High Court of Ireland Decisions

Judgment Title: Byrne -v- Judge O Leary & Ors

Neutral Citation: [2006] IEHC 412


High Court Record Number: 2002 499 JR

Date of Delivery: 07 December 2006

Court: High Court

"It is ordered that the said Inspectors investigate and report to the Court on the affairs of the Company in the title hereof and in particular
(a) to examine and define the nature and extent of the Company's Irish business from 1971 to date i.e. the business carried out in the State or any other business carried out on behalf of Irish residents whether in the State or elsewhere;
(b) to identify as far as possible all of the parties who were either officers (including shadow directors) and agents of the Company, clients of the Company or who otherwise assisted in the carrying out of the business at the relevant time
(c) to examine whether the Companies Acts, 1963-1990 were breached by the Company, its officers (including shadow directors), agents or third parties at the relevant time and if so to identify the provisions involved and the persons in default in each case;
(d) to examine whether the affairs of the Company were conducted with intent to defraud its creditors or the creditors of any other person or otherwise for a fraudulent or unlawful purpose and if so to identify the statutory provisions involved and the persons in default in each case;

“where it has not been found practical for all four Inspectors to be present at an interview at which a witness’ evidence has been taken under oath or where that witness has been interviewed prior to the appointment of a particular Inspector the Inspector or Inspectors who was/were absent from that interview shall not be precluded from further examining that witness or reporting to the court on that witness subject to the following;
that the veracity of the evidence given by that witness during the said interview is not in dispute or if the veracity of the evidence given by that witness during the said interview is in dispute that the said interview is conducted in full again with the said Inspector or Inspectors in attendance”.

“In particular, but without prejudice to the generality of the foregoing, a client shall include:
(a) Any person who directly or indirectly maintains or has maintained all or part of any account with the Company [i.e. Ansbacher Cayman Ltd] or who has or had de facto or de jure control over all or part of any account with the company.
(b) Any person who has or had de jure or de facto control of a body corporate which directly or indirectly maintains or has maintained an account with the Company or is or was administered by the Company or which has had borrowings directly or indirectly secured wholly or partly by the Company.
(c) The Settlor of any trust administered by the Company or of which the Company is or was the trustee and/or any other person or persons who funded such a trust or caused such a trust to be funded.
(d) The beneficiary of any trust administered by the Company or of which the Company is or was the trustee in circumstances where the beneficiary has or had de jure or de facto control over all or part of the trusts funds.
(e) Any person who had an account relationship with a body corporate owned or managed by the Company.”

“persons who established trusts, and persons who deposited money in a simple account. The persons who established trusts tended to be larger clients. In these cases, the trust would have a name which would not immediately identify the beneficial owner of the funds. It also would have one or more companies, which would be used by the trust as a vehicle for the investments controlled.”

... As already reported, GMCT had a number of deposit accounts in Guinness and Mahon, and, to an increasing extent over the years, these were used to provide funds for beneficiaries of trusts of which GMCT was trustee. No evidence has emerged that these payments were made as a result of decisions by trustees to make distributions to beneficiaries. Among files of over 50 trusts furnished to the Inspectors by Ansbacher (Cayman) Limited following litigation in the Grand Court of the Cayman Islands, not a single document exists minuting a decision of the trustees to make a distribution. On the contrary, all the evidence points to the request for payment originating with the client and being processed in Guinness and Mahon (and later in IIB) upon the instructions of Mr. Traynor. GMCT was not informed of the completed transaction until Mr. Collery (having posted the transaction in the secret Irish Memorandum accounts or otherwise processed it internally within Guinness and Mahon) sent a reconciliation statement to Cayman, which he did on a monthly basis. This is strong evidence that the trust structure was a sham – not
in respect of its legal status at the time of establishment, but in the manner of its operation – and that GMCT exercised no effective control over the assets nominally under its control.
The back-to-back loans, considered in more detail further on, are additional evidence that the trust structure was a legal fiction. One example will suffice to illustrate this. Mr. John Byrne (see Chapter 23) established two complex trust structures, one for Irish and one for UK business. These trusts were alleged to be completely separate from each other and from Mr. Byrne. All the liquid assets happened to be in one trust, but back-to-back loans were granted by Guinness and Mahon to a company owned by the trust which did not have cash, backed by the funds of the other ‘independent’ trust. No fee was charged for this financial service. To give what amounted to a cash guarantee to a stranger, without charge, would be a breach of the trustee's fiduciary duty. That an experienced trust company such as GMCT approved of such an irregular financial transaction and that Guinness and Mahon accepted this security suggests that both institutions viewed these trusts as legal fictions. It seems evident that both trusts were operated as one in the interest of Mr. Byrne with knowledge and approval of Guinness and Mahon and GMCT without reference to their legal status...

