Legislation enabling the immediate liquidation of IBRC, the Irish Bank Resolution Corporation Act, was signed into law on 7 February 2013. On the same day, IBRC was placed in liquidation by a Ministerial Order made under the Act, called a Special Liquidation Order. Unlike other forms of liquidation, no court order or shareholder resolution was required to commence the liquidation. On the making of the order by the Minister for Finance, two joint Special Liquidators were appointed.
No other insolvency process can now be initiated against IBRC or in respect of any of its subsidiaries without the consent of the Special Liquidators.
Application of Companies Acts
The provisions of the Companies Acts governing the liquidation of companies apply to the special liquidation of IBRC, but with some key differences. The Special Liquidators have full custody and power over all the assets and undertaking of IBRC and the power to carry on its business insofar as may be necessary for the liquidation. These powers are subject to the right of the Minister for Finance to give instructions to the Special Liquidators as to the manner in which the liquidation is to be conducted. The terms and conditions of the Special Liquidators’ appointment and their reporting obligations are also subject to direction of the Minister for Finance.
The provisions of the Companies Acts which require a liquidator to report to and be supervised by the High Court (for compulsory liquidations) or creditors (for voluntary liquidations) are disapplied. The Special Liquidators can, however, apply to the High Court for directions on any question arising in the liquidation. Section 222 of the Companies Act 1963, as amended, is also disapplied. That section provides that where a winding up order has been made, no proceedings can be instituted or continued against the relevant company, except with leave of the court. The IBRC Act contains particular provisions dealing with the commencement and continuation of proceedings against IBRC. These provisions are discussed further below.
The provisions of the Companies Acts dealing with such matters as the scrutiny and, in certain cases, the reversal of certain pre-liquidation transactions, such as fraudulent preference and fraudulent disposition of assets (except for transactions in favour of the Central Bank), and contribution and pooling orders affecting related companies apply. Similarly, the liquidator’s powers to investigate the conduct of directors and officers apply, including the power to impose sanctions against defaulting persons.
Section 6(2)(a) of the IBRC Act confers an automatic stay on all court proceedings against IBRC. Section 6(2)(b) of the Act provides that no new proceedings can be commenced against IBRC without the prior consent of the High Court.
Section 6(2)(a) has been the subject of much attention since the Act was signed into law and has already been the subject of a court hearing in litigation pursued by the family of Seán Quinn against IBRC.
At that hearing it was argued on behalf of the Quinn family that the High Court had an inherent jurisdiction to lift the stay imposed by the IBRC Act. Counsel for the Quinn family submitted that section 6(2)(a) should be construed as meaning that a stay is imposed on litigation against IBRC unless and until an affected party applies to court to lift it. It was argued that as a person can apply to court for consent to issue new proceedings against IBRC (pursuant to 6(2)(b)), a person who issued proceedings against the bank prior to the enactment of the Act must have a similar entitlement in respect of continuing their proceedings.
It was also submitted that any other interpretation of the provision would breach the entitlement of citizens to equal access to the courts and, in such circumstances, the Quinn family indicated they would consider challenging the constitutionality of the IBRC Act.
IBRC agreed with the Quinn family that the section should be construed so that the stay was capable of being lifted by the court and submitted that sections 6(2)(a) and (b) should be construed harmoniously.Judgment was given on 15 March 2013 by Ryan J. The judge remarked that the distinction between section 6(2)(a) and 6(2)(b) was “puzzling” and that no sensible draftsman or legislator would provide for the deprivation of rights in such a case without providing any justifying context of circumstance or without establishing a basis for a distinction between existing and future litigants. He accepted that the long-established authorities on interpretation dictated a constitutionally sound and harmonious construction of the provision along the lines proposed by the parties. He concluded that a fair, proper and constitutional interpretation of the sections led to the inevitable conclusion that the stay was intended to be subject to being lifted on application to the High Court. Accordingly he lifted the stay.
This judgment is likely to have a significant impact on a number of cases currently before the High Court. Indeed, it is reported that up to one-third of existing cases pending before the commercial division of the High Court are against IBRC. Applications to lift the stay will have to be made in each individual case, but the outcome will be informed by this judgment.
View a previous article on the liquidation of IBRC here.