transcript mark traynor ibrc delaware chapter 15 04.11.2013

8/14/2019 Transcript Mark Traynor IBRC Delaware Chapter 15 04.11.2013

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In The Matter Of:


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MARK TRAYNOR - 11/4/2013

1-800-325-3376 www.merrillcorp.com/law

Merrill Corporation - New York

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IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF DELAWARE

-----------------------------------xIn re:THE IRISH BANK RESOLUTION Chapter 15

CORPORATION LIMITED Case No.

(IN SPECIAL LIQUIDATION) 13-121599 (CSS)

Debtor in a foreign proceeding-----------------------------------x

November 4, 2013

1:07 p.m.

Deposition of MARK TRAYNOR, held at

the offices of Skadden, Arps, Slate,

Meagher & Flom LLP, Four Times Square,

New York, New York, before Mark Richman

and Gail F. Schorr, Certified Shorthand

Reporters, Certified Realtime Reporters

and Notaries Public within and for the

State of New York.


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1

2 A P P E A R A N C E S:

3 SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP

Attorneys for The Irish Bank Resolution4 Corporation Limited

300 South Grand Avenue

5 Los Angeles, CA 90071-3144

6 BY: ERIC S. WAXMAN, ESQ.

VAN C. DURRER II, ESQ.

7 -and- ANNIE Z. LI, ESQ.

8 ([email protected]) ([email protected])

9 ([email protected])

10LEONARD ZACK & ASSOCIATES

11 Attorneys for the Flynn Parties

405 Park Avenue, Suite 100112 New York, NY 10022

13 BY: LEONARD ZACK, ESQ.

([email protected])14

15 O'NEILL & COMPANY

Attorneys for the Flynn Parties16 240 Central Park South

Suite 23D17 New York, NY 10019

18 BY: LAWRENCE DANIEL O'NEILL, ESQ.

([email protected])19

20

21

22

23

24

25


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2 A P P E A R A N C E S (Continued):

3 11:48:3LAW OFFICES OF DORON A. HENKIN, ESQ.

Attorneys for Castleway Properties LLC4 11:48:3and Walnut Rittenhouse LP

Radnor Financial Center

5 150 N. Radnor-Chester Road Suite F200

6 Radnor, PA 19087

7 BY: DORON A. HENKIN, ESQ. ([email protected])

8

9 ALSO PRESENT:

LEONA FLYNN10 JOHN FLYNN

ANDREW O'LEARY

11 JAMES SHEEHAN

12

13

14

15

16

17

18

19

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21

22

23

24

25


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1 MARK TRAYNOR

2 MARK TRAYNOR, Having been

3 called as a witness, having been

4 first duly sworn by the Notary

5 Public (Mark Richman), was examined

6 13:07:4 and testified as follows:

7 13:07:4 EXAMINATION BY MR. O'NEILL:

8 13:11:4 Q. Good afternoon.

9 13:11:5 A. Good afternoon.

10 13:11:55 Q. With Mr. Wallace we started

11 13:11:5with a discussion of the types of

12 13:12:0liquidation under Irish law and Mr.

13 13:12:05Wallace narrowed it down to two, one of

14 13:12:1which is a court liquidation and the

15 13:12:12other is a shareholders liquidation. And

16 13:12:1the law deals with those slightly

17 13:12:1differently.

18 13:12:2 Would you have a

19 13:12:22categorization of this liquidation, the

20 13:12:2IBRC liquidation, is it a court

21 13:12:3liquidation or a shareholders

22 13:12:3liquidation?

23 13:12:3 A. It's a mixture of both. It

24 13:12:33has elements of court liquidation and has

25 13:12:3elements of what are called the voluntary


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2 13:12:3liquidation.

313:12:4

Q. Are you aware of a

4 13:12:43shareholders resolution putting IBRC into

5 13:12:4liquidation on the 6th of February?

6 13:12:4 A. No, I'm not.

7 13:12:4 Q. Are you aware that the

8 13:12:55statement of affairs refers to such a

9 13:12:5resolution?

10 13:13:0 A. I can't recall seeing that in

11 13:13:0the statement of affairs.

12 13:13:0 Q. Let's deal with this hybrid

13 13:13:1liquidation. Who put, who specifically

14 13:13:2put IBRC into liquidation?

