Permanent TSB Group Holdings Plc, Permanent TSB Group Holdings Plc_2
| Jurisdiction | Ireland |
| Judge | Mr Justice Maurice Collins,Ms. Justice Costello |
| Judgment Date | 21 January 2020 |
| Neutral Citation | [2020] IECA 1 |
| Date | 21 January 2020 |
| Court | Court of Appeal (Ireland) |
| Docket Number | Court of Appeal Record No 2018/177 High Court Record No 201872 COS (2018 No 33 COM) Record Nos. 2018/177 2018/365 |
IN THE MATTER OF PERMANENT TSB GROUP HOLDINGS PLC
AND IN THE MATTER OF A PROPOSED CAPITAL REDUCTION PURSUANT TO SECTION
84 AND SECTION 85 OF THE COMPANIES ACT 2014 (AS AMENDED)
AND IN THE MATTER OF THE COMPANIES ACT 2014 (AS AMENDED)
[2020] IECA 1
Baker J.
Costello J.
Collins J.
Court of Appeal Record No 2018/177
Court of Appeal Record No 2018/365
High Court Record No 201872 COS (2018 No 33 COM)
Record Nos. 2018/177
2018/365
THE COURT OF APPEAL
CIVIL
Recusal – Costs – Confirmation – Appellant seeking to appeal against High Court orders – Whether the judge ought to recuse himself from dealing with the confirmation application
Facts: The applicant/respondent, Permanent TSB Group Holdings plc (the company), applied for an order pursuant to s. 85 of the Companies Act 2014 confirming a resolution passed by its shareholders providing for a reduction in its company capital by way of the cancellation of 3,562,883,512 deferred shares. By way of two notices of appeal, the respondent/appellant, Mr Skoczylas, appealed to the Court of Appeal against the following orders of the High Court (Haughton J): (i) an order of 4 April 2018 refusing an application made by Mr Skoczylas that the Judge recuse himself from dealing with the confirmation application; (ii) an order of 5 April 2018 confirming the proposed company capital reduction; (iii) costs orders, namely an order directing Mr Skoczylas to pay measured costs of €20,000 in relation to the recusal application and an order that there be no order for costs in the substantive confirmation application; (iv) an order made under the slip rule correcting the terms of the order made in relation to the recusal costs to provide for the payment of an amount of €20,000 plus VAT by Mr Skoczylas (and correcting two other errors also). The company cross-appealed against the Judge’s refusal to award it the costs of the confirmation application.
Held by Collins J that throughout the recusal application and in his ruling on it the Judge articulated and applied the correct test. Collins J held that, regarding the appeal against the confirmation order, there was no basis, in law or in commercial common-sense, for suggesting that the value of any company at any given time ought to reflect the cumulative nominal value of its issued shares, which appeared to be the basic premise of Mr Skoczylas’ argument. Collins J rejected the argument that the cancellation of the deferred shares on the terms proposed would involve a breach of EU law. Collins J could see no basis for interfering with the Judge’s exercise of his discretion regarding the costs of the confirmation application. As for the company’s cross-appeal, Collins J held that this must equally be rejected; the Judge was best-positioned to assess the extent to which he derived assistance from Mr Skoczylas’ submissions. Although the Judge was entitled to a significant margin of appreciation in relation to the issue of costs, given that the view that he took was based on a characterisation of the recusal application which did not appear to Collins J to be appropriate, Collins J considered that he was free to reach his own view as to the appropriate order. In Collins J’s view the appropriate order to make in the particular circumstances was to set aside the costs order made by the Judge and to substitute for it an order that there be no order for costs in respect of the recusal application. In the circumstances, Collins J did not think that it would be consistent with the interests of justice to require Mr Skoczylas to pay any part of the company’s costs in relation to the recusal application. Collins J held that the appeal against the slip rule order was effectively moot in light of the fact that the underlying order for costs was being set aside. There appeared to Collins J to be no basis for any reference to the CJEU.
Collins J held that he would: (i) refuse the appeal against the recusal order; (ii) refuse the appeal against the confirmation order; (iii) vary the costs order to the extent of setting aside the order for costs (measured in the amount of €20,000 plus VAT) in respect of the recusal application and substitute no order for costs; (iv) affirm the costs order made in the confirmation application; (v) make no order in slip rule order; and (vi) decline to make any reference to the CJEU.
Appeal refused.
