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Cite as: [2002] 2 IR 60, [2002] IESC 7

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Dunnes Stores Ireland Company v. Ryan [2002] IESC 7 (1st February, 2002)

THE SUPREME COURT
KEANE C.J.
DENHAM J.
MURPHY J.
MURRAY J.
HERBERT J.
280 & 291/00


BETWEEN
DUNNES STORES IRELAND COMPANY, DUNNES STORES
(ILAC CENTRE AND LIMITED) AND MARGARET HEFFERNAN
APPLICANTS/RESPONDENTS
AND
GERARD RYAN AND THE MINISTER FOR ENTERPRISE, TRADE AND EMPLOYMENT
RESPONDENTS/APPELLANTS
IRELAND AND THE ATTORNEY GENERAL
NOTICE PARTIES

[Judgments delivered by Keane C.J., Murray J. and Herbert J.; Denham J. and Murphy J. agreed with Murray J.]

JUDGMENT delivered the 1st day of February 2002 by Keane C.J.


Introduction

1. The facts in this case are largely not in dispute and can be summarised as follows. On the 11th September, 1997, the second named respondent/appellant (hereafter “the Minister”) wrote to the third named applicant/respondent (hereafter “Mrs Heffernan”) stating:

“The report of the Tribunal of Inquiry (Dunnes Payments) has disclosed a number of possible breaches of the Companies Acts 1963 - 1990. As I have responsibility for these Acts, I have decided that my department should proceed to make enquiries of certain companies to clarify what breaches did in fact take place ...”

2. The report referred to was that of a tribunal established under the Tribunals of Inquiries Acts, 1921 to 1998, of which the sole member was Mr. Justice McCracken. The remit of the Tribunal was to enquire into certain payments alleged to have been made to Mr. Charles Haughey T.D. and Mr. Michael Lowry T.D. It is not in dispute that payments had been made by the first and second named Applicants (hereafter “the companies”) to the two persons concerned and to companies with which they, or members of their family, were associated. This was found to be a fact by the Tribunal in its report and it is also not in dispute that the payments were made at a time when the companies were effectively under the stewardship of Mr. Ben Dunne. The payments came to light as a result of proceedings which were instituted by other shareholders and directors of the companies, including Mrs. Heffernan, against Mr. Ben Dunne. Those proceedings were ultimately the subject of a settlement between the parties. Mrs. Heffernan and her brother, Mr. Frank Dunne had also appointed a firm of accountants, Price Waterhouse, to carry out an independent inquiry into the manner in which the affairs of the company had been conducted under Mr. Ben Dunne’s stewardship. That report was made available both to His Honour Judge Buchanan, who at the request of the government carried out an initial inquiry into the question of the irregular payments, and to the tribunal presided over by Mr. Justice McCracken.


3. Following the receipt of the letter of 11th September from the Minister, Mrs. Heffernan wrote to her expressing her concern that the companies should be subjected to a further inquiry which, she claimed, was unnecessary and would result in further damaging publicity to the companies. There followed further correspondence between the companies and the Minister’s officials concerning her request, in which the companies, while indicating their willingness to co-operate with the Minister and furnishing her with any documents she required, expressed their anxiety at the wide ranging nature of the requests emanating from the Minister and the difficulties facing the companies in meeting her requests. Ultimately on the 22nd July, 1998, the Minister wrote as follows:-

“I now write to indicate that I have decided to appoint an authorised officer to examine the books and documents of (the companies) and to provide such explanations as are appropriate. The legal basis for the appointment to Dunnes Stores Ireland Company is paragraphs (a), (b)(ii), (b)(iii), (d), (f) of s.19 (2) of the Companies Act 1990, while that for the appointment to Dunnes Stores (Ilac Centre) Limited is paragraphs (a), (b)(ii), (f) of s.19 (2) of the 1990 Act. You may know that s. 21 of the 1990 Act contains very strict limitations on the publication or disclosure of any information obtained by me on foot of a s.19 examination of books and documents.”

4. The letter went on to state that the authorised officer was Mr. George Maloney, FCCA.


5. Mrs. Heffernan replied on the 22nd July expressing her surprise at the proposal to appoint an authorised officer, but on the same day, Mr. Maloney wrote to her informing her that he had been so appointed by warrants signed by the Minister on that day. The warrants were in the following terms:-

Companies Acts, 1963 - 1990
Warrant of appointment of authorised officer
I, Mary Harney, T.D., Tanaiste and Minister for Enterprise, Trade and Employment, pursuant to the powers vested in me under s. 19 of the Companies Act, 1990, and every other power me thereunto enabling, considering that there is good reason so to do, do hereby authorise George Maloney to require the company listed hereunder, being a body as defined in s. 19 (1) of the Companies Act, 1990, to produce the books and documents specified by him forthwith and to exercise all the necessary powers under the said Companies Act 1990.
Dunnes Stores Ireland Company.
Mary Harney T.D.
Tanaiste and Minister for Enterprise, Trade and Employment.
22 July, 1998”

6. Mr. Maloney wrote again on the 24th July, to Mrs. Heffernan enclosing a schedule of documentation which he said he required for the purposes of his examination.


7. On the 4th August, 1998, the companies were given leave by the High Court to apply by way of judicial review for orders of certiorari quashing the decisions of the Minister to appoint Mr. Maloney as an authorised officer pursuant to s. 19 of the 1990 Act on two principal grounds, i.e.

8. Mr. Maloney at a later date resigned and was replaced as the authorised officer by the first named respondent, Mr. Gerard Ryan, and the alleged conflict of interest accordingly ceased to be of any relevance.


9. A statement of opposition having been filed on behalf of Mr. Maloney and the Minister, the hearing of the substantial issues came on before Laffoy J. In a reserved judgment, reported sub nom Dunnes Stores Ireland Company and Others -v- Maloney and Anor at (1999) 3 I.R. 543, Laffoy J granted the relief sought on the ground that the companies were entitled to be informed of the reasons which formed the basis of the Minister’s decision to appoint an authorised officer, saying:-

“In my view, this is a case in which procedural fairness requires that the Minister give reasons for her decision. The applicants have demonstrated a bona fide belief that the Minister has misused her powers in appointing an authorised officer. Whether that belief is well founded or not, they are entitled to explore the possibility of obtaining redress by way of judicial review. They have made a bona fide request for reasons. In the absence of reasons, they cannot explore the possibility of, or pursue redress by way of judicial review.”

10. Laffoy J. also held that the extent of the demand for documents made by the authorised officer was excessive and unreasonable, saying:-

“Without knowing the reasons why the Minister thought it appropriate to appoint an authorised officer, it is impossible to form any view as to whether even the categories of documents sought which are specific fall within the ambit of the entitlement to seek documents under s. 19. The inclusion of the categories which are of a general nature gives the demand as a whole the hallmark of a trawl. That being the case, the only reasonable inference is that the demand was excessive in content.”

11. While concluding that the companies were entitled to the relief which they claimed, Laffoy J. placed a stay on the orders until a specified date in order to enable the Minister, if so minded, to give reasons for her decision. On the 27th November, 1998, Mr. Paul Appleby, Principal of the Company Law Administration Section of the Minister’s department swore an affidavit, the Schedule to which set out the purported reasons for the appointment of the authorised officer.


12. Under the heading, Dunnes Stores Ireland Company s.19 (2)(a)” , the Schedule stated :-

“The circumstances outlined under the following headings give substantial cause for concern as to the standards of corporate governance operating in Dunnes Stores Ireland Company and suggest that it is necessary to examine the books and documents of the company to determine whether an inspector should be appointed to conduct an investigation of the body under the Companies Acts.”

13. Under the heading “ s. 19 (2)(b)(ii) of the 1990 Act ”, the Schedule states:-

“There are circumstances suggesting that the affairs of the body have been conducted with intent to defraud the creditors of any other person, in this case the Revenue Commissioners, as follows ...”

14. There follow details of two payments of £395,107 from Dunnes Stores Ireland Company to finance improvements to Mr. Lowry’s house at Holycross and of £27,502.75 from the same company via the Bank of Ireland Marino to Mr. Lowry. In both cases, the report of Mr. Justice McCracken is cited as indicating that these payments were made to assist Mr. Lowry evade tax. It is then stated that:-

“In the circumstances, it is necessary to examine the books and documents of Dunnes Stores Ireland Company to determine whether or not payments by or on behalf of the company were made for the purpose of further defrauding the Revenue Commissioners or the creditors of any other person.”

15. Under the heading “ s. 19(2)(b)(iii), s. 19(2)(d) (of the 1990 Act )”, the Schedule states:-

“There are circumstances suggesting that the affairs of Dunnes Stores Ireland Company have been conducted with intent to defraud its members or in a manner which is unfairly prejudicial to some part of its members.”