15 13:13:3 A. There was a special

16 13:13:32liquidation order signed by the Minister

17 13:13:35For Finance on the 7th of February which

18 13:13:3appointed Mr. Wallace and Mr. Richardson

19 13:13:4as joint special liquidators of IBRC.

20 13:13:43 Q. In what capacity did the

21 13:13:45minister put IBRC into liquidation?

22 13:13:4 MR. WAXMAN: Vague. You can

23 13:13:5 answer.

24 13:13:5 A. Sorry. The special

25 13:13:52liquidation order was as part of section


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2 13:13:54 of the IBRC Act that had been passed by

313:14:0

Parliament on, early in the morning of

4 13:14:03the 7th of February.

5 13:14:0 Q. I'm sorry I probably wasn't

6 13:14:0clear with my question. In order to put

7 13:14:12even a hybrid company into liquidation,

8 13:14:1you must have some standing vis-a-vis

9 13:14:1that company. In what capacity did the

10 13:14:1-- was the finance minister, was he a

11 13:14:22shareholder, was he a creditor, what

12 13:14:2capacity did he put the company into

13 13:14:25liquidation?

14 13:14:2 A. He was acting in the capacity

15 13:14:2had a had been given to him under the

16 13:14:2powers given by the IBRC Act itself. So

17 13:14:33I don't -- to answer your question, I

18 13:14:35don't believe it was as a shareholder or

19 13:14:3as a creditor. It was in his role as the

20 13:14:4finance minister as designated under the

21 13:14:43terms of the IBRC Act.

22 13:14:45 MR. O'NEILL: I reserve this

23 13:14:4 issue. We will come back when I

24 13:14:4 have a copy of the IBRC.

25 13:14:4 MR. WAXMAN: Sure.


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2 13:14:53 Q. So in a creditor's winding up,

313:15:02

in any liquidation, what role do the

4 13:15:05creditors play in that process, in a

5 13:15:1normal, let's not talk about this act,

6 13:15:12but in a normal Irish liquidation?

7 13:15:15 MR. WAXMAN: Vague, calls for

8 13:15:1 a narrative. Can you be a bit more

9 13:15:1 specific in what you're asking the

10 13:15:2 witness?

11 13:15:2 Q. What is the position that the

12 13:15:2creditors take vis-a-vis the company

13 13:15:23after a company has either A shareholder

14 13:15:2resolution putting the company into

15 13:15:2liquidation or has applied to the court

16 13:15:3or a creditor has put the company into

17 13:15:3liquidation, the other creditors of the

18 13:15:3company?

19 13:15:4 MR. WAXMAN: Vague. I don't

20 13:15:4 understand the question. But if

21 13:15:42 you --

22 13:15:43 A. I'm sorry, I don't quite

23 13:15:4understand whether you are talking about

24 13:15:4in the liquidation generally or you're

25 13:15:4talking about the actual procedure to


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2 13:15:5place those into liquidation in the first

313:15:52

instance. I just am not clear.

4 13:15:5 Q. I'm talking about after the

5 13:15:5company has been placed into liquidation.

6 13:15:5 A. Okay.

7 13:15:5 Q. Let's take a hypothetical

8 13:16:0company, Newco or Oldco. Oldco is placed

9 13:16:03into liquidation. The creditors of Oldco

10 13:16:0have what rights at that point under the

11 13:16:1law?

12 13:16:1 MR. WAXMAN: In which type of

13 13:16:13 liquidation are we referring to

14 13:16:1 with respect to the two that have

15 13:16:1 been identified?

16 13:16:1 Q. A shareholder's and a court's?

17 13:16:2 A. Well first take a creditor's

18 13:16:22voluntary liquidation, and they can

19 13:16:2submit their claims to the liquidator as

20 13:16:2to what they claim to be owed by the

21 13:16:2company in liquidation and can go through

22 13:16:3that claims process with the liquidator

23 13:16:3in terms of that.

24 13:16:3 And there is a procedure

25 13:16:3whereby in a creditor's voluntary


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2 13:16:4liquidation there could be a committee of

313:16:42

inspection appointed at the creditors

4 13:16:4meeting, which Mr. Wallace referred to,

5 13:16:4when the company is placed into

6 13:16:5liquidation. And that committee of

7 13:16:53inspection is typically made up of a

8 13:16:5number of representatives of the creditor

9 13:16:5group and a number of representatives of

10 13:17:0the shareholder group.

