Settlement reached in case against four INBS directors

Action over alleged ‘wholly unlawful’ delegation of board powers to former CEO

A legal action against four former directors of the Irish Nationwide Building Society over the alleged "wholly unlawful" delegation of powers of the Board of the Society to its former CEO Michael Fingleton has settled, the Commercial Court heard on Wednesday. No terms of settlement were disclosed.

A separate action against former INBS CEO Michael Fingleton, involving a claim by State-owned Irish Bank Resolution Corporation for up to €6 billion over losses suffered by the Society, is proceeding on a date yet to be fixed.

Mr Fingleton denies any liability, has pleaded he was not negligent and had prudently sought to reduce the society’s exposure.

IBRC, which took over INBS, had separately sued John Stanley Purcell and three other former INBS directors – former INBS chairman Michael Walsh, Terence Cooney and David Brophy – over alleged 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.

All four directors denied the claims and Mr Purcell last year secured orders joining the Central Bank as a third party to the case against the directors. He alleged the bank had a liability over alleged failures to properly monitor and regulate the Society concerning the alleged delegation of the Board's powers to Mr Fingleton.

The bank and other State entities had joined together in exposing him to a “wholly unmeritorious” claim for damages of perhaps more than €1 billion, he also claimed.

Mr Purcell also complained IBRC, in bringing its proceedings against the directors, had not joined accountancy firm KPMG, the former auditors of INBS, as a defendant to the case. KPMG had been joined as a third party.

On Wednesday, as Ms Justice Caroline Costello was about to give judgment on discovery issues raised by the defendants in both cases, Reg Jackson SC, for Mr Purcell, said the case against the former directors had settled.

On consent of Neil SteinSC, for IBRC, the judge agreed to adjourn the proceedings against the directors to allow for implementation of settlement after which it is expected the proceedings against the directors will be formally struck out.

The case was adjourned for a month and the discovery matters concerning the directors were struck out.

The judge noted the case against Mr Fingleton is proceeding and also adjourned that to allow the sides consider her ruling on the discovery matters.

In that ruling, the judge noted the two related cases, even in the context of the “myriad of litigation which has been one of the fallouts from the economic crisis which has befallen the state in recent years”, were “extraordinary by any measure”.

The scope of the allegations was “extraordinarily wide” and, as many of the claims were not time limited, they could range from 1971 up to April 2009, she said.

Among the claims was that, as a result of alleged unlawful delegation of the Board’s powers, Mr Fingleton had very significant responsibility for the conduct of the Society’s business and had the sole authority to approve decisions by the Society to lend sums of more than €1m, she said.

The judge commended the parties for reaching agreement on many discovery matters and noted her judgment related to some outstanding matters on which the parties had not agreed.

Dealing with Mr Fingleton’s discovery application, the judge ruled he was entitled to discovery of a number of categories of documents, including certain records of the INBS Board up to July 2011 when IBSS was transferred to IBRC and documents related to discussions for the sale of the society or any merger of it with the EBS.

The judge also noted the plaintiffs had agreed to make discovery of documents relating to Mr Fingleton’s expenses. In that context, there was no need for an additional discovery order to be made concerning any documents linked to expenses for his pension arrangements, she said.