16. There follow references to passages in the report of Mr. Justice McCracken disclosing that a large number of payments were made to various parties from an account in the Marino branch of the Bank of Ireland, which were acknowledged to be the property of Dunnes Stores. It was pointed out that some 63% of the payments were found by the Buchanan Report to have been made beneficiaries could not be identified. The report of Mr. Justice McCracken is also cited as indicating that profits of two companies associated with Dunnes Stores in the far east were remitted to a company called Tutbury Limited which was under the control of Mr. Ben Dunne. The report of Mr. Justice McCracken is also cited as indicating that payments of £182,632 sterling and £282,500 sterling were made from Dunnes Stores (Bangor) Limited for the benefit of Mr. Charles Haughey were which subsequently lodged to a suspense account of the Dunnes Stores Ireland Company, but that no benefit had been received by the Dunnes Stores Group in respect of these payments. This part of the Schedule concludes as follows:-

“Conclusion 37 of McCracken (page 73) indicates inter alia that the large majority of payments considered in its report were made by Mr. Ben Dunne without the knowledge or approval of his co-shareholders. In the circumstances, it is necessary to examine the books and documents of Dunnes Stores Ireland Company to determine whether or not the affairs of the company had been conducted with intent to defraud its members or in a manner which was unfairly prejudicial to some part of its members.”

17. Under the heading “ s. 19(2)(f) of the 1990 Act ”, the Schedule states that there are circumstances suggesting that a series of acts or omissions of the body or are likely to be unlawful. The particulars given of this are the payments already mentioned from the Marino account, payments made to Streamline Enterprises for the benefit of Mr. Michael Lowry, three payments from Dunnes Stores Ireland Company totalling £180,000 and payable to cash, the ultimate beneficiaries of which were apparently a company called Celtic Helicopters Limited and Mr. Desmond Traynor and the failure of Dunnes Stores Ireland Company to obtain auditor’s certificates for the financial period ended 31st December, 1992 and a number of subsequent years. The McCracken Report was also cited for the conclusion that the payment to Streamline Enterprises had been made contrary to the then existing exchange control legislation. This part of the Schedule concludes:-

“In the circumstances, it is necessary to examine the books and documents of Dunnes Stores Ireland Company to determine whether or not the acts or omissions of the company or on behalf of the company are or are likely to be unlawful.”

18. Under the heading “ Dunnes Stores (Ilac Centre) Limited; s. 19(2)(a) of the 1990 Act ”, the Schedule states:-

“The circumstances outlined under the following headings gives substantial cause for concern as to the standards of corporate governance operating in Dunnes Stores (Ilac Centre) Limited and suggest that it is necessary to examine the books and documents of the company to determine whether an inspector should be appointed to conduct an investigation of the body under the Companies Acts.”

19. Under the heading “ s. 19(2)(b)(ii) ”, it is stated that:-

“The following circumstance suggest that the affairs of the body have been conducted with intent to defraud the creditors of any other person, in this case the Revenue Commissioners....”

20. There follow references to the payments already referred to of £395,107 to finance the improvements to Mr. Lowry’s house.

21. Under the heading “ s .19(2)(f) ”, the Schedule finally states that:-

“The following circumstance suggest that an act or an omission of the body is or is likely to be unlawful...”

22. There is then a further reference to the payments of £395,107 in respect of the improvements to Mr. Lowry’s house, which, it is stated, appeared to have been falsely charged as capital expenditure in the accounts of Dunnes Stores (Ilac Centre) Limited. The Schedule concludes:-

“In the circumstances, it is necessary to examine the books and documents of Dunnes Stores (Ilac Centre) Limited to determine whether or not the acts or omissions of the company or on behalf of the company are or likely to be unlawful.”

23. The applicants/respondents were dissatisfied with the reasons as thus set out in the Schedule. They also claimed that the Minister’s department was disseminating information which it was obtaining from the applicants/respondents to the media without their consent. In addition, they claimed that the demand made by the Minister for the production of documents was unreasonable both in its extent and the time allowed for compliance and that the applicants feared that it would be used as the justification for the criminal prosecution of the applicants/respondents and an application for a search warrant with attendant unfavourable publicity.


24. On the 22nd December, 1998, the Minister’s department responded to a request pursuant to the Freedom of Information Act 1997 by the applicants/respondents as to the reasons of the Minister for appointing an authorised officer. This included a memorandum by Mr. Paul Appleby circulated inter alia to the Minister in which he stated that :-

“We have been considering for some weeks now whether or not to initiate an investigation of [the companies]. The primary options are:-

25. In the course of the memorandum Mr. Appleby said:-

“I now favour the use of s.19 in the cases of [the companies]... While s.19 allows for the examination of the books and documents of [the companies] and for explanations to be sought of past and present officers, its scope is clearly not as wide as a s.8 appointment. Nevertheless, a decision on this basis should make some progress and should improve the quality and quantity of information on the companies. The one major advantage of this approach is that if it were to be judicially reviewed (a likely possibility), we would have a very strong defence and a positive decision on any such appeal would make it very difficult for the parties involved to refuse co-operation with the authorised officer. If circumstances demanded an s.8 application at a later date, we would, it is considered, have stronger grounds to make such an approach.”

26. Following a request by the first named respondent for a meeting with officers of the companies to discuss the provision of books and documents, the solicitors for the companies, on the 6th January, 1999, sought a meeting with the first named respondent. This suggestion was rejected by the first named respondent. On the 18th January he wrote to Mrs. Heffernan requesting the production of various categories of documents.

27. The present proceedings were then instituted beginning with an application to the High Court for leave to apply by way of an application for judicial review for specified reliefs. These proceedings, in addition to seeking inter alia relief by way of certiorari quashing the decision of the Minister to appoint the authorised officer, also claimed declarations that the provisions of s.19(5) and (6) of the 1990 Act were invalid having regard to Articles 38.1 and 40.1 of the Constitution.


28. The High Court having given the leave sought by the applicants, a statement of opposition was filed on behalf of the respondents. The hearing of the motion having come on before the High Court, the claim on behalf of the applicants that the appointment by the Minister of the first named respondent as an authorised officer was invalid was rejected. It was also concluded, however, that the first named respondent had acted unreasonably in requiring the books and records specified by him and, since that relief had not been claimed on behalf of the applicants, they were given liberty to amend their statement of grounds so as to include that claim. The High Court judge made no finding as to the constitutionality of the 1990 Act and an appeal was brought to this court. This court set aside the order of the High Court in its entirety, in a written judgment delivered on the 8th of February 2000, and the proceedings were remitted to the High Court for a determination of the issues in respect of which leave to apply for judicial review was granted including, if necessary, the constitutional issue.


29. That hearing came on before Butler J. in the High Court and the evidence adduced at the hearing consisted of, in addition to evidence on affidavit, a transcript of the evidence at the earlier hearing in the High Court. In a written judgment delivered on the 29th of July 2000, the learned High Court judge concluded that the applicants/respondents were entitled to an order of certiorari in respect of the decision of the Minister purporting to appoint an authorised officer to examine the books and records of the companies and the decision of the first named respondent by which the first named respondent purported to require from Mrs Heffernan the books and records set out in a letter dated the 18th of January 1999. From that judgment and order, the first named respondent and the Minister now appeal to this court.


The High Court Judgment

30. In his judgment, Butler J. having set out the relevant statutory provisions, said that the essential issue was as to whether the reasons ultimately furnished by the Minister sustained her decision to appoint an authorised officer. He found that there was no evidence that it was “necessary” to examine the books and documents of the company in order to determine whether an inspector should be appointed to conduct an investigation of Dunnes Stores Ireland Company under the Companies Acts. He further found that the reason given by the Minister that it was necessary to examine the books and documents of the same company in order to determine whether payments by or on behalf of the company were made for the purpose of further defrauding the Revenue Commissioners or the creditors of any other person was unsustainable. The learned judge said that the Minister had no right to pass on any information gained as a result of such an examination, since the revenue was not listed as a “competent authority” under s.21 of the 1990 Act, which empowers the Minister to furnish information obtained as a result of such an examination to a number of specified bodies.


31. As to the Minister’s statement that there were circumstances suggesting that the affairs of the company had been conducted with intent to defraud its members or in a manner which was unfairly prejudicial to some part of its members, the learned judge accepted the contention made on behalf of the applicants/respondents that it was “stretching credulity too far” to contend that the Minister had appointed an authorised officer out of concern for members of the Dunnes family who, long before the 22nd July 1998, had compromised their differences and gone their separate ways. He rejected as invalid the reason given by the Minister that she was entitled to examine the books and documents of Dunnes Stores Ireland Company because of unlawful acts or omissions on the part of Dunnes Stores Ireland Company, i.e. their breach of exchange control legislation and their failure to obtain auditor’s certificates for a number of specified periods. He held that the provisions of s.19(2)(f) merely entitled the Minister to make an appointment in respect of acts or omissions which are or are likely to be unlawful and that this envisaged contemporaneous or ongoing illegality and not illegality which had happened in the past.


32. The learned judge said that in deciding whether the Minister had acted unreasonably in making the appointment on these grounds he had applied the test laid down by this court in The State(Keegan) -v- Stardust Victims Compensation Tribunal (1986) I.R. 642.


33. The learned High Court judge went on in his judgment to consider the other grounds on which leave had been granted to seek judicial review, but said that he was satisfied that the applicants/respondents had not established that the Minister had failed to have due regard for the principles of natural and constitutional justice and/or fairness, had undertaken an enquiry which was disproportionate and excessive in its ambit or had served a demand for documentation which was unreasonable and/or ultra vires and/or vexatious.


