessary to examine whether there were reasonable grounds to suspect that as a person concerned in the management of INBS between the 1st of August, 2004, and 30th of September, 2008, the applicant may have participated in the commission of the suspected prescribed contraventions for the purposes of s. 33 AO (2) of the Act. The letter went on to give details of the suspected prescribed contraventions and of the administrative sanctions procedure (‘the ASP’) which came into force on the 1st of August, 2004, being the commencement date of the period under review.

7 On the 14th of March, 2012, solicitors for the applicant responded to this correspondence stating ‘we are instructed that it is our client's intention to fully assist and co-operate with the Central Bank in its inquiry in relation to Irish Nationwide Building Society (“INBS”).’

8 However the applicant's position in that regard changed when in a further letter of the 10th of May, 2012, his solicitors said ‘our preliminary advice to our client, based on senior counsel's opinion, is that Mr. Fingleton is not a person who is now liable to administrative sanctions under Chapter 2 of Part IIIC of the Act, and we propose accordingly to advise our client not to participate in the process as a suspected person.’ The applicant has maintained that position since.

9 Further correspondence ensued between the parties and on the 12th of December, 2013, the respondent wrote what is described as an ‘investigation letter’ to the applicant setting out in an appendix a list of suspected prescribed contraventions in respect of which the applicant was alleged to have participated. These were stated to supersede the contraventions in the earlier letter of the 17th of January, 2012. The letter invited the applicant to confirm whether he admitted or denied participation in the suspected prescribed contraventions by the 20th of January, 2014, following which the respondent intended to decide whether to refer the matter to inquiry pursuant to Part IIIC of the Act. The applicant responded through new solicitors on the 21st of January, 2014, repeating the earlier contention that he was not subject to the ASP and also drawing attention to the fact that the applicant is the defendant in proceedings in which he is being sued by IBRC and INBS for damages of the order of €6 billion in respect of alleged negligence and breach of fiduciary duty arising from the discharge of his functions as chief executive of INBS.

10 The solicitors go on to claim that there is a substantial overlap between the matters in issue in those proceedings and the suspected prescribed contraventions the subject of the ASP and accordingly it would be a breach of the applicant's right to fair procedures if the respondent were to make factual findings in relation to issues which are also the subject of the proceedings. The letter went on to suggest that any investigation into the applicant be suspended pending the outcome of the proceedings which had been admitted to the Commercial Court. This suggestion was declined by the respondent.

11 A Notice of Inquiry was issued on the 9th of July, 2015, pursuant to Part IIIC of the Act concerning INBS, the applicant and a number of named individuals. This notice states that the respondent has determined that it has reasonable grounds to suspect that INBS committed during the review period certain prescribed contraventions within the meaning of Part IIIC of the Act. The notice further states that the respondent has determined that it has reasonable grounds to suspect that the applicant and other named persons, being persons concerned in the management of INBS during the review period, participated in the commission of some or all of the...