Dunnes Stores Ireland Company, Dunnes Stores (Ilac Centre) Ltd and Margaret Heffernan (applicants) v Gerard Ryan and the Minister for Enterprise Trade and Employment (respondents); Ireland and the Attorney General (notice parties).
Judicial Review - Company law - Appointment of authorised officer by Minister for Enterprise, Trade and Employment - Reasons grounding appointment - Whether decision unreasonable or irrational - Companies Act 1990, sections 19 and 21.
The High Court (Mr Justice Butler); judgment delivered 29 July 2000.
A DECISION to appoint an authorised officer under the Companies Act 1990 will be ultra vires if it is unreasonable and irrational in that it plainly and unambiguously flies in the face of fundamental reason and common sense.
The High Court so held in granting relief to the applicants.
Dermot Gleeson SC, Richard Law Nesbitt SC and Benedict O Floinn BL for the applicants; Frank Clarke SC, R. John McBratney SC and Mark Sanfey BL for the respondents.
MR JUSTICE BUTLER set out the facts of the case, stating that on 22 July 1998 the second respondent (hereafter the minister) informed the third applicant, a director of the first and second applicants, that she had decided to appoint an authorised officer to examine the books and documents of the first and second applicants, pursuant to section 19 of the Companies Act 1990.
The minister made the appointment following the report of the McCracken Tribunal. The tribunal had been established to inquire into payments made to, inter alia, certain politicians, by Dunnes Holding Company or any associated enterprises and/or by Mr Ben Dunne. The report concluded that such payments had been made by Mr Dunne, who was at the relevant time the chairman and an executive director of Dunnes Holding Company. Correspondence then ensued between the minister and officers of the department on the one hand and the third applicant on the other, in which the former expressed concern that the report in question had disclosed a number of possible breaches of the Companies Acts 1963-90 and requested the production of various books and documents relating to the first and second applicants. Although at least some of the books and documents of the applicants were made available in response to this request, the correspondence culminated in a letter of 22 July 1998 in which the minister said she was invoking her powers under section 19 Companies Act 1990. The third applicant asked the minister, in a letter of 23 July1998, to indicate the basis of the appointment and, not being satisfied with the response, initiated proceedings by way of judicial review in the High Court, seeking to challenge the validity of the appointment. Those proceedings were grounded, inter alia, on the failure of the minister to give reasons.
Miss Justice Laffoy, in a reserved judgment, concluded that the minister was obliged to give reasons for her decision since otherwise the applicants would be entirely frustrated in any challenge they might seek to make to her decision. Although she did not quash the appointment of the authorised officer, Miss Justice Laffoy did order that the minister should swear an affidavit, setting out in full, the reasons for her decision to appoint an authorised officer. The response to that order was an affidavit of Mr Paul Appleby, the principal of the Company Law Administration Section of the Department of Enterprise, Trade and Employment. The schedule to the affidavit set out what were stated to be the reasons for the minister appointing an authorised officer and included a statement that the circumstances set out in it "gave substantial cause for concern as to the standard of corporate governance operating in Dunnes Stores Ireland Company".
The applicants were dissatisfied with the reasons as thus set out in Mr Appleby's affidavit. They also claimed that the department was disseminating information, which it was obtaining from the applicants, to the media, without the consent of the applicants. As a result, they instituted the present judicial review proceedings. In a reserved judgment delivered on 6 July 1999, Mr Justice Kinlen in the High Court rejected the applicants' claim that the appointment by the Minister of the first respondent as an authorised officer was invalid. However, the Supreme Court set aside the order of the High Court in its entirety and remitted the proceedings to the High Court for a determination of the issues in respect of which leave to apply for judicial review was granted.
The first and principal ground upon which the applicants sought relief was that the minister, in making the decision to appoint the first respondent, had acted unreasonably and/or irrationally; mala fide and/or vexatiously; and ultra vires and/or in a manner which was an abuse of her powers.
Mr Justice Butler stated that the case depended upon one essential issue, namely, whether the reasons ultimately furnished by the minister sustained the decision to appoint an authorised officer. Mr Justice Butler then went on to deal with the reasons offered by the minister as follows: (1) inspectorship/corporate governance; (2) the Revenue as creditor; (3) the concerns of members; and (4) illegality.
In relation to the first of these, the minister referred to section 19(2)(a) saying that the circumstances outlined under the following three headings gave substantial cause for concern as to the standards of corporate governance operating in the first and second applicants, and suggesting that it was necessary to examine the books and documents of the company, to determine whether an inspector should be appointed to conduct an investigation of the body under the Companies Acts. Section 19(2) provides, inter alia, that directions may be given by the minister if she is of the opinion that there are circumstances suggesting that it is necessary to examine the books and documents of the body with a view to determining whether an inspector should be appointed. The court held that there was no evidence that it was necessary to examine the books and documents for that purpose.
In relation to the second reason, section 19(2)(b)(ii) provides that directions may be given by the minister if she is of the opinion that there are circumstances suggesting that the affairs of the company are being conducted with intent to defraud the creditors or any other person. The minister said that the Revenue Commissioners were such a person, and referred to evidence from the McCracken Tribunal of payments to Mr Michael Lowry, indicating that the same were made to assist Mr Lowry to evade tax. The court held that this reason was simply unsustainable. The minister had no right to pass on any information gained, because the Revenue was not listed as a "competent authority" under section 21 of the 1990 Act. Counsel for the respondent quite rightly drew the Court's attention to the fact that the Revenue were added to the list of bodies referred to in section 21 by the Companies (Amendment) Act 1999. This amendment, if anything, lent support to the applicants' contention.
