Four shareholders who lost their High Court challenge to the State’s recapitalisation of Irish Life & Permanent under emergency law are entitled to bring an appeal concerning how the courts should consider powers that may be provided for under future emergency legislation, a judge has ruled.

Ms Justice Iseult O’Malley said the case raised issues of “exceptional public importance” for reasons including the “unprecedented” nature of the “exceptional” law permitting the IL&P recapitalisation – the Credit Institutions (Stabilisation) Act 2010 – and the incursions into rights of shareholders.

She said while the Minister for Finance opposed any appeal for reasons including the 2010 Act has expired, the Oireachtas may in the future consider other emergency legislation desirable.

It was “entirely possible” to conceive of emergency situations that might arise in the future, affecting the vital interests of the State, that may not be related to banks and their resources, and it would be in the public interest to have an “authoritative analysis” of the criteria to be applied by a court when considering similar powers.

The judge said she would permit an appeal on issues including whether she had correctly interpreted and applied the terms of the 2010 Act in dismissing the shareholders’ case.

She was delivering judgment on whether the shareholders could appeal her rejection of their case last July, potential grounds of appeal and liability for the substantial costs of the case.

Public funds

The shareholders – Piotr Skoczylas, his company Scothstone Capital Fund Ltd, Gerard Dowling and Padraig McManus – challenged the direction order obtained by then minister Michael Noonan from the High Court under which he effectively nationalised IL&P and injected €4 billion of public funds into it.

An egm of IL&P shareholders had opposed the Minister’s proposal, but the IL&P board reluctantly supported it because it considered IL&P had no other option to achieve the €4 billion recapitalisation required by the troika of the European Commission, European Central Bank and International Monetary Fund in the context of the global financial collapse.

In July, the judge ruled the shareholders had failed to show the Minister for Finance’s opinion the July 2011 recapitalisation order was necessary was either unreasonable or vitiated by legal error.

During the proceedings the judge referred issues to the Court of Justice of the EU (CJEU) which in November 2016 decided the direction order was not precluded under an EC Directive concerning rights of shareholders. Having applied the CJEU findings to outstanding issues, she dismissed the challenge.

On Friday the judge said while the 2010 Act imposed some restrictions in terms of an appeal, it did not prevent an appeal against a refusal to overturn a direction order made under section 64 of the Act. In those circumstances, the applicants did not require leave to appeal that issue.

Public importance

The judge said she would, in any event, permit an appeal on certain grounds for reasons including the public importance of the case. Some, but not all, of the proposed grounds of appeal had merit, including whether she had correctly applied rulings of the CJEU and whether she correctly interpreted and applied the terms of section 11 of the 2010 Act.

For reasons including the public importance of the case and because it transcended the personal interests of the shareholders, she ruled the four should have various percentages of their legal costs and outlay paid by the Minister. Mr Skoczylas and Scotchstone were entitled to 40 and 30 per cent respectively, while Mr Dowling and Mr McManus were entitled to 20 per cent.

She said there had been a public benefit in domestic law in the analysis of the proper approach of a court to the exercise of the powers conferred on the Minister.

The applicants were not entitled to their full costs because some of their arguments relating to the options available for IL&P's recapitalisation were "entirely misconceived". She said Permanent TSB, a notice party to the case, was also not entitled to its costs against the shareholders.

A stay on the costs’ orders applies to allow an appeal against those to be considered.