11 13:17:02 And in a committee of

12 13:17:0inspection position, they would typically

13 13:17:0meet with the liquidator at various times

14 13:17:0during the liquidation. There's no set

15 13:17:12time but they have to meet every month or

16 13:17:15so, but that will be arranged with the

17 13:17:1liquidator.

18 13:17:1 Q. And none of that is happening

19 13:17:1in this case; is that correct?

20 13:17:2 A. There is no committee of

21 13:17:22inspection in this case, correct.

22 13:17:23 Q. Nor have the creditors met in

23 13:17:2this case?

24 13:17:2 MR. WAXMAN: Well that lacks

25 13:17:2 foundation.


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2 13:17:3 Q. Have the creditors met in this

313:17:32

case?

4 13:17:32 MR. WAXMAN: Well they may

5 13:17:33 have met and he wouldn't know about

6 13:17:35 it. But do you mean --

7 13:17:3 Q. No in terms of the structure

8 13:17:3of the liquidation, have the creditors

9 13:17:4met to approve the appointment of the

10 13:17:4liquidators? Have the creditors met to

11 13:17:45approve the appointment of the

12 13:17:4liquidators?

13 13:17:4 A. No.

14 13:17:4 Q. And why is that?

15 13:17:4 MR. WAXMAN: Calls for

16 13:17:5 speculation as phrased.

17 13:17:52 Q. Is in fact that meeting

18 13:17:55proscribed by the IBRC Act?

19 13:17:5 A. No, there's no provision of

20 13:18:0the IBRC Act that says a creditor's

21 13:18:03meeting is to take place.

22 13:18:05 Q. Is to take place, is not to

23 13:18:0take place?

24 13:18:0 A. What I'm saying is there is no

25 13:18:1provision within the IBRC Act which


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2 13:18:12stipulates that a creditor's meeting

313:18:15

should take place when the company was

4 13:18:1placed into liquidation.

5 13:18:1 Q. I see. So that's why there

6 13:18:2was not a creditor's meeting?

7 13:18:22 A. Yes.

8 13:18:22 Q. And the same is true with the

9 13:18:32committee of examination as you called

10 13:18:3it?

11 13:18:35 A. There is no provision within

12 13:18:3the IBRC Act to appoint a committee of

13 13:18:4inspection.

14 13:18:4 Q. Committee of inspection.

15 13:18:42Okay.

16 13:18:4 A. In fact, sorry, just to

17 13:18:45clarify.

18 13:18:4 Q. Yes.

19 13:18:4 A. In fact I think and without

20 13:18:4looking at the --

21 13:18:4 Q. We will do that now.

22 13:18:5 A. -- I think that provision in

23 13:18:52respect of creditors voluntarily winding

24 13:18:55up the appointment of committee of

25 13:18:5inspection has been disapplied by the


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2 13:18:5IBRC Act.

313:18:5

Q. I believe that's correct, yes.

4 13:19:0 MR. O'NEILL: I have here a

5 13:19:0 copy which we will put into --

6 13:19:0 thank you very much. Mark this as

7 13:19:0 Traynor Exhibit 1. Very efficient

8 13:19:12 that we have two copies.

9 13:19:1 (Traynor Exhibit 1 for

10 13:19:1 identification, document titled

11 13:19:1 "Exhibit B, Irish Bank Resolution

12 13:19:22 Corporation Act 2013.")

13 13:19:22 MR. O'NEILL: And this is

14 13:19:23 Traynor Exhibit 2 which is the

15 13:19:2 properly marked up copy of the

16 13:19:32 Companies Act.

17 13:19:33 (Traynor Exhibit 2 for

18 13:19:2 identification, document, properly

19 13:19:2 marked up copy of the Companies

20 13:19:3 Act.)

21 13:19:3 Q. So why don't we focus on the

22 13:19:3Companies Act marked up, because I think

23 13:19:4that reflects the limitations of the IBRC

24 13:19:4Act. We will get to the IBRC Act in a

25 13:19:4minute.


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2 13:19:4 MR. WAXMAN: So you're now

313:19:4

referring to Traynor Exhibit 2?

4 13:19:4 MR. O'NEILL: Exactly, Traynor

5 13:19:5 Exhibit 2.

