No duplication between banking inquiries by comptroller and statutory inspectors

In the matter of National Irish Bank Limited (under investigation).

And In the matter of National Irish Bank Financial Services Limited (under investigation).

And in the matter of the Companies Act 1990.

Natural Justice - Fair procedures - Investigation under Companies Act at a preliminary stage - Whether applicants having entitlement to transcripts of evidence at that stage.

Company - Affairs - Investigation - Whether there was duplication with investigation being conducted by the Comptroller and Auditor General - Whether overlap between investigations contrary to rule against double jeopardy - Whether overlap contrary to principle of res judicata.

Company - Affairs - Investigation - Whether investigation being carried out as quickly and as inexpensively as possible - Companies Act 1990, section 7(4).

The High Court (Mr Justice Peter Kelly); judgment delivered 19 March 1999.

There was no duplication of process where an investigation into the affairs of particular companies by inspectors appointed under the Companies Acts overlapped with an industry-wide investigation conducted by the Comptroller and Auditor General. Nor was there any contravention of the rule against double jeopardy, the principle of res judicata, or of section 7(4) of the Companies Act 1990. There was no entitlement to the rights established in Re Haughey at the preliminary or information-gathering stage of an investigation by inspectors appointed under the Companies Acts.

Mr Justice Peter Kelly so held in dismissing the application of the applicants for an order limiting the scope of the investigation by the inspectors into the affairs of the applicants, and for an order compelling the inspectors to furnish copies of all transcripts of interviews carried out by the inspectors with staff and customers of both entities.

Richard Law Nesbitt SC and James O'Callaghan BL for the applicants. Donal O'Donnell SC and Denis McDonald BL for the inspectors. Eoghan Fitzsimons SC and Brian Murray BL for the Minister for Enterprise and Employment.

Mr Justice Kelly said that the applicants, National Irish Bank Limited ("the bank") and National Irish Bank Financial Services Limited ("the company"), were both under investigation by inspectors appointed by the High Court pursuant to Part II of the Companies Act 1990. They sought two orders which, if granted, would affect the conduct of those investigations. The first order sought would limit the inspectors in their investigation of compliance by the bank with its obligations concerning Deposit Interest Retention Tax (DIRT). The second order would compel the inspectors to furnish to the applicants copies of all of the transcripts and supporting documentation relating to interviews carried out by the inspectors with staff and customers of both entities.

The background to the case was that in 1998 the High Court had appointed two inspectors over the bank. They were directed to investigate and report on the affairs of the bank relating to the improper charging of interest and fees to accounts of customers of the bank between 1988 and 30 March 1998, and the improper removal of funds from accounts of customers of the bank between those dates. On 15 June 1998, a similar order was made in respect of the company. The same inspectors were appointed and were directed to investigate and report on the affairs of the company relating to, inter alia, the effecting of insurance policies through the company with specified insurance companies.

On 13 July 1998, the High Court (Mr Justice Shanley) gave judgments in respect of certain issues which arose in the investigation, including a determination that procedures outlined by the inspectors as ones which they would follow in the conduct of their investigation, and which were set forth in a letter of 4 June 1998, were consistent with the requirements of natural and constitutional justice. In the letter, the inspectors indicated that the first phase of their examination would consist of an information-gathering exercise where witnesses would be questioned in private. If the outcome of this first phase indicated that adverse conclusions might be drawn in relation to certain individuals dependent in whole or in part on the testimony of others, hearings would be held at which such individuals would be entitled to attend, hear the evidence, cross-examine the witnesses, and give evidence themselves.

The applicants had submitted to the High Court (Mr Justice Shanley) that the first stage was accusatory rather than investigative, and that an individual who was at risk of adverse conclusions being drawn against him on the evidence of other witnesses was entitled to the full panoply of rights as set out in Re Haughey [1971] IR 217, i.e. a copy of evidence reflecting on his good name, the opportunity to cross-examine his accusers, the opportunity to give rebutting evidence and the entitlement to address the inspector. This submission was rejected by Mr Justice Shanley who distinguished Re Haughey on the basis that the accusations in these investigation were made in evidence given under oath, rather than in hearsay evidence as had been the case for Mr Haughey. He was satisfied that the procedures outlined by the inspectors were consistent with the requirements of natural and constitutional justice.