“Mr John Byrne is a well-known property developer. He has extensive property interests in Ireland and the United Kingdom.
On the 9 August 1971, Mr Byrne put in place two structures each headed by a trust – namely the Tristan Settlement and the Prospect Settlement.
The Tristan Settlement
This related to Mr Byrne's UK business. The beneficiaries were to be identified by reference to a nominal payment to the British Red Cross. The settlor was Mr John Furze.
The Tristan Settlement had a structure that included a Cayman company, Tristan Securities Limited (TSL). This company had two subsidiaries, Danstar Holdings Pty (an Australian company) and Intramar Securities, a Cayman company. Danstar had an UK subsidiary, Tepbrook Properties Limited.
The Inspectors accept the evidence supplied by Mr Byrne on the structure of this group (see exhibit 2 of transcript of evidence). The Inspectors, however, looked at the element of control as relevant to their work. They are satisfied that the legal ownership of the group vested in the trust but that control remained with Mr Byrne.

This related to Mr Byrne’s Irish business. The settlor was Mr Byrne. The beneficiaries were the wife and family of the settlor.
An unlimited Cayman company, Prospect Holdings, which in turn owned Carlisle Trust Limited, an Irish company, which held the assets on behalf of the trust. Carlisle had in turn a number of subsidiaries: Dublin City Estates Limited, Alstead Securities, Smithfield Property Development Limited (formerly Endcamp Limited), Goreville Limited, Pritco Limited and JEC properties. This is set out in Exhibit 2 ibid.
These entities typically had various categories of shares, which vested ownership in the next highest corporate vehicle while retaining control in the hands of Mr Byrne.
That Prospect Holdings was a client of Ansbacher is clear. The Inspectors considered whether it could be said that Mr John Byrne and Tristan Securities Ltd were also clients. Other evidence must be considered to arrive at any conclusion on these matters.

In the case of both the Tristan and Prospect Settlements, Mr Byrne funded the establishment of the trusts and retained the right to change the trustees. The trustees appointed were the Company now under investigation. The trustees are unchanged to date.
The two trust structures were established and remain separate. Notwithstanding this independence, the Tristan Settlement had provided back-to-back money to facilitate the borrowings of Irish companies with which it had no legal connection. The representation made on Mr Byrne's behalf, as an explanation for this unusual arrangement, was that money on deposit continues to earn interest while forming the basis of back-to-back loan is noted and accepted. Interest earned, however, would arise in any event. To provide cash backing for the borrowings of a third party, for no reward, in a commercial situation, is a very strange use of trust money. The Inspectors are of the view that it shows a closer connection between these entities than represented by Mr Byrne.

Mr Byrne personally guaranteed the borrowings of companies within the structure on many occasions. He was unable to explain, to the satisfaction of the Inspectors, why he should be called upon and/or agree to so do where he had no legal or beneficial interest in the trusts.
Ansbacher made a STG£3,500 payment to Mr Byrne through Guinness and Mahon in April 1990. No explanation has been received as to this transaction.
IIB advanced a loan in the sum of IR£212,000 in 1994 circa to Mrs Byrne (the wife of John Byrne), on behalf of Ballymadun Stud. This was cash backed by Hamilton Ross or Ansbacher. At that time, Hamilton Ross (which had in theory separated from Ansbacher `parent') continued to use Ansbacher's Cayman address and telephone number. Its business continued to be a matter on which the Inspectors were required to report and its activities continued to be interwoven with Ansbacher's Irish Business. The loan was repaid in September of the same year. The funds were raised to refund Mr Byrne for advances to the stud over the years. The repayment of the loan is reflected in Ansbacher's J6 account on 1 September 1994. The Inspectors have been informed by Mr Byrne that this account was relevant to Tristan Securities Ltd. The Ansbacher connection is confirmed by the IIB internal documentation attached hereto. Mr Byrne’s explanation is rejected as failing to disclose the full extent of the terms and conditions under which the money was advanced. The Inspectors conclude that Mr Byrne was the real beneficiary of this transaction.
The Inspectors received a letter dated 28th February, 2001 from Mr Byrne’s solicitor, which was considered by the Inspectors prior to their decision.
The Inspectors noted from documents supplied by Mr Byrne that Ansbacher, in contacting their clients recently in connection with the Cayman Island litigation concerning the disclosure of information, appears to include Mr. Byrne as one of their clients who were entitled to object.
The Inspectors considered all the matters dealt with at the interview, those items exhibited herewith and Mr Byrne's explanations, written and oral, in arriving at their conclusions.
The Inspectors note the matters set out herein above and further conclude:

The Inspectors conclude that control of the trust funds rested with Mr Byrne at all times.”

