Gerard Dowling and Others v Minister for Finance and Others

• Jurisdiction: Ireland
• Judge: Ms Justice Iseult O'Malley,MR. JUSTICE McGOVERN
• Judgment Date: 15 August 2014
• Neutral Citation: [2014] IEHC 418
• Court: High Court
• Date: 15 August 2014

Dowling & Ors v Min for Finance & Ors

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 ANCILLARY ORDERS

BETWEEN:

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

Applicants

-AND-

THE MINISTER FOR FINANCE

Respondent

-AND-

PERMANENT TSB GROUP HOLDINGS PLC AND PERMANNENT TSB PLC

Notice Parties

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 THE CREDIT INSTITUTIONS (STABILISATION) ACT, 2010

AND

IN THE MATTER OF AN APPLICATION BY THE MINISTER FOR FINANCE FOR A DIRECTION ORDER IN RELATION TO IRISH LIFE AND PERMANENT GROUP HOLDINGS PLC AND IRISH LIFE AND PERMANENT PLC

PURSUANT TO SECTION 9 OF THE CREDIT INSTITUTIONS (STABILISATION) ACT 2010 AND ANCILLARY ORDERS

[2014] IEHC 418

Record No. 239 MCA/2011

No. 239 MCA/2011

THE HIGH COURT

Banking – Financial institution – Recapitalisation – Ministerial proposals rejected at EGM – Direction order sought by minister under Credit Institutions (Stabilisation) Act 2010 – Second Company Law Directive

During the midst of the recent banking crisis, the respondent minister had proposed the recapitalisation of the Irish Life and Permanent group (‘ ILP’) at an EGM in 2011. This proposal was rejected by shareholders. Following the rejection, the respondent proposed a direction order to be issued under the provisions of the Credit Institutions (Stabilisation) Act 2010. This order saw the ILP group effectively come in to state ownership. The applicants, shareholders and a former director in the group, applied to have that direction order set aside alleging that the takeover was illegal and had affected their interests adversely.

Held by Mrs Justice Iseult O’Malley, that three issues were before the Court. Firstly, whether the provisions of s 7 of the Act had been complied with? Secondly, whether the respondent’s opinion on the necessity for the order was reasonable? Finally, was the opinion flawed by errors of law? Having considered the submissions by the parties, Justice O?Malley stated that the third issue was crucial, and there was no need to consider the first two issues until the error of law matter had been resolved. Having taken consideration of the EU case law on the Second Company Law Directive, the Court considered that it could not determine the matter without referring the issue of the EU jurisprudence to the CJEU. A number of findings of law and fact were therefore made to that end.

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S9

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S7

DOWLING & ORS v MIN FOR FINANCE UNREP SUPREME 19.12.2013 2013/14/4144 2013 IESC 58

DOWLING & ORS v MIN FOR FINANCE UNREP FEENEY 2.3.2012 2012/10/2639 2012 IEHC 89

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S11

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S7(2)

CREDIT INSTITUTIONS (FINANCIAL SUPPORT) ACT 2008

EEC REG 407/2010

TREATY ON THE FUNCTIONING OF THE EUROPEAN UNION ART 125

TREATY ON THE FUNCTIONING OF THE EUROPEAN UNION ART 122(2)

EEC DECISION 2011/77 ART 3(5)

EUROPEAN COMMUNITIES (CAPITAL ADEQUACY OF INVESTMENTS FIRMS) REGS 2006 SI 660/2006

EUROPEAN COMMUNITIES (CAPITAL ADEQUACY OF CREDIT INSTITUTIONS) REGS 2006 SI 661/2006 REG 70

EUROPEAN COMMUNITIES (CAPITAL ADEQUACY OF CREDIT INSTITUTIONS) REGS 2006 SI 661/2006 REG 3(1)(A)

EUROPEAN COMMUNITIES (CAPITAL ADEQUACY OF CREDIT INSTITUTIONS) REGS 2006 SI 661/2006 REG 3(1)(B)