In December 1998, the Comptroller and Auditor General was requested by the Oireachtas to investigate the affairs and the books of account and other records and documents, in respect of the period from 1 January 1986 to 1 December 1998, of various financial institutions. The purpose of this investigation was to examine whether those institutions had complied with their obligations in relation to DIRT.

On the same day, the inspectors delivered their second interim report to the High Court and they indicated to the court that the marketing of insurance policies was carried out by the bank rather then by the company. It seemed to the inspectors that their investigation in relation to the effecting of the insurance policies could not be confined to their investigation of the affairs of the company and would have to be carried out as part of their investigation of the affairs of the bank. In the report, the inspectors set out evidence given to them by persons who invested in the insurance policies. It was clear that a number of the interviewees in the course of evidence had made statements concerning the activities of bank employees covering the opening and maintenance of bogus non-resident deposit accounts. The inspectors stated in their report that they had not formed any concluded view on those matters and could not do so until officials of the bank had been given an opportunity of giving evidence.

The form of the order now sought by the applicants was an order directing that the inspectors should not engage in a DIRT compliance investigation of the bank save insofar as it related to the effecting or selling or marketing of the insurance policies with the specified companies.

Mr Justice Kelly said that the principal theme which resonated throughout the applicants' argument was that there was a duplication of process and that it was wrong that they should be the subject matter of contemporaneous investigations into the same matter. In support of their argument they relied on a number of well-known legal principles such as the protection from double jeopardy, the doctrine of res judicata and arguments based on section 7(4) of the Companies Act 1990. While it was accepted that there might well be an overlap, Mr Justice Kelly said that it had to be determined if that fact gives rise to a "duplication of process". The investigation which was being carried out by the inspectors was being conducted pursuant to Part II of the Companies Act 1990. That part of the Act contains a series of mechanisms which provide for the investigation of entities which enjoy the privilege of incorporation to establish whether there exist improprieties in the conduct of their affairs. It is carried out at all times under the supervision and at the direction of the court.

If the report of an inspector discloses wrongdoing the court is, if satisfied that such is established, invested with very wide powers to deal with such wrongdoing pursuant to section 12. Those powers include an order of the court of its own motion for the winding up of a company. The report would also be admissible as evidence in any civil proceedings pursuant to section 22. The comptroller is a constitutional officer, whose function is to control on behalf of the State all disbursements and to audit all accounts of monies administered by or under the authority of the Oireachtas. He is obliged to report to Dail Éireann in that regard. In the conduct of his investigation, he had many powers similar to those enjoyed by inspectors appointed under the Companies Act 1990. However, the object of the exercise was fundamentally different to that being carried out by the inspectors.

The comptroller must present a report to the Dail. Whatever the Dail might decide to do, it could not exercise judicial powers such as those contained in the companies legislation. While there might well be an area of overlap between the two inquiries and a similarity in procedures, the purposes of the exercises, the objects sought to be achieved by them and the steps to be taken on foot of them were entirely dissimilar and distinct. Mr Justice Kelly said that there was no true duplication. However, he would still consider whether any of the legal doctrines relied upon would be applicable even if the processes could be regarded as involving a duplication.

The applicants contended that they were being doubly jeopardised by the existence of two investigations. Mr Justice Kelly said that in any case in which the principle had been applied to prohibit a proceeding, it has always occurred in the case of the second such proceeding in time. In the present case, the inspectors' investigation long antedated the Comptroller and Auditor General's investigation, but no attempt had been made to prevent the latter investigation from proceeding.

The principle was not in any case applicable to the present case. It was normally associated with the criminal law, and might arguably extend to other tribunals which exercised disciplinary functions. There was not a single authority to extend the principle to fact-finding investigations of the type being conducted by the inspectors and the Comptroller and Auditor General. These entities had only a reporting function, and could not themselves impose penalties or make orders which were self-executing. Mr Justice Kelly said that the position was similar to a public inquiry, and he referred to the judgment of the then Chief Justice, Mr Justice Finlay, in Goodman International v Hamilton [1992] 2 IR 542, 588.

