Select Committee on Finance and General Affairs díospóireacht -
Thursday, 6 Feb 1997

SECTION 55.

Question proposed: "That section 55 stand part of the Bill."

Mr. McCreevy

A provision similar to the provision in this section is endemic in all Government legislation over a period of years. It is never included at the request of politicians but always at the request of public servants, civil servants and employees of State agencies. The effect of the section is that neither an employee, a director or anyone connected with a board or agency is ever liable for damages, no matter what they do. When Bills are drawn up, someone always makes sure there is a section to ensure that no civil servant or employee of the board or agency being set up under the Bill will ever be liable for damages. Last week a tribunal of inquiry concluded its investigation into a State agency and people may be held liable in that case. I do not think this provision, in whatever legislation it appears, would stand up in law, because it means that no matter how bad a civil servant was or what mistakes he or she made, he or she will never be held liable for damages. This should not apply during this great era of openness, transparency and accountability, of which I have spoken for many years. If a politician or Minister can be held responsible I do not see why public servants are not responsible also.

I oppose this provision in all legislation. The purpose of section 55 is that any employee of the Central Bank, any member of its board or any other authorised person shall not be liable for damages unless it is shown that the person acted in bad faith, which would be impossible to prove. I know of no case——

Mrs. Doyle

Fraud or insider meddling of any description is bad faith.

Mr. McCreevy

Yes, but bad decisions are not. If politicians make bad decisions they are held accountable for them and if public servants make bad decisions they should be held accountable also. I fundamentally object that a provision such as this is included in all Bills to ensure that whoever is found responsible for mistakes that are made, it will not be anyone "back at the ranch". Given the new climate of accountability for politicians, I object to this section. I have no problem so long as everyone plays on a level pitch.

Acting Chairman

It is an interesting matter because only yesterday the liaison committee of committee chairmen discussed the dilemma of the Chairman of the Committee of Public Accounts who, acting properly and on advice, is being sued but the State is refusing to give him the protection proposed in this section. Perhaps we should amend it on Report Stage to say the protection of civil servants and public servants shall be to the same extent as that given to chairmen of committees.

Mr. McCreevy

I will go along with that.

Mrs. Doyle

With respect, we are not comparing like with like. I have sympathy for the position in which the Chairman of the Committee of Public Accounts finds himself but it was not in his discharge of his duties at a committee meeting that the problem arose and I do not think we should discuss the details here.

Acting Chairman

This section does not mention committee meetings.

Mrs. Doyle

No, I was referring to the example you gave. This does not mean employees of the Central Bank will not get into trouble for something they might do at a disco. It provides that there will be no liability in the discharge of their statutory function, the day job. They will be accountable for bad decisions but the Central Bank will not be financially liable if there is no evidence that the decision was made in bad faith.

Mr. McCreevy

On previous occasions I have forcefully made the point about employees being included in legislation.

Mrs. Doyle

Such a provision is included in the Stock Exchange Act, the Investment Intermediaries Act, the Central Bank Act, etc. because if it was not every disgruntled customer would sue the bank right, left and centre. The mind boggles as to what we would create if we did not have this provision.

Mr. McCreevy

A more serious provision is contained in section 55(2), which provides that the authorisation or revocation of authorisation by the Central Bank shall not constitute a warranty as to the solvency or performance of a person and neither the State nor the Central Bank shall be liable for any losses incurred through the insolvency, default or performance of such person. Would that provision stand up in court? The subsection means that even if the Central Bank makes a mistake it will not be liable. The Bank might state that an institution is fine and customers might suffer as a result but whoever they sue they cannot sue the Bank. I doubt that it would stand up but it would have to be tested.

Mrs. Doyle

I am advised this has been cleared by the Attorney General. Just because someone has been given a licence to trade does not mean there has to be a hand-holding operation by the State. This is the commercial sector and imperatives are involved.

Mr. McCreevy

Let us use the same logic we applied earlier. I was not present for Deputy O'Rourke's contribution. However, one of the reasons the Central Bank does not want power under the Investment Intermediaries Act is that it feels it might be held liable for intermediaries which got into bad financial circumstances. Yet, the Central Bank is not applying the same logic in this provision. It cannot have it both ways. Why is subsection (2) necessary? If, as the Minister of State said, it would not be liable in any event, why is it necessary to insert a section which says it will not be liable? It cannot be argued both ways.

Mrs. Doyle

I again put on the record what the Governor of the Central Bank said to the committee to which Deputy O'Rourke referred. We are selectively quoting the Governor, depending on how it suits our arguments. It is important that we are correct about what he said. He said that it will not be without its difficulties but he did not suggest that the Central Bank was not the right arena in which to operate the regulatory regime.

My case stands, quite frankly, in relation to this. Just because a bank has been given a licence to operate and then subsequently goes into liquidation——

Mr. McCreevy

If that is right, why is it necessary to insert it into the Bill?

Mrs. Doyle

It is similar to provisions incorporated in the recent Stock Exchange and Investment Intermediaries Act and is designed to bring the Central Bank Act into line with similar legislation. It is a housekeeping section.

Mr. McCreevy

I submit that is not housekeeping. It is a case of minding the shop to insert a section which states it is not liable although it has said it is not liable anyway.

Mrs. Doyle

It is to remove any possible doubt. It would be a mine field if there was any doubt about whether the provisions of the section pertained to the operation of the system. One can imagine the number of cases which would be taken. Section 25A provides that no employee or member of the board of a bank will be liable for damages for "anything done or omitted in the discharge or purported discharge of any of its statutory functions under this Act unless it is shown that the act or omission was in bad faith".

