Supreme Court allows appeal to join notice parties to High Court proceedings regarding capitalisation direction order.

THE SUPREME COURT

[Appeal No. 125/2013]

Fennelly J.

Clarke J.

MacMenamin J.

IN THE MATTER OF IRISH LIFE & PERMANENT GROUP HOLDINGS PLC

AND IN THE MATTER OF IRISH LIFE & PERMANENT PLC

AND IN THE MATTER OF SECTION 11 OF THE CREDIT INSTITUTIONS (STABILISATION) ACT, 2010

AND IN THE MATTER OF AN APPLICATION FOR THE SETTING ASIDE PURSUANT TO SECTION 11 OF

THE CREDIT INSTITUTIONS (STABILISATION) ACT, 2010, THE DIRECTION ORDER WHICH WAS MADE

ON THE 26TH 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

Ltd.

Applicants / Respondents

AND

The Minister for Finance

Respondent

AND

Permanent TSB Group Holdings plc and Permanent TSB plc

Limited Notice Parties / Appellants

JUDGMENT of Mr. Justice Fennelly delivered the 19th day of December, 2013.

1. This appeal concerns a motion brought in the High Court to add parties to a special proceeding in that Court whose object

is the setting aside of a direction order whereby the Minister for Finance proposed the capitalisation of the first-named

appellant allegedly to the disadvantage of existing shareholders. The Direction Order was made on 26th July 2011 by the

High Court (McGovern J.) on the application of the Minister. The trial in the High Court is due to take place on 14th

January 2014.

2. The context of the appeal calls for the exercise of caution. It is important to exercise restraint in expressing even tentative

views about matters of law or fact which will fall to be decided by the High Court judge who will hear the case. Some of the

points most strenuously argued as grounds for or against the admittance of the appellants to full participation in the main

proceedings are or are closely related to matters to be decided in those proceedings themselves. It is, nonetheless, necessary

to describe the essential background.

3. First, I will identify the parties. The appellants are Permanent TSB Group Holdings plc (formerly Irish Life and

Permanent Group Holdings plc) (hereinafter “the Company”) and Permanent TSB plc (formerly Irish Life and Permanent

plc) (hereinafter “the Bank”). The Company was established in 2009 to become the parent of the Bank. Shareholders in the

Bank became shareholders in the Company instead. The Bank is thus a wholly owned subsidiary of the Company. The

respondents are shareholders in the Company. The third-named the respondent (hereinafter “Mr. Skoczylas”) argued the

case ably on their behalf at the hearing of the appeal. The Minister for Finance who applied to the High Court for the

Direction Order is also a Respondent. He supports the appeal of the appellants.

4. The appeal is taken against the judgment and order of Charleton J dated the 21st February 2013 insofar as that order

permitted the appellants to participate on a limited basis only in the proceedings. The appellants submit that that they should

be joined fully as notice parties to the proceedings which challenge the Direction Order

5. First, it is necessary to describe the legislation which gave rise to the making of the direction order and to the High Court

proceedings. It is the Credit Institutions (Stabilisation) Act 2010. The Act is an extraordinary piece of legislation. It does not

pretend to be otherwise. It claims to address an extraordinary situation. Its long title proclaims that it is intended to make

provision, in the context of the National Recovery Plan 2011 - 2014 and the European Union/International Monetary Fund

Programme of Financial Support for Ireland, in relation to the stabilisation, and the preservation or restoration of the

financial position of certain credit institutions. It recites serious disturbance in the economy of the State and says that

measures are necessary to address a unique and unprecedented economic crisis which has led to difficult economic

circumstances and severe disruption to the economy.

6. More particularly, the long title says that there is a continuing serious threat to the stability of certain credit institutions in

the state, and to the financial system generally. To that end, it states that it is necessary, in the public interest, to maintain

the stability of those credit institutions and the financial system in the state and explains that “the functions and powers

conferred by this act are necessary to secure financial stability and to effect a reorganisation of certain credit

institutions.”

7. Section 7(1) of the Act confers on the Minister for Finance (hereinafter “the Minister”) the power to “make a proposed

direction order proposing that a relevant institution be directed to take (within a specified period) or refrain from taking

(during a specified period) any action……” (emphasis added). That action may include “notwithstanding any statutory or

contractual pre-emption rights, the listing rules of a regulated market or the rules of any other market on which the

shares of the relevant institution may be traded from time to time, issuing shares to the Minister or to another person

nominated by the Minister on terms and conditions that the Minister specifies in the proposed direction order at a

consideration that the Minister sets……” (emphasis added). It is not in dispute that the Bank is a “relevant institution,” as

defined in s. 2(1), for the purposes of the Act.

8. A proposed direction order becomes a direction order, in accordance with s. 9 of the Act. Section 9(1) provides:

“As soon as may be after completion in relation to a proposed direction order of the procedures

required by section 7, the Minister shall apply ex parte to the Court for an order (in this Act called

a “direction order”) in the terms of the relevant proposed direction order.”

Under s. 9(2), the Court (which means the High Court) is obliged “if satisfied that the requirements of section 7 have been

complied with and that the opinion of the Minister under that section was reasonable and was not vitiated by any error of

law, [to] make a direction order in the terms of the proposed direction order.”

9. It will be noted that the order, which is effectively a final order, is made ex parte. However, section 7 contains provisions

for the giving by the Minister of prior notice to the relevant institution of the terms of the proposed direction order, a time

for the making of written submissions and consideration of those submissions by the Minister.

10. Section 11 of the Act provides for the making of an application to the High Court to set aside a direction order. That

section provides:

“(1) The relevant institution in relation to which a direction order is made or a member of that

institution may apply to the Court by motion on notice grounded on affidavit, not later than 5

working days after the making of a direction order, for the setting aside of the direction order.

(2) The Court shall give such priority to an application under subsection (1) as is necessary in the

circumstances and may give such directions with regard to the hearing of the application as it

considers appropriate in the circumstances.