Even if the principle of double jeopardy did apply, Mr Justice Kelly said that it was clear that it was a narrow principle of limited effect. It concerned identical or similar charges, and not identical evidence. In Connelly v DPP [1964] AC 1254, Lord Morris said that what had to be considered was whether the crime or offence charged in the later indictment was the same or was substantially the same as the crime charged in a former indictment and that it was immaterial that the facts under examination or the witnesses being called in the later proceedings were the same as those in some earlier proceedings. This decision was cited with approval by the Supreme Court in O'Leary v Cunningham [1980] IR 367, 379, and was applied by the Court of Appeal in R v Beedie [1998] QB 356.

It was consistent with McGrath v Garda Commissioner [1991] 1 IR 69, where a garda who had been acquitted by a jury in the Circuit Court on charges of dishonesty obtained an order of prohibition preventing the holding of disciplinary procedures which would have reopened allegations of dishonesty and would have re-exposed the applicant to punishment. The court made it clear that there was no general principle preventing a disciplinary inquiry where there had been an acquittal on a criminal charge arising out of the same facts. Mr Justice Kelly said he was supported in his finding by Mooney v An Post [1994] ELR 103 (affirmed by the Supreme Court [1998] ELR 238), where Mr Justice Keane rejected the proposition that in every case where an employee was acquitted on criminal charges his employer was thereafter precluded from considering whether he should be dismissed because of the circumstances which gave rise to the charges.

Mr Justice Kelly said that the applicants had argued that the doctrine of res judicata did not permit two bodies empowered by different statutes to investigate and rule upon the same subject matter because to do so would place the applicants in the unfair position whereby the body which reports second was not bound by the findings of the other. Mr Justice Kelly said that given the nature of the inquiries that were being pursued and the status in law of the reports which would be produced, this doctrine had no application. There was a risk that the investigatory bodies would arrive at different conclusions. Such a risk arises also in criminal proceedings which were followed by civil proceedings arising out of the same incident, but the existence of a criminal acquittal would not bar subsequent civil proceedings arising out of the same facts (Murray v Fitzpatrick (1914) 48 ILT 305, Donnelley v Ingram (1897) 31 ILTR 139) and the existence of different burdens of proof between criminal and civil actions has even been the basis for refusing to prevent later civil proceedings (O'Donnell v Hegarty [1941] IR 538, Meath County Council v Daly [1987] IR 391). He distinguished Athlone Woollen Mills v Athlone UDC [1950] IR 1, since the powers of the planning authority in that case were in no way comparable to the powers of the investigating bodies in this case.

The applicants had also contended that the duplication of investigation ensured that the work of the inspectors was not being carried out as quickly and as inexpensively as possible, as was required by section 7(4) of the Companies Act 1990. The inspectors submitted that the DIRT issue could not be successfully excised from the scope of their investigations of the bank or the company, and that even if this could be done, it would hamper the efficiency and effectiveness of their investigation. Mr Justice Kelly said that the inspectors were in the best position to know how an order of the type sought could impact upon their investigation, and he rejected this argument.

Mr Justice Kelly said that even if he were prepared to accede to the substantive application, he would not be prepared to make an order in the form sought. It would give rise to the possibility of endless applications to the court asking it in effect to second guess decisions made by the inspectors as to what steps they considered necessary in order to report on the issues.

The applicants also claimed an entitlement, as a matter of natural justice, to all transcripts and supporting documentation relating to interviews carried out by the inspectors. In support of this application, they relied heavily on Re Haughey [1971] IR 217, and on parts of the judgment given in these proceedings by Mr Justice Shanley on 13 July 1998. The inspectors contended that that application was both factually and legally unsustainable, and in any event has already been decided by Mr Justice Shanley.

Mr Justice Kelly agreed that Mr Justice Shanley had expressly ruled on this matter where he held that there was no entitlement to invoke the panoply of rights identified by the Supreme Court at the information-gathering stage of the inspectors' work. He also ruled that the applicants had no entitlement to obtain the transcripts of the interviews with members of its own staff. The inspectors had made it clear that they would supply a transcript of the interview to each person interviewed by them even at the information-gathering stage, but that entitlement was personal to the individual interviewee and did not extend to the bank. If such a right existed, it derived purely from the contractual relationship between employer and employee and was enforceable in private law, but not in these proceedings.