34. However, having reached the conclusion that the appointment of the authorised officer was unlawful the learned judge was of the view that he should not go on to consider whether the relevant provisions of the 1990 Act were invalid having regard to the provisions of the Constitution. It is not contested that his decision not to do so was in accordance with the accepted jurisprudence of this Court.


Submissions of the Parties

35. It was submitted on behalf of the appellants/respondents that the Minister was entitled to appoint the authorised officer where she was of the opinion that there were “circumstances suggesting” that it was necessary to examine the books and documents of the body with a view to determining whether an inspector should be appointed to conduct an investigation under the Companies Acts and that the various payments referred to in the Report of Mr Justice McCracken constituted such circumstances. It was further submitted that the fact that the Revenue Commissioners were not a “competent authority” did not preclude the Minister from appointing the officer on the ground that the affairs of both companies were being conducted with intent to defraud the Revenue Commissioners, who were clearly “creditors of another person” within the meaning of s.19(2)(v)(ii). The Revenue were entitled to be supplied with information pursuant to s.21(1) of the 1990 Act with a view to the institution of criminal proceedings. That was confirmed by the fact that the Director of Public Prosecutions was also not named as a “competent authority” under s.21(1).

36. It was further submitted that the making of a complaint by any members of a company was not a necessary precondition to an authorised officer being appointed where there was a concern that the affairs of the company were being conducted with the intent of defrauding any of its members. It was also submitted that there was in any event no evidence of proceedings concerning differences between members of the company - as distinct from members of the Dunne family - having been previously compromised.


37. It was further submitted that the fact that the relevant wrongdoing had been committed in the past did not prevent s.19(1)(f) from having effect. A completed act, it was said, does not cease to be unlawful once it has been committed: it is in a continuing state of unlawfulness.


38. It was finally submitted that the finding by the learned High Court Judge that the decision of the Minister to appoint an authorised officer “plainly flew in the face of fundamental reason and common sense” within the formulation in Keegan was wholly dependent on his construction of s.19(2). If, as was submitted on behalf of the first named respondent and the Minister, his construction of the provisions, as they are to be applied to the present case, was erroneous, then the appointment was clearly justified and the criteria laid down in Keegan were not relevant.


39. It was submitted on behalf of the applicants/respondents that the Oireachtas clearly did not intend a direction under s.19 or the appointment of an authorised officer to be a licence to range at will through the books and records of a company. Where, as here, an authorised officer had been appointed, he had to identify specific documents to be produced: he could not be appointed so as to conduct what Laffoy J. had correctly described as a “trawl” through the company’s books and documents. It was clear from the documents discovered under the Freedom of Information Act, 1997 that the Minister did not require the production of books and documents so as to ground an application to the Court for the appointment of an inspector: she had deliberately chosen to go down the route of an application under s.19 because, on the advice of her officers, she thought it would be more immune to a judicial review challenge.


40. As to the claim that the examination of the books and records was required in order to determine whether or not payments had been made for the purpose of defrauding the Revenue Commissioners, it was submitted that the Minister had no functional responsibility for tax collection and that there was nothing to indicate that there was any concern on the part of the revenue as to the tax status of the applicants/respondents: it had been expressly conceded on behalf of the Minister that there had been no evasion of tax by any of the companies in the group.

41. It was further submitted that it had never been contended on behalf of the applicants/respondents that an appointment could only be made on the grounds specified in s.19(2)(b)(iii) where the members of the company had lodged a complaint: merely that, in determining whether the decision of the Minister was rational and factually sustainable, the court was bound to have regard to the fact that the members of the companies concerned had compromised their differences and there was no longer any ground for holding that the company was being conducted in a manner which required any intervention by the Minister. It was also submitted that the contention on behalf of the Minister that there was no evidence that the members of the Dunne family were in fact members of the company, was a wholly unjustifiable attempt to bolster the reasons already furnished by the Minister: it had been uncontroverted at every stage of these and the earlier proceedings that the applicant/respondent companies are members of the Dunnes Stores Group and that the ownership of that group is ultimately vested in the surviving members of the Dunne family, with the exception of Mr Ben Dunne.


42. It was further submitted that the learned High Court judge was correct in his construction of s.19(2)(b): the draftsman must be presumed to have deliberately used the present tense in that provision, in contrast to the past tense used in the other provisions and, accordingly, it is properly construed as having regard to ongoing unlawfulness.

43. As to the submission that the applicants/respondents were estopped from challenging the validity of the appointment by virtue of the letters written by their solicitor on 5th and 6th January 1999, it was submitted that this was without any legal foundation: the first named respondent and the Minister would have to demonstrate that they had acted in some way to their detriment on the faith of the alleged representations and a delay of some ten working days in seeking to act on foot of the purported appointment could not conceivably be regarded as such detriment.


The Applicable Law
Section 19 of the 1990 Act provides inter alia
“(1) the Minister may, subject to sub-section (2), give directions to ...
requiring the body, at such time and place as may be specified in the directions, to produce such books or documents as may be so specified, or may at any time, if he thinks there is good reason so to do, authorise any officer of his, on producing (if required so to do) evidence of his authority, to require any such body as aforesaid to produce to him forthwith any books or documents which the officer may specify.
(2) directions may be given by the Minister if he is of the opinion that there are circumstances suggesting that
(i) its creditors,
(ii) the creditors of any other person,
(iii) its members; or

44. The section goes on to provide in s.s.(5) that it is to be a criminal offence for a person or body not to comply with the requirements made under the section.


S.21 of the 1990 Act provides that no book or document obtained under s.20 is to be published or disclosed without the consent in writing of the body concerned except to a “competent authority” unless publication or disclosure is required for one of a number of specified purposes. These are, broadly speaking, the institution of criminal proceedings in relation to companies, the Exchange Control Acts, 1954-1986, or the Insurance Acts, 1909-1990, complying with requirements made with respect to reports by inspectors appointed under the Act, the institution by the Minister of proceedings for the winding up of a body and proceedings under s.20, relating to the entry and search of premises.

45. The expression “competent authority” is defined in sub-section (3), but does not include the Revenue Commissioners: they were, however, added as a competent authority by s.21 of the Companies (Amendment) Act, 1999.


Conclusions

46. Although the powers conferred on the Minister by s.19 may be availed of as a preliminary to the appointment of an inspector by the High Court to conduct an investigation of a company under the Companies Acts, it is clear that this is not the only context in which those powers may be invoked. The Oireachtas has given the Minister a general supervisory jurisdiction over companies formed under the Acts and undoubtedly one of the most important powers which he or she enjoys is that of applying to the High Court for the appointment of an inspector under s.8(1) of the 1990 Act. However, the Acts - and, in particular, the 1990 Act - also confer other important powers on the Minister, including the power to investigate the ownership of companies (s.14) and to obtain a search warrant from the District Court and seize books or documents whose production has been required under other provisions (s.20). The Minister is also normally the prosecuting authority in respect of summary offences created by the Acts.


47. The Oireachtas thus has assigned to the Minister, as the appropriate officer of State, significant powers to ensure that companies incorporated under the Act do not abuse the privileges which incorporation confers on them to the detriment of their members, their creditors or indeed the public in general. That has been a recognised function of the Minister and her statutory predecessor since the first decade of the twentieth century.


48. Such statutory powers can only be exercised for the purposes for which they have been granted and, as Laffoy J. held in Dunnes Stores Ireland Company and Ors -v- Maloney and Anor ., they are liable to be set aside by the High Court in judicial review proceedings where their invocation is not justified. In particular, the exercise by the Minister of the powers conferred by the section can be set aside when the reasons given for invoking the section make it clear that they are being used for a purpose not contemplated by the Oireachtas. It is also clear that they can be set aside where, as indicated by this court in Keegan, the relevant authority has sought to operate them in a patently irrational fashion.


49. The power conferred on the Minister by s.19 is two fold: either to direct herself the production by the company of the specified books or documents or, if she thinks there is good reason so to do, to authorise any of her officers to require the body to produce books or documents specified by that officer. While the limitations indicated by s.s.(4) as to the circumstances in which the Minister may properly give such directions do not, in terms, extend to the appointment of an authorised officer under s.s.(4), it seems unlikely in the extreme that the draftsman envisaged that the Minister, by appointing an authorised officer rather than by giving directions herself, could secure the production of books or documents in circumstances other than those set out in s.s.(2). However, in any event, the reasons given in the Schedule for the appointment of the first named respondent all relate to the circumstances specified in s.s.(2).


50. The first of these is - adopting the wording of s.19(2)(a) - the circumstances outlined under the heading which follow which, it is said, gave substantial cause for concern as to the standards of “corporate governance” operating in Dunnes Stores Ireland Company and suggested that it was necessary to examine the books and documents in order to determine whether an inspector should be appointed to conduct an investigation under the Companies Acts. This reason, of itself, couched as it is in such general terms, could not justify the appointment of the authorised officer and, as its wording suggests, it is necessary to examine the reasons subsequently given to determine whether they afford a sufficient basis for the appointment.


