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Irish Bank Resolution Corporation Ltd & anor v Purcell & ors
Factual and Procedural Background
This opinion concerns an application brought by the Central Bank of Ireland, as a third party, seeking the dismissal and/or striking out of the first named defendant’s third party statement of claim against it. The application was made pursuant to the High Court's inherent jurisdiction and specific procedural rules, on grounds that the claim disclosed no reasonable cause of action, was frivolous, vexatious, an abuse of process, or bound to fail.
The plaintiffs are Irish Bank Resolution Corporation Limited (IBRC), formerly Anglo Irish Bank Corporation Ltd, and Irish Nationwide Building Society (INBS). IBRC was placed into special liquidation in 2013, with joint liquidators appointed. INBS was nationalised in 2010 following substantial financial losses and its assets and liabilities were transferred to IBRC in 2011 by court order, including all causes of action related to any prior period.
The defendants include several former directors of INBS, with the first named defendant having been an executive director and Chief Financial Officer of INBS until 2010. The Central Bank of Ireland and KPMG (a firm of accountants) were joined as third parties. The proceedings involve claims relating to the management and governance of INBS, particularly concerning the delegation of powers by the Board to the Chief Executive, Mr. Fingleton, and the alleged failure of oversight leading to significant financial losses.
The matter was transferred to the Commercial List of the High Court and heard over four days, with extensive affidavits and legal submissions filed by the parties.
Legal Issues Presented
- Does the Central Bank owe a statutory duty to INBS, constituting a stateable cause of action for breach of statutory duty simpliciter (without negligence)?
- Does INBS have a stateable cause of action against the Central Bank for negligent breach of statutory duty?
- Does the Central Bank owe a common law duty of care to INBS?
- Does the Central Bank owe a statutory duty under the Building Societies Act towards individual directors, and do the directors have a stateable cause of action for breach of statutory duty simpliciter?
- Does the first defendant, as a director, have a stateable cause of action against the Central Bank for negligent breach of statutory duty?
- Does the first defendant have a stateable cause of action against the Central Bank for the common law tort of negligence?
- Is the first defendant’s claim for misfeasance in public office against the Central Bank unstateable?
- Does the Central Bank’s statutory immunity from damages preclude a stateable cause of action against it?
- Can a defendant claim damages against the third party in respect of a wrong done to him within third party proceedings?
Arguments of the Parties
First Named Defendant's Arguments
- The delegation of powers from the Board to the Chief Executive was central to the plaintiffs' claims, but was done with the full knowledge and consent of the Central Bank.
- The Central Bank was intimately involved in approving and amending the delegation of powers, including drafting the wording and approving a rider to the delegation.
- The Central Bank never revoked the delegation despite awareness of its scope and operation, including retrospective approval of loans.
- The Central Bank owed a duty of care to both INBS and its directors, including the first defendant, and is liable for negligent breach of statutory duty, negligence, and misfeasance in public office.
- The first defendant is entitled to indemnity and contribution from the Central Bank for any liability arising from the delegation of powers.
- The Central Bank and plaintiffs have cooperated extensively in the proceedings, and the Central Bank’s statutory immunity does not prevent it from being joined as a third party.
Central Bank's Arguments
- The Central Bank submits it owes no private law duty of care to INBS or its directors, relying on precedent that public bodies performing statutory functions for the public benefit do not owe such duties to individual entities.
- The statutory immunity provisions protect the Central Bank and its agents from liability for damages unless bad faith is proven.
- The claim for misfeasance is insufficiently particularised and should be struck out.