6 13:19:5 Q. What other provisions that

7 13:20:03would take place in the normal, let's

8 13:20:0call it more standard liquidation have

9 13:20:12been removed, are prohibited by the IBRC

10 13:20:1Act pursuant to this markup of the

11 13:20:2Companies Act?

12 13:20:22 MR. WAXMAN: I'm going to

13 13:20:23 object to the term standard or

14 13:20:2 regular or normal because I'm not

15 13:20:2 sure that that term can be applied

16 13:20:2 to any liquidation. But if you're

17 13:20:3 asking the witness to answer what

18 13:20:32 are the differences between the act

19 13:20:35 that was put in place in 2013 and

20 13:20:3 the Companies Act, the witness can

21 13:20:42 answers that question.

22 13:20:42 MR. O'NEILL: Let me rephrase.

23 13:20:45 Q. We have discussed the

24 13:20:4committee of inspection and the creditors

25 13:20:52committee as being eliminated by the IBRC


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2 13:20:5Act. What other provisions of a

313:21:02

Companies Act liquidation have been

4 13:21:05eliminated by the IBRC Act?

5 13:21:0 A. Well section 10 of the IBRC

6 13:21:1Act, which I have in front of me, sets

7 13:21:13out a number of the provisions which have

8 13:21:1been disapplied, and there is also

9 13:21:2schedule 1 of the IBRC Act which sets out

10 13:21:22certain amendments to the Companies Act.

11 13:21:25 So if you want I can go

12 13:21:2through each and every one of those.

13 13:21:2 Q. Would you, please, I would

14 13:21:3like to go through those.

15 13:21:3 A. So there's section 205(a) and

16 13:21:3section 206.1 have been disapplied.

17 13:21:3Sections 212 to --

18 13:21:4 Q. Sorry, can I just stop. I'd

19 13:21:42like to deal with not the section numbers

20 13:21:4but the specific substance of the things

21 13:21:4that have been disapplied, if we could.

22 13:21:53 In other words, if we start

23 13:21:5with the Companies Act and we say, okay,

24 13:22:02the jurisdiction of the High Court has

25 13:22:0been removed by the IBRC Act, for


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2 13:22:0example, this is section 212.

313:22:0

MR. WAXMAN: So the record is

4 13:22:1 clear, you're withdrawing the prior

5 13:22:12 question.

6 13:22:12 MR. O'NEILL: Yes, I am.

7 13:22:13 MR. WAXMAN: And you're now

8 13:22:1 posing a new question.

9 13:22:15 MR. O'NEILL: I'm asking a new


11 13:22:1 Q. I'm asking the question can we

12 13:22:1go through the Companies Act with the

13 13:22:22IBRC Act side by side and refer to the

14 13:22:25Companies Act changes which have been

15 13:22:2made by the IBRC legislation. Because I

16 13:22:32presume to all liquidations in Ireland,

17 13:22:3except this one -- I'll ask a question,

18 13:22:3sorry.

19 13:22:3 Are all liquidations in

20 13:22:42Ireland, except this one, governed by the


22 13:22:5 A. Yes, to the best of my

23 13:22:52recollection, yes.

24 13:22:53 Q. Okay, fine. So this

25 13:22:55liquidation is governed by the Companies


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2 13:22:5Act as amended by the IBRC Act, yes?

313:23:02

A. That's correct.

4 13:23:03 Q. Okay, fine. So what I'd like

5 13:23:05to do is to go through the Companies Act

6 13:23:0amendments and have you clarify, as an

7 13:23:12experienced lawyer in this field, those

8 13:23:15parts of a Companies Act liquidation

9 13:23:1which are altered by the IBRC Act, the

10 13:23:22substance of them, not the numbers.

11 13:23:25Could we?

12 13:23:2 A. Yes. Where would you like to

13 13:23:2start?

14 13:23:2 Q. I'd like to start with 212.

15 13:23:3 A. Yes. Well 212 has been

16 13:23:33disapplied in full, so the High Court

17 13:23:3does not have jurisdiction to wind up

18 13:23:3IBRC.

19 13:23:3 Q. Okay. Is there anything else

20 13:23:42in 212, the whole act, is there anything

21 13:23:4else besides the restriction of the High

22 13:23:4Court's role in this liquidation?

23 13:23:5 A. Not under 212.

24 13:23:52 Q. Okay. And let's move on then

25 13:23:5to 214.


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2 13:24:03 A. Yes, 214 has been disapplied

313:24:0

in respect of the IBRC liquidation.