(3) On an application under subsection (1), the Court shall set aside the direction order only if it is

of the opinion that there has been non-compliance with any of the requirements of section 7 or that

the opinion of the Minister under section 7 (2) was unreasonable or vitiated by an error of law.

(4) The Court may, instead of setting aside the direction order, make an order varying or amending

that order in the manner it considers appropriate if the Court is satisfied that—

(a) there has been non-compliance with any of the requirements of section 7 or that the

opinion of the Minister under section 7 (2) was unreasonable or vitiated by an error of

law,

(b) it would be appropriate to do so, having regard to any report referred to in section 9

(4), and

(c) to do so is necessary to secure the achievement of the purpose specified in the

direction order or any other purpose of this Act.

(5) An order under subsection (3) is effective, from the date of its making, to set aside the direction

order without prejudice to the validity of anything previously done or taken to have been done

under the direction order.

(6) An order under subsection (4) has effect, from the date of its making, to vary or amend the

direction order without prejudice to the validity of anything previously done or taken to have been

done under the direction order.”

The period of five working days was later extended to 14 working days.

11. I will now give a brief account of the events which led up to the making of the direction order. For the most part, the

disputes between the parties relate, not so much to the happening of the events related here, as to their legal effect. I will

describe these events as objectively as possible. In particular, I will try to avoid commenting on the financial soundness of

the Bank in the period in question, since that is hotly disputed. What cannot be disputed is that the Minister considered,

rightly or wrongly, that the Bank was in the greatest financial difficulty and that it could not have survived in the period from

2008 onwards without Government support.

12. In March 2011, the Central Bank of Ireland published a document called the Financial Measures Programme in which

the Bank was identified as requiring additional regulatory capital of €4 billion. The Central Bank was of opinion that a failure

to maintain sufficient funds could provide a ground for revocation of the Bank’s banking licence. By letter dated 28th April,

2011, the Central Bank indicated to the Company that if it did not raise the additional regulatory capital by 31st July, 2011,

a number of consequences might follow, including the possible loss by the Bank of its banking licence. In effect, the Bank

had, following an extension, up to 31st July 2011 to raise the required regulatory capital. Following efforts by the appellants

themselves to raise capital the sum required became €2.7 billion.

13. There are areas of very sharp disagreement between the appellants and the Minister on the one hand and the

respondents on the other concerning the financial condition, the prospects of raising capital on the markets and ultimately the

viability of the Bank. Counsel for the appellants submitted that the evidence showed that the market capital value of the

Bank, based on the market value of its shares, in June 2011 was €19 million, whereas Mr. Skoczylas submitted that its

value based on its balance sheet was €2 billion.

14. The greatest contention surrounds the Extraordinary General Meeting (“EGM”) of the Company held on 20th July

2011, though not the fact that certain resolutions were passed and other resolutions rejected. The Board had come to the

conclusion that the only way for the Bank to survive was to accept the Minister’s proposal for capitalisation.

15. To that end the Board placed three resolutions before the EGM. It recommended that the Bank required capitalisation of

€4 billion by 31st July 2011 and that the State should provide the necessary capital. The meeting was attended by less than

500 of the total of 135,000 shareholders. The board resolutions were defeated. Instead three resolutions were proposed by

the respondents and passed. These required the Board to explore other means of raising capital, to seek an extension of the

deadline and to negotiate further with the Minister.

16. Following the EGM, the Board of the Company was bound to comply with the resolutions passed at the meeting. In that

light, the Chairman wrote to the Minister to bring his attention to the concerns raised by the shareholders who had attended

the meeting. He also wrote to the Second Secretary of the Department of Finance. He requested an urgent meeting with the

Minister. The Board did not secure any improvement in the terms previously available. The Minister proceeded with his

proposed direction order. The Company was given the opportunity to make submissions. The Board did not oppose the

direction order.

17. On 26th July 2011, McGovern J made the Direction Order pursuant to s. 9 of the Act on the application ex parte of the

Minister. The order required the company to make the required alterations in its share capital, to allot shares to the Minister,

to make changes in its memorandum and articles of association and to enter into a placing agreement, annexed to the order,

with the Minister and the National Treasury Management Agency. The order specifically required the Company not to

implement the resolutions passed at the EGM of 20th July 2011.

18. It is unnecessary and inappropriate in this judgment to decide on the legal effect of the Direction Order whether vis à vis

the legal status of the resolutions passed at the EGM or otherwise. That is a matter for the High Court.

19. On 3rd August 2011 there was issued in the High Court the Notice of Motion which initiated the proceedings now

pending before that Court. It is accepted that the respondents are the applicants in those proceedings. Some early procedural

issues were resolved and are not before this Court. The Notice of Motion issued by the respondents seeks the setting aside

of the direction order pursuant to s. 11 of the Act.

20. The Notice of Motion was grounded on an affidavit of the same date sworn by the second-named the respondent,

though almost all subsequent affidavits have been sworn by Mr. Skoczylas. The grounds advanced in the affidavit are that

the opinion of the Minister was unreasonable and was not necessary to secure the achievement of the purposes of the Act. It

is claimed that the Act is unconstitutional, though there are now separate constitutional proceedings pending in the High

Court. The affidavit also says, inter alia:

“The recapitalization………… which was effected via the Direction Order was not necessary. The

Company, including its banking operations, was-- before the implementation of the Direction Order--

fully viable and had substantial equity value. Before the implementation of the Direction Order, PTSB

had a strong capital position and adequate funding position.

the Prudential Capital Assessment Review… and the Prudential Liquidity Assessment Review… stress

tests, upon which the… recapitalisation requirements were set, were unduly excessively pessimistic and

imposed artificially high and unnecessary capital requirements…. which had hardly anything to do with

the real capital needs.

the dilutions of the ownership of the shareholders effected by the Direction Order was greatly excessive

and not commensurate with the capital contributions which are being made by the Company……The

Minister’s actions have been arbitrary and the shareholders’ rights have been abrogated without any

consultation.

the Direction Order was imposed and implemented under false pretences and there was no genuine

urgency or emergency regarding the [Company’s] recapitalization.

practical alternatives to the Direction Order existed which would have safeguarded the Government's

investment and protected the Irish taxpayers…..”

