The Commercial Court has ruled the Irish Stock Exchange’s decision revoking stockbroking firm Bloxham’s membership of the exchange cannot be quashed through judicial review proceedings.
The liquidator has also brought a separate plenary challenge to that decision, which is proceeding.
Had its membership of the exchange not been revoked, Bloxham could be entitled to significant funds arising from proposals to transfer the business of the exchange to a new company limited by shares with a distribution of accumulated reserves to existing members. That project, known as Project Chrysalis, has not yet been implemented, but the exchange's accumulated reserves stood at some €27 million in 2011.
The liquidator sought judicial review after Bloxham’s membership of the exchange was revoked last December on grounds Bloxham had not been trading for some six months.
The Central Bank had in May 2012 directed the firm to suspend its trading activities after it was revealed it was undercapitalised and the firm petitioned to be wound up.
As a preliminary issue in the judicial review proceedings, the exchange asked the Commercial Court to rule its decision could not be quashed by judicial review, as such an order is available only for decisions taken in the exercise of public authority.
The exchange argued its decision did not have the necessary public law attributes required for judicial review.
Contractual power
It was argued the power exercised by the exchange in revoking Bloxham's membership was a purely private contractual power embodied in the exchange's own rules which Bloxham had undertaken to abide by when accepting membership of the private limited company that was the Irish Stock Exchange.
Today, Mr Justice John Cooke said the revocation decision was one that put an end to the contractual relationship created when Bloxham became a subscribing guarantor of that private limited company.
He ruled as “misplaced” Bloxham’s reliance on arguments the role and functions of the exchange have been materially altered following enactment of the EC Markets in Financial Instruments (MIF) Regulations.
The exchange’s entitlement to operate the stock exchange here derives, as far as those regulations are concerned, from authorisations granted by the Central Bank, he said.
While it could be said the exchange had been in a sense co-opted into arrangements for the common regime for regulation of markets and instruments under the aegis of the Central Bank, that was solely in its capacity as one of the entities coming within the supervision of the Central Bank as a market operator.
The exchange was itself answerable to the Central Bank and the regulations did not endow it with any public law authority vis-a-vis its own members, which replaced such authority as it had over them under its own rules.
The exercise by the exchange of those rules did not amount to exercise of the power of a public authority at least in relation to a decision to discontinue corporate membership of the exchange as a company limited by guarantee, he added.
The judge also said the “real purpose” of the proceedings by the liquidator was concerned with Bloxham’s membership of the private limited company that was the exchange.
It was clear the firm, having been wound up, has no prospect of, or interest in, resuming any trading activity, he said. What was really sought was to preserve its corporate status as a guarantor member of the exchange. The firm’s membership of the private limited company was distinct from its trading membership of the exchange.
The objective sought to be pursued by the liquidator was in the realm of private law and not a claim on the part of an undertaking whose rights have been affected by an exercise of powers of public authority, he ruled.
The disputed decision of the exchange was “based exclusively” upon the private contactual relationship between it and Bloxham.