51. The first of the following grounds is that there are circumstances suggesting that the affairs of Dunnes Stores Ireland Company have been conducted with intent to defraud the creditors of another person, i.e. the Revenue Commissioners. Assuming that the Revenue Commissioners are properly described as a “creditor” of a person who is in default in the payment of tax, I am satisfied that the stated reason could not have afforded any basis for the appointment of an authorised official to examine the books and records of the company. Mr Justice McCracken had found in his report that the relevant payments had been made by the company in order to assist Mr Lowry to evade tax and an examination of the books and documents of the company was superfluous if it was for the purpose of establishing whether the payments had been made for that purpose. While it may be possible to envisage circumstances in which even the ample powers available to the Revenue Commissioners are not sufficient to enable them to ascertain whether the affairs of a company are being carried out in order to evade the payment of tax, and the examination by the Minister of the books and documents of the company may in the result be justified under s.19(2)(b)(ii), this was certainly not such a case.


52. The next reason is that there are circumstances suggesting that the affairs of the company have been conducted with intent to defraud its members or in a manner which is unfairly prejudicial to some part of its members. It is, of course, not in dispute that there were serious differences between the members of the Dunne family as to the manner in which the affairs of the Dunnes Stores Group of companies had been conducted during the period of Mr. Ben Dunne’s stewardship. Those differences led to proceedings in the High Court which were ultimately the subject of a compromise. Since then, Mr Ben Dunne has severed his links with the Dunnes Stores Group of companies. There is no indication of any sort that any of the members of this company or any of the Dunnes Stores Group of companies have any continuing concern with the manner in which their affairs were conducted in the past. It might seem surprising that powers conferred by the Oireachtas on the Minister to interfere in the affairs of a private company by examining their books and documents could be invoked in circumstances where none of the members had any complaints as to the manner in which its affairs were being conducted and any complaints that existed in the past had been the subject of a final settlement. It is to be noted, however, that the Minister’s powers under the section arise, not merely where the affairs of the body are being , but also where they have been , conducted in such a manner. I shall return at a later point to the question as to whether the circumstances were such as to justify the Minister’s invocation of her powers on this particular ground.


53. The next reason given was that there were circumstances suggesting that a series of acts or omissions of the body “are or are likely to be unlawful”. The first category of acts or omissions relied on are the payments made from the Marino branch of the Bank of Ireland to beneficiaries some of whom have not been identified. The same suggestion is made in respect of the payments to Streamline Enterprises, Celtic Helicopters Limited and Mr Desmond Traynor. It is also suggested that the payments to Streamline Enterprises may have been made contrary to exchange control legislation in force at the time. It is also stated that Dunnes Stores Ireland Company failed to obtain auditor’s certificates for a number of subsequent years.


54. The Minister is the competent prosecuting authority in respect of summary offences created by the Companies Acts. If offences in relation to the keeping of proper books of accounts or the laying of audited accounts before the Annual General Meeting of the company in each calendar year have been committed by the company, she is the appropriate body to institute such proceedings. While she has no function in relation to the exchange control legislation which was in existence at the time of the payments to Streamline Enterprises, she is in a position to furnish to the appropriate authorities the information in her possession as to the apparent breach of those regulations, if indeed those authorities are not already aware of the possible breaches since they are manifestly in the public domain as a result of the publication of Mr Justice McCracken’s report. There is no indication as to what purpose would be served in this context by an examination of the books and documents of the company by an authorised officer. There is no suggestion in the Schedule that, at the time the Minister appointed the authorised officer, the company was not keeping proper books of account, was not laying its audited accounts before the Annual General Meeting or was acting in breach of the exchange control regulations. The language used in s.20(2)(f), using as it does the present tense in contrast to the past tense employed in other subparagraphs, makes it clear that the examination of books or documents authorised under that subparagraph is related to continuing or future illegal acts or omissions of the company and not to acts or omissions which have occurred in the past. I am satisfied this reason affords no basis for the appointment of an authorised officer to examine the books and documents of the company.


55. There remains the question as to whether the invocation by the Minister of her powers on the ground that there were circumstances suggesting that the affairs of the company had been conducted in a manner which was unfairly prejudicial to some part of the members was justified.


56. The purpose of an inspection in such circumstances is not solely to determine whether the affairs are being so conducted: the power may arise in a case where, as here, it is beyond argument that they had been so conducted in the past. They may be invoked in such circumstances because the Minister, in the exercise of her supervisory jurisdiction over companies, may be concerned to establish how such a misuse of the privilege of incorporation took place with a view to ensuring, so far as possible, that similar abuses do not take place in this, or indeed any other companies regulated by the Acts, in the future.


57. The argument advanced on behalf of the applicants/respondents, while superficially attractive, rests essentially on the fallacious proposition that, because the controlling shareholders in the companies have taken the necessary steps to put an end to the conduct of the companies which they regarded as detrimental to their commercial interests, the interest of the Minister is also at an end. That is clearly not so: the Minister remains under a statutory duty to take whatever steps are open to her to satisfy herself as to the reasons which led to the use by the person then in control of those assets for purposes which, in terms of the relevant Acts and the constitution of the companies concerned, were clearly unlawful. It is unnecessary to embark in this case on a consideration of the circumstances, frequently a matter of controversy, in which payments may be made on behalf of a company which are of no discernible, immediate and direct benefit to the company: it is sufficient to say that, in the light of the findings of Judge Buchanan and Mr. Justice McCracken the payments made in the present case could not be regarded as having any conceivable legal justification.


58. The Minister was clearly entitled to conclude that an examination carried out by her of the books and records of the company would throw greater light on an issue which was not of any great significance in the context of the inquiry being conducted by Mr. Justice McCracken, i.e., as to how, given the complex and detailed requirements of the legislation as to the keeping of records by companies, the auditing of their accounts and the access of directors to the companies records, it was possible for these payments to be made without the knowledge or approval of the other directors and the companies auditors. The results of such an examination might, in turn, lead the Minister to the conclusion that the existing safeguards, however detailed, in the legislation against such abuses of the privilege of incorporation, were not adequate. The fact that the conduct which the other directors and shareholders saw as being inimical to the their interests had now ceased would not necessarily be a relevant factor in the Minister’s determination as to whether such an inquiry should be undertaken by her.


59. That inquiry is justified, in terms of the section, where inter alia there are circumstances suggesting that the affairs of the body have been conducted in a manner which was unfairly prejudicial to some part of its members. That precondition was, beyond argument, fulfilled in the present case.


60. The documents sought pursuant to s.19 are described in a letter dated 18th January 1999 from Mrs. Gerard Ryan to Mrs. Margaret Heffernan as follows:


“(I) All documentation relating to all payments from the period of incorporation to 31st December 1994 in excess of £5,000 made by or charged to Dunnes Stores Ireland Company which had been brought to the attention of the directors or auditors of the company and for which value was not received by the company.
(II) All documentation and correspondences relating to all issues which were relevant to the delay, until 1988, by the auditors in signing the auditors reports of Dunnes Stores Ireland Company for the years 1990 - 1994:
(III) All documentation relating to all transfers of monies from Dunnes Stores Ireland Company through the bank account, referred to in the report of the tribunal of inquiry (Dunnes payments) as the “Marino account” together with all documentation relating to rebates due to Dunnes Stores Ireland Company which monies were directed by Mr. Bernard Dunne into the “Marino account” up to the end of 1994:
(IV) Copies of the audited accounts of Dunnes Stores Ireland Company for all the years since its incorporation.”

61. It may be that this requirement which is couched in necessarily general terms may cause particular problems for the companies in some areas: if that is the case, any difficulties can be identified by the companies and I see no reason to suppose that the authorised officer, if satisfied that the difficulties were real, would not endeavour to meet any legitimate concerns of the company. I am satisfied that the range of documents sought is not unduly extensive, having regard to the scale of the misuse of the company’s assets which has already been identified.

62. In the judgment which he will delkiver this morning, Herbert J analyses the circumstances in which the Minister may give a direction such as was given in this case in exclusive reliance on s 19(2)(a) of the 1990 Act. I agree entirely with what he says and have nothing to add. In his judgment, Murray J discusses the question as to whether this court should consider the question of the constitutionality of an Act even where the case can, as here, be disposed of on other grounds. I agree that this matter may require reconsideration: I am also of the view that any such reconsideration should extend to the question as to whether the High Court is necessarily and invarianbly precluded from reaching the constitutional issue where the case can be decided on other grounds. I would, however, reserve both questions to a case in which they are fully argued.


63. I would, accordingly, allow the appeal on those grounds. Since, however, the issue as to the constitutionality of the relevant statutory provisions remains to be determined, I would remit the matter to the High Court so that that issue can be resolved.

THE SUPREME COURT
Record No. 280/00
Keane, C.J.
Denham, J.
Murphy, J.
Murray, J.
Herbert, J.

BETWEEN
DUNNES STORES IRELAND COMPANY, DUNNES STORES
(ILAC CENTRE AND LIMITED) AND MARGARET HEFFERNAN

Applicants/Respondents

AND

GERARD RYAN AND THE MINISTER FOR ENTERPRISE, TRADE AND EMPLOYMENT
Respondents/Appellants

IRELAND AND THE ATTORNEY GENERAL
Notice Parties


Judgment delivered the 1st day of February, 2002, by Murray, J.

64. By letter dated the 22nd July, 1998 the Second Named Respondent/Appellant (hereafter “The Minister”) wrote to the Third Named Applicant/Respondent,

65. Mrs Margaret Heffernan, informing her of her decision to appoint an authorised officer to examine books and documents of the First and Second Named Applicants/Respondents pursuant to Section 19 of the Companies Act 1990.