21. By Notice of Motion dated 10th October 2012, the appellants applied in the High Court for an order that they be joined

as Notice Parties to the proceedings. The respondents opposed the application.

22. Charleton J., in his judgment of 21st February 2013 noted the argument of the appellants that that they have a vital

interest in ensuring that the direction order is not overturned, claiming that it was right and that they said that they needed to

participate with a view to ensuring that whatever other order might be made by the High Court would be tailored to their

particular circumstances. He posed for himself the question “whether the submissions of [the Company or the Bank] were

needed on any issue for the court to reach a just and complete adjudication.”

23. He then made the following observation:

“It must be remembered that the holding company voted against this scheme in general meeting.

Now, under a new regime, it and the bank seek to come in and support the lawfulness of what

subsequently happened. It is difficult to accept that it is logical for both companies to claim the

right to appear as notice parties and to argue in support of the Minister that the direction order

was properly granted in the first place. In doing so, they would be in effect acting as co-defendants,

because that is what happens in public law challenges, and were this Court to make an unlimited

order allowing them participation, that joinder of parties would take place a year and a half after

the direction order was made, in circumstances where the holding company had opposed the

proposal in general meeting and where the Act of 2010 specifies urgency and efficiency in the

disposal of ensuing litigation.”

24. In a further passage, the learned judge proceeded:

“In that context, there is no need, and there is no benefit to be gained by the Court, from these

parties attending the hearing and backing up the contention of the Minister that the direction order

was correctly made in the first place. They have claimed that their presence is necessary. That

proposition is illogical. The Act of 2010 allows the Minister to override private arrangements and

to bypass company law for the purposes of saving a financial institution. Through the holding

company this financial institution, apparently, either did not want to be saved or believed that

salvation lay elsewhere. It is entirely the business of the Minister as to whether he acted correctly.

An argument is made that the financial institution and its holding company would be able to supply

vital information to the Court by way of background to the order being made. That, of itself, cannot

be a sufficient reason for joinder. Litigation is about finding the truth. All the rules of court do is to

provide a fair means towards that end consistent with the need to manage that process.”

25. The learned judge qualified this conclusion by accepting that there was one respect in which the participation of the

Bank and the Company was necessary. He said that, if the applicants were to “show an error of procedure such as to

vitiate the direction order, an unreasonably held opinion by the Minister or an error of law in the sense needed to

overturn that order under s. 11(3), the High Court has two choices; the order may be overturned or another order may be

substituted for it. In effect, it is possible for the Court to be faced with substituting a new order.” He then quoted s. 11,

subsections (4), (5) and (6) of the Act.

26. On foot of that judgment the High Court order provided “that the Company and the Bank be joined as Notice Parties

to the within proceedings entitled to swear affidavit evidence of testimony challenge testimony or affidavit evidence and

proffer submissions in that part of the substantive hearing and that part alone as deals with their current financial

situation and as deals with what Order ought to be substituted should the Direction Order be impugned”. The effect of

that order is to permit the appellants to participate in the proceedings but to a limited extent. The parties agree that it does

not permit them to enter into the question of whether the Direction Order should be set aside or even to argue about the

effect of such an event.

27. The appellants, in their notice of appeal, argued that the learned High Court judge was in error in limiting their

participation in the manner described and in particular:

in failing to have any or any adequate regard to the potential direct adverse effect of the setting aside

of the Direction Order on their interests;

in applying an incorrect test, namely whether the submissions of the appellants were needed on any

issue;

in finding that it was not logical for the appellants to claim the right to appear and to make submissions

consistent with the position of the Minister;

in failing to have regard to the fact that the appellants had been joined as Notice Parties in a related

challenge to the Direction Order;

in finding that there had been any delay on the part of the appellants.

28. Just as it was a matter, in the High Court, for the appellants to demonstrate grounds on which an order should be made

joining them as Notice Parties, they must show to this Court that the High Court was in error insofar as it failed to permit

them to be admitted to the proceedings as Notice Parties without any restriction. I propose, therefore, to consider, in the

first instance the legal principles governing this matter.

29. Looking at the matter from the point of view of principle and, without reference to the applicable Rules governing the

joinder of parties, it is clear that the position is significantly different depending on whether the proceedings are purely civil

and private or whether they concern issues of public law. In civil litigation, generally speaking, parties are allowed to choose

whom they wish to sue. In matters of public law persons other than the public authority may have a real and substantial

interest in the outcome. The simplest example is the planning permission. While the judicial review must of necessity be

sought on grounds that the planning authority or An Bórd Pleanála on appeal has committed an error of law affecting the

validity of its decision, any decision of the court is very likely to affect the very real rights and interests of private persons or

corporations. The holder of a planning permission is, of course, potentially affected by the outcome of an application for

judicial review of its validity. Civil and public-law proceedings are not, however, in completely watertight compartments.

There is an underlying principle that a person is entitled to participate in proceedings which are capable of adversely and

directly affecting his or her substantial interests.

