INBS ex-director can pursue Central Bank, judge rules

John Stanley Purcell has made out a stateable case against the bank, says judge

The Central Bank has failed to stop a former director of Irish Nationwide Building Society pursuing various claims against it, including of negligent breach of statutory duty, in a case concerning an alleged "wholly unlawful" delegation of powers of the society's board to its former chief executive, Michael Fingleton.

State-owned Irish Bank Resolution Corporation has sued John Stanley Purcell and three other former INBS directors – former INBS chairman Michael Walsh and two other former directors, Terence Cooney and David Brophy.

They deny claims of breach of contract, breach of duty and negligence over the alleged delegation of the board’s powers to Mr Fingleton from 1997 to 2009. INBS was later nationalised with losses of some €6 billion.

IBRC has separately sued Mr Fingleton.

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Mr Purcell, who previously got an order joining the bank as a third party to the proceedings against him and other directors, has made out a stateable case against the bank on several grounds, Mr Justice Brian Cregan ruled in refusing the bank's pre-trial application aimed at striking out Mr Purcell's claims against it.

Statutory immunity

The Central Bank can be correctly joined as a third party to the case although at a later stage it may seek to contend it has a statutory immunity preventing enforcement of any damages award against it, the judge said.

Mr Purcell has made out a stateable case arising from claims the Central Bank owes a statutory duty to the INBS, is liable to INBS for negligent breach of statutory duties and owes a common law duty of care to INBS, he said.

The judge said he was also “firmly of the view” Mr Purcell had made out a prima facie case the Central Bank has a duty of care to individual building societies under the Building Societies Act 1989.

There was also a stateable case the Central Bank owes directors of building societies a duty of care and, therefore, Mr Purcell could pursue his claims the bank acted in negligent breach of statutory duty, the judge said.

Mr Purcell could also pursue claims directors of a building society have a common law case of negligence against the Central Bank for negligence, he said. Such claims by directors of a building society cannot form part of a third-party claim for an indemnity but could form part of separate proceedings, he added.

There was a further stateable claim on the part of INBS for misfeasance in public office against the Central Bank, he said. Mr Purcell had failed to make out a stateable case the Central Bank owed a statutory duty simplicter (without establishing negligence) to directors of a building society, the judge said.

In its application, the bank argued it properly administered the system of regulation and its legal duty to regulate building societies applied only to societies “generally” and not individually.

Mary Carolan

Mary Carolan

Mary Carolan is the Legal Affairs Correspondent of the Irish Times