- The third party claim for separate damages owed to the first defendant is procedurally improper within third party proceedings, which must be limited to indemnity or contribution claims as concurrent wrongdoers.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Barry v. Buckley [1981] IR 306 | Permits court to consider affidavit evidence in strike out applications; strike out jurisdiction to be exercised sparingly. | Court applied principles that strike out is only appropriate in clear cases where claim cannot succeed regardless of evidence at trial. |
| Sun Fat Chan v. Osseous Ltd [1992] 1 IR 425 | High Court should be slow to strike out claims; only if claim cannot succeed on admitted facts. | Court emphasised the need to treat plaintiff’s claim at its highest point in strike out analysis. |
| Lac Minerals v. Chevron Corporation [1995] 1 I.L.R.M. 161 | Standard for strike out applications; court must be confident claim cannot succeed at trial. | Applied to refuse strike out of misfeasance claim given potential for facts to emerge at trial. |
| Pine Valley Developments Ltd v. Minister for the Environment [1987] IR 23 | No liability for damages where public official acts bona fide even if decision later held ultra vires; breach of statutory duty does not automatically give rise to private law cause of action. | Court distinguished this case noting that here negligence is alleged and must be considered. |
| Glencar Explorations plc v. Mayo County Council (No. 2) [2002] 1 IR 84 | Clarifies when breach of statutory duty can give rise to damages; duty must be for protection of identifiable class; duty of care considerations include foreseeability, proximity, and justness. | Applied principles to conclude statutory duty of care could exist and to assess public policy considerations. |
| Whelan v. AIB [2014] IESC 3 | Modern analysis of duty of care, proximity, and public policy in negligence claims against public bodies. | Used to support finding of duty of care on Central Bank given relationship and statutory framework. |
| X (minors) v. Bedfordshire County Council [1995] 2 AC 633 | Categories of private law claims against public bodies; breach of statutory duty requires identifiable protective purpose and class. | Framework used to analyse claims against Central Bank for breach of statutory duty and negligence. |
| Beatty v. The Rent Tribunal [2006] 2 IR 191 | Test for imposing duty of care on public bodies includes proximity, foreseeability, and just and reasonable considerations. | Applied to assess whether it is just and reasonable to impose duty on the Central Bank. |
| Kennedy v. The Law Society (No. 4) [2005] IESC 23 | Test for misfeasance in public office requires subjective recklessness as to lawfulness of actions. | Applied to conclude misfeasance claim was stateable and not suitable for strike out at early stage. |
| Staunton v. Toyota (Irl) Ltd (Unreported, High Court, 1988) | Right to contribution from concurrent wrongdoers requires that the third party committed a wrong. | Applied to clarify that third party claims for indemnity/contribution require concurrent wrongdoing. |
| Conole v. Redbank Oyster Co. Ltd [1976] IR 191 | Clarifies principles for liability and contribution among concurrent wrongdoers. | Referenced to support interpretation of Civil Liability Act provisions on concurrent wrongdoers. |
Court's Reasoning and Analysis
The court undertook a detailed statutory interpretation of the Building Societies Act 1989, emphasizing the extensive regulatory and supervisory role of the Central Bank over building societies, including INBS. The court found that the Central Bank owes a statutory duty to building societies generally, and thus to INBS specifically, for the protection of their funds and maintenance of financial stability. This statutory duty supports a stateable cause of action for breach of statutory duty simpliciter.
Applying the principles from Glencar and related case law, the court held that the Central Bank also owes a statutory duty of care to building societies, fulfilling the foreseeability and proximity tests, and that it is just and reasonable to impose such a duty given the Central Bank’s role and the reliance placed on it by the societies. The court further found that the Central Bank owes a common law duty of care to building societies on similar grounds.
Regarding directors of building societies, the court concluded that while there is no stateable cause of action for breach of statutory duty simpliciter owed to directors, there is a stateable cause of action for negligent breach of statutory duty and for common law negligence. This is because directors are sufficiently proximate and foreseeably affected by the Central Bank’s actions or omissions in supervising the societies.
The court rejected the Central Bank’s contention that the misfeasance claim was unstateable, finding that the pleadings sufficiently allege reckless disregard by the Central Bank, and that the issue of subjective recklessness is properly a matter for trial and cross-examination.
On the issue of statutory immunity, the court acknowledged that the Central Bank has immunity from damages except in cases of bad faith, but held that this does not preclude the Central Bank from being joined as a third party for indemnity or contribution claims. The definition of "liable" in the Civil Liability Act includes legal liability not enforceable by action, allowing such joinder despite immunity.
Finally, the court held that a defendant cannot claim a separate and independent cause of action for damages against a third party within third party proceedings; such claims must be pursued separately. Third party claims are limited to indemnity or contribution as concurrent wrongdoers.
Holding and Implications
The court DISMISSED the Central Bank’s application to strike out the first named defendant’s third party statement of claim.
This holding means that the third party claims against the Central Bank, including claims for breach of statutory duty, negligence, and misfeasance in public office, are sufficiently stateable to proceed to trial. The Central Bank’s statutory immunity does not bar the joinder as a third party for indemnity or contribution claims. However, claims by directors for damages against the Central Bank cannot be pursued within third party proceedings but require separate actions.
No new precedent was established beyond the application of existing legal principles to the facts and statutory scheme in this case.
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