30. The joinder of parties in civil proceedings is governed by Order 15, Rule 13 of the Rules of the Superior Courts, which

provides:

“No cause or matter shall be defeated by reason of the mis-joinder or non-joinder or parties, and

the court may in every case or matter deal with the matter in controversy so far as regards the

rights and interests of the parties actually before it. The court may at any stage of the proceedings,

either upon or without the application of either party, and on such terms as may appear to the court

to be just, order that the names of any parties improperly joined, whether as plaintiffs or as

defendants, be struck out and that the names of any parties, whether plaintiffs or defendants, who

ought to have been joined, or whose presence before the court may be necessary in order to enable

the court effectually and completely to adjudicate upon and settle all the questions involved in the

cause or matter, be added.” (emphasis added)

31. This Court considered the application of that Rule in Barlow v Fanning [2002] 2 I.R. 593. The litigation in that case

arose from a dispute in the economics department of a university. The plaintiffs, who were members of the staff originally

sued the university as well as a professor against whom they made most of their complaints. They discontinued the claim

against him and intended to continue against the university alone. The professor applied to be joined again as a defendant.

Keane C.J. cited authority, in particular the speech of Viscount Dilhorne in Vandervell Trustees Limited v White and ors

[1971] A.C. 912, to the effect that Order 15 Rule 13 requires that the presence of the party to be joined is necessary to

enable the matters in dispute to be effectually and completely decided, that a plaintiff is entitled to choose the defendants he

wishes to sue, but that the court has power to add a party whose proprietary or pecuniary rights are or may be directly

affected by the proceedings.

32. Keane C.J. approved the judgment of Lynch J in Fincoriz S.A.S. Di Bruno Tassin Din e C v. Ansbacher & Co. Ltd.

(Unreported, High Court, 20th April, 1987). That case involved rival claims to a sum of money deposited in a bank. The

applicants who wished to be joined had obtained an injunction in separate proceedings restraining the release of the funds.

The plaintiff in the action pending before Lynch J had brought the action claiming rights in the same fund. Lynch J said:

“ in order that a person may be joined as a Defendant without the consent and, a fortiori, against

the wishes of the Plaintiff there must be some exceptional circumstances. The exceptional

circumstances must be such that the added Defendants or persons who ought to have been joined as

Defendants by the Plaintiff in the first instance or alternatively even if it was not unreasonable that

they were not joined as Defendants by the Plaintiff in the first instance it is shown at the time of the

application to the Court that their presence before the Court will as a matter of probability be

necessary in order to enable the Court effectually and completely to adjudicate upon and settle all

questions involved in the cause or matter.”

33. Lynch J found that such circumstances were present in the context of two rival claims to the same bank deposit. Keane

C.J., in Barlow v Fanning, approved the test adopted by Lynch J that “there must be exceptional circumstances before a

person could be joined as a defendant against the wishes of the plaintiff…” He acknowledged that the good name and

reputation of the professor who was seeking to be joined might be adversely affected, since, for the most part, the

establishment of the plaintiffs’ case against the university would necessitate the proof by them of damaging allegations

against the first defendant. That, however, was not a sufficient exceptional circumstance, recalling that, in cases of vicarious

liability generally, such as in road traffic cases, an action might be brought against the owner of a vehicle without joining the

driver. The conclusion from all his is that a person must demonstrate exceptional circumstances in order to persuade a court

to join him or her in an action against the will of the opposing party. The special circumstances must consist in some real or

apprehended adverse effect on his proprietary interests. Reputational damage would not suffice. Nor would the fact that the

case will lead to a decision on a point of law which could adveresly affect the applicant in other litigation.

34. In the case of judicial review, Order 84 of the Rules of the Superior Courts contains very different provisions. It makes

express provision for ensuring that persons directly affected are put on notice of proceedings. The fundamental requirement

is in Order 84, r. 22(2) which imposes an express obligation on the applicant to see to it that the “notice of motion or

summons must be served on all persons directly affected…” This is reinforced by two additional provisions:

a. Order 84, r. 22(6) provides:

"If on the hearing of the motion or summons the Court is of opinion that any person who ought,

whether under this rule or otherwise, to have been served has not been served, the Court may

adjourn the hearing on such terms (if any) as it may direct in order that the notice or summons may

be served on that person."

b. Order 84, r. 26(1) provides:

"On the hearing of any motion or summons under rule 22, any person who desires to be heard in

opposition to the motion or summons, and appears to the court to be a proper person to be heard,

shall be heard, notwithstanding that he has not been served with notice of the motion or the

summons."

35. The most relevant authority for the purposes of the determination of the present appeal is BUPA Ireland Ltd. v. Health

Insurance Authority [2006] 1 I.R. 201, where this Court considered both the judicial review Rules and those applicable to

civil actions. That case concerned judicial review proceedings brought by a health insurer, BUPA. BUPA wished to

challenge the implementation of the scheme of Risk Equalisation under the Health Insurance Act, 1994. Implementation of

the scheme would have resulted in the payment by other health insurers, including BUPA, of very substantial sums to the

Voluntary Health Insurance Board (“VHI”). The case had an unusual procedural history. Initially, BUPA had sought judicial

review of a recommendation made to the Minister for Health and Children by the Health Insurance Authority (“HIA”). In

the same judicial review proceedings it challenged the constitutionality of the underlying legislation and its compatibility with

EU law. The HIA recommendation was not accepted by the Minister so the issue of its validity became moot. The

proceedings continued but were limited to an attack on the legislation as being both unconstitutional and contrary to EU law.

That change persuaded the High Court that it was no longer a judicial review and it struck out VHI as a notice party. VHI

appealed. VHI sought the status of notice party to the proceedings because, it claimed, it was the party entitled to receive the

greater part of any funds which would become available as a result of payments directed by the Minister under the Scheme.

This Court decided to restore VHI as a notice party.

36. The judgment of this Court was delivered by Kearns J. It is clear from a reading of that judgment that the Court was of

the view that VHI ought to be permitted to remain as a notice party regardless of whether the proceedings were treated

under the Rules relating to judicial review or those concerning civil actions. Firstly, Kearns J held that it was “clear beyond

question that the present proceedings have at all times been judicial review proceedings and continue now as such.” He

cited the provisions of the Rules set out at paragraph 34 above. He referred to the decisions of this Court in O’Keeffe v An

Bórd Pleanála [1993] 1 I.R. 39 and Spin Communications T/A Storm F.M. v. Independent Radio and Television

Commission (Unreported, Supreme Court, 14th April, 2000).

