Irish Bank Resolution Corporation Ltd v Purcell

• Jurisdiction: Ireland
• Judge: Mr. Justice Cregan
• Judgment Date: 24 October 2014
• Neutral Citation: [2014] IEHC 525
• Docket Number: [2012 No. 3279 P & 2013 No. 75 COM]
• Court: High Court
• Date: 24 October 2014

Irish Bank Resolution Corporation Ltd & Anor v Purcell & Ors

COMMERCIAL

BETWEEN

IRISH BANK RESOLUTION CORPORATION LIMITED AND IRISH NATIONWIDE BUILDING SOCIETY

PLAINTIFFS

AND

JOHN S. PURCELL, DAVID M. J. BROPHY, TERENCE J. COONEY, CORNELIUS P. POWER AND MICHAEL P. WALSH

DEFENDANTS

AND

CENTRAL BANK OF IRELAND

FIRST THIRD PARTY

AND

KPMG (A FIRM)

SECOND THIRD PARTY

[2014] IEHC 525

[No. 3279P/2012]

[No. 75 COM/2013]

THE HIGH COURT

Breach of statutory duty – Strike out applications – Reasonable cause of action – Third party seeking the striking out of third party statement of claim – Whether the third party owes a statutory duty to building societies

Facts: The plaintiffs, Irish Bank Resolution Corporation Ltd (IBRC) and Irish Nationwide Building Society (INBS), claimed that there was a wholly unlawful delegation of powers by the defendants, INBS”s Board of directors. The plaintiffs pleaded that the failures and breaches of duty on the part of the defendants caused and contributed to the massive losses sustained by INBS from 2008 onwards. The plaintiffs claimed damages for breach of contract, negligence, breach of duty including breach of fiduciary duty and breach of statutory duty and an order directing the repayment by the defendants of all amounts that may be due and owing by them to the plaintiffs. IBRC pleaded that that this delegation was done with the full knowledge and consent of the first third party, the Central Bank of Ireland. There was a plea that the losses sustained by INBS were caused by the acts and/or omissions of the Regulator, the Central Bank and the Society”s auditors KPMG, the second third party. In the third party statement of claim, IBRC pleaded that INBS was at all material times regulated by the Central Bank who had a duty to maintain proper and effective regulation of the Society, and that the Central Bank owed a duty of care to IBRC. The third party statement of claim pleaded that if the plaintiffs succeed in their claim against the first defendant, Mr Purcell, the Central Bank is in turn liable to indemnify and/or contribute with respect to all costs, losses, damages and expenses payable to the plaintiffs on the basis that it is a concurrent wrongdoer within the meaning of s. 12 of the Civil Liability Act 1961 on the basis that such loss, damage, inconvenience and expense were caused by the negligence, breach of duty and misfeasance in public office on the part of the third party. The Central Bank sought to rely on the fact that the plaintiffs had not joined the Central Bank as a co-defendant, arguing from that this was because the plaintiffs did not believe that Central Bank owed any duty to the Society directly. Mr Purcell countered that it would be most unusual for one State body to issue proceedings against another. The Central Bank applied to the High Court seeking the dismissal and/or striking out of the third party statement of claim on the grounds that it discloses no reasonable cause of action, pursuant to the inherent jurisdiction of the High Court and/or pursuant to Order 19 rule 27 and/or rule 28 of the Rules of the Superior Courts and/or pursuant to Order 16 rule 8 (3).

Held by Cregan J that, having distinguished Pine Valley Developments Ltd & Ors v The Minister for the Environment & Ors [1987] IR 23, relied upon by the Central Bank, and considered the Building Societies Act 1989, there was a stateable case that the Central Bank owed a statutory duty to INBS; thus there was a stateable case that INBS could sue for breach of a statutory duty simpliciter and that IBRC could join the Central Bank as a third party. Cregan J held that there was a stateable case that the Central Bank was liable to INBS for negligent breach of statutory duties, applying Glencar Explorations plc v Mayo County Council (No 2) [2002] 1 IR 84, and that the Central Bank owed a common law duty of care to INBS. Cregan J held that there was no stateable case that the Central Bank owed a statutory duty simpliciter to directors of a building society; there was however a stateable case that the Central Bank owes directors of building societies a duty of care, hence there was a stateable case that Mr Purcell as a director has a cause of action against the Central Bank for negligent breach of statutory duty. Cregan J held that there was also a stateable case that directors of a building society have a common law case of negligence against the Central Bank for negligence, however those claims by directors of a building society, namely Mr Purcell against the Central Bank, cannot form part of a third party claim for an indemnity of contributions and can only form part of separate proceedings. Cregan J held that there was a stateable claim for misfeasance of public office on the part of INBS against the Central Bank; therefore the third party was entitled to include this in its third party Statement of Claim against the Central Bank. Cregan J held that Central Bank”s statutory immunity in damages did not prevent it from being joined as a third party.

Cregan J held that in the circumstances he would dismiss the application of the Central Bank to strike out the third party statement of claim.

Application refused.

