Central Bank asks court to strike out claims over Irish NationwideTuesday 24 June 2014 18.53
The Central Bank has asked the High Court to strike out legal claims against it which could make it liable for hundreds of millions of euro of losses at Irish Nationwide Building Society.
In a pre-trial application, the Central Bank asked Mr Justice Brian Cregan to strike out claims by a former director of INBS that it approved the alleged delegation of powers of the INBS board to its former chief executive, Michael Fingleton.
John Stanley Purcell is one of four former directors of INBS being sued, separately from Mr Fingleton, by State-owned IBRC over "catastrophic" losses of €6 billion at the Society between 2008 and 2010.
Mr Purcell denies the claims against him and is claiming entitlement to a contribution and indemnity from the Central Bank should IBRC win its case.
He claims the Central Bank and Financial Regulator knew of the alleged delegation of board powers to Mr Fingleton between 1997 and 2009.
While the regulator had expressed wishes between 2006 and 2007 that the delegation of powers be monitored and risk tolerance controls put in place, he never sought to revoke it, he claims.
The Central Bank was previously joined to the case as a third party.
In a pre-trial application to Justice Cregan, its counsel David Barniville SC sought orders striking out the claims against it.
He said Mr Purcell had made out no stateable case to support claims of negligence towards him. Nor had he made out a case to support claims of breach of statutory duty, breach of duty of care or misfeasance in public office by the regulators, he said.
John Rogers SC, for Mr Purcell, argued his claims against the Central Bank are admissible. Mr Purcell was alleging breach of duty to him in his office as director and also as secretary of INBS.
Mr Purcell was led to believe what he was doing was right but the Central Bank was making a series of "pincer" movements against Mr Purcell and the other directors, counsel added.
In an affidavit, Mr Purcell said the INBS board passed the first delegation of powers to Mr Fingleton in 1981, including powers to set and vary interest rates on all loans.
In 1994 it delegated to Mr Fingleton all the board's powers for the effective management of the society.
Mr Purcell denied Mr Fingleton enjoyed the alleged complete - or near complete - autonomy and freedom from board oversight in his conduct of the business of the society.
The Central Bank in 1997 sought and approved amendments to the board's delegation, he also claims.
Those stated that policy decision in several specified areas, including acquisition and disposal of the society's assets, investment, capital projects and risk management policies were reserved for the INBS board.
Neither the Central Bank nor Financial Regulator, who was appointed in 2003, ever sought to revoke the delegation, he added.
Mr Purcell denies any breach of duty on his part concerning the delegation but pleads, should IBRC win its case, the Central Bank must bear responsibility and liability for losses on grounds it failed to maintain proper and effective control of INBS.
Had it done so, the losses would not have been suffered or would have been substantially reduced, he claims.
The other defendants are former INBS chairman Michael Walsh, Terence Cooney and David Brophy.
All four allege they were in a very different position from Mr Fingleton and contend he had significant knowledge of transactions but they were non-executive directors who had not.
The losses mainly arose from development loans made while Mr Fingleton was CEO, IBRC claims.
Had the true picture of INBS' affairs been disclosed, Mr Fingleton would have been summarily dismissed for breach of duty by 2007 at the latest and not paid expenses inappropriately incurred, plus €1.2m performance bonuses for 2008 and 2009, IBRC claims.