37. The learned judge concluded that those “cases demonstrate that where a party has a "vital interest in the outcome of

the matter" or is "vitally interested in the outcome of the proceedings" or would be "very clearly affected by the result" of

the proceedings, it is appropriate for that party to be a notice party in the proceedings.” That passage must not be

misunderstood as laying down a test in the terms used by Kearns. What it says that is that it is appropriate to join a party in

the circumstances mentioned. Order 84, Rule 22(2) imposes an obligation to notify “ all persons directly affected…”

38. O’Keeffe v An Bórd Pleanála was notable because the beneficiary of the planning permission had abstained from

participation in the High Court proceedings. It had not been served with the proceedings but had been notified of them by

letter. It had not applied to be joined in the High Court, but had applied to be joined as a notice party only at the stage of the

appeal. Finlay C.J. was commenting on the omission to serve that party when he remarked, perhaps obiter, at page 78:

“If application is made for liberty to issue proceedings for judicial review and the claim includes

one for certiorari to quash the decision of a court or of an administrative decision-making

authority the applicant must seek to add as a party any person whose rights would be affected by

the avoidance of the decision impugned. If liberty is granted the court should except for special

reasons ordinarily add such person as a party.”

I would interpose the word “directly” before “affected” in that passage.

39. This Court, in BUPA, was primarily of the view that the judicial review rules provided the framwork for the decision

and that the High Court judge in that case had been mistaken in considering the matter in the light of Order 15, Rule 13 and

the decision in Barlow v Fanning, cited above. It concluded, nonetheless, that, even if Order 15 were to be treated as

applicable, VHI should still be joined because the Court was “strongly of the view that this case does involve exceptional

circumstances and that the continued presence of the notice party in the proceedings is "necessary in order to enable the

court effectually and completely to adjudicate upon and settle all questions involved in the cause or matter".”(page 214)

40. The judgment of Clarke J in Yap v. Children’s University Hospital Temple Street Ltd. [2006] 4 I.R. 298 explains the

relevance of the distinction between public-law and purely private civil proceedings. Referring specifically to the BUPA case,

he noted that VHI had been “directly affected by any order that might be made by the court.” At paragraph 22, he

continued:

“For example if a regulatory authority makes a decision in proceedings between two entities, and

one of those entities challenges the decision because it was unfavourable, if the court is persuaded

that the determination of the regulatory authority should be upset, then that decision has a direct

effect upon the party who had secured the favourable decision in the first place and therefore that

party must be joined as a notice party because the order itself (rather than collateral matters such

as the reasoning of the court or comments which the court might make on the facts) affects the

interests of that party.”

41. The proceedings in the present case are not, of course, brought by way of judicial review in the formal sense. Order 84

is concerned principally with the traditional remedies of certiorari, mandamus, prohibition and quo warranto, mentioned in

Order 84, Rule 18. Section 11 of the Act of 2010 lays down the procedure for applying to set aside a direction order and

prescribes the grounds upon which relief can be granted. The application itself is for the setting aside of a Direction Order.

The procedure is by way of notice of motion grounded on affidavit. Section 11(3) provides that the court may set aside the

Direction Order “only if it is of the opinion that there has been non-compliance with any of the requirements of section 7

or that the opinion of the Minister under section 7(2) was unreasonable or vitiated by an error of law.” The Direction

Order, it is true, was technically made by the Court. However, in reality the Court was endorsing the proposed direction

order adopted by the Minister and it is the correctness of the Minister’s actions, not those of the Court which are in issue.

42. I am satisfied that the application to set aside a Direction Order has all or almost all of the indicia of an application for

judicial review. It has few, if any, of the characteristics of a civil action. If a choice were to be made between the application

of Order 15 and Order 84, the latter would have to apply. Since the Act is silent on the matter and s. 11(2) provides the only

guidance by saying that the court “may give such directions with regard to the hearing of the application as it considers

appropriate in the circumstances,” it seems to me that order 84 must be applied by analogy. It follows that an applicant for

an order pursuant to s. 11 should serve the notice of motion and grounding affidavit on “all persons directly affected…”

43. The appellants, in the first instance, submit that the learned judge adopted the incorrect test when deciding whether to

join the appellants. The test is not whether the submissions are needed by the court in order to arrive at a decision. This is

not the test adopted in the cases, particularly BUPA. The test is related to the effects on the interests of the party seeking to

be joined. They also challenge his view that it was not logical for the appellants to apply and that they had been in delay.

44. The court has before it a vast volume of material concerning the issues, actual and potential arising in the case. For the

purposes of this decision, it seems to me that a brief summary is sufficient. Counsel for the appellants summarised the

arguments in favour of their being joined by emphasising that the application is for the setting aside of the Direction Order

under which capital amounting to some €2.7 billion was subscribed to the Bank. He says that the application to set aside

would at the very least create uncertainty for the Bank with consequences which could be enormous. Without the capital

provided by the Minister, the Bank would not, he argued, be viable. The essence of and central focus of these arguments is

on the fact that the capital was paid to the Bank and the consequence of the setting aside of the Direction Order which

provided the basis for that payment. Counsel made the following points:

a consequence of the setting aside of the Direction Order is that, putting it at its lowest, there is an “at

least theoretical” possibility that the capital might have to be repaid; although the respondents insist

that they are not seeking such relief, that result could follow, even if not sought;

if the conditions laid down in the Direction Order for the subscription of the capital were to be

changed, the Minister might possibly seek the return of the money;

the result of any order setting aside the Direction Order might be that the State would not be in

compliance with the conditions under which State Aid approval had been given and the result might be

that the State Aid had been unlawfully given and might have to be repaid;

Under a Placing Agreement entered into by the appellants with the Minister and the National Treasury

Management Agency, as one of the conditions of the Direction Order, the Company is required to

indemnify various parties, including the Minister, from and against any and all losses or claims

incurred by him, including sums which might be payable by the Minister in the event that the

Applicants are successful in these proceedings.

