The High Court has overturned the appointment of an authorised officer to two Dunnes Stores companies by the Tanaiste and Minister for Enterprise and Employment, Ms Harney.
Mr Justice Butler found the Minister's reasons for the appointment were unreasonable and irrational and plainly and unambiguously flew in the face of fundamental reason and common sense.
He also found the appointment exceeded the Minister's powers under the Companies Act 1990.
But the judge found the Minister had not acted in bad faith in making the appointment. He was also satisfied there was "absolutely no evidence" that the Minister, or any person in her Department, was responsible for unauthorised disclosures or leaks (to the media) regarding the appointment.
The decision prevents any examination by the authorised officer, Mr Gerard Ryan, of the books and records of the Dunnes Stores Ireland Company and Dunnes Stores (ILAC Centre) Ltd.
In July 1998, Ms Harney appointed an authorised officer to examine the two Dunnes companies. The Minister initially appointed Mr George Maloney as authorised officer and he was later replaced by Mr Ryan. The Dunnes companies, and the group's chief executive, Ms Margaret Heffernan, took a legal challenge to the appointment. In the High Court, Ms Justice Laffoy found the Minister was obliged to give reasons for the appointment.
Dunnes was dissatisfied with the reasons given and challenged these in further proceedings. In the High Court in April 1999, Mr Justice Kinlen rejected Dunnes' claim that the appointment was invalid although he did find the authorised officer had exceeded his powers.
This decision was appealed by both the State and Dunnes to the Supreme Court which ordered a rehearing of the proceedings in the High Court. That action was heard over five days by Mr Justice Butler last month and he delivered his reserved decision yesterday.
The judge said that, in support of her decision to appoint Mr Ryan, the Minister advanced four reasons: her concern about the standards of corporate governance operating in the two Dunnes companies; her opinion their affairs were being conducted with intent to defraud creditors and the Revenue; an alleged intent to defraud other members of the companies; and illegality detected by the Minister in the past.
While Section 19(2)(a) of the Companies Act permitted the Minister to make directions if she was of the opinion there were circumstances suggesting it might be necessary to examine the books and documents of a company with a view to determining whether an inspector should be appointed, the judge said there was no evidence it was "necessary" to examine the books and records for this purpose.
The same section also permitted the Minister to make directions if she believed there were circumstances suggesting the company's affairs were being conducted with intent to defraud the creditors or any other person. In this case, the Minister was saying the Revenue Commissioners were such a "person" and had referred to the evidence of payments to Mr Michael Lowry, indicating these were made to assist him evade tax. The judge said that reason was "simply unsustainable".
Mrs Heffernan submitted members of the Dunne family had compromised their differences and gone their separate ways. "I agree. There is no evidence of complaints by any member of the company," the judge said.
He awarded costs to Dunnes and Mrs Heffernan but placed a stay on the costs order in the event of an appeal.