CENTRAL BANK ACT 1971 S11(1)(B)(v)

CENTRAL BANK ACT 1942 S6A(2)

CENTRAL BANK ACT 1942 S5A(11)

EUROPEAN COMMUNITIES (CAPITAL ADEQUACY OF CREDIT INSTITUTIONS) REGS 2006 SI 661/2006 REG 70(1)

EUROPEAN COMMUNITIES (CAPITAL ADEQUACY OF CREDIT INSTITUTIONS) REGS 2006 SI 661/2006 REG 70(4)

EUROPEAN COMMUNITIES (CAPITAL ADEQUACY OF CREDIT INSTITUTIONS) REGS 2006 SI 661/2006 REG 19

IRISH TAKEOVER PANEL ACT 1997 TAKEOVER RULES & SUBSTANTIAL ACQUISITION RULES RULE 9

IRISH TAKEOVER PANEL ACT 1997 TAKEOVER RULES & SUBSTANTIAL ACQUISITION RULES RULE 9(1)

IRISH TAKEOVER PANEL ACT 1997 S9

TREATY ON THE FUNCTIONING OF THE EUROPEAN UNION ART 107

TREATY ON THE FUNCTIONING OF THE EUROPEAN UNION ART 107(1)

TREATY ON THE FUNCTIONING OF THE EUROPEAN UNION ART 107(3)(B)

CENTRAL BANK & CREDIT INSTITUTIONS (RESOLUTION) ACT 2011

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S4

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S63

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S63(3)

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S47

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S52

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S53

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S61

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S4(A)

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S4(B)

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S4(E)

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S4(F)

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S4(G)

EEC DIR 2001/24

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S4(H)

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S7(4)

EEC DECISION 2011/326

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S9(4)

TREATY ON THE FUNCTIONING OF THE EUROPEAN UNION ART 260

EEC DIR 77/91 ART 25

EEC DIR 77/91 ART 29

EEC DIR 77/91 ART 8

EEC DIR 2001/34

EEC DIR 2004/25

CHARTER OF FUNDAMENTAL RIGHTS OF THE EUROPEAN UNION ART 17

EUROPEAN CONVENTION ON HUMAN RIGHTS ACT 2003 S3

COLLINS ENGLISH DICTIONARY 11ED 2011

DOWLING & ORS v MIN FOR FINANCE UNREP PEART 28.6.2012 2012/10/2702 2012 IEHC 436

ASSOCIATED PROVINCIAL PICTURE HOUSES LTD v WEDNESBURY CORP 1948 1 KB 223 1947 2 AER 680

KEEGAN & LYSAGHT, STATE v STARDUST VICTIMS COMPENSATION TRIBUNAL 1986 IR 6421987 ILRM 202

MEADOWS v MIN FOR JUSTICE & ORS 2010 2 IR 7012011 2 ILRM 1572010 IESC 3

INQUIRY UNDER THE COMPANY SECURITIES (INSIDER DEALING) ACT 1985, IN RE (NO 1) 1988 AC 6601988 2 WLR 33 1988 1 AER 203 1988 4 BCC 35

DUNNES STORES IRL CO & ORS v RYAN & MIN FOR ENTERPRISE 2002 2 IR 60

DOWLING & ORS v MIN FOR FINANCE UNREP SUPREME 24.5.2012 2012/10/2668 2012 IESC 32

O'KEEFFE v BORD PLEANALA & O'BRIEN 1993 1 IR 391992 ILRM 237

HEANEY & MCGUINNESS v IRELAND & AG 1994 3 IR 5931994 2 ILRM 420 1994/10/3029B

SYNDESMOS MELON TIS ELEFTHERAS EVANGELIKIS EKKLISSIAS & ORS v GREECE & ORS 1994 2 CMLR 348 1992 ECR I-2111

EEC DIR 77/91 ART 25(1)

