The appointment of inspectors to Independent News and Media today was described by High Court President, Mr Justice Peter Kelly, as “well justified and not disproportionate.”
He said the appointment of inspectors was a serious matter and while such a sledge hammer should not be used to crack a nut “what has been disclosed in the evidence before me is no nut.”
Judge Kelly appointed top criminal lawyer Sean Gillane SC and British company law lawyer Richard Fleck CBE.
From Thursday, when the court’s orders will come into being, the two experts - working on behalf of the State’s corporate watchdog – will have power to conduct a major inquiry into Independent News and Media and the handling of its affairs by its directors.
The Director of Corporate Enforcement had sought the appointment of the Inspectors, a move that had been strongly opposed by INM.
In his 76-page reserved judgment today Justice Peter Kelly said the evidence heard by him related to four different matters - an interrogation of company data involving staff and former employees; the proposed acquisition of Newstalk by INM; an Independent Review Process and Market Abuse Regulations.
He said the application for the appointment of inspectors arose from a detailed investigation conducted by the ODCE into allegations contained in disclosures both by former Group Chief Executive Robert Pitt and Ryan Preston Group Chief Financial Officer.
An investigation had been conducted by the ODCE whose director considered that nothing less than court appointed inspectors would be able to get to the bottom of matters which were of concern to him.
Judge Kelly said that in 2014 back-up tapes of computer data were removed from the company’s premises and taken to a company outside the jurisdiction where it had been sieved through over a period of months.
This operation had been directed by Mr Leslie Buckley, Company Chairman, and other members of the Board had not been aware of the “interrogation” of tapes at the time.
The Judge said that during the course of the interrogation, data appeared to have been searched against the names of no fewer than 19 individuals including journalists Rory Godson, Maeve Sheehan, Brendan O’Connor and Sam Smyth; two members of the Inner Bar, Jeremiah Healy SC and Jacqueline O’Brien SC; former board and staff members Joe Webb, Karl Brophy, Mandy Scott, Vincent Crowley, Donal Buggy, and the late James Osborne.
Also included were Andrew Donohue, Mark Kenny, Jonathan Neilan, Harriet Mansergh, Jenny Kilroy, Nick Cooper and Ann Marie Healy “persons who may be regarded as having acted adversely to Mr Denis O'Brien, chief shareholder in INM.
“The rights and entitlements of some or all of these 19 people may have been transgressed in a most serious way by this activity,” the judge said.
He said that even to this day it was not clear whether the data removed and taken out of the company was copied and, if so, if the copies were retained by those responsible for or benefitting from the interrogation.
Mr Justice Kelly said the ODCE Director had stated that during the course of his investigation he had uncovered evidence to suggest there may have been unlawful sharing of the company’s inside information with third parties outside of the company as well as unlawful sharing of the company’s confidential information.
He said the company had commenced proceedings against Mr Buckley seeking damages for breach of fiduciary duty, negligence, misrepresentation, breach of contract and wrongful interference with the economic interests of the company.
He had been told that while there may have been a breach of the data protection legislation it had been a breach committed by Mr Buckley and not the company.
Judge Kelly said the ODCE Director contended the inspectors should be appointed in the public interest, to ascertain facts previously unknown and even though such an appointment may have negative consequences for the company.
He said a review of relevant case law demonstrated that the public interest was ensuring the maintenance of proper standards of probity and good governance in companies was one of the major matters which ought to be taken into account.
In the case before the court there was a further dimension to the public interest because of the nature of the business which was carried on by the company.
“A free Press is a cornerstone of a functioning democracy. Journalists’ communications have a particular importance in that regard. Thus allegations of the accessing of journalists’ communications by unauthorised third parties raise issues of particular public interest,” Judge Kelly said.
He said that anybody’s private data would be wrongfully accessed was a serious matter but in the context in which this had allegedly been done was even more so. The company occupied a dominant position in the media sector in the country and there was an obvious public interest in its proper governance.
It was, as pointed out by the late Shanley J. a legitimate objective of the State to lay bare dishonest stratagems which may have infected the affairs and governance of the company.
It was legitimate for the Director to see to it that the issues identified were investigated and, if found to have happened, dealt with effectively.
“Having regard to the evidence which has been placed before me I am of the opinion that the issue of the public interest in this case is one to which I must afford considerable weight,” Judge Kelly said.
Dealing with the company’s argument on the negative consequences resulting from the appointment of inspectors he said INM alleged it had suffered and would continue to suffer financial harm and reputational damage.
The appointment of inspectors was always likely to cause damage to a company but the court was not convinced that the consequences were as serious as suggested.
“I find it difficult to accept that “the Board believes that INM’s very survival would be jeopardised if there were a general erosion of confidence, including a loss of advertiser and supplier confidence in the INM group such as would follow the appointment of inspectors,” Judge Kelly said.
As to reputational damage it seemed to the court that a good deal of that had already occurred as a result of what had been disclosed already.
It was a matter of public knowledge that the company’s former chief executive Mr Pitt and chief financial officer Mr Preston regarded what had been taking place in the company so seriously that they made protected disclosures.
The High Court President said that from what had been disclosed to the court in evidence the appointment of inspectors to ascertain the truth of what had allegedly been going on in the company was well justified and not disproportionate.
He said the Director sought appointment of inspectors to investigate and report on the affairs of the company as the court should deem fit in its acceptance of the inspectors’ terms of reference apart from the exclusion of one particular term ruling out the necessity for a “roving investigation” of the company
Judge Kelly said he felt there should be provision for an interim report to the court by the inspectors and postponed the making of his orders until Thursday morning when he will deal with a number of issues including the matter of costs.