4 13:24:0 Q. And the implications of that,

5 13:24:1the meaning of that, the impact of that?

6 13:24:12 A. Well, 214 sets out effectively

7 13:24:1a definition as we call for insolvency

8 13:24:1under the Companies Acts.

9 13:24:2 Q. So the elimination of 214

10 13:24:2removes the standard definition of

11 13:24:2insolvency from application?

12 13:24:2 MR. WAXMAN: I'll object to

13 13:24:3 the term standard. The legislature

14 13:24:32 has amended the provisions that

15 13:24:3 would otherwise apply with respect

16 13:24:3 to this particular statute.

17 13:24:3 MR. O'NEILL: For this

18 13:24:4 particular liquidation only.

19 13:24:4 MR. WAXMAN: For the

20 13:24:42 particular statute.

21 13:24:43 MR. O'NEILL: And not amended

22 13:24:4 Companies Act, yes.

23 13:24:45 MR. WAXMAN: Well, they've

24 13:24:4 passed a statute and that statute

25 13:24:4 has the effect of amending the


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2 13:24:4 Companies Act.

313:24:5

Q. And 215, the impact of the

4 13:25:0elimination of section 215?

5 13:25:03 A. 215 refers to how someone can

6 13:25:0present a petition to wind up the company

7 13:25:1to the court, and that has been

8 13:25:12disapplied.

9 13:25:13 Q. And 216 relating to the powers

10 13:25:15of the court?

11 13:25:1 A. That is the powers of the

12 13:25:1court in respect of a petition to wind up

13 13:25:2the company. That has been disapplied.

14 13:25:2 Q. And 217?

15 13:25:3 A. 217 which deals with the

16 13:25:32situation where proceedings which are

17 13:25:35brought and between the time that a

18 13:25:3winding up petition has been presented

19 13:25:4and a winding up order has been made,

20 13:25:43would be stayed, that has been

21 13:25:4disapplied.

22 13:25:45 Q. That has been disapplied.

23 13:25:5Okay. And we can deal I think with 220

24 13:25:5through 222 as a collective group. This

25 13:26:02is a commencement of the winding up by


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2 13:26:0the court. What is the impact of the

313:26:0

disapplication of those?

4 13:26:1 A. Well that has been disapplied

5 13:26:12in that the IBRC Act has made it clear

6 13:26:1when IBRC went into liquidation.

7 13:26:1 Q. Okay.

8 13:26:1 MR. WAXMAN: And just so we're

9 13:26:1 clear, counsel, you're asking the

10 13:26:2 witness about those portions of the

11 13:26:2 act that have been amended, not

12 13:26:23 those portions of the act that

13 13:26:2 continue to apply.

14 13:26:2 MR. O'NEILL: That's correct.

15 13:26:2 We will get to the ones that

16 13:26:3 continue to apply.

17 13:26:3 Q. Section 225, appointment of a

18 13:26:4liquidator.

19 13:26:45 A. Yes, that has been disapplied.

20 13:26:4 Q. And the effect of that?

21 13:26:5 A. The effect of that is that it

22 13:26:52is not the court who appoints the

23 13:26:5liquidator to IBRC.

24 13:26:5 Q. Does the court have any power

25 13:27:0over the liquidator in IBRC?


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2 13:27:03 A. Yes, I believe it does.

313:27:0

Q. We will get to that in a

4 13:27:0minute, where you believe it does.

5 13:27:1Section 228?

6 13:27:2 A. Yes, that is that -- the

7 13:27:25procedure for notifying the making of the

8 13:27:2winding up order has been disapplied.

9 13:27:3 Q. Well 228 I believe deals with

10 13:27:33court's power over the liquidators.

11 13:27:35 A. Sorry, I was looking at

12 13:27:3227(b), my apologies.

13 13:27:3 Q. Yes. 228?

14 13:27:4 A. Yes, that has been disapplied

15 13:27:42in terms of a number of general

16 13:27:4provisions.

17 13:27:45 Q. Yes. Does that remove the

18 13:27:4court's jurisdiction over the liquidator?

19 13:27:5 A. No, I do not believe it does.

20 13:27:53 Q. And can you explain why you

21 13:27:55don't believe it does?

22 13:27:5 A. Because I think under section

23 13:27:5280 of the Companies Act which has not

24 13:28:0been disapplied the court still has a

25 13:28:03role and can determine any question in


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2 13:28:0respect of the liquidation by IBRC.