EEC DIR 77/91 ART 29(1)

KARELLA & KERALLAS v MIN FOR INDUSTRY ENERGY & TECHNOLOGY & ORGANISMOS ANASYGKROTISEOS EPICHEIRISEON AE 1991 ECR I-2691 1993 BCC 677 1994 1 BCLC 774 1993 2 CMLR 865

EEC DIR 77/91 ART 41(1)

EEC DIR 77/91 ART 42

KERAFINA-KERAMISCHE-UND FINANZ HOLDING AG & VIOKTIMATIKI AEBE v GREECE & ORGANISMOS OIKONOMIKIS ANASYGKROTISSIS EPICHEIRISSEON AE 1992 ECR I-5699 1993 2 CMLR 277

TREATY OF ROME ART 93

PAFITIS & ORS v TRAPEZA KENTRIKIS ELLADOS AE & ORS 1996 ECR I-1347 1996 2 CMLR 551

EEC DIR 77/91 ART 29(3)

DIAMANTIS v GREECE 2000 ECR I-1705 2001 3 CMLR 41

KEFALAS & ORS v GREECE & ANOR 1998 ECR I-2843 1999 2 CMLR 144 1998 AER (D) 205

CMSN v SPAIN 2008 ECR I-10139 (CASE NO C-338/06)

REAL DECRETO LEGISLATIVO 1564/1989 (SPAIN)

EEC DIR 77/91 ART 29(6)

TREATY ON THE FUNCTIONING OF THE EUROPEAN UNION ART 119

TREATY ON THE FUNCTIONING OF THE EUROPEAN UNION ART 126

TREATY ON THE FUNCTIONING OF THE EUROPEAN UNION TITLE VIII

TREATY ON THE FUNCTIONING OF THE EUROPEAN UNION ART 119(3)

TREATY ON THE FUNCTIONING OF THE EUROPEAN UNION ART 120

COMPANIES ACT 1963 S205

PRINGLE v IRELAND & ORS 2013 2 CMLR 2 2013 AER (EC) 1

TREATY ON THE FUNCTIONING OF THE EUROPEAN UNION ART 267

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S60

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S9(8)

CREDIT INSTITUTIONS (STABILISATION) ACT 2010 S9(3)

EUROPEAN COMMUNITIES (REORGANISATION & WINDING-UP OF CREDIT INSTITUTIONS) REGS 2011 SI 48/2011 REG 9

MR. JUSTICE McGOVERN

CONTENTS

Section A

1. Introduction	5
2. The parties	7
3. The witnesses	7

Section B

4. Background- The economic crisis and the Irish banks	10
5. Specific evidence relating to ILP	12

Section C

6. The Programme for Support	14
7. The Memorandum of Understanding	14
8. Council Regulation 407/2010 (11 th May 2010)	16
9. The Implementing Decision	17
10. United Kingdom loan	17

Section D

11. The Prudential Capital Assessment Review 2011	18
12. The BlackRock assessment	19
13. PCAR	19
14. Legal requirements for capital adequacy	19
15. PLAR and deleveraging	20
16. Central Bank decision	20
17. The Updated Memorandum of Understanding	20

Section E

18. Developments after PCAR and PLAR	22
19. The company's reaction	24
20. Shareholder reaction to the FMPR	25
21. Irish Takeover panel approval	26
22. State Aid approval	26

Section F

23. The Extraordinary General Meeting, 20th July 2011	32
24. Correspondence between the company and the Minister	35
25. Submissions made to the Minister on behalf of shareholders	37

Section G

26. The Credit Institutions (Stabilisation) Act, 2010 39

SECTION H

27. The Proposed Direction Order	46
28. Compliance with s.7 of the Act	47

Section I

29. The application for the Direction Order	50
30. The purposes of the order	53
31. The details of the order sought	55

Section I

32. Alternative means of raising capital 58

SECTION K

33. The "False Market" Issue 63

Section L

34. The...