If the direction order were to be set aside a question would arise as to whether the Central Bank, the

body which had insisted on the need for the recapitalisation would accept that it had been properly

done.

45. The respondents have vigorously and with great tenacity opposed the attempt of the appellants to be joined in the

proceedings as notice parties or at least, as notice parties free of the restrictions imposed by the order of the High Court.

They have not appealed against the grant of those limited rights. Mr. Skoczylas presented these arguments and displayed

highly impressive command of a wide range of materials of law and fact. There are three main threads to the respondents’

opposition:

The purpose and intended effect of the Direction Order is to revoke the decisions of the EGM of the

company of the 20th July 2011, an action which is incompatible with provisions of Irish company law

which implement EU law;

there is no possibility in any circumstances of the repayment of capital arising, whatever the outcome

of the proceedings: neither the Company nor the Bank, therefore, had any interest to defend;

there has been delay, amounting to unfairness, by the appellants in making the application, particularly

considered in the light of the very strict time limit imposed on the respondents.

46. The first two of these lines of argument are intimately connected with the substantive issues in the underlying case. It is

important, therefore, not to reach any final conclusions on those issues.

47. In making the first point, Mr. Skoczylas complains that the Direction Order, having been made in the terms of the

proposed direction order of the Minister was made for the purpose of revoking the decisions of the EGM of 20 July 2011.

Those decisions included one whereby the shareholders voted by an overwhelming majority to oppose the terms of the

Minister’s proposal. The Company is incapable of acting in contravention of the EGM decisions. The Direction Order is

incapable of overriding those decisions. To do so would be directly contrary to the terms of Article 10 of the (codifying)

Directive 2009/101/EC of the European Parliament and of the Council of 16 September 2009 on coordination of safeguards

which, for the protection of the interests of members and third parties, are required by Member States of companies within

the meaning of the second paragraph of Article 48 of the Treaty, with a view to making such safeguards equivalent. The

respondents refer to the following provisions:

a. Article 10 provides: “Acts done by the organs of the company shall be binding upon it even if those acts are

not within the objects of the company, unless such acts exceed the powers that the law confers or allows to be

conferred on those organs.

b. That principle is implemented in Irish law by Regulation 6 of the European Communities (Companies)

Regulations, 1973 (S.I. No. 163 of 1973, which provides:

“In favour of a person dealing with a company in good faith, any transaction entered into by any

organ of the company, being its board of directors or any person registered under these regulations

as a person authorised to bind the company, shall be deemed to be within the capacity of the

company and any limitation of the powers of that board or person, whether imposed by the

memorandum or articles of association or otherwise, may not be relied upon as against any person

so dealing with the company.”

48. While the respondents referred to what they call a "whole plethora of provisions of EU law," which, in the main

proceedings, they accuse the Minister of violating, the essence of this argument, as presented on this appeal, is that the

Court should not permit the appellants even to appear in the action since to do so would involve acting in violation of EU

law.

49. The second point made forcibly by Mr. Skoczylas is that, contrary to the submission of the appellants, there is no

possibility whatever that the recapitalisation funds will have to be repaid. Those funds must stay in the recapitalise relevant

institutions. This is required by the EU Implementing Decisions 2011/77/EU and 2011/326/EU. Mr. Skoczylas refers to

provisions of those Decisions referring to the requirement that Ireland should have recapitalise its banks in accordance with

the findings of the Central Bank of Ireland of 31 March 2011.

50. In the third line of argument, the respondents criticise the delay by the appellants in making the application to be joined.

They point to the time limit of five working days which was imposed upon them and complain that a different standard, no

time limit, would be applied to the appellants.

51. Apart from those three main lines of argument, the respondents resist the attempt, as they see it, by the appellants to

assist the State in defending the very court proceedings in which the respondents themselves claim that the state has

unlawfully and effectively taken over complete control of the Company and the Bank.

52. In resolving the issue on this appeal, I start from the conclusion I have already expressed that the appropriate test to

apply is by analogy with Order 84 of the Rules of the Superior Courts. I do so because an application made under Section

11 of the Act is both in form and in substance essentially a form of judicial review of the decision of the Minister. It follows

that any person or body which is “directly affected” should be joined. To begin with, any such person or body should be

served with the proceedings. If that has not been done, an order joining him, her or it should be made. Finlay C.J. expressed

the matter briefly and clearly in his judgment in O’Keeffe v An Bórd Pleanala.

53. It seems to me obvious, at least prima facie, that the body most likely to be directly affected by the setting aside of a

Direction Order is the “relevant institution” in respect of which the order must necessarily have been made. Section 11

itself recognises this by limiting the right to make an application to the “relevant institution” or a member.

54. At this point, I must pause to say that, with great respect, I do not agree with the view of Charleton J that the question

to be asked is whether the submissions of the party applying to be joined “are needed on any issue for the court to reach a

just and complete adjudication.” It follows that I also disagree with his conclusion that there was “no benefit to be gained

by the Court, from these parties attending the hearing and backing up the contention of the Minister that the direction

Order was correctly made in the first place.” That is not the correct test. An interested party, i.e. a party directly affected,

is, in my view, entitled to be represented to defend his or its interests, even if the decision-maker is there to advance the

same arguments. The matter was expressed by Keane C. J. when giving judgment on a question of costs in Spin

Communications T/A Storm F.M. v. Independent Radio and Television Commission (Unreported, Supreme Court, 14th

April, 2000):

"This is a case in which the notice party, as indeed the High Court Judge accepted, is a party with

a vital interest in the outcome of the matter. As Finlay C.J. said in O'Keeffe v. An Bord Pleanála ,

where you have a party such as the notice party in the present case who is vitally interested in the

outcome of the proceedings, they must be joined as a party and will be joined by the court if the

applicant does not join them. In those circumstances, it seems to me that, once the notice party is

there, once he is in the proceedings protecting his interests, he may find himself in precisely the

same position as the respondent. He may find himself in the position that he has been there, of

necessity, to protect his interests, to advance arguments that may not have been advanced by the

IRTC and to have had the benefit of his own counsel and solicitor to protect his interests. It would

be quite unjust that he should have to pay his costs because the applicant company has no assets,

where he has been brought there as a necessary party."

