Judge refuses Fingleton bid to stop case over alleged INBS mismanagement

Former chief had sought to have case halted on grounds of its breadth and his ill-health

Michael Fingleton is the former chief executive of Irish Nationwide Building Society. File photograph: Alan Betson

Michael Fingleton is the former chief executive of Irish Nationwide Building Society. File photograph: Alan Betson

 

Former Irish Nationwide Building Society (INBS) boss Michael Fingleton has failed to get a High Court order halting a case against him over alleged negligent mismanagement of the society’s affairs.

Mr Justice Tony Hunt on Friday refused Mr Fingleton’s application to have dismissed, or permanently stayed, the action against him by the special liquidators of Irish Bank Resolution Corporation (IBRC), which took over the building society after it collapsed, on the grounds of ill health.

The judge accepted 83-year-old Mr Fingleton’s deteriorating health meant he could not participate meaningfully in the case but concluded that, for reasons including that the resolution of IBRC’s claims depended substantially on objective evidence, factors and standards, rather than subjective evidence from Mr Fingleton, the balance of justice “lies firmly on the side of permitting the proceedings to continue”.

While there may be rare cases where disability could in itself found a successful application to stay or dismiss, he was “not convinced this is one of those cases”.

It was “impossible” to conclude at this stage of the proceedings that it would be fundamentally unfair to allow them to continue.

“It may be that such a conclusion might be reached at another stage of the proceedings, with the benefit of the focus of trial,” the judge said.

In proceedings initiated in 2012, IBRC, among various claims, alleges the society’s €6 billion losses from 2008 to 2010 arose from development loans made when Mr Fingleton was chief executive, had excessive control over the society’s business and flouted its lending rules.

Had the true picture of Irish Nationwide’s affairs been disclosed, IBRC claims Mr Fingleton would have been summarily dismissed for breach of duty by 2007 at the latest and not paid expenses allegedly inappropriately incurred, plus some €1.2 million in performance bonuses for 2008 and 2009 when he left.

Mr Fingleton denies the claims and, in a pre-trial application, his solicitor Niall Clerkin sought to have the case halted on grounds of its breadth and complexity and Mr Fingleton’s ill-health.

Health difficulties

IBRC, represented by Lyndon MacCann SC, did not dispute the medical evidence but said the case could be decided on objective, documentary, witness and expert evidence.

The judge was satisfied that the net result of Mr Fingleton’s health difficulties, including a stroke in May 2019, is that he is in the throes of a gradual and irreversible deterioration of his condition and will be unable to give evidence or participate meaningfully in the trial.

In considering whether the case should proceed, he balanced various factors.

While the absence of Mr Fingleton’s direct testimony and input into preparations for the trial represented a significant litigation disadvantage for him, he was satisfied the “relatively limited” prejudice he would suffer was not a reason to stay/dismiss.

The judge disagreed that the complexity and scope of the claims were a significant operative consideration.

He said the basic issues were whether the decisions taken concerning the overall business strategy of INBS, and the 18 specific lending decisions relied on by IBRC, were taken in the presence or absence of reasonable grounds supporting the contention that they were in the best interests of INBS as a whole.

He believed resolution of the significant area of dispute lies within an objective realm.

Direct testimony

IBRC did not appear to be claiming Mr Fingleton’s decisions were dishonest or made for an improper purpose but rather that they were negligent and that there was no objective support for what Mr Fingleton asserts to be a genuine belief they were in the best interests of INBS, he said. He did not see how the loss of Mr Fingleton’s direct testimony on this aspect of the matter was “crucial”.

He rejected arguments that the proceedings were “punitive”, noting they would be decided on the basis of the civil standard of proof. While a finding of negligence or breach of duty would be damaging to Mr Fingleton’s reputation, that was a feature of any such finding in civil litigation.

Mr Fingleton received “considerable financial compensation” for his services to INBS and must therefore accept the burden of litigation arising from provision of those, unless he could show he is entitled to a stay/dismissal, he said.

The Central Bank’s decision not to proceed with an inquiry into Mr Fingleton’s management of INBS was not a guide concerning whether this case should be stayed/dismissed for reasons including that the Central Bank inquiry had features “more punitive in nature”.

The statement of claim was advanced in 2014, giving Mr Fingleton some time to prepare his defence before the more recent deteriorations in his health, he also noted.