DEVELOPERS MICHAEL and Thomas Bailey have lost their Supreme Court bid to overturn a decision allowing a report criticising the conduct of the affairs of their company to be used in a court application by the Director of Corporate Enforcement to stop them acting as company directors.
The court was giving its reserved judgment on an appeal by the Baileys against a 2007 High Court ruling that the Director of Corporate Enforcement could use the PricewaterhouseCoopers report in disqualification proceedings under section 160 of the Companies Act.
The Supreme Court also ruled, however, that he cannot use material from reports of the planning tribunal to support his application to have the Baileys disqualified from the affairs of any company on grounds of alleged misconduct and fraud in relation to the affairs of Bovale Developments.
He had cross-appealed against Ms Justice Mary Irvine’s finding that he could not use certain other materials in the proceedings, particularly reports of the planning tribunal, as additional evidence of wrongdoing by the brothers or evidence of alleged wrongdoing from 1988 to 2000.
He initiated the disqualification proceedings in 2006 but they were delayed due to issues concerning the admissibility of some material.
Yesterday Mrs Justice Susan Denham delivered the main judgment dismissing both the Baileys’ appeal and the Director of Corporate Enforcement’s cross-appeal.
In separate judgments, Mr Justice Nial Fennelly and Mr Justice Adrian Hardiman agreed with her central findings but said they wanted to address certain issues.
Mr Justice Hardiman focused on the cross-appeal and described as “extremely novel and far-reaching” the argument that sections of tribunal reports should be admitted as prima facie evidence in disqualification proceedings.
Having referred to the “truly awesome” powers of tribunals and the “enormous” expense incurred by them, the judge concluded the law clearly prevents the deployment of tribunal findings as “a weapon of attack” by any litigant.
In her judgment, Mrs Justice Denham dismissed the Baileys’ claim the Director of Corporate Enforcement had impermissibly delegated his functions under the Company law Enforcement Act, 2001, to PwC when he asked it in 2004 to investigate the books and records of Bovale over a two-year period to the end of June 1998.
Two reports from PwC in 2006 concluded Bovale’s accounts were prepared in a way that misstated its transactions and grossly understated the remuneration paid to the Bailey brothers, she noted.
It was open to the Director of Corporate Enforcement to use his powers under the 2001 Act to hire PwC, and he did not impermissibly delegate his functions to PwC under that Act, she found.
On the cross-appeal, the judge upheld the High Court finding that portions of affidavits relied upon by the director for the section 160 proceedings were inadmissible as they contained material relating to reports of the planning tribunal.
She noted he wanted to put in evidence material from reports of the tribunal, including a statement by the tribunal that Michael Bailey provided a benefit or payment to former minister Ray Burke, and paid former assistant city and county manager for Dublin George Redmond three cash payments of between £16,000 and £20,000 in the 18 months prior to July 1989.
Having set out the relevant law, particularly a 1992 Supreme Court decision in relation to Larry Goodman’s challenge to the beef industry tribunal, Mrs Justice Denham said the law clearly provided that decisions of tribunals are “sterile of legal effect” and devoid of legal consequences.
She also noted, while counsel for the director had asked the Supreme Court to overrule the Goodman decision, that submission was not pressed. In the circumstances, she would not consider departing from the Goodman ruling delivered by then chief justice Thomas Finlay, she said.
Mr Justice Fennelly said the director’s concerns about the delay to proceedings because of issues concerning admissibility of some material, in circumstances where the material was challenged without giving any indication of the issues disputed, were “real and legitimate”.
The effect of yesterday’s decision means the Director of Corporate Enforcement can rely on the PwC report, which is confined to an analysis of the affairs of Bovale for the years to end June 1997 and end June 1998. The director has alleged wrongdoing over a longer period, from 1988 to 2000, and based that claim on much of the material now excluded.
He has claimed the reports from PwC and the planning tribunal, in addition to a €22 million settlement by the company with Revenue, made clear the alleged misconduct was very serious.
