Ireland 'does not treat negligence in major institutions as criminal'

Legal Affairs Correspondent

Ireland does not treat even gross negligence in the management of major institutions or companies as criminal activity, Mr Justice Frank Clarke of the Supreme Court has said.

Speaking at a conference on the aftermath of the financial crisis yesterday, Mr Justice Clarke said there were strong arguments for and against making gross incompetence a criminal offence, but that he was suggesting it only as a possible issue for discussion.

An individual who was persistently negligent or grossly negligent even in one case could be subject to disciplinary procedures or ultimately lose a right to practice in their profession, while a company director who made mistakes could be sacked, disqualified or restricted in some way.

“What we have not traditionally done, in Ireland and in many other countries, is treated even gross negligence in the management of important institutions or major companies as criminal activity,” he told an audience at Griffith College in Dublin.

“Whether that is a good idea or not is for others to decide and debate, but I think it is important, and perhaps hasn’t been emphasised enough publicly, that if you don’t have those laws – and they certainly couldn’t be introduced retrospectively – there are consequences that go with that too.

“The amount of times you hear comment in the media . . . on ‘why hasn’t more been done to bring people to book’. There is a real question to be asked: what crimes is it being said might have been committed?”

'Extremely lax'
Reflecting on his experiences as a judge on the Commercial Court during the crisis, Judge Clarke said he believed the public perception of banks' "extremely lax" lending practices was "very well founded".

“I saw far too many cases where the bank paper said something like: Mr Hegarty is a high net-worth individual. He is the kind of guy that we need to be lending money to. If we don’t lend it to him, the guys up the road will lend it to him,” the judge said.

In many such cases, he added, banks relied on short, unverified documents submitted by the loan applicants themselves in order to make decisions on multimillion-euro loans.

Judge Clarke said he didn’t know the extent to which such practices may have been driven by the fact that bonuses were paid on the basis of business done rather than by whether that business actually worked. He added: “One would have thought a more rational system would have been that you get a little bonus based on it this year but you really got your bonus in three-four years time if the loan was truly performing.”

The judge, who stressed he was not referring in his remarks to any specific cases, spoke of the “huge amount of human misery” the courts had witnessed during the crisis. He said there was a danger that every businessman who got into trouble was now being “tarred with the same brush – greedy, stupid people who made very stupid decisions.”

Separately, the master of the High Court, Edmund Honohan, said a legislative provision giving judges discretion in dealing with cases of families facing eviction offered "tremendous potential".

"In his second stage speech to the Seanad [on the personal insolvency Bill], the Minister for Justice described the new provision as 'radical'," he said. "Read between the lines: the Oireachtas may feel unable to impose terms on lenders but when the task is delegated to the court, the new discretion will be safe from constitutional challenge."