Shareholder setback in Permanent TSB action

Shareholders of Permanent TSB who wish to challenge the constitutionality of laws under which the State has recapitalised the institution with some €4 billion cannot do so by amending their existing court proceedings, the High Court has ruled.

Mr Justice Peter Charleton said the proposed challenge to sections of the Credit Institutions Stabilisation Act 2010 would have to be brought in separate plenary proceedings as it cannot be pursued by amending the action initiated in 2011 by the shareholders.

In that action, Piotr Skoczylas, his company Scotchstone Capital Fund Ltd, Gerard Dowling and Pádraig McManus have challenged the 2011 direction of the Minister for Finance to inject €2.7 billion into the former Irish Life Permanent, now Permanent TSB.

They claim the direction order was not appropriate or reasonable in relation to their position as shareholders and the money could have been sourced elsewhere.

As a consequence of the Minister’s action their shareholding value was, but should not have been, written down from around 33 cent per share to one cent, the plaintiffs claim.

Although an egm of ILP Group Holdings plc, the holding company for ILP plc, voted 60/40 in July 2011 against the Minister’s intervention, the Minister secured the direction order from the High Court on July 26th 2011. The €2.7 billion capital injection was then made, followed by another €1.3 billion in March 2012.

In March 2011, Mr Skoczylas and the other shareholders initiated their proceedings as a challenge to the earlier €2.7 billion injection and the fall in value of their shareholdings.

Their full action has yet to be heard and Mr Justice Charleton yesterday ruled on a number of preliminary applications, including the shareholders’ application to amend their case to include a challenge to sections of the Credit Institutions Stabilisation Act.

The judge ruled the relevant laws prevented such an amendment and said any constitutional challenge would have to be brought separately in plenary proceedings.

Any such challenge should be initiated within three weeks and could be heard together with the shareholders’ existing case with the non-constitutional points being addressed first, the judge said.