Fingleton -v- The Central Bank of Ireland, [2016] IEHC 1 (2016)

Docket Number:2015 508JR
Party Name:Fingleton, The Central Bank of Ireland
 
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THE HIGH COURT

JUDICIAL REVIEW[2015 No. 508 JR] MICHAEL P. FINGLETONAPPLICANTAND

THE CENTRAL BANK OF IRELANDRESPONDENT

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 prescribed contraventions by INBS.

  12. The notice states that the respondent will hold an inquiry to determine whether or not INBS has committed prescribed contraventions and whether or not the persons concerned participated in the commission of some or all of the prescribed contraventions. It invites the applicant and the other persons concerned to attend the inquiry to commence on the 1st of February, 2016, at 10.30 am. The notice further states that the respondent has appointed three persons to act as members of the inquiry and identifies those persons.

  13. Shortly thereafter on the 15th of July, 2015, the respondent published a document entitled “Settlement Agreement Between the Central Bank of Ireland and Irish Nationwide Building Society” with a sub heading “Following Central Bank Investigation INBS admits widespread breaches”.

  14. A lengthy publicity statement follows which says that INBS has entered into a settlement agreement with the Central Bank following the conclusion of the Central Bank’s most significant and extensive regulatory investigation to date. It says that the Central Bank formally referred the case against INBS and the relevant individuals to inquiry which is the first such referral under the Central Bank Act 1942 as amended. On the first page of the document, the following appears:

    “As part of the settlement, INBS has admitted to having committed multiple breaches of financial services law and regulation, including persistent failure to comply with its own internal policies and procedures during the relevant period. As a result, the Central Bank has reprimanded INBS and imposed the maximum applicable fine of €5 million. As INBS does not have any assets, it would not be in the public interest to pursue the collection of the fine and, accordingly, the Central Bank will not do so on this occasion.”

    The document goes on to quote a statement from the respondent’s director of enforcement and give details of the various breaches in respect of which admissions were made by INBS. The statement went on to say that the respondent will be holding an administrative sanctions inquiry to establish whether certain persons who were concerned in the management of INBS during the relevant period participated in the commission by INBS of the above breaches.

  15. Leave to bring this application was granted by order of White J. on the 8th September, 2015.

    The Legislative Framework.

  16. The Central Bank of Ireland Act 1942 has been subject to very extensive amendment since its introduction. The ASP was introduced in 2004, by the insertion of a new Part IIIC in the...

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