These appeals arise from an application brought by Permanent TSB Group Holdings plc ( “the Company”) for an order pursuant to Section 85 of the Companies Act 2014 ( “the 2014 Act”) confirming a resolution passed by its shareholders providing for a reduction in its company capital by way of the cancellation of 3,562,883,512 deferred shares ( “the Confirmation Application”).
It will be necessary to say something more about the Confirmation Application below and to explain the nature and origin of these deferred shares.
By way of two notices of appeal, the Appellant, Piotr Skoczylas, appeals against the following orders of the High Court (Haughton J):
• An order of 4 April 2018 refusing an application made by Mr Skoczylas that the Judge recuse himself from dealing with the Confirmation Application (“ the Recusal Order”) 1
• An order of 5 April 2018 confirming the proposed company capital reduction ( “the Confirmation Order”) 2
• Costs orders, namely (1) an order directing Mr Skoczylas to pay measured costs of €20,000 in relation to the Recusal Application and (2) an order that there be no order for costs in the substantive Confirmation Application. ( “the Costs Orders”) 3
• An order made under the slip rule correcting the terms of the order made in relation to the recusal costs to provide for the payment of an amount of €20,000 plus VAT by Mr Skoczylas (and correcting two other errors also). ( “the Slip Rule Order”)
The Company cross-appeals against the Judge's refusal to award it the costs of the Confirmation Application.
The background to the appeals is rather tangled but I will begin with the re-capitalisation of the Company (then called Irish Life and Permanent Group Holdings Plc) in 2011. The Company was/is a holding company, owning the entirety of Irish Life &. Permanent plc ( “ILP”), which operated Permanent TSB, as well as (as of 2011) owning Irish Life Assurance plc and Irish Life Investment Managers plc.
Irish Life Assurance plc and Irish Life Investment Managers plc were at all times profitable companies. However, even though it had avoided NAMA (because it had not lent significantly to property developers) and had not needed State capital (though it did require liquidity assistance), at the end of Quarter 1 2011, based on an assessment exercise by Blackrock Solutions, the Central Bank of Ireland ( “the CBI”) determined that the Company required to raise additional capital of €4 billion. The deadline for doing so was 31 July 2011.
The background to this direction (which was legally binding on the Company) is more fully set out in the judgment of O' Malley J in In the Matter of Irish Life and Permanent Group Holdings plc, Dowling v Minister for Finance [2014] IEHC 418, at sections A-E. As she explains, the wider context involved the Programme for Support (commonly referred to as the “bail-out”) and various legal instruments, including an Implementing Decision adopted in December 2010 pursuant to Council Regulation (EU) 407/2010 the effect of which was to require the State to “adequately recapitalise, rapidly deleverage and thoroughly restructure the banking system” here (paras 9.1 – 9.7).
While the Company was in a position to raise some of the additional capital (something in the order of €1.7 billion), that left a significant shortfall (of €2.3 billion). In reality, the
State was the only source of this capital and, reflecting this reality, at the end of June 2011 the board of the Company notified shareholders of an EGM on 20 July 2011, at which various resolutions intended to facilitate the issuing of a large number of additional shares to the Minister for Finance were to be proposed.
The ordinary shares in the Company had a nominal value of €0.32. As of July 2011, the trading price of those shares was, however, only a fraction of that nominal value. The Company was not permitted to issue new shares at a discount to their nominal value so it was proposed to “re-nominalise” the ordinary shares by sub-dividing all issued and unissued ordinary shares into 320 ordinary shares of €0.001 each and immediately following such sub-division, 289 of every 320 ordinary shares would be consolidated into one deferred share of €0.289, with the remaining 31 ordinary shares being consolidated into one ordinary share of €0.031. 4
The EGM Notice explained that the purpose of the issue of the deferred shares was to ensure that the reduction in the nominal value of the ordinary shares did not result in a reduction in the Company's capital. It also explained that the deferred shares would have no voting or dividend rights and, on a return of capital on a winding up, would have the right to receive the amount paid up on them only after shareholders received any amounts paid up, plus €10 million, per ordinary share. This, the Notice explained, “is to ensure that the deferred shares have no economic value.” 5 The deferred shares, it was also explained, would not be freely transferable.
In the event, the Company's shareholders voted down this proposal, rejecting the re-capitalisation resolutions and passing a series of resolutions revoking the directors' power to allot shares, directing the board to appoint advisors and carry out a review of recapitalisation options, directing the board to seek an extension...
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