Q. And for the purpose of this question I am accepting you do not own it? A. Yes.”

“that the veracity of the evidence given by that witness during the said interview is not in dispute or if the veracity of the evidence given by that witness in the said interview is in dispute, that the said interview is conducted in full again with the said Inspector or Inspectors in attendance.”

“Judicial Review is concerned, not with the decision, but with the decision making process. Unless that restriction on the power is observed, the court will, in my view, under the guise of preventing the abuse of power, be itself guilty of usurping power.
Judicial Review as the words imply is not an appeal from a decision but a review in the manner in which the decision was made.”

“Both Mr. Rowan and I found Mr. Byrne to be a truthful and reliable witness. We fully accepted his evidence as to facts. Insofar as we differed from him it was only as to conclusions to be drawn from those facts. So for example, pages 45 and 46 of the transcript of evidence deals with borrowings
by companies owned by the two trusts which were in turn personally guaranteed by Mr. and Mrs. Byrne. Mr. Byrne stated in evidence that the giving of such guarantees did not strike him as odd. Whilst the Inspectors considered it to be odd they did not dispute the fact that the view as articulated by Mr. Byrne was genuinely held by him.”

“For my part, I would be slow to test unreasonableness by seeing if the decision accords with logic. Many examples could be given of reputable decisions and of substantive laws which reject logic in favour of other considerations. I think in any event that it is only a particular aspect of logic that could be applicable in testing the validity of a decision when it is subjected to judicial review on the ground of unreasonableness, namely, whether the conclusion reached in the decision can be said to flow from the premises. If it plainly does not, it stands to be condemned on the less technical and more understandable test of whether it is fundamentally at variance with reason and common sense ........ I would myself consider that the test of unreasonableness or irrationality in judicial review lies in considering whether the impugned decision plainly and unambiguously flies in the face of fundamental reason and common sense. If it does, then the decision-maker should be held to have acted ultra vires, for the necessarily implied constitutional limitation of jurisdiction in all decision-making which affects rights or duties requires, inter alia, that the decision-maker must not flagrantly reject or disregard fundamental reason or common sense in reaching his decision.”

“The question arising on this issue falls to be decided in accordance with the principles laid down by this Court in The State (Keegan) v. Stardust Compensation Tribunal [1986] I.R. 642 which are set out in the judgment of Henchy J. in that case, with which in respect of the legal principles applicable, all the other members of the Court specifically agreed.
In dealing with the circumstances under which the Court could intervene to quash the decision of an administrative officer or tribunal on grounds of unreasonableness or irrationality, Henchy J. in that judgment set out a number of such circumstances in different terms.
They are:
‘1. It is fundamentally at variance with reason and common sense.
2. It is indefensible for being in the teeth of plain reason and common sense.
3. Because the court is satisfied that the decision-maker has breached his obligation whereby he ‘must not flagrantly reject or disregard fundamental reason or common sense in reaching his decision.’
I am satisfied that these three different methods of expressing the circumstances under which a court can intervene are not in any way inconsistent one with the other, but rather complement each other and constitute not only a correct but a comprehensive description of the circumstances under which a court may, according to our law, intervene in such a decision on the basis of unreasonableness or irrationality.
In setting out these principles, Henchy J., in the course of that judgment, quoted with approval the statement of Lord Greene M.R. in Associated Provincial Picture Houses Limited v. Wednesbury Corporation [1948] 1 KB 223 where, at p. 230, he stated:
‘It is true to say that, if a decision on a competent matter is so
unreasonable that no reasonable authority could ever have come to it, then the courts can interfere ... but to prove a case of that kind would require something overwhelming.’”

“I am satisfied that in order for an applicant for judicial review to satisfy a court that the decision-making authority has acted irrationally in the sense which I have outlined above so that the court can intervene and quash its decision, it is necessary that the applicant should establish to the satisfaction of the court that the decision-making authority had before it no relevant material which would support its decision.”

“... the kind of error that produces invalidity is one which no rational or sane decision maker, no matter how misguided, could essay. To be reviewably irrational it is not sufficient that a decision maker goes wrong or even hopelessly and fundamentally wrong: he must have gone completely and in inexplicably mad; taken leave of his senses and come to an absurd conclusion. It is only when this last situation arises or something akin to it that a court will review the decision for irrationality.”