66. In these proceeding the Applicants/Respondents (hereafter Dunnes) have challenged the lawfulness of that decision. In the proceedings before the High Court, the learned High Court Judge found in favour of Dunnes and held that the appointment of the First Named Respondent for the purposes of Section 19 of the Act was ultra vires the powers of the Minister.

67. Issues concerning the constitutionality of this section were also raised in the High Court and the learned trial Judge, in accordance with established practice, found it unnecessary to consider this issue having regard to his determination, that, as a matter of law, the appointment in question was ultra vires the powers of the Minister under the Act. Accordingly, there is no issue concerning the constitutionality of the section before this Court.

68. While I propose to refer to certain essential facts of the case, I adopt the summary of them and of the submissions of the parties which the Chief Justice has set out in his judgment.


Legislative Provisions

69. The provisions of the 1990 Act which are material to the issues in this case are set out hereunder: -

1(2) This Act and the Companies Acts, 1963 to 1986 may be cited together as the Companies Acts, 1963 to 1990.
(Where appropriate, I will refer to them hereafter as the ‘Companies Acts).

8-(1) Without prejudice to its powers under section 7, the court may on the application of the Minister appoint one or more competent inspectors to investigate the affairs of a company and to report thereon in such manner as the court shall direct, if the court is satisfied that there are circumstances suggesting

(a) that its affairs are being or have been conducted with intent to defraud its creditors or the creditors of any other person or otherwise for a fraudulent or unlawful purpose or in an unlawful manner or in a manner which is unfairly prejudicial to some part of its members, or that any actual or proposed act or omission of the company (including an act or omission on its behalf) is or should be so prejudicial, or that it was formed for any fraudulent or unlawful purpose; or

(b) that persons connected with its formation or the management of its affairs have in connection therewith been guilty of fraud, misfeasance or other misconduct towards it or towards its members; or

(c) that its members have not been given all the information relating to its affairs which they might reasonably expect.

(2) (a) The power conferred by section 7 or this section shall be exercisable with respect to a body corporate not withstanding that it is in course of being wound up.

(b) The reference in subsection 1) (a) to the members of a company shall have effect as if it included a reference to any person who is not a member but to whom shares in the company have been transferred or transmitted by operation of law.


19.-(1) The Minister may, subject to subsection 2), give directions to any body being -
(a) a company formed and registered under the Companies Acts;

(b) an existing company within the meaning of those Acts;

(c) a company to which The Principal Act applies by virtue of section 325 thereof or which is registered under that Act by virtue of Part IX thereof;

(d) a body corporate incorporated in, and having a principal place of business in, the State, being a body to which any of the provision of the said Act with respect to prospectuses and allotments apply by virtue of section 377 of that Act;

(e) a body corporate incorporated outside the State which is carrying on business in the State or has at any time carried on business therein;
(f) any other body, whether incorporated or not, which is, or appears, to the Minister to be, an insurance undertaking to which the Insurance Acts, 1909 to 1990, or regulations on insurance made under the European Communities Act, 1972, would apply,

requiring the body at such time and place as may be specified in the directions, to produce such books or documents as may be so specified, or may at any time, if he thinks there is good reason to do so, authorise any officer of his, on producing (if required so to do) evidence of his authority, to require any such body as aforesaid to produce to him forthwith any books or documents which the officer may specify.

(2) Directions may be given by the Minister if he is of the opinion that there are circumstances suggesting that -

(a) it is necessary to examine the books and documents of the body with a view to determining whether an inspector should be appointed to conduct an investigation of the body under the Companies Acts; or

(b) that the affairs of the body are being or have been conducted with intent to defraud -

(i) its creditors,
(ii) the creditors of any other person, or
(iii) its members; or

(c) that the affairs of the body are being or have been conducted for a fraudulent purpose other than described in paragraph b); or

(d) that the affairs of the body are being or have been conduced in a manner which is unfairly prejudicial to some part of its members; or

(e) that any actual or proposed act or omission or series of acts or omissions of the body or on behalf of the body are or would be unfairly prejudicial to some part of its member; or

(f) that any actual or proposed act or omission or series of acts or omission of the body or on behalf of the body are or are likely to be unlawful; or

(g) that the body was formed for any fraudulent purpose;
or

(h) that the body was formed for any unlawful purpose.

(3) Where by virtue of subsection (1) the Minister or an officer authorised by the Minister has power to require the production of any books or documents from any body, the Minster or officer shall have the like power to require production of those books or documents from any person who appears to the Minster or officer to be in possession of them; but where any such person claims a lien on books or documents produced by him, the production shall be without prejudice to the lien.

(4) Any power conferred by or by virtue of this section to require a body or other person to produce books or documents shall include power -

(a) if the books or documents are produced -
(i) to take copies of them or extracts from them; and

(ii) to require that person, or any other person who is a present or past officer of, or is or was at any time employed by, the body in question, to provide an explanation of any of them;

(b) it the books or documents are not produced, to require the person who was required to produce them to state, to the best of his knowledge and belief, where they are.

(5) If a requirement to produce books or documents or provide an explanation or make a statement which is imposed by virtue of this section is not complied with, the body or other person on whom the requirement who so imposed shall be guilty of an offence but where a person is charged with an offence under this subsection in respect of a requirement to produce any books or documents, it shall be a defence to prove that they were not in his possession or under his control and that it was not reasonably practicable for him to comply with the requirement.

(6) A statement made by a person in compliance with a requirement imposed by virtue of this section may be used in evidence against him.

(7) Nothing in this section shall prevent the Minister from authorising a person other than an officer of his to exercise the functions which an officer of his may exercise under this section and, where the Minister so authorises, such person shall have the same rights, duties and obligations as if he were such officer.


The appointment of the authorised officer

70. It is the decision of the Minister on the 22nd July, 1998 to appoint an authorised offer pursuant to Section 19 of the 1990 Act that is in issue in these proceedings. On that date the Minister wrote to the Third Named Applicant/Respondent in the following terms: -

“... I now write to indicate that I have decided to appoint an authorised office to examine the books and documents of Dunnes Stores Ireland Company and Dunnes Stores (Ilac Centre) Ltd and to provide such explanations as are appropriate. The legal basis for the appointment to Dunnes Stores Ireland Company is paragraph (a), (b)(ii), (b)(iii), (d) and (f) of Section 19 (ii) of the Companies Act 1990, while that for the appointment of Dunnes Stores (Ilac Centre) Ltd is paragraphs (a), (b) (ii) and (f) of Section 19 (ii) of the 1990 Act. You may know that Section 21 of the 1990 Act contains very strict limitations on the publication or disclosure of any information obtained by me on foot of a Section 19 examination of books and documents.
The authorised officer is Mr George Maloney, F.C.C.A. ...” (On the same date the Minister signed a warrant appointing Mr Maloney as an authorised officer. The warrant was as follows: -
Companies Acts, 1963 - 1990
Warrant of appointment of authorised officer
1I, Mary Harney, T.D., Tánaiste and Minister for Enterprise, Trade and Employment, pursuant to the powers vested in me under section 19 of the Companies Act 1990 and every other power me, thereunto enabling, considering that there is good reason so to do, to hereby authorise George Maloney to require the Company listed hereunder, being a body as defined in section 19 (i) of the Companies Act, 1990, to produce the books and documents specified by him forthwith and to exercise all necessary powers under the said Companies Act, 1990.
Dunnes Stores Ireland Company

71. The warrant was signed by the Minister.

72. A warrant in the same terms appointing Mr Maloney as an authorised officer in respect of Dunnes Stores (Ilac Centre) Ltd was issued by the Minister on the same date, 22nd July, 1998.


Previous Proceedings

73. On 4th August, 1998, Dunnes sought and were granted leave by the High Court to apply by way of judicial review for Orders of Certiorari quashing the decisions of the Minister to appoint Mr Maloney as an authorised officer in respect of the said companies. Leave was granted on two principal grounds. Firstly, the failure of the Minister to give any adequate reason for the purported appointment of the authorised officer and secondly, an alleged conflict of interest which vitiated the appointment of Mr Maloney as the authorised officer.

74. On 10th August, 1998, Mr Maloney resigned as the authorised officer and was replaced by the First Named Respondent in these proceedings, Mr Gerard Ryan. Since then the alleged conflict of interest ceased to be an issue between the parties.

75. The judicial review proceedings referred to above came on for hearing before

76. Laffoy, J. and the learned High Court held that the exercise by the Minister of her powers pursuant to Section 19 of the Act could be the subject of judicial review proceedings ( Dunnes Stores Ireland Company -v- Maloney [1999] 3 IR 542 ). In her judgement Laffoy, J. also held that the principles laid down in East Donegal Co-operative -v- Attorney General [1970] IR 317 and The State (Lynch) -v- Cooney [1992] IR 337 applied to the exercise of powers by the Minister pursuant to Section 19 of the 1990 Act.

