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The Constitutionality of the Administrative Sanctions Procedure

2013年 7月 2日

1 The Draft Inquiry Guidelines and Part IIIC of the Central Bank Act 1942 (As Amended)

1.1 In November 2011, the Central Bank (the "Bank") issued Consultation Paper 57 ("CP 57") on the draft Inquiry Guidelines (the "draft Guidelines") to be prescribed undersection 33BD of the Central Bank Act 1942 (as amended) (the "Act"). The Bank then issued Consultation Paper 65 ("CP 65") on 23 May 2013 having considered the submissions made in respect of CP 57 and undertaken a review of the draft Guidelines.

1.2 Under Part IIIC of the Act (the "Administrative Sanctions Procedure") the Bank can impose sanctions for breaches of regulatory requirements by regulated financial service providers and persons involved in their management. Under this procedure the Bank can, in appropriate cases, convene an inquiry to determine whether or not a prescribed contravention has been or is being committed and determine sanctions. The intention underlying the draft Guidelines is to provide some exposition on the practice and procedure to be adopted during an inquiry1.

1.3 Since the draft Guidelines were first published in 2011, one criticism is that "some or all of Part IIIC of the Central Bank Act 1942 may potentially be unconstitutional in that some or all of Part IIIC may be inconsistent with Article 34(1) of the Constitution and may not fall within the exemption as set out in Article 37(1) of the Constitution"2.

2 Relevant Constitutional Provisions

2.1 Article 34.1 states that "Justice shall be administered in courts established by law by judges appointed in the manner provided by this Constitution, and, save in such special and limited cases as may be prescribed by law, shall be administered in public".

2.2 Article 37.1 states that "Nothing in this Constitution shall operate to invalidate the exercise of limited functions and powers of a judicial nature in matters other than criminal matters, by any person or body of persons duly authorised by law to exercise such functions and powers, notwithstanding that such person or such body of persons is not a judge or a court appointed or establish as such under this Constitution".

2.3 Both Article 34.1 and 37.1 are the subjects of considerable bodies of case law3; neither of which have ever managed to unambiguously define the meaning of the "administration of justice" or "the exercise of limited functions and power of a judicial nature".

3 The Administration of Justice

3.1 In Re Solicitors Act 19544 concerned a dispute as to the constitutionality of the provisions of the Act which authorised the disciplinary committee of the Law Society to conduct inquiries, strike the names of solicitors from the roll and order the payment of restitution. After an extensive consideration of Irish, English and Australian authorities, the Supreme Court stated that the "decisive test" lay in which orders the committee could make5,

3.2 Damages awarded by a court for fraud or negligence are primarily an attempt to produce restitutio in integrum and the court is unable to distinguish the power given to the Committee from the power given to a court, unless it be that the power given the Committee is wider than that a court can exercise. The questions which arise before the Committee are as contentious, as difficult, and as important as the questions which would arise before a court trying a common law action for negligence or fraud. In the opinion of the court a tribunal which may make such an order is properly described as administering justice and such a tribunal unless composed of judges is unconstitutional.

3.3 This standard for the administration of justice has been cited frequently in later cases but the Supreme Court has generally resisted the formulation of a restrictive standard or test; in addition, greater reliance has been placed on clearer definitions in later cases.

3.4 This test is not entirely clear and beyond that, it has the capacity to bring almost every administrative tribunal with the power to make quasi-judicial orders into the remit of the "administration of justice".

3.5 Subsequent attempts by the courts to identify the characteristic features of the "administration of justice" fell out of favour. The definition which would seem to have found the most support6 is that of Kenny J in McDonald v Bord na gCon (No 2)7, wherein he indicated that the five characteristic features of the administration of justice were:

(i) A dispute or controversy as to the existence of legal rights or a violation of the law;

(ii) The determination or ascertainment of the right of parties or the imposition of liabilities or the infliction of a penalty;

(iii) The final determination (subject to appeal) of legal rights or liabilities or the imposition of penalties;

(iv) The enforcement of those rights or liabilities or the imposition of a penalty by the court or by the executive power of the State which is called in by the court to enforce its judgment;

(v) The making of an order by the court which as a matter of history is an order characteristic of courts in this country"8.