As that passage explains with the clarity characteristic of its author, a party with a direct interest in an administrative decision

is entitled to have his own case put to the court by his own counsel independently of the defence made on behalf of the

decision maker. That is his right. It does not depend on the court’s view as to whether it finds it necessary to hear the party.

Naturally, it often happens in practice, usually to save costs, that a notice party will choose not to make independent

arguments and to rely on the principal respondent to defend the case. But that is his decision to make.

55. I turn then to address the two principal grounds upon which the respondents base their opposition. The first is that, put

briefly, it is impossible for the appellants to speak for the Company or the Bank. Because of the EGM resolutions, only the

respondents can lawfully do so. The second is that, whatever the appellants say, there is absolutely no possibility of a

question arising as to the repayment of the capitalisation funds. Both of these points encounter what I consider to be an

insuperable objection. They involve the Court in reaching a final conclusion on this interlocutory motion in advance of the

hearing of the main proceedings on two issues which are precisely in contention in those proceedings. Firstly, the proposition

that the resolutions passed at an EGM of a company enjoy such binding effect in national and, even more so, in EU law,

that it is legally impossible for the Company, even under the compulsion of a subsequent law given effect by a court order is

at the heart of the proceedings themselves. The point is based on Article 10 of a Directive which has been implemented in

Irish law in the manner set out above and in “favour of a person dealing with a company in good faith.” The respondents

contend that the Article makes it impossible for the Company to depart from the resolutions passed at an EGM. If the Court

were to reach a conclusion on that issue for the purpose of refusing the appellants the right to participate in the hearing of

the applicant, it would be deciding a central issue in that action on a motion and would be pre-empting the High Court’s

consideration of the matter. The second proposition is that, in no circumstances whatever, can it be envisaged that any

question of the repayment of the capital would arise is equally a matter for decision by the High Court.

56. I have carefully refrained from expressing any view about the strength of the arguments. In my view it is clear that,

prima facie, the appellants are at least potentially affected by the s. 11 application. I cannot preclude them from enjoying

the right to participate by deciding in advance issues which are essentially matters to be decided in the proceedings

themselves. That would be to beg the question. There are two further considerations. Firstly, I cannot see that, in any event,

the respondents suffer any disadvantage or prejudice from the presence and full participation of the appellants. It is not

suggested that the hearing of the application will be delayed by their participation. They are already notice parties under the

limited order of Charleton J. They do not wish to postpone the hearing. Secondly, the appellants are not necessarily in

precisely the same position as the Minister. The Minister made the payments required for the capitalisation. The appellants,

more precisely the Company, are the recipients. If there is a debate about whether an order setting aside the Direction Order

implies repayment, the Minister and the Company clearly have potentially different interests.

57. The third ground or set of grounds touch more on the discretion of the Court. The first point, referred to in fact by the

learned High Court judge, is that it would be, in some sense, illogical to permit the appellants to participate in support of the

Direction Order in circumstances where the Company and voted at the EGM against it. That, however, is precisely to beg

one of the questions which arise for decision in the action. It is arguable -- and I refrain from expressing any view about it --

that there is no lack of logic but that there was a divergences of view between the Board of the Company and the

shareholders.

58. The argument about delay involves two points. The first is that it is unfair that the respondents were obliged to comply

with an extremely short time limit (at that time, five working days) whereas there was no time limit for the application by the

appellants to be joined as notice parties. That, however, is the result of the terms of the Act. It is true that any applicant

must comply with the time limit and that the time limit is extremely short. A person or body wishing to support the Direction

Order could not possibly apply to be joined within that time, because it would be necessary to wait until an application had

been made under the section. Once the matter is, as it necessarily is, outside the time limit it remains for the court to judge

whether there has been any undue delay. The learned trial judge criticised the appellants for delay. Nonetheless, he

permitted them to participate, though to a limited extent. Even if that point is not entirely decisive, I would say that there

was no such delay has should preclude the appellants from exercising what I consider to be their right to participate in the

proceedings. In O’Keeffe v An Bórd Pleanala, a party was permitted to be joined as a notice party at the appeal stage,

having made a considered decision not to apply in the High Court. That is not, of course, decisive. The matter be must be

judged on its merits in each case. There has been some delay, undoubtedly on the part of the appellants. There was a short

time, at the beginning of the proceedings, when there were questions about the participation of some of the respondents.

They were resolved at an early stage. More crucially, however, the motion brought by the appellants to be joined as notice

parties was dated 10th October 2012. The points of claim were not delivered by the respondents until 2nd November 2012.

The respondents grounding affidavit was sworn on 31st August 2013. Looking at the matter in broad terms, while there has

been some delay, it has not been significant and has not contributed to delay in the proceedings.

