Court of Appeal refuses to order discovery of correspondence leading to settlement between the Central Bank and INBS

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Mr Purcell retired in 2010 pursuant to a requirement from the Minister for Finance that the directors of banks and building societies covered by the State guarantee in September 2008 retire their positions.

INBS was one of two major banks which required State assistance in the aftermath of the financial crash of 2008.

By 2011 its remaining assets were transferred to the Irish Bank Resolution Corporation, and by 2012 it was little more than a shelf company with new management and no assets.

In 2012 INBS and IBRC brought proceedings against Mr Purcell and other former officers of the society which sought to make them personally liable for INBS’s losses. Those proceedings were compromised in June 2015 with no admission of liability by the defendants.

In 2015 the Central Bank issued INBS, Mr Purcell and others a Notice of Inquiry pursuant to Part IIC of the 1942 Act, alleging that Mr Purcell was a “person concerned” who participated in certain “prescribed contraventions” during the period between 1st August 2004 and 30th September 2008.

About a week later the Central Bank announced it had reached a settlement of the case against the INBS, and that while it would be imposing a €5 million fine, it did not propose to collect it, as INBS had no assets.

Mr Purcell challenged the validity of the settlement, arguing that the administrative sanctions procedure was unconstitutional, and that his constitutional right to a good name under article 40.3.2 was infringed by the implication that he had participated in the admitted contravention of INBS.

He had brought simultaneous judicial review proceedings, challenging the validity of an inquiry the Central Bank proposes to hold under Part IIIC of the Central Bank Act 1942.

He argued that he was not a “person concerned” within the meaning of the administrative sanctions procedure, since he no longer holds any post within INBS.

He further maintained that the Bank have infringed the principles of fair procedures by pre-judging the outcome of the inquiry having regard to the comments made in the course of the publicity statement, which referred to “multiple failings…all the way to its Board of Directors”.

Mr John Purcell therefore sought discovery of the without prejudice correspondence leading to the settlement passing between the Central Bank and INBS.

This was initially refused by the High Court, who held that “damage to the interest of justice caused by non disclosure would need to be very clear and overwhelming in order to set aside the privilege claimed where parties genuinely come and try to settle a case, open their secrets to the other side”.

This was held not to be the case in the current situation.

The Court of Appeal observed that: “The resolution of litigious disputes is, of course, most desirable. Litigation consumes significant time, effort and money on the part of the litigants and the ever-increasing amounts of complex litigation places burdens on the administration of justice.

“The same is also true of contentious disciplinary hearings before administrative bodies such as that which is embraced in the administrative sanctions procedure. It is for these reasons that litigation privilege not only exists, but that quite compelling – even exceptional – reasons are required to displace it.”

The Court cited Ryan v. Connolly 1 I.R. 627 as providing a good example of the modern approach to this issue, which highlighted that if “a defendant did make such an unequivocal representation in without prejudice correspondence and the plaintiff acted on foot of same, it would be highly damaging to the administration of justice if the plaintiff were not permitted to go behind the without prejudice correspondence in order to demonstrate his or her opponent’s duplicity in the conduct of the litigation”.

The Court stressed this point because the English Court of Appeal case Savings and Investment Bank Ltd. v. Fincken EWCA Civ. 1630, 1 All E.R. 1125 illustrates that it is really only this category of conduct which will allow a court to look behind without prejudice correspondence of this kind.

Thus, the Court found that “it would be necessary for the plaintiff to demonstrate that the Central Bank had actually abused the privilege so far as the conduct of the litigation was concerned before this Court could – or should – sanction the lifting of this litigation privilege”.

While acknowledging Mr Purcells’ contention that the settlement constitutes a pure contrivance, the Court stressed that the settlement was of complete irrelevance to the prosecution or defence of the Notice of Inquiry which he was facing.

As the present management of INBS have no knowledge of the conduct of former directors like Mr Purcell, their acceptance that there were historically multiple failings, could have no probative value in the Central Bank’s case under the administrative sanctions procedure against Mr Purcell.

The Court observed that Mr Purcell was entirely free to maintain his judicial proceedings against the Central Bank, despite the Court’s refusal to allow his appeal against the High Court’s decision on disclosure.

In response to Mr Purcell’s contention that the the Central Bank waived its privilege by making a public statement regarding the INBS settlement which, he contends, impliedly suggested that he (and others) were also guilty of “multiple failings” such as would in time justify an adverse finding under the Administrative Sanctions Procedure against him (and others).

The Court of Appeal noted that it was possible for a litigant to waive its privilege, noting the cases of Property Alliance Group Ltd. v. Royal Bank of Scotland W.L.R.(D) 251, EWHC 1557 andHannigan v. Director of Public Prosecutions IESC 10, 1 I.R. 378.

However, while the Court acknowledged that the Central Bank’s publicity statement could have been more “happily expressed”, the Bank had not formally put the terms of the INBS settlement at issue or sought to rely on those terms adversely as against the plaintiff.

As a result, the Court upheld the decision of the High Court and dismissed the appeal.