3.6 On application of the above criteria to the statutory powers of Bord na gCon to exclude a person from a greyhound meeting; the Supreme Court held that the power was not judicial in character. In particular, the court pointed to the fact that the Board was not entitled to impose any penalty or liability on anyone and therefore, it was not acting judicially9.

3.7 In Goodman International v Hamilton (No 1)10, the Supreme Court applied these criteria in relation to the Tribunal Inquiries Acts 1921-1979 and held that they were constitutional11. The court determined that although the Beef Tribunal probably satisfied the first criterion above, it certainly did not satisfy the fifth in that it was never a function of the judiciary to make a finding of fact and report it to the legislature.

3.8 In Keady v Garda Commissioner12, the plaintiff challenged the statutory authority of the then interim Garda Commissioner allowing him to dismiss members from An Garda Síochana as being an unconstitutional administration of justice. The Supreme Court dismissed his argument and relied again on the McDonald criteria. McCarthy J stated that in order for an act to qualify as the administration of justice, it was necessary that each of the five criteria be satisfied and that the procedure at issue failed in respect of the first criterion because there was no dispute or controversy as to the existence of legal rights or violation of the law if "violation of the law" means "criminal offence" and that the second, third and fourth criteria made it appear as such13.

3.9 O'Flaherty J on the other hand indicated in the same case that it was possible to distil the McDonald criteria to two "essential ingredients"14; namely that there be a contest between parties together with the infliction of some form of penalty or liability on one of the parties. He was satisfied that there was a penalty but he did not consider that the other ingredient was present in that there was not a contest between parties.

3.10 These decisions have thus suggested that there is no formula to be applied to such cases and that every such constitutional challenge will turn on its own facts.

4 Is the Central Bank Administering Justice?

4.1 It might seem difficult to argue that the Bank is not engaged in the administration of justice when it conducts inquiries and imposes sanctions under Part IIIC of the Act. The situation is certainly analogous to that the subject of the Solicitors Act decision and, on that basis, it might prove difficult for a court to distinguish it. Nonetheless, when one applies the McDonald criteria, bearing in mind the guidance provided by later Supreme Court decisions, it would seem far from a foregone conclusion that justice is, in fact, being administered.

A Dispute or Controversy as to Legal Rights or a Violation of the Law

4.2 As to the first criterion, relying on the dicta of McCarthy J in Keady, as noted above, the dispute between the Bank and the individual or entity the subject of the inquiry, is neither a dispute as to legal rights or the violation of the law, as no legal rights are concerned and nor is a violation of the criminal law concerned.

4.3 In addition and although contrary to the rationale in the Solicitors Act case, O'Flaherty J in Keady stated that there was no contest involved between the disciplinary board of An Garda Síochana and the accused as it was not "a contest between parties; it was, as its name says, an inquiry". Similarly, where an inquiry is conducted by the Bank, it is done so solely by the Bank in order for the relevant panel to determine if a regulated financial service provider has committed a prescribed contravention.

The making of an order by the court which as a matter of history is an order characteristic of courts in this country

4.4 As to the fifth criterion, it would seem that the administrative sanctions procedure does not involve the making of orders characteristic of Irish courts. It has been suggested that a significant feature of the Solicitors Act case was the emphasis the court placed on the fact that the power to strike off solicitors lay traditionally with the courts and that due to the importance of the relationship between solicitors and the courts, this should continue. The court referred to this and discussed the necessity for the proper administration of justice that the courts be served by legal practitioners of "high integrity and professional competence and that judges should have the power not only of removing those who in their opinion fail to meet the requirements of the office bit of retaining those who do"15.

4.5 The same traditionally significant relationship does not exist between the courts and regulated financial service providers. The administration, regulation and discipline of such persons and entities have always been the province of the Bank. In that sense, although its powers may be far reaching, they are confined to the scope of the Bank's traditional role of supervising such persons and entities and thus, lie outside the realm of the administration of justice.

5 Limited Functions and Powers

5.1 It must be also considered whether the Bank's powers under Part IIIC are sufficiently limited to fall within the four corners of Article 37.1. Notably and not unlike the situation with respect to Article 34.1, the case tends to distinguish later cases from the Solicitors Act case; however, in the course of so doing, a number of conflicting principles have been established.