77. It is well established that where a Minister is given a statutory power which may be invoked by him or her in the due exercise of a discretion conferred by that statute, such a discretion cannot be exercised arbitrarily or contrary to the principles of constitutional justice. In East Donegal Co-operative -v- Attorney General [1970] IR 317 at 343

78. Walsh J. held, when considering the powers accorded to a Minister under the Livestock Marts Act 1967, held, “all the powers granted to the Minister by s.3 which are prefaced or followed by the words “at his discretion” or as he shall think proper” or “if he so thinks fit” are powers which may be exercised only within the boundaries of the stated objects of the Act; They are powers which cast upon the Minister the duty of acting fairly and judicially in accordance with the principles of constitutional justice, and they do not give him an absolute or unqualified or an arbitrary power to grant or refuse at his own will ”. While the nature of the power granted to the Minister under that Act was different and not purely investigative as in the case of Section 19 of the Act in issue here, the principle is the same. In The State (Lynch) -v- Cooney [1982] IR 337 at 380 , which considered the exercise of the powers of a Minister pursuant to Section 31 subsection 1 of the Broadcasting Authority Act 1960

Henchy, J held “ it is to be presumed that, when it conferred the power, parliament intended the power to be exercised only in the manner that would be in conformity with the Constitution and within the limitations of the power as they are to be gathered from the statutory scheme or design. This means, amongst other things, not only that the power must be exercised in good faith but that the opinion or other subjective conclusion set as a precondition for the valid exercise of the power must be reached by a route that does not make the exercise unlawful - such as by misinterpreting the law, or by misapplying it through taking into consideration irrelevant matters of fact or through ignoring relevant matters. Otherwise, the exercise of the power would be held be invalid for being ultra vires .”

79. In the light of those principles Laffoy, J. held that in order to ensure that parties in the position of the Applicants would have an effective recourse to judicial review the principles of constitutional justice required that the Minister should give reasons for her decision.

80. I agree fully with the conclusions reached by Laffoy, J. in his regard.


The discretion of the Minister

81. In the context of these principles the requirement in Section 19 (2) that the Minister be “ of the opinion that there are circumstances suggesting that ” one of the reasons enumerated at (a) to (h) of the subsection exist means no more than that she must have reasonable grounds for her opinion. It is exclusively a matter for the Minister to form the opinion. It is necessarily a subjective one.

82. In the light of the foregoing considerations it seems to me that in exercising her powers under Section 19, the Minister, without intending to be exhaustive as to all the elements which may be taken into account, must do so, so that:

(a) It is exercised for a purpose contemplated by the Act and within the terms of the Section;
(b) Reasons are given for her decision;
(c) The decision to do so must be rational, and neither arbitrary nor disproportionate.

Reasons for the Minister’s decision

83. Following upon the decision of Laffoy, J. the reasons given by the Minister for the appointment of an authorised officer under this section in respect of the First Named Applicant Company were as follows: -


SCHEDULE OF REASONS FOR THE APPOINTMENT OF AN
AUTHORISED OFFICER UNDER SECTION 19 OF THE COMPANIES ACT, 1990 TO DUNNES STORES IRELAND COMPANY AND DUNNES STORES (ILAC CENTRE) LTD.

Dunnes Stores Ireland Company

1 Section 19(2)(a)

The circumstances outlined under the following heading give substantial cause for concern as to the standards of corporate governance operating in Dunnes Stores Ireland Company and suggest that it is necessary to examine the books and documents of the Company to determine whether an inspector should be appointed to conduct an investigation of the body under the Companies Acts.

2. Section 19(b)(ii)

There are circumstances suggesting that the affairs of the body have been conducted with intent to defraud the creditors of any other person, in this case the Revenue Commissioners, as follows:

Payments totally about £395,107 from Dunnes Stores Ireland Company to finance the refurbishment/extension of Mr Michael Lowry’s house at Holycross. Conclusion 14 of McCracken (page 69) indicates inter alia that this must have been made to assist Mr Lowry evade tax. The undated letter of Mrs Heffernan responding to the Tanaiste’s of 19 September, 1997 attaches copies of the relevant cheques.

Payments totally £27,502.75 from Dunnes Stores Ireland Company via Bank of Ireland Marino to Mr Michael Lowry. Conclusion 12 of McCracken (page 69( indicates inter alia that this was made to assist Mr Lowry evade tax.

In the circumstances, it is necessary to examine the books and documents of Dunnes Stores Ireland Company to determine whether or not payments by or on behalf of the Company were made for the purpose of further defrauding the Revenue Commissioners or the creditors of any other person.

3. Section 19(2)(b)(iii)/Section 19(2)(d)

There are circumstances suggesting that the affairs of Dunnes Stores Ireland Company have been conducted with interest to defraud its members or in a manner which is unfairly prejudicial to some part of its members, viz:

The McCracken Tribunal (e.g., pages 19, 20, 24 and 26) discloses that a large number of payments was made to various parties from an account in the Marino Branch of the Bank of Ireland. These are acknowledged to be the property of Dunnes Stores. At least a portion of the funds in this Account was apparently supplied by a series of cheques drawn by Mr Ben Dunnes on the Ulster Bank account operated by Dunnes Stores Ireland Company in College Green Dublin. Despite the efforts of the Dunnes Stores Group to establish the beneficiaries of payments from this Account and a number of similar accounts, some 63% of the payments were found by the Bunchanen Report to have been made to beneficiaries who could not be identified.

The McCracken Tribunal Report (pages 26/27) refers to a company called Tutbury Ltd. which was also under the control of Mr Ben Dunne. Again, it is acknowledged that these funds were the property of Dunnes Stores and originated from profits made by companies associated with Dunnes Stores in the Far East, e.g., Wytrex, Carica. It appears that Mr Ben Dunne negotiated in many instances the price which Dunnes Stores Ireland Company paid to Wytrex for its purchases in the Far East thus enabling Wytrex to make substantial profits on its trading at the expense of Dunnes Stores Ireland Company. According to the evidence of Mr Ben Dunne accepted by the McCracken Tribunal, the “profits” of both Carica and Wytrex were remitted to Tutbury Ltd.

The payments of Stg£182,630 and Stg£282,500 from Dunnes Stores (Bangor) Ltd. for the benefit of Mr Charles Haughey were subsequently lodged to a suspense account of Dunnes Stores Ireland Company. Conclusion 36 of the McCracken Report (page 73) indicates inter alia that there is no evidence of any benefit having been obtained by the Dunnes Stores Group for the payment of Stg£182,630 and for other payments mentioned in its Report.

Conclusion 37 of McCracken (page 73) indicates inter alia that the large majority of payments considered in its Report were made by Mr Ben Dunne without the knowledge or approval of his co-shareholders. In the circumstances, it is necessary to examine the books and documents of Dunnes Stores Ireland Company to determine whether or not the affairs of the Company had been conducted with intent to defraud its members or in a manner which was unfairly prejudicial to some part of its members.




4. Section 19(2)(f)

There are circumstances suggesting that a series of acts or omissions of the body are or are likely to be unlawful, viz:

As indicated earlier, Dunnes Stores Ireland Company was apparently the source of some of the funds in the Marino Account. Having regard to the nature of this Account and the failure acknowledged in the Buchanes Report of the Dunnes Stores Group to trace the beneficiaries of these funds, it appears that proper books of account may not have been kept by or on behalf of Dunnes Stores Ireland Company.

Payments totalling £27,502.75 payable to Bank of Ireland were apparently recorded in the books of account of Dunnes Stores Ireland Company as having been made to Streamline Enterprises, although they were paid to the benefit of Mr Michael Lowry. It appears therefore that proper books of account may not have been kept by or on behalf of Dunnes Stores Ireland Company and/or that the books may have been falsified. Conclusion 12 of McCracken (page 69) also indicates inter alia that the payment of these funds (which had been lodged to an offshore account in the Isle of Man) was made contrary to the exchange control legislation then in being.

Three payments from Dunnes Stores Ireland Company, totalling £1180,000 and payable to cash, were initially lodged to an account in the Bank of Ireland Rotunda Branch, but the ultimate beneficiaries were apparently Celtic Helicopters Ltd. and Mr Desmond Traynor. Having regard to the manner and circuitous nature of these payments, these payments may not have been properly recorded in the books of account of Dunnes Stores Ireland Company.

The failure of Dunnes Stores Ireland Company to obtain Auditor’s Certificates for the financial period ended 31 December, 1992 and a number of subsequent years indicates a breach of the statutory requirement to lay audited accounts before the annual general meeting of the Company in every calender year.

In the circumstances, it in necessary to examine the books and documents of Dunnes Stores Ireland Company to determine whether or not the acts or omissions of the Company or on behalf of the Company are or are likely to be unlawful.”



Dunnes Stores (Ilac Centre) Ltd

84. The reasons given by the Minister for the appointment of an authorised officer in respect of Dunnes Stores (Ilac Centre) Ltd were confined to Section 19(2)(a), (2)(b)(ii) and (2)(f). Determination of the validity of the exercise of the Ministers powers in relation to Dunnes Stores Ireland Company will govern the issues which arise in respect of Dunnes Stores (Illac Centre) Ltd.



Section 19(2)(a) - Submissions of Applicants/Respondents

85. Dunnes firstly take issue with the Minister’s decision based on Section 19(2)(a) primarily on the grounds that a general concern about corporate governance is not a ground for appointing an authorised officer or an inspector. It was pointed out that the Minister had refused to define what she meant by corporate governance, which was too vague a term to be relied upon.