59. The question, however, arises whether this Court should, at this stage of the proceedings refer questions of

interpretation to the Court of Justice for preliminary ruling pursuant to Article 267 of the Treaty on the Functioning of the

European Union. Mr. Skoczylas, speaking for the respondents, submits that the Court should now refer three specific

questions. They are:

a. “Does Article 10 of Directive 2009/101/EC preclude [the Company] from opposing the Applicants in the

main action in the High Court, given that [the Company] decided at the EGM on 20 July 2011 to oppose the

terms of the July 2011 Direction Order?”

b. “Is a company ([the Company] in the instant case), which has been taken over by the State based on

measures, which are alleged in the ongoing court proceedings to have breached EU law, precluded from

assisting the State in defending the very court proceedings in question, after the company’s shareholders had

decided in general meeting to oppose the State’s takeover?”

c. “If the Supreme Court allows [the Company] to assist the State in defending the main action, and if it

subsequently turns out that the measures taken by the State to take over [the Company] were indeed

incompatible with EU law, would then be in effect allowed to take advantage of its own failure to comply with

EU law? Must, therefore, the Supreme Court preclude [the Company] from assisting the State in the defence in

the main action?”

60. It is immediately obvious that, in the context of the present case, the object and purpose of each of these questions is to

prevent the appellants from being admitted as full notice parties to the claim they make under s. 11 of the Act in the pending

proceedings in the High Court. Essentially, the respondents make the point that Article 10 of Directive 2009/101/EC can

have the effect that a national Court is precluded from allowing a natural or legal person to become a party to legal

proceedings, even in circumstances where that national court considers the proposed party to have a direct interest. The

Court has not been referred to any authority for that surprising proposition.

61. The respondents cite the decision of the European Court in Case 222/85 Johnston v. Chief Constable of the Royal

Ulster Constabulary [1986] ECR 1651. That case was is best known for the Court’s ruling, at paragraph 19 of the

judgment, that “all persons have the right to obtain an effective remedy in a competent court against measures which they

consider to be contrary to the principle of equal between men and women” laid down in Directive No. 76/207. The

obligation thus imposed on Member States to provide an effective judicial remedy, as the Court stated at paragraph 18,

“reflects a general principle of law which underlies the constitutional traditions to the Member States” as well as Articles

6 and 13 of the European Convention for the Protection of Human Rights and Fundamental Freedoms.

62. The respondents are unquestionably entitled to call that proposition in aid in pursuit of their application in the High

Court. It by no means follows from the proposition that one individual has the right to a judicial remedy to pursue a claim

based on EU law against the State that another individual or corporate body directly affected by the claim should not be

permitted to argue against it. The contrary appears much more consistent with the principle laid down in Johnston.

63. The principle advanced by the respondents also runs counter to the principle of national procedural autonomy which

would appear to include the power of each national court to decide what parties may participate in legal proceedings. That

fundamental principle, as stated, for example, by the Court of Justice in C-255/00 Grundig Italiana Spa v Ministero delle

Finanze [2002] ECR I-8003, is that:

“it is for the domestic legal system of each Member State to designate the courts and tribunals having

jurisdiction and to lay down the detailed procedural rules governing actions for safeguarding rights which

individuals derive from Community law, provided, first, that such rules are not less favourable than those

governing similar domestic actions (principle of equivalence) and, secondly, that they do not render virtually

impossible or excessively difficult the exercise of rights conferred by Community law (principle of

effectiveness)”

64. The mechanism for obtaining preliminary rulings pursuant to Article 267 TFEU is based “on a dialogue between one

court and another, the initiation of which depends entirely on the national court’s assessment as to whether a reference is

appropriate and necessary.” (Case C-2/06 Kempter [2008] ECR I-411). It is true that the Supreme Court, being a court

against whose decisions there is no further judicial remedy under national law, may become bound to refer a question of

interpretation which it finds necessary to enable it to give judgment in the case before it. However, it is matter for this Court

to assess the stage of the proceedings at which any such question should be referred. There may be cases in which a single

point of law can be readily identified at an interlocutory stage. More frequently, however, it is appropriate to await any

necessary findings of fact and full argument about relevant points of national law, which must be determined before the

European Court can conveniently be asked to decide a disputed point of EU law.

65. The Court of Justice in its “Recommendations to National Courts and Tribunals in Relation to the Initiation of

Preliminary Ruling Proceedings” (OJ 6.11.2012, 2012/C 338/01) addresses the question of the “appropriate stage at

which to make a reference for a preliminary ruling” as follows:

“18. A national court or tribunal may submit a request for a preliminary ruling to the Court as soon as it

finds that a ruling on the interpretation or validity of European Union law is necessary to enable it to give

judgment. It is that court or tribunal which is in fact in the best position to decide at what stage of the

proceedings such a request should be made.

19. It is, however, desirable that a decision to make a reference for a preliminary ruling should be taken when

the national proceedings have reached a stage at which the referring court or tribunal is able to define the

legal and factual context of the case, so that the Court of Justice has available to it all the information

necessary to check, where appropriate, that European Union law applies to the main proceedings. In the

interests of the proper administration of justice, it may also be desirable for the reference to be made only

after both sides have been heard.”

66. In my view, it would be entirely inappropriate to make any reference at this stage of the proceedings. It is inconceivable

that the Court of Justice would hold that there is a duty on a national court positively to exclude a party with a direct interest

in proceedings from being heard. The questions posed are at the heart of the respondents’ case in the main proceedings. To

refer them now would beg a question which has yet to be fully argued. It is overwhelmingly preferable to allow the

application pending in the High Court to proceed to hearing with all parties appearing and participating. A date has been fixed

for that hearing. There will be no delay arising from the joining of the appellants. If, on the other hand, the Court were to

postpone the joinder of the appellants at this point and make a reference at this there would be inevitable delay pending the

decision on the reference. While the ruling is pending, the question arises as to how the existing High Court proceedings are

to be affected. If they continue to hearing as contemplated, the appellants will necessarily be excluded from playing the full

part which, in my view they are entitled to play. The alternative is that they would be adjourned to await the outcome of the

reference with consequent delay to the detriment of all parties. These are powerful considerations which weigh against the

making of a reference at this stage of the proceedings.

67. For all of these reasons, I would allow the appeal and I would make an order permitting the appellants to be joined as

notice parties to the application in the High Court, without the limitations imposed by the High Court.