5.2 In Re Solicitors Act 1954 was the first case in which Article 37 was addressed16. Kingsmill Moore J stated that it is the "powers and functions which must be limited and not the ambit of their exercise … Nor is the test the number of powers and functions which are in their own nature to be limited"17. He went on to state that a tribunal which had only a few powers and functions but which were of "far-reaching effect and importance" could be regarded as exercising unlimited powers and functions18.

5.3 The court said further that the true test of a limited power lay in the effect of that power when exercised and if the exercise of the power was "calculated ordinarily to affect the lives, liberties, fortunes or reputations of those against whom they are exercised they cannot properly be described as limited"19.

5.4 The court considered that the striking of a solicitor from the rolls constituted such an act of unlimited power in that it had the potential to be more profound in effect than a sentence of imprisonment20. In this respect, the court noted the extensive training required to attain the qualification and the fact that when struck off, all this training counts for nothing in that it is a criminal offence to practice after same has taken place and the Law Society's permission was required even to work as a solicitor's clerk21.

5.5 With respect to Part IIIC, section 33AQ(3) sets out the following penalties, one or more of which the Bank may impose upon a finding that a regulated financial service provider is committing or has committed a prescribed contravention:

(i) a caution or reprimand;

(ii) a direction to refund or withhold all or part of an amount of money charged or paid, or to be charged or paid, for the provision of a financial service by the financial service provider;

(iii) a direction to pay to the Bank a monetary penalty not exceeding the prescribed amount;

(iv) if the financial service provider is a natural person, a direction disqualifying the person from being concerned in the management of a regulated financial service provider for such period as is specified in the order;

(v) if the financial service provider is found to be still committing the contravention, a direction ordering the financial service provider to cease committing the contravention and to pay to the Bank all or a specified part of the inquiry costs incurred by it;

(vi) a direction to pay to the Bank all or a specified part of the costs incurred by the Bank in holding the inquiry and in investigating the matter to which the inquiry relates.

5.6 For the purpose of subsection (c) above, section 33AQ(4) sets out the relevant prescribed amounts which are limited to €5,000,000 if the financial service provider is a body corporate or €500,000 if it is a natural person. The Act also allows for similar penalties to be imposed on persons concerned in the management of a regulated financial service provider22.

5.7 Although the Solicitor's Act test set out above might seem damning in respect of the powers afforded the Bank under Part IIIC, the legislation includes certain in-built protections, which are designed to limit the ability of the Bank to affect the "lives, liberties, fortunes or reputations of those against whom they are exercised"23. In particular, the Act, at section 33AS thereof, restricts the ability of the Bank to impose a monetary penalty in such an amount that would be likely to cause the financial service provider to cease business and in the case of a natural person, the amount can not be such as would be likely to cause the person to be adjudicated a bankrupt.

5.8 In addition, as noted previously, a tendency to distinguish the In Re Solicitors Act decision or confine it to its own facts has been seen in later cases. For example, in Keady, the court distinguished the officer of An Garda Síochana being dismissed from that of a solicitor struck off on the basis that a Garda who is dismissed loses his immediate employment but he does not lose any qualification by virtue of his dismissal24. The court stated that the Solicitors Act decision concerned a solicitor's right to "work in an occupation for which he has been trained over a period of years and achieved an expertise and certified qualification ... If he loses that certificate and holds himself out as being so qualified, he commits a criminal offence"25. Such a distinction could be said to be apply equally to the case of a regulated financial service provider who is penalised by a panel of inquiry; however, the legal contortionism required to arrive at such a conclusion leaves the result somewhat unsatisfying.

5.9 While efforts to distinguish the dicta from the Solicitors Act case provide some illumination as to the Supreme Court's over-arching attitude in respect of the application of Article 37.1, the problem with such decisions is that many contain remarks which were necessary to distinguish a particular case but prove unhelpful when attempting to identify consistently-applicable principles. What does seem clear, however, is that the courts' chief concern is that of preserving in the judiciary the ultimate authority to decide disputed questions of fact and to limit or remove the risk that a quasi-judicial administrative body might be so empowered that it would usurp this function. In K v An Bord Altranais26, the Supreme Court held, in relation to the procedure for the erasure and suspension of persons from the register of nurses for misconduct, that "where the whole question as to whether the applicant is a fit person to remain as a registered nurse depends upon the truth or falsity of evidence as to her conduct, it seems … essential that the High Court must reach its own conclusion as to the truth or falsity of those allegations"27.