313:28:0

Q. We will get to 280 shortly.

4 13:28:1Okay. I note that the provisions of 229,

5 13:28:1with the exception of the removal of

6 13:28:2court, remain intact.

7 13:28:2 Except when we get to section

8 13:28:3231, 3 and 4. What is the implication of

9 13:28:3that change?

10 13:28:4 A. The implication of that change

11 13:28:4is that the liquidators do not have to

12 13:28:4apply to court in order to seek their

13 13:28:4sanction to exercise certain powers.

14 13:28:5 Q. And --

15 13:28:5 A. In the liquidation.

16 13:28:53 Q. And who would they apply to if

17 13:28:55not the court?

18 13:28:55 A. They don't have to apply to

19 13:28:5anyone.

20 13:28:5 Q. So they have no obligation to

21 13:29:0seek anyone's approval?

22 13:29:02 A. Correct.

23 13:29:03 Q. Let's view 232, 233, this gets

24 13:29:12to, to the issue we just talked about in

25 13:29:15the beginning, the committee of


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2 13:29:1inspection, the committees of creditors.

313:29:25

The disapplication of these clauses does

4 13:29:25what?

5 13:29:2 A. It disapplies the rules for

6 13:29:2appointment of a committee of inspection

7 13:29:3in a court liquidation.

8 13:29:32 Q. Okay. So in the IBRC

9 13:29:3liquidation there is no, pursuant to this

10 13:29:3change, then, there is a disapplication

11 13:29:4of the right of a creditors committee and

12 13:29:43a committee of inspection?

13 13:29:45 A. Yes. There's no -- there's no

14 13:29:4provision in the IBRC Act to appoint a

15 13:29:5committee of inspection.

16 13:29:52 Q. Could the liquidators if they

17 13:29:5wished appoint the committee of

18 13:29:5inspection?

19 13:29:5 A. I don't believe there's any

20 13:30:0prohibition under the IBRC Act to that

21 13:30:02happening.

22 13:30:03 Q. 234, powers of the court, has

23 13:30:15been stricken, the impact of that is?

24 13:30:1 A. Can I just -- I just want to

25 13:30:2read this.


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2 13:31:2fairly minor. Let's move on to section

313:31:4

256, declaration of solvency.

4 13:31:5 A. Yes.

5 13:31:52 Q. What is the impact of the

6 13:31:53elimination of section 256?

7 13:31:5 A. Declaration of solvency is

8 13:31:5required only in the case of a solvent

9 13:32:02liquidation that is taking place and this

10 13:32:0has been disapplied.

11 13:32:05 Q. And the impact of disapplying

12 13:32:0that is?

13 13:32:0 A. That this is not a members

14 13:32:1voluntary liquidation.

15 13:32:13 Q. So can I clarify that that

16 13:32:1means that the directors of the company

17 13:32:2are not required to make a declaration of

18 13:32:22solvency which they would ordinarily be

19 13:32:25required to do?

20 13:32:2 A. They are ordinarily required

21 13:32:2to make a declaration of solvency only in

22 13:32:3a members voluntary winding up. So, for

23 13:32:3instance, if this was a court

24 13:32:3liquidation, the directors would not have

25 13:32:3to file a declaration of solvency.


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2 13:34:02 A. Any person can apply to the

313:34:0

court to seek any question or direction

4 13:34:0in respect to this liquidation. So I

5 13:34:1would say yes, there is a supervisory

6 13:34:1role for the court in this liquidation.

7 13:34:1 Q. And how is that supervisory

8 13:34:1role exercised?

9 13:34:22 MR. WAXMAN: The witness just

10 13:34:23 testified to that.

11 13:34:23 Q. No, how would the court

12 13:34:25exercise that supervisory role?

13 13:34:2 A. Any person could apply to the

14 13:34:2court seeking the court to exercise its

15 13:34:3role in respect of particularly section

16 13:34:35280. So if I can just turn to that.

17 13:34:3 Q. Well I'll get to 280 in a

18 13:34:3minute, please.

19 13:34:3 MR. WAXMAN: Let the witness

20 13:34:4 answer the question, counsel.

21 13:34:42 Please, go ahead.