RSC O.19 r27

RSC O.19 r28

RSC O.16 r8(3)

EUROPEAN COMMUNITIES (REORGANISATION & WINDING-UP OF CREDIT INSTITUTIONS) REGS 2011 SI 48/2011 REG 17

CENTRAL BANK ACT 1942 S33

CIVIL LIABILITY ACT 1961 S12

PINE VALLEY DEVELOPMENTS LTD v MIN ENVIRONMENT 1987 IR 23 1987 ILRM 747 1985/9/2700

GLENCAR EXPLORATIONS PLC & ANDAMAN RESOURCES PLC v MAYO CO COUNCIL (NO 2) 2002 1 IR 84 1993/3/568

WHELAN & LYNCH v ALLIED IRISH BANKS PLC & ORS UNREP SUPREME 30.1.2014 2014 IESC 3

X (MINORS) v BEDFORDSHIRE CO COUNCIL 1995 2 AC 633 1995 3 WLR 152 1995 3 AER 353 1995 ELR 404

MCMAHON v AG & REGISTRAR OF FRIENDLY SOCIETIES 1988 ILRM 610

YUEN KUN YEU v AG OF HONG KONG 1988 AC 175 1987 3 WLR 776 1987 2 AER 705

BEATTY v RENT TRIBUNAL 2006 2 IR 191 2006 1 ILRM 164 2005/4/623 2005 IESC 66

BUILDING SOCIETIES ACT 1989 S9(1)

BUILDING SOCIETIES ACT 1989 S10

BUILDING SOCIETIES ACT 1989 S10(1)

BUILDING SOCIETIES ACT 1989 S10(3)

BUILDING SOCIETIES ACT 1989 S11(2)

BUILDING SOCIETIES ACT 1989 S14(1)

BUILDING SOCIETIES ACT 1989 S14(3)

BUILDING SOCIETIES ACT 1989 S17(1)

BUILDING SOCIETIES ACT 1989 S17(4)

BUILDING SOCIETIES ACT 1989 S17(5)

BUILDING SOCIETIES ACT 1989 S17(6)

BUILDING SOCIETIES ACT 1989 S17(8)

BUILDING SOCIETIES ACT 1989 S18

BUILDING SOCIETIES ACT 1989 S18(8)

BUILDING SOCIETIES ACT 1989 S23

BUILDING SOCIETIES ACT 1989 S28(3)

BUILDING SOCIETIES ACT 1989 S36

BUILDING SOCIETIES ACT 1989 S36(4)

BUILDING SOCIETIES ACT 1989 S36(5)

BUILDING SOCIETIES ACT 1989 S36(7)

BUILDING SOCIETIES ACT 1989 S36(9)

BUILDING SOCIETIES ACT 1989 S36(10)

BUILDING SOCIETIES ACT 1989 S36(11)

BUILDING SOCIETIES ACT 1989 S37

BUILDING SOCIETIES ACT 1989 S37(1)

BUILDING SOCIETIES ACT 1989 S39

BUILDING SOCIETIES ACT 1989 S39(5)

BUILDING SOCIETIES ACT 1989 S39(7)

BUILDING SOCIETIES ACT 1989 S40

BUILDING SOCIETIES ACT 1989 S40(1)

BUILDING SOCIETIES ACT 1989 S40(2)

BUILDING SOCIETIES ACT 1989 S49(1)(A)

BUILDING SOCIETIES ACT 1989 S50(15)

BUILDING SOCIETIES ACT 1989 S51

BUILDING SOCIETIES ACT 1989 S51(7)

BUILDING SOCIETIES ACT 1989 S59

BUILDING SOCIETIES ACT 1989 S60(9)

NYBERG MISJUDGING RISK: CAUSES OF THE SYSTEMIC BANKING CRISIS IN IRELAND (THE NYBERG REPORT) 2011 PARA 71

KENNEDY T/A GILES J KENNEDY & CO v LAW SOCIETY OF IRELAND & ORS (NO 4) 2005 3 IR 228 2005/34/7011 2005 IESC 23

OMEGA LEISURE LTD v SUPERINTENDENT BARRY & ORS UNREP CLARKE 12.1.2012 2012 IEHC 23

LAC MINERALS LTD v CHEVRON MINERAL CORP UNREP KEANE 6.8.1993 1993/12/3862

CENTRAL BANK ACT 1942 S33C(12)

CIVIL LIABILITY ACT 1961 S11(2)

Introduction

1 1. This is an application brought by the Central Bank of Ireland (as a third party in these proceedings) seeking the dismissal and/or striking out of the first named defendant's third party statement of claim against the third party. The application to strike out the first named defendant's proceedings is brought pursuant to the inherent jurisdiction of the High Court and/or pursuant to Order 19 rule 27 and/or rule 28 of the Rules of the Superior Courts and/or pursuant to Order 16 rule 8 (3). The grounds upon which the application is brought is that the first named defendant's third party statement of claim discloses no reasonable cause of action against the third party and/or that the claims are frivolous and/or vexatious and/or an abuse of process and/or are bound to fail.

2 2. The third party and the first defendant have filed numerous affidavits in this application and have also filed legal submissions. The matter was at hearing for four days.

The parties to the proceedings

3 3. The first named plaintiff (IBRC) is a limited liability company incorporated in the state. IBRC was formally known as Anglo Irish Bank Corporation Ltd but on 7 ^th February, 2013, a special liquidation order was made pursuant to section 4 of the Irish Bank Resolution Corporation Act 2013 for the purposes of winding up IBRC. Kieran Wallace and Eamonn Richardson of KPMG were appointed as joint liquidators of IBRC. As is stated at paragraph 8 of the affidavit of Sean Barton dated 5 ^th June, 2013, (sworn on behalf of the plaintiffs) "In accordance with the provisions of regulation 17 (4) of the European Communities (Reorganisation and Winding up of Credit Institutions (Regulations) 2011, IBRC (in special liquidation) is operating with the consent and under the supervision of the Central Bank of Ireland."

4 4. The second plaintiff - Irish Nationwide Building Society - is a building society registered under the Building Societies Act 1989 with its registered office at Grand Parade, Dublin 6 within the state. INBS was one of the financial institutions whose...