Supreme Court reserves judgment in Dunnes Stores case on appointment of authorised officer

A three-year legal battle arising from the appointment by the Tanaiste and Minister for Enterprise and Employment, Ms Harney, of an authorised officer to two Dunnes Stores companies, has entered its final stages in the Supreme Court.

The five-judge court yesterday heard and reserved judgment on an appeal by the Minister against the High Court's decision of July 2000 to strike down her appointment of an authorised officer to examine the books and records of the two companies - Dunnes Stores Ireland Company and Dunnes Stores (Ilac Centre) Ltd.

In July 1998, following publication of the McCracken report into payments to politicians, which concluded payments had been made by Mr Ben Dunne of Dunnes Stores to former Taoiseach Mr Charles Haughey and former Fine Gael minister Mr Michael Lowry, and two companies with which Mr Lowry was associated, the Minister appointed an authorised officer to the two Dunnes companies. She initially appointed Mr George Maloney as authorised officer and he was later replaced by Mr Gerard Ryan. The Dunnes companies, and the group's chief executive, Ms Margaret Heffernan, brought a legal challenge to the Minister's action.

In a decision in late 1998, the High Court ruled the Minister must give reasons for the appointment. Reasons were later supplied but Dunnes was dissatisfied with these and took further proceedings.

After an 11-day hearing in the High Court in April 1999, Mr Justice Kinlen rejected Dunnes' claim that the appointment was invalid but ruled the authorised officer had exceeded his powers. Both sides appealed the judgment and the Supreme Court ordered a full re-hearing in the High Court of the proceedings.

That hearing came before Mr Justice Butler in June 2000 and, in a reserved judgment of July 28th, he found the Minister's reasons for the appointment were unreasonable and irrational and in excess of the Minister's legal powers under the Companies Act 1990. He rejected Dunnes' claim the Minister had acted in bad faith in making the appointment.

The judge found none of the four reasons advanced by the Minister to justify her appointment of the authorised officer provided a legal basis for her action. The Minister had outlined those reasons: (1) her concern about the standards of corporate governance in the two Dunnes companies; (2) her opinion the affairs of the companies were being conducted with intent to defraud creditors and the Revenue; (3) an alleged intent to defraud other members of the companies: and (4) illegality detected by the Minister in the past.

Presenting the Minister's appeal to the Supreme Court yesterday against the High Court's decision, Mr Michael Collins SC argued Mr Justice Butler had applied the wrong test in finding there was no evidence on which the Minister could conclude it was necessary to appoint an authorised officer to examine the books and records of the companies for the purpose of deciding whether an inspector should be appointed to the companies.

The correct test was whether the Minister was of the opinion there were circumstances suggesting it might be necessary to examine the books and records of the companies, counsel said. Once the Minister thought there was good reason to do so, that was the end of the matter. There were such circumstances in this case, including a clear finding by the McCracken tribunal that the purpose of payments made to Mr Michael Lowry were to help him evade tax. Inquiries into the affairs of two other companies, Garuda Ltd and Celtic Helicopters, also provided material justifying the Minister's action.

The Minister had chosen the least invasive of all the steps open to her, counsel said. This was not a case, he added, where the Minister wanted to be seen to be doing something.

Mr Dermot Gleeson SC, with Mr Richard Nesbitt SC, for Dunnes, said the principal focus of his clients' objection to the Minister's appointment was proportionality. If the Minister was concerned about tax evasion, she could write a letter to the Revenue Commissioners rather than embark on a strained interpretation of her powers under the Companies Act 1990. What the Minister was doing was usurping the powers of the Revenue and this was not permitted by the Companies Act.

Dunnes was the most investigated company in Ireland and 95 per cent of the information which the Minister referred to when justifying her decision was already in the public domain, counsel added.

Mr Gleeson said a confidential report by Price Waterhouse, prepared at the request of Dunnes, seemed to be the focus of the Minister's attention. The members of the company had decided to bring in Price Waterhouse and had sorted out matters.