Thursday 21 November 2019

No new matters allowed in PTSB recapitalisation challenge

Tim Healy

PERMANENT TSB shareholders who wish to challenge the constitutionality of laws which permitted the bank's €4bn recapitalisation by the State cannot bring additional matters into their current court proceedings, a judge ruled today.

Mr Justice Peter Charleton said their proposed High Court challenge to sections of the Credit Institutions Stabilisation Act 2010 - the CIS Act - would have to be brought in separate proceedings as it cannot be pursued by amending the action initiated in 2011 by the shareholders.

In that action, Piotr Skoczylas, his company Scotchstone Capital Fund Ltd, Gerard Dowling and Padraig McManus have challenged the 2011 direction of the Minister for Finance to inject €2.7bn into the former Irish Life & Permanent (IL&P), now Permanent TSB.

They claim the direction order was not appropriate or reasonable in relation to their position as shareholders and the money could have been sourced elsewhere. As a consequence of the Minister's action their shareholding value was, but should not have been, written down from around 33 cent per share to one cent, they claim.

Although an egm of IL&P Group Holdings plc, the holding company for IL&P plc, voted 60/40 in July 2011 against the Minister's intervention, the Minister secured the direction order from the High Court on July 26, 2011.  The €2.7bn capital injection was then made, followed by another €1.3bn in March 2012.

In March 2011, Mr Skoczylas and the other shareholders initiated their proceedings as a challenge to the earlier €2.7bn injection and the fall in value of their shareholdings.

Their full action has yet to be heard and Mr Justice Charleton ruled on a number of preliminary applications, including the shareholders application to amend their case to include a challenge to sections of the CIS Act.

The judge ruled the relevant laws prevented such an amendment and said any constitutional challenge would have to be brought separately in plenary proceedings.

He also dealt with an application by Permanent TSB Group Holdings plc and Permanent TSB plc to be joined as notice parties to the case on grounds they have a vital interest in ensuring the direction order is not overturned.

While the holding company had voted against the direction order in July 2011, it now, under a new regime, wanted to join the case to support the lawfulness of what later happened, the judge said.

Under the CIS Act, actions to set aside direction orders must be made within five days, a time limit which the shareholders have claimed restricts their rights, he said. Applications for judicial review of commands given by the Minister (once a direction order is made) must be made within 14 days unless substantial reasons are given for an extension of that period.

He ruled there was no need for Permanent TSB to be joined to the case unless the court got to a point in the main action  where it was considering substituting the direction order for a new order.

Only then would the court hear submissions from PTSB about the effect any reversal of the order would have on it and what alternative order might be suitable, he said.

The judge further ruled that a separate challenge to the recapitalisation by investment fund Horizon Growth NV should travel with the shareholders case. Horizon bought six million shares in IL&P between February and July 2011.

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