86. It was further submitted on behalf of the Applicant Respondent’s that “corporate governance” embraces a range of features of the system by which Companies are directed and controlled including the contractual duties owed by the Directors and/or the company to its member or shareholders pursuant to the Memorandum and Articles of Association; the common law duty owed by Directors to their shareholders to exercise their functions with reasonable care and skill; the fiduciary duty owed by the Directors to their members and shareholders generally. It was submitted that these features are over and above the duty to act in compliance with the Companies Act. Accordingly the Minister, it was submitted, could not ground an appointment under Section 19 upon general concerns as to the standards of corporate governance. It was further submitted that rather than having a general responsibility for corporate governance, the Minister’s responsibility, for the purposes of Section 19 was confined to securing compliance with the Companies Acts and not with any perceived “best practice” criteria.

87. In short, the Ministers responsibility under the Act was considerably narrower than a concern for corporate governance which could not constitute a ground within the meaning of Section 19(2)(a) for the appointment of an authorised officer.

88. It was also submitted that all the circumstances relied upon by the Minister as giving rise to concerns about standards of governance relate to matters disclosed in the ‘McCracken’ and ‘Buchanan’ reports. These reports had been available to the Minister for a considerable period of time. In the meantime the Applicant/Respondents had rectified the abuses referred in those reports. It had not been shown that the appointment of an authorised officer was “necessary” within the meaning of Section 19(2)(a).


Conclusions

89. The condition identified in paragraph (a) of subsection 2 of section 19 differs from the conditions referred to in any of the other subparagraphs of that subsection. Paragraph (a) does not refer to any suspected wrongdoing, whether criminal or civil, but to the necessity to examine the books and documents of the body with a view to determining whether an inspector should be appointed to conduct an investigation of the body under the Companies Act 1963-1990.

90. The reasons given by the Minister for the exercise of her power under paragraph (a) ought to be considered together. I do not think it can be accurately said that the Minister relied simply on a general concern for breaches of standards of corporate governance.

91. As has been seen the reasons which the Minister has given for relying on that provision refer to substantial breaches of standards of corporate governance by reference to specific circumstances arising out of findings made by McCracken, J. and Buchanan, J. in the inquiries conducted by them. Those specific circumstances include the making of substantial payments in a manner so as to assist a third party to evade income tax liability, the disbursement of various substantial funds of the company by a director of the company to the benefit of Third Parties, most of whom could not be identified, with no evidence of any benefit having been obtained by the Dunnes Stores Group and the failure of the company to keep proper books of accounts which made it impossible for most of the beneficiaries of the funds dispersed to be traced. Those matters are referred to in the reasons given by the Minister for relying on Section 19(2)(a) by reference to the circumstances which are outlined in relation to the other paragraphs of Section 19(2) referred to in the schedule of reasons.

92. In my view the nature of the power conferred upon the Minister by subsection 2(a) of Section 19 is deliberately expressed in wide and general terms, relating as it does to a form of preliminary inquiry which would enable the Minister to best determine whether there are sufficient grounds for the appointment of an Inspector to conduct an investigation of the company in question. This contrasts to the very specific occasions for such intervention by the Minister instanced in Subsections 2(b) to (h).

93. It seems to me that the phrase “standards of corporate governance” in its ordinary and natural meaning refers to the standards according to which the affairs and business of the company are conducted by reference to the obligations and standards imposed upon them by law as well as the Memorandum and Articles of Association. (‘ governance: the action or manner of governing: conduct of business behaviour .’ New Shorter Oxford Dictionary).

94. The very nature of public regulation of Companies, such as that found in the Companies Acts (as well as other legislation) is to ensure and reinforce certain standards of governance of corporate bodies. As a matter of policy companies may look to generally accepted “best practice” criteria in the conduct of their affairs.

95. The O.E.C.D. Principles of Corporate Governance (SG-CG (99) 5) acknowledges in its preamble that “ the Corporate Governance framework also depends on legal, regulatory, and institutional environments .” The World Bank report on Corporate Governance (published September 1999) acknowledges that “ in its narrowest sense , (emphasis added) corporate governance can be viewed as a set of arrangements internal to the corporation that define the relationships between managers and shareholders .” but even, “ these arrangements may be embedded in Company Law, Securities Law, listing requirements, and the like ...” That report also acknowledged that external rules have a direct effect on corporate governance including “... the legal machinery for enforcing shareholders rights, systems for accounting and auditing, a well regulated financial system, ...”

96. In any case, apart from the foregoing citations, any ordinary and reasonable interpretation of the notion of standards of corporate governance relates to the manner in which a corporate body’s officers govern the corporation and must in my view include compliance by companies and directors with any regulatory regime, such as the Companies Acts, governing the conduct of their affairs.

97. I think it can be said that corporate governance has an internal and external dimension. It is only in its narrowest sense that corporate governance can be viewed as a set of arrangements internal to the corporation that define relationships between managers and shareholders. Such internal arrangements may, as was submitted, be governed by the Memorandum and Articles of Association and companies may choose to follow certain “best practice” criteria. The error, as I see it, in the submissions of the Applicants/Respondents is to confine their perception of corporate governance to such an internal dimension. The external dimension comprises those standards or obligations laid down by external sources such as statutes or statutory regulations.

98. While the Companies Acts generally include provisions relating to the incorporation, registration and structure of companies as well as such matters as duties of directors towards their members, they also govern fundamental aspects of the relationship between companies and the rest of society. The advantages of trading or conducting business through a corporate entity, such as a company with limited liability, are self-evident. Companies have a legal personality separate and distinct from its individual members. Many aspects of how they conduct their affairs as distinct entities are regulated by law in the public interest. The Companies Acts are the primary source of that regulatory regime even though there are other statutes which may regulate how a company or its directors conduct its affairs such as the Competition Acts, certain provisions of the Finance Acts or the Central Bank Acts. Statutory measures specifically directed at companies, in particular the Companies Acts, define, inter alia , obligations specific to companies and their directors with which they are bound to comply in the public interest. They set standards for corporate governance.

99. It is not in issue that the Minister has a role under the Companies Acts in supervising compliance by companies with such statutory provisions governing, inter alia, the conduct of their affairs. Summary proceeding in relation to an offence under the Acts may be prosecuted by the Minister. As regards the Companies Acts, 1990, the Minister may apply to the court, pursuant to section 8, for the appointment of an inspector to investigate the affairs of a company and to report thereon. She may appoint an inspector to investigate and report on the membership or ownership of a company pursuant to section 14 of that Act. In addition to her powers under Section 19, the focal point of these proceedings, the Minister also has certain powers to investigate share dealings of a company pursuant to Section 66.

100. Thus the Oireachtas has conferred on the Minister, as the member of Government responsible for the Department of Enterprise, Trade and Employment, significant powers to ensure, inter alia , that companies who have availed of the right to incorporate and register under the Acts and the advantages which such incorporation confers, do not abuse those advantages to the detriment of their shareholders, creditors and, in particular, the public interest. I do not think the statutory duties and obligation imposed on companies and directors can be viewed simply as an end in themselves for their benefit since those duties have a function in preventing abuses of their corporate status which may lead to consequences which are not just breaches of the Companies Acts per se, but may have other far reaching consequences of public interest. Therefore, I do not think the concerns of the minister in exercising her supervisory role pursuant to the Acts can be said to be limited to simply whether a particular company has breached a particular provision of the Companies Acts at a particular point in time. The Minister must also be concerned with the damage which such breaches have on public confidence in how companies conduct their affairs particularly where such breaches may be extensive and have a potential consequence of undermining confidence in corporate status and its governance.

101. In this sense one of the purposes of the Companies Acts is to confer on the minister a responsibility to be concerned with and oversee the standards of corporate governance in companies as laid down or reinforced by those Acts.

102. Accordingly, I have come to the conclusion that breaches of standards of corporate governance as laid down or reinforced by the Acts may be taken into account by the Minister when considering whether to exercise her powers under Section 19(2)(a). An expression of general concern with breaches of such standards would not constitute a sufficient statement of her reasons for exercising her power under that paragraph. As I have already pointed out the Minister relates her concern to specific circumstances of abuse and misfeasance disclosed by the reports of McCracken, J. and Buchanan, J. The reasons given are sufficient to disclose a reasonable and rational basis for the Minister’s decision pursuant to paragraph (a)

103. One cannot loose sight of the fact that the whole purpose and object of paragraph (a) is to enable the Minister to decide whether she has sufficient grounds to proceed with an application for the appointment of an Inspector pursuant to Section 8(1), (a), (b) or (c) of the Act. The abuses disclosed by the two reports and relied upon by the Minister are clearly relevant to the grounds upon which a Court might be asked to make an appointment pursuant to Section 8(1).

104. I have come to the conclusion, therefore, that the reasons stated by the Minister for

the appointment of an Inspector pursuant to Section 19(2)(a) come within the terms of paragraph (a) and she was entitled to rely upon them.