In relation to the third reason, the minister said that there were circumstances suggesting that the affairs of the companies had been conducted with intent to defraud its members, or in a manner which was unfairly prejudicial to some part of its members, and she referred to the report of the McCracken Tribunal in this regard. In these circumstances, it was argued, it was necessary to examine the books and documents of the companies to determine whether or not the affairs of the companies had been conducted with intent to defraud the members or in a manner which was unfairly prejudicial to some part of the members. The applicants contended that it was stretching credulity too far to contend that the minister appointed an authorised officer out of concern for members of the Dunnes family who had, long before 22 July 1998, compromised their differences and gone their separate ways. The court agreed. There was no evidence of complaints by any member of the company.
In relation to the fourth reason, the minister contended that the illegality, which she had detected in the past, sustained the appointment under section 19(2)(f). The said sub-section provides that directions may be given by the minister if she is of the opinion that there are circumstances suggesting that "any actual or proposed act or omission or series of acts or omissions of the body or on behalf of the body are or are likely to be unlawful." Mr Justice Butler noted that where sub-sections (b) and (d) of the section used the present with the alternative of the past tense, sub-section (f) clearly and unambiguously used the present or, in the alternative, the future tense. The court accepted, therefore, the contention that the sub-paragraph in question dealt only with contemporaneous or ongoing illegality, not illegality of an historical kind.
Mr Justice Butler noted that the question of the unreasonableness or irrationality of a decision was considered in The State (Keegan) v Stardust Victims Compensation Tribunal [1986] IR 642 by Mr Justice Henchy, who stated at page 648 that the test of unreasonableness or irrationality in judicial review lay in considering whether the impugned decision plainly and unambiguously flew in the face of fundamental reason and common sense. If it did, then the decision maker should be held to have acted ultra vires, for the necessarily implied constitutional limitation of jurisdiction in all decision-making which affected rights or duties required that the decision maker must not flagrantly reject or discard fundamental reason or common sense in reaching his decision. Mr Justice Butler stated that he was satisfied that the minister's decision to appoint an authorised officer, if based on the reasons summarised above, was unreasonable and irrational in that it plainly and unambiguously flew in the face of fundamental reason and common sense and that the decision was ultra vires.
Mr Justice Butler stated that the fact that the minister gave reasons only after being ordered to do so by the Court had been strongly commented upon and had been argued to show some form of mala fides. Mr Justice Butler was satisfied firstly, that there was no evidence of mala fides on the part of the minister and secondly, that there was absolutely no evidence that the minister, or any person in her department, was responsible for unauthorised disclosures or leaks.
Mr Justice Butler went on to deal with the other grounds upon which the applicants sought relief. It was a ground of the applicants' claim for relief that the minister had failed to have due regard for the principles of natural and constitutional justice and/or fairness. Mr Justice Butler did not accept that the applicants were in any way hampered in their challenge to the minister's decision as a result of any of the matters set forth under the foregoing heading and it had not been seriously argued that they were.
The applicants also sought relief on the ground that both the first respondent and the minister had failed to indicate the ambit of their inquiry adequately or at all and/or had purported to undertake an inquiry which was disproportionate and excessive in its ambit and was unsupported by any facts or any adequate facts as would justify an enquiry of such breadth and expense. Mr Justice Butler did not accept the proportionality argument. If it was the case that the authorised officer had been properly appointed under section 19, then there was no evidence to suggest that his inquiries were in any way disproportionate or excessive as suggested.
A further ground was that the first respondent had served what purported to be a demand for documentation which was unreasonable and/or ultra vires and/or vexatious. Mr Justice Butler stated that he did not recall it being argued that the demand in question was, of itself, ultra vires. It had been ordered by Miss Justice Laffoy that no further action be taken on foot of the appointment of the first respondent until after 4 January 1999. Between 5 and 18 January 1999 there were communications between the first respondent and the applicants' solicitors wherein the former sought to arrange a meeting with the officers of Dunnes Stores Ireland Company for the purpose of discussing the request for books and documents. This request for a meeting seemed perfectly reasonable, said Mr Justice Butler, and when a meeting could not be arranged, the first named respondent wrote on 18 January requiring production of documents not later than 4 pm on Friday 22 January 1999. Mr Justice Butler said that the range of documents requested would appear to be enormous. Mr Justice Butler was satisfied that the making of such a request by an authorised officer would be lawful but for the fact that only four days were given to produce this mass of documents. In any view the time allowed was unreasonable.
Mr Justice Butler noted that the Chief Justice had pointed out, in the earlier Supreme Court judgment in the present case, that the Supreme Court had made it clear on more than one occasion, that where the issues between the parties could be determined and finally disposed of by the resolution of an issue of law other than constitutional law, the court should proceed to determine the other issue first. If that determination disposed of the case, then the court should refrain from expressing any view on any constitutional issue that might have been raised and the Chief Justice referred to Murphy v Roche [1987] IR 106 and Brady v Done- gal County Council [1989] ILRM 282. Mr Justice Butler stated that by reasoin of his first finding, namely that the appointment of the first respondent was ultra vires, the court should not proceed further to consider the constitutional issue which had been raised.
Solicitors: William Fry (Dublin) for the applicants; the Chief State Solicitor for the respondents.
