The Gazette 1974

Irish Trust Bank wins its case togainst Central Bank—

conditions judged to be "not validly imposed"

In a reserved judgment, the President of the High

Court (Mr. Justice O'Keeffe) held that conditions

imposed by the Central Bank in relation to a banking

licence granted to Irish Trust Bank, of Dawson Street,

Dublin, were not validly imposed and that the I.T.B.

could hold their licence without any such conditions.

Pleadings

Irish Trust Bank had sued the Central Bank claiming

that the conditions were improperly imposed.

They claimed that on January 31, 1972, the Central

hank intimated that under Section 10 of the Central

hank Act, 1971, they proposed to make it a condition

the licence issued on December 23, 1971, that Mr.

Kenneth W. Bates should cease to be a director of the

company on or before April 6, 1972, and that as from

fhat date the shareholders of the company should not

mclude Mr. Bates or any nominee of his.

The condition also stipulated that, as from the same

date, shareholders of the company should not include

t °

an interest exceeding 10% any company in which

Mr. Bates had an interest of 10% or more.

The company sought a declaration that the condi-

tions were outside the powers of the Central Bank to

npose and that they were unjust and invalid. They also

sought a declaration that they were entitled to hold

their licence freed and discharged from these condi-

tions. They further sought damages and costs.

Complies with Act

In its defence, the Central Bank pleaded that they

had granted the licence expressedly subject to such

conditions as might be imposed in accordance with

Section 10 of the Act. They pleaded that, at the time

me licence was issued, they had been furnished by the

°mpany with particulars of Mr. Bates' career and early

activities but that these had failed to disclose matters

relevant to and necessary for a proper consideration of

me application. They further pleaded that they did not

infringe the constitutional rights of I.T.B. and denied

mat they had failed to act judicially or failed to

ormulate any precise or specific charge against Mr.

bates.

Delivering his judgment, the President said that

rrish Trust Bank was formed in 1971 and had applied

and obtained a licence before the Central Bank Act

came into force. At that time, a licence was available

anybody who paid the appropriate fee to the Reve-

n u e

Commissioners and made the required deposit

der the Central Bank Act 1971.

Conditions to licence only subsequently imposed

The President said that anybody engaging in the

mess of banking as defined in the Act was required

t o

hold a licence and the relevant conditions came into

d e r a t i on as from the end of 1971. The plaintiffs had

applied for a licence under the provisions of the Act.

Y first the Bank decided to refuse a licence, but later

bered its view and decided to grant a licence which

^as in due course granted. There were at the time no

°oditions attached to the licence but it was the inten-

tion of the defendants—and they so informed the plain-

tiffs—that conditions would later be attached to the

licence. The licence became effective as from the end

of December, 1971, and about January 6, 1972, the

Secretary of the Central Bank obtained some informa-

tion which caused the defendants to be concerned

about the status of the plaintiff company. Inquiries

were made with the result that it was thought wise to

communicate with the chairman of the plaintiff com-

pany and to discuss privately with him the suitability

of Mr. Bates as a director of the plaintiff company.

Ultimately the defendants notified the plaintiffs

under Section 10 of the Central Bank Act, 1971, of

their intention to impose conditions on the licence.

Section 10 provided that a licence should be subject to

such conditions, if any, as the Bank might impose and

specified at the granting thereof. There were conditions

which in the Bank's opinion were calculated to promote

the orderly and proper regulation of banking and they

might be amended, revoked or added to, and condi-

tions might be imposed in relation to a licence from

time to time by the Bank, if, in their opinion, the

amendments were calculated to promote the orderly

and proper regulation of banking.

The President said that it was under this provision

that the Central Bank decided to impose conditions on

the licence granted to the plaintiffs. Sub-section 3 of the

section provided that whenever the Bank proposed to

impose conditions in relation to a licence or to amend

or add to the conditions (a), it shall notify in writing

the person holding the licence or to whom the licence

is intended to be granted, that it intends to impose the

conditions in relation to the licence or to amend or

add to the conditions and show its reasons for so

doing; and that the person may within 21 days after

the date of giving of the notification, make representa-

tions in writing to the Bank; (b), the person may

make such representations within the time, and (c) the

Bank shall, before deciding to impose the conditions,

or amendments to the conditions, consider any represen-

tations duly made to them under the sub-section.

Central Bank not willing to accept a Director of plain-

tiff Bank

Mr. Justice O'Keeffe said that the Bank, having

decided to impose conditions, notified the plaintiff

company by letter of January 31, 1972, of its intention

to impose the conditions. Their reason for this course

of action was that arising out of an inquiry which it

had made it was not willing to accept Mr. Bates as a

director of I.T.B. or as a shareholder in that company.

The plaintiff bank had made representations which

were being considered by the board of the Central Bank

and it was decided that the conditions outlined in the

letter of January 31 should be imposed unless there

were substantial grounds for doubting the validity of

such conditions.

The matter was not dealt with by imposing these

conditions, perhaps because the Central Bank, when the

Governor, secretary and other officials dealing with the

matter came to implement the board's decision found

that the letter of January 31 had not in fact complied

with the requirements of sub-section 3, section 10, inas-