Mr Justice Kelly said that it was the contents of the second interim report of 17 December 1998 which gave rise to this application. At paragraph 10, the inspectors set out aspects of evidence which had been given to it. This evidence was adverse to the applicants. At paragraph 11, the inspectors emphasised that they had not yet formed any concluded view on the matters alluded to, nor could they do so until officials of the bank were given an opportunity of giving evidence to them. They also made it clear that until such time as they had the opportunity of interviewing the relevant employees of the bank it was not possible even to commence the process of considering whether the evidence should be accepted or not. The applicants had taken objection to this report and implicit in these objections was the view that the inspectors had drawn conclusions without affording the applicants an opportunity to cross-examine witnesses or to make submissions. The applicants had continued to allege, in further correspondence and on affidavit, that the inspectors were guilty of a lack of objectivity, lack of due care and attention in the preparation of the report, lack of precision in the contents of the report and the possible demonstration of pre-judgment of the conduct of members of the bank staff.

Mr Justice Kelly said that there was no factual basis for those allegations, since it had been made clear both in the report and in correspondence that no conclusions had been drawn. As regards the legal position, Mr Justice Kelly said that the applicants had misconceived the functions of inspectors appointed under the Companies Act 1990. An inspection of this type was primarily investigative and only became adversarial in limited circumstances. In Chestvale Properties Ltd v Glackin [1993] 3 IR 35, Mr Justice Murphy cited with approval the observations of Lord Justice Sachs in Re Permagon Press Ltd [1971] Ch 388. Lord Justice Sachs said that it would often be a considerable time before inspectors appointed under the Companies Acts would have before them sufficient information to see any pattern in the affairs of a company. Even when this pattern commenced to take shape, they might need further material before the possibility emerged of any criticism attaching to individuals. Where there was a conflict of evidence, there might come the stage when the inspectors have to decide whether simply to record that conflict or whether to seek to resolve it. The more complex the affairs of the company, the longer it might take before those respective stages were reached.

In Chestvale, Mr Justice Murphy held that the application was premature, the proceedings having been instituted when the inquiry had reached only a very preliminary and exploratory stage and the inspector was not at that time involved in a quasi-judicial function. Mr Justice Kelly said that in the present case, the inspectors would not be called upon to exercise any quasi-judicial functions until they reached the second stage of their inquiries. At that stage, they had made it clear that all of the rights to which a party might be entitled under the decision in Re Haughey would be respected. That position was no different where there was sworn evidence which was adverse to the applicants as opposed to allegations in the media. Until the inspectors had decided that the testimony would be admitted by them as evidence and that its admission might give rise to adverse conclusions being drawn, the rights identified in Re Haughey did not come into play.

The final argument of the applicants was that they were in a position of an accused person and such a person had a right to have the book of evidence served upon him. Mr Justice Kelly said that on that analogy, the applicants could not be regarded as the equivalent of an accused person. This investigation was only at the same stage as a preliminary police investigation. There was no right in a potentially accused person to copies of statements made to police in the course of their investigation.

Both applications were dismissed.

Solicitors: Matheson Ormsby Prentice (Dublin) for the applicants; William Fry (Dublin) for the inspectors; Chief State Solicitor for the Minister for Enterprise and Employment.

CorrectionUltan Todd and Fionnuala Todd (plaintiffs) v Concetta Cinelli, Bruno Concelli, Newtown Developments Ltd, Brefni Plant Hire Ltd, Rafaele Cavallo and Paul McMahon (defendants).In the report of the High Court decision in the above case published on 12 April 1999 the name of the firm of solicitors for the fifth defendant was stated incorrectly. It should have read Noel O'Gorman & Co (Cavan) and not Noel O'Connor & Co (Cavan).Also, in column 3, in the last line of the 3rd paragraph, the sum for the total of items of agreed damages was erroneously stated to be £29,900. This figure should have been £39,800.