“Necessary”

105. Much argument was directed to the use of the word “necessary” in subparagraph (a). It was contended on behalf of Dunnes that it was not “necessary” to examine any of the books or documents of Dunnes in the circumstances which exist in the present case. Clearly paragraph (a) anticipates an application by the Minister under s.8 of the 1990 Act for the appointment by the Court of an inspector in the exercise of the discretion which the Court would possess in the event of the Court being satisfied as to the existence of any of the circumstances identified in paragraphs (a) - (c) of subsection 1 of section 8 aforesaid. That being the case the word “necessary” clearly relates to the requirement that the Minister should satisfy herself that appropriate circumstances exist in which to make such an application and the Court being provided with appropriate information to prove, first, compliance with the statutory conditions and, secondly, adequate information on which to base the exercise of the discretion conferred upon it in relation to such an appointment. The word “necessary” could not be read as an absolute condition precedent to the making of an application to the Court for the appointment of an inspector, but the practical necessity of obtaining sufficient information to justify the decisions which would be involved in making an application to the Court which could have damaging effects for the company in respect of which the application was made. Where, as in the present case, it is established that serious abuses took place in the past I can readily see the necessity of examining certain books and records to ensure that the position has been fully rectified and not repeated and that there are reasonable grounds for assuming that there would be no further recurrence.


Decision

106. Having regard to the nature and extent of the abuses relied upon by the Minister in the reasons which she gave, it has not been established that the appointment of the authorised officer on Section 19(2)(a) was either irrational or disproportionate.

107. Having regard also to my earlier conclusions, I am satisfied that the Minister’s decision, so far as Section 19(2)(a) is concerned, was an exercise of her powers for purposes contemplated by the Companies Acts and within the terms of the section.

108. Accordingly I would allow the appeal on this ground.


Other Issues

109. As regards the Minister’s reliance on other paragraphs and subparagraphs of Section 19(2) I agree with the judgement of the Chief Justice and would allow the appeal also in respect of the appointments made by the Minister pursuant to Section 19(2)(d).

Remittal

110. In the circumstances this matter must be remitted to the High Court so that the issue as to the constitutionality of the relevant statutory provisions should be determined. This will unavoidably delay a final determination of the issues between the parties in these proceedings. The learned High Court Judge properly exercised his discretion not to deal with this issue for the reasons stated at the outset of this judgement. I do not propose to consider in this case the circumstances in which the High Court, as opposed the Supreme Court, might in my view, consider an issue concerning the constitutionality of an Act even where the proceedings are also determined in the High Court on another legal basis. I do however think it appropriate to recall that the Committee on Court Practice and Procedure in its 11th Interim Report published in 1970 made the following recommendation:-

There should be expressly conferred on the Supreme Court jurisdiction to try in the first and final instance, on consent of the parties, net constitutional issues initiated in the High Court concerning the validity of Act of the Oireachtas or issues arising under Article 50, Section 1, of the Constitution for the resolution of which no decision on any disputed question of fact is required, or any other net issue of law of importance initiated in the High Court.”

111. Again, I do not wish to enter upon the merits of the entire ambit of this recommendation but it does seem to me that where a net constitutional issue concerning the validity of an Act or part of an Act of the Oireachtas arises in proceedings for the resolution of which no decision on any disputed question of fact is required, there is a great deal of merit in conferring on this Court, at least with the consent of the parties, the power to determine that issue in circumstances such as have arisen in this case rather than remitting it again to the High Court when the common experience is that such issues are almost invariably further appealed to this Court for final determination.

THE SUPREME COURT
JUDICIAL REVIEW
No 280/2000
KEANE C.J.
DENHAM J.
MURPHY J.
MURRAY J.
HERBERT J.

BETWEEN
DUNNES STORES IRELAND COMPANY,
DUNNES STORES (ILAC CENTRE) LIMITED AND MARGARET HEFFERNAN
APPLICANTS/RESPONDENTS
AND
GERARD RYAN AND THE MINISTER FOR ENTERPRISE, TRADE AND EMPLOYMENT
RESPONDENTS/ APPELLANTS
AND
IRELAND AND THE ATTORNEY GENERAL
NOTICE PARTIES
Judgment of Mr. Justice Herbert delivered on the 1st day of February 2002

112. Pursuant to the provisions of the Section 19(2)(a) of the Companies Act, 1990 directions may be given by the Minister if she is of the opinion that there are circumstances suggesting that it is necessary to examine the books and documents of the “body”, as defined by Section 19(1) of the Act with the view to determining whether an inspector should be appointed to conduct an investigation of the body under Companies Acts. The bodies in question in this instance are Dunnes Stores Ireland Company and Dunnes Stores (Ilac Centre) Limited. The appointment of an inspector refers to the power of the court to appoint one or more competent inspectors to investigate the affairs of a company and to report thereon, on the application the Minister pursuant to Section 8 of the Act.

Section 19 of the Act is solely concerned with the production of books or documents. To be successful in an application under Section 8(1) of the Act, the Minister must satisfy the court that there are, “circumstances suggesting”, that some one or more of the matters specified in that subsection have occurred, are occurring or will occur. Subsection 19(2)(a) of the Act is available to be called in aid by the Minister as a sort of preliminary check, assessment or a verifying process in determining whether or not to make an application to the Court under Section 8(1) of the Act.

113. The vesting of such a power in the Minister is in the interest of saving court time, expense and probably unwelcome publicity for the body or bodies in question.

114. In my judgment, to avail of this preliminary screening process all that is requisite is that the Minister should be of the opinion that there are circumstances suggesting that an application to the Court under Section 8(1) might be necessary and with this in mind that a review of the relevant books or documents or the body or bodies in question was appropriate before a final decision to proceed was made.

115. It is important not to overlook that the opinion to be formed is that of the Minister alone: it is not the opinion of the Court or an opinion based on some other objective standard. The basis for this opinion is no more than that there are, “circumstances” which act upon the mind of the Minister. What these “circumstances” are, is not defined in the Companies legislation and in my judgment it is not for the Court to say what they might be, but I venture to suggest that they at least should be identifiable matters of substance.

116. The subsection merely provides that these, “circumstances” should suggest to the Minister that the particular course of action should be considered. Once again the test is entirely subjective, and in my judgment involves no more than that a positive indication should be presented to the mind of the Minister that it is necessary to examine the books or documents of the body or bodies with a view to making a determination whether or not to apply to the Court under Section 8(1). There is no suggestion of legal or civil standards of proof being requisite.

117. In my judgment, “necessary” is not used in any extreme or compelling sense in this subsection. In my judgment it has the meaning of, “reasonably required”, in contrast to merely optional. Again, it is important to emphasise that the question of whether it is or is not reasonably required is not a matter of objective proof, or an issue to be decided by the Court. The determination is that of the Minister alone and that decision may not be usurped by the court and may only be set aside on clear proof that it flies in the face of fundamental reason and common sense.

118. Incorporation under the Companies Acts involves accepting the overseeing power of the Minister. Persons who bind themselves together to constitute the legal entity known as the “Company” cannot choose to enjoy the manifold privileges and benefits of incorporation while rejecting the less convenient aspects, such as the supervisory role of the Minister. It is for the more the effective discharge of this function that the Oireachtas saw fit to confer on the Minister the right to examine the books or documents of the bodies in the circumstance specified in Section 19(2)(a) to 19(2)(h). In my judgment the nature of the power conferred upon the Minister by Section 19(2)(a) is intentionally expressed in wide and general terms relating as it does to a form of preliminary enquiry, in contrast to the very specific occasions for such intervention by the Minister instanced in subsections 19(2)(b) to 19(2)(h).

119. In my judgment it is not sufficient for the Minister to cite, “a general concern about standards of corporate governance”, without more, as a basis for giving the direction under Section 19(2)(a).

120. I consider that Section 19(2)(a) cannot be construed in isolation from Section 8(1), and the circumstances suggesting to the Minister the necessity to examine the books and documents of the body or bodies must also suggest to her that an application to Court under Section 8(1) is reasonably required.

121. A departure from the, “standards of corporate governance”, so far as this phrase is capable of a sufficiently certain definition, is not as such a ground upon which the Court may appoint an inspector under Section 8(1).

122. In my view, if the Minister has concerns about the proper management and control of a body or bodies, the matters giving rise to that concern must be clearly identified and must be such as suggests the presence of fraud, misfeasance, misconduct or unlawfulness of the type indicated in Section 8(1).

123. In the present case, having regard to this view of its meaning extent and purpose, I believe that the Minister was entitled to give a direction under Section 19(2)(a).

124. In the Schedule exhibited at “A” in the affidavit of Paul Appleby sworn on the 27th of November, 1998, under the heading “Section 19(2)(a)”, the first reason advanced for the decision of the Minister to give the direction refers to, “the circumstances outlined under the following headings”. This reference is to specific findings of the McCracken and Buchanan Inquiries set out in the statement of the other reasons.

125. This first reason then goes on to state that these circumstances:-

“Gives substantial cause for concern as to the standards of corporate governance operating in Dunnes Stores Ireland Company and (the emphasis is mine), suggest that it is necessary to examine the books and documents of the Company to determine whether an inspector should be appointed to conduct an investigation of the body under the Companies Act.”

126. In my judgment these reasons are cumulative and severable. Even though the Minister could not rely upon unspecified concerns about the standards of corporate governance, she was entitled to rely upon the identified findings of the McCracken and Buchanan Inquiries without more, for the purpose of giving the direction under Section 19(2)(a).

127. I also agree with the decision of the Chief Justice, for the reasons set out by him, that the Minister was entitled under Section 19(2)(d) to give the direction in this case.



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