If a human error is made by an employee of a bank doing what they understood they should be doing, the bank will not be held liable for that. That is a normal provision in similar legislation. It is similar to provisions incorporated in the recent Stock Exchange and Investment Intermediaries Act and is designed to bring the Central Bank Act into line with those enactments.

Subsections 2(a) and (b) provide that any authorisation, approval or supervision, etc. of any entity by the bank shall not be construed as a warranty as to the solvency or performance of that entity. Otherwise, no one would accept the role of supervising, authorising or approving the operation of a bank. How could they? They would be de facto accepting a risk for all potential liabilities in the operation of that bank. Subsection (2)(a) states “neither the State nor the Bank shall be liable for any losses caused through the insolvency, default or performance of the entity”. I rest my case.

Acting Chairman

To return to the dilemma of the chairman of the Public Accounts Committee, he was discharging his duty as chairman just as I was when I was discussing today's business last night. Why does the Minister feel so strongly about giving this protection in this instance when we are having such difficulties in getting the same protection for——

Mrs. Doyle

I am not sure we should discuss Deputy Foley's predicament.

Acting Chairman

Every committee chairman is very upset about it.

Mrs. Doyle

As is every Deputy. However, we are not comparing like with like.

Acting Chairman

Why not?

Mrs. Doyle

My understanding of the predicament in which Deputy Foley finds himself is that when he gave the comment which is now the question of an action it was not during a committee session.

Acting Chairman

But it was in discharge of his duty as chairman of the Public Accounts Committee.

Mrs. Doyle

It did not occur during a session of the committee. If a bank employee after 5 p.m., or whenever they are off duty——

Acting Chairman

My duties as chairman of this committee do not just mean chairing a meeting. I have to order the business of the committee, discuss the business, make plans and arrangements and defend the good name of the committee if it is attacked.

Mr. McCreevy

And speak to the media on occasion about the activities of the committee.

Mrs. Doyle

That is a matter to be resolved in the present predicament, with which we all sympathise and empathise — any of us could be in that position. However, I do not think we are comparing like with like. One is a question of privilege and the other is a question of liability for damages and discharge of duty.

Mr. McCreevy

There are two separate cases involved in this section. The first is the usual "get out" clause for public servants. The Minister of State made the point that we are not comparing like with like, but we never are because politicians never have any protection whereas public servants have a job for life. I fundamentally object to it on the basis that we should all play on a level pitch in this new era of openness, transparency and accountability. These provisions are included in various legislation to protect public servants who can never be held liable, no matter how bad the policy decision or advice they give.

Mrs. Doyle

How would a bank ever employ anyone to run the business if they were liable for every human error made by an employee in the discharge of his statutory function?

Mr. McCreevy

Commercial banks sack people every day of the week for making bad decisions.

Mrs. Doyle

Accountability is all right but they are not liable for damages, which is what we are talking about. We are not saying they need not be accountable.

Mr. McCreevy

Yes, but individual banks——

Mrs. Doyle

The Central Bank can sack people too.

Mr. McCreevy

——whose employees make bad decisions pay out large sums of money on foot of those bad decisions. This section gives a guarantee that cannot be done. If an employee of a commercial bank makes a bad policy decision which impacts on the customer and the customer wins an action, the bank has to pay considerable amounts of money. The purpose of this subsection is not to treat the Central Bank in like manner.

Regardless of the authorisation of licences given to commercial banks by the Central Bank, the purpose of the subsection is that there is no guarantee as to the solvency of that institution. Although it is regulated and the Bank has no liability for it, this subsection is being included just in case it might have. That is not right.

Mrs. Doyle

The Central Bank does not run it — that is the point. It may regulate, authorise or oversee it but it does not run it. The Central Bank cannot be responsible for the running of the bank or its insolvency.

Mr. McCreevy

I do not think that the Central Bank, which regulates and controls the bank and has a supervisory role, can get out of all its responsibilities regarding the solvency of the bank by using section 25A(2). That is not good enough in this day and age.

Mr. Cullen

We spoke earlier about the Bank being a player and a regulator. What happens when the Bank is involved in a subsidiary situation? Would the liability apply equally in that case? Does the section only apply to the Central Bank acting as the Central Bank in its totality?

Mrs. Doyle

Only when it is overseeing an authorisation.

Mr. Cullen

Or does it apply when it is involved in another company, as is provided for in the Bill? If it was in a company with another partner, would the partner be liable while the Bank was not?

Mr. McCreevy

The partner would be liable.

Mr. Cullen

Is the Minister of State saying that if the Bank was in an arrangement with another company that half the company would be liable while the other half was not?

Mrs. Doyle

It only applies with regard to its own activities.

Mr. Cullen

There is a heavy weight of law here. Does this section apply to the Central Bank where there is involvement in another company in a partnership arrangement where liability would not fall on the Central Bank in a case giving rise to compensation but where it could apply in respect of the other parts of the company? This would not stand up under the Companies Acts.

Mr. McCreevy

It would not stand up in court.

Mrs. Doyle

This related only to liability connected with the authorisation of an entity to trade. If a bank is a partner in another company or a subsidiary then this question arises only with regard to the authorisation, not the running of the company.

Mr. McCreevy

The bank is saying that while it gives an authority or authorisation and supervises the operations of this financial institution it is not liable for the solvency of the institution if anything goes wrong. I understand what is being done here, but I do not agree with it. Furthermore, a court would not take that view. One cannot absolve oneself of all responsibility. If disputed, this section will be found to be wrong.

Mrs. Doyle

It is prevalent in banking legislation and the precedent is established.

Question put and agreed to.