High Court dismisses NIB objections to inspectors' DIRT investigation

A BID by National Irish Bank to prevent court-appointed inspectors from investigating the bank's compliance with Deposit Interest Retention Tax (DIRT) was dismissed by the High Court yesterday.

Mr Justice Peter Kelly also rejected the bank's claim that it was entitled to copies of all transcripts and documents relating to interviews carried out by the inspectors with staff and customers.

The judge said he wanted to make it clear that the court disapproved of the "unjustified criticism and intemperate language" that was used by the bank concerning the work of the inspectors involved in the hearing.

It was "a matter of regret" that the inspectors had had to place on record their belief that the bank had not co-operated with them to the utmost extent possible, the judge added. He hoped it would not be necessary for the inspectors to repeat such a view in future.

The judge made the remarks when delivering his reserved judgment on the application by NIB and National Irish Bank Financial Services Limited (NIBFSL) to limit the investigation into the affairs of both companies by inspectors John Blayney and Tom Grace.

The inspectors were appointed by the court last year on the application of the Tanaiste and Minister for Enterprise, Trade and Employment, Ms Harney.

In relation to NIB, they were ordered to investigate allegations of improper charging of interest and fees to customer accounts during the 10 years up to March 1998 and improper removal of customer funds and to identify persons responsible for any of these alleged practises.

Regarding NIBFSL, they were asked to report on questions about effecting insurance policies with Clerical Medical Insurance Company Ltd, Scottish Provident International Life Assurance Ltd and Old Mutual International (Guernsey) Ltd and to identify persons responsible or aware of the purposes behind such policies.

The bank opposed the orders. Last July, the late Mr Justice Shanley upheld the inspectors' procedures, which involved an initial information-gathering exercise followed by evidence and cross-examination of witnesses.

Last December, the legislature gave increased powers to the Comptroller and Auditor General, entitling him to investigate financial institutions to find out if they had complied with DIRT obligations. NIB and NIBFSL claimed there was duplication in the two investigations and applied to prevent the inspectors from investigating the DIRT issue. Mr Justice Kelly said this restriction would narrow the directions originally given to the inspectors and limit the scope of their enquiries. It was accepted by all parties that there might well be an overlap in the investigations, he said. But, if the inspectors' report disclosed wrongdoing, then the court had wide powers, including the power to wind up a company. The report could be admissible as evidence in any civil proceedings.

The Comptroller and Auditor General, on the other hand, reported to the Dail. What the Dail did with the report was entirely a matter for it, but the Dail could not exercise judicial powers.

Mr Justice Kelly said it seemed that the thrust of the Comptroller's investigation related to the possible loss of revenue to the State. It was an industry-wide investigation.

The focus of the inspectors' investigation was whether or not unlawful practices existed at NIB and NIBFSL concerning the evasion of revenue obligations.

The banks were not correct when they sought to argue there was duplication between the two investigations, he found.

The judge also rejected the bank's argument that it was entitled to transcripts and supporting documentation relating to interviews carried out by the inspectors with bank employees and customers.

The inspectors had made it clear that they would supply to each interviewee a transcript of their own interview provided the appropriate stenographer's fee was paid.

Mr Justice Kelly said that appeared to be a personal entitlement and he could not see how it could be read as entitling the bank to the documents.

Throughout the hearing, staff members had been referred to as "our witnesses" by the two financial institutions, the judge said. This was one of a number of misconceptions under which the companies appeared to be suffering concerning the nature of the investigation.

The companies were incorrect in claiming they were entitled to transcripts of the interviews with its staff members at the investigative stage of the inspector's investigation.

Mr Justice Kelly said the companies had taken exception to a report prepared by the inspectors in December 1998, which referred to evidence given by persons who had invested in insurance policies. The inspectors had not yet formed any concluded view on those matters, nor could they do so until officials of the bank were given an opportunity of giving evidence to them, the judge said.

National Irish Bank is to study the High Court judgement and take legal advice before coming to any decision as to whether it will make an appeal to the Supreme Court.