5.10 Prior to the decision in K, the Nurses Act 1985 provided that professional misconduct alleged against a registered nurse were to be referred to the Fitness to Practice Committee which would then hold an inquiry at which the nurse concerned could appear. Post-inquiry, the Committee would make a finding and report them to the An Bord Altranais. Upon consideration of the Committee's report and any further submissions made by the impugned individual, the Board would then determine if the particular individual should have their name erased or suspended from the register of nurses. The Board's decision would not take effect until considered by the High Court. The nurse concerned could apply to court seeking a cancellation of the Board's decision or, alternatively the Board could apply to the court on an ex parte basis for confirmation of its decision and the court would then make a decision directing the appropriate disciplinary action unless there was good reason to the contrary.

5.11 In K, the High Court had determined that it was intended by the legislature that when the matter came before it, the court should be confined to the findings of fact made by the Fitness to Practice Committee and the court so limited the scope of its analysis. The Supreme Court, on appeal, however, directed that the evidence of the disputed facts in that particular case should be tried orally before the High Court.

5.12 In his decision, Finlay CJ acknowledged that there would be a great number of cases with regard to disciplinary proceedings in professional bodies in which no direct issues of fact were concerned but rather questions of "propriety, professional conduct, professional standards and the consequences of undisputed facts"28 and said that in all those cases, no necessity would arise for oral evidence in the High Court. Although, that case was not itself an Article 37 challenge, the comments of the court noted above were directed at the issue of unconstitutional acts of quasi-judicial bodies. The court noted that the "necessity for the procedure to vest [the power to decide questions of disputed fact] in the court … arises from the constitutional frailty that would attach to the delegation of any such power to a body which was not a court established under the Constitution…"

5.13 The Supreme Court's concern in this regard seems to be the avoidance of situations where the High Court would be forced to determine an appeal in reliance on the factual findings of a quasi-judicial body. Part IIIC of the Act allows the panel of inquiry to make determinations on questions of disputed fact. For instance, section 33AO of the Act states, "Whenever the Bank suspects on reasonable grounds that a regulated financial service provider is committing or has committed a prescribed contravention, it may hold an inquiry to determine whether or not the financial service provider is committing or has committed the contravention". However, the Act also makes provision for an appeal to the Irish Financial Services Appeal Tribunal with a further appeal to the High Court and thereafter to the Supreme Court on a point of law only29.

5.14 There is no language in Part IIIC which limits the High Court's capacity to conduct a full re-hearing on oral evidence where necessary and given the precedent established in K and other cases, it would seem reasonable that the Act should be read in that way. This being so, it would seem that the role of the courts could not be said to be usurped in any way by the Bank acting pursuant to Part IIIC as the ability of the court to hear oral evidence as to disputed facts would not be confined or otherwise fettered. Thus, an entity or individual the subject of an inquiry under the Administrative Sanctions Procedure would have unrestricted access to the High Court in the event that he is unsatisfied with the result and would not be limited in terms of the nature of the case made on appeal.

6 Conclusion

6.1 Despite the interpretive issues arising from the case law, it is difficult to imagine Part IIIC of the Act being held unconstitutional. There is no question that the Bank is obliged to act judicially in the conduct of its duties and to vindicate the rights to fair procedures of persons the subject of inquiries. It would appear that every effort has been made to comply with this obligation in that Part IIIC makes specific provision for representation by counsel or solicitor30, for the right to make submissions31, for the right to receive adequate notice in advance of the inquiry32, for the right to receive a reasoned decision33, for extensive appellate rights34, etc. Nonetheless, it can be said that the Bank is not engaged in the administration of justice; rather, Part IIIC facilitates its administration of regulated financial service providers and affords it the ability to investigate and resolve certain breaches of professional misconduct. Moreover, such a role cannot be said to form a component of the traditional function of the judiciary.

6.2 Even if one were to accept that the Bank is engaged in the administration of justice, the Bank's functions are limited in terms of their operation and effect to such an extent as to avoid any usurpation of the essential functions of the courts and, as such, fallsquarely within the ambit of Article 37.1.


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