22 13:34:43 A. Any person may apply to the

23 13:34:43court to determine any question arising

24 13:34:45in the winding up of IBRC. So any person

25 13:34:5can apply for that.


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2 13:34:55 Q. Let's deal with --

313:34:5

A. Sorry, any creditor.

4 13:34:5Apologize.

5 13:35:0 Q. 264 -- 261, sorry, 261. This

6 13:35:03eliminates, I might point out, the duty

7 13:35:0of the liquidators to call creditors

8 13:35:13meetings?

9 13:35:13 A. No, 261, to be very clear,

10 13:35:15deals with the situation where the

11 13:35:1company has gone into a solvent voluntary

12 13:35:2liquidation and that once the company has

13 13:35:23gone into liquidation the liquidator then

14 13:35:25forms the view that it in fact is not a

15 13:35:2solvent liquidation and is rather an

16 13:35:3insolvent liquidation and is there under

17 13:35:33a duty to call the creditors meeting in

18 13:35:35that instance.

19 13:35:35 Q. I see.

20 13:35:3 A. So that has been disapplied.

21 13:35:3 Q. Now let me get back to Mr.

22 13:35:4Wallace's statement this morning, that

23 13:35:4the minister and the directors of the

24 13:35:53statement of affairs stated that the bank

25 13:35:5was solvent at the time just before it


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2 13:35:5was liquidated. Mr. Wallace is of the

313:36:0

opinion that the bank was insolvent

4 13:36:03before it was liquidated. Wouldn't that

5 13:36:05-- this would then apply, had this not

6 13:36:1been removed this would apply to exactly

7 13:36:12such a circumstance, would it not?

8 13:36:1 MR. WAXMAN: The question is

9 13:36:1 vague and ambiguous and as phrased

10 13:36:1 an improper attempt to impeach Mr.

11 13:36:2 Wallace collaterally. So why don't

12 13:36:23 you just rephrase the question and

13 13:36:25 ask this witness his view on

14 13:36:2 whatever it is that you're

15 13:36:2 inquiring about.

16 13:36:3 MR. O'NEILL: I will attempt

17 13:36:32 to do so.

18 13:36:33 Q. This clause would apply where

19 13:36:42a company that was solvent is put into

20 13:36:4liquidation and the liquidators formed

21 13:36:5the opinion that the company was

22 13:36:52insolvent after being appointed. Is that

23 13:36:55correct?

24 13:36:5 A. This section would apply if a

25 13:36:5declaration of solvency had been sworn by


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2 13:37:0the directors under section 256 and the

313:37:05

liquidator then forms the view that the

4 13:37:0company would not be able to pay its

5 13:37:0debts in full.

6 13:37:1 In this instance, there was

7 13:37:12never a declaration of solvency sworn at

8 13:37:1any time by any person or any director.

9 13:37:1 Q. And why was that declaration

10 13:37:1of solvency not sworn?

11 13:37:22 MR. WAXMAN: Calls for

12 13:37:23 speculation as phrased.

13 13:37:2 Q. Well, I'm sorry, we just

14 13:37:2covered that and declaration of solvency

15 13:37:2under 258 -- sorry, under 256 is

16 13:37:3eliminated, the requirement for such a

17 13:37:3declaration is eliminated by the statute?

18 13:37:3 A. That's correct. Because the

19 13:37:4statute has set out the provisions under

20 13:37:43which IBRC was to be liquidated.

21 13:37:4 Q. I understand. So there was

22 13:37:4not a direct declaration of solvency in

23 13:37:53this case because the statute declared

24 13:37:55that there shouldn't be one, correct?

25 13:37:5 A. Yes, because it was not a


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2 13:38:0members voluntary winding up.

313:38:03

Q. So what are the protections of

4 13:38:0section 261? What is the purpose for

5 13:38:1these protections in 261 in a situation

6 13:38:12where a presumably solvent company is

7 13:38:1determined to be insolvent? Why is this

8 13:38:2clause in the Companies Act?

9 13:38:22 A. Because for the company to be

10 13:38:2solvent and having sworn the declaration

11 13:38:2of solvency creditors can take comfort

12 13:38:32their debts will be paid in full.

13 13:38:33 If the liquidator now forms

14 13:38:35the view that will not be the case, he is

15 13:38:3under the duty to inform them that that

16 13:38:3is not the case so that they are aware

17 13:38:4that their debts will not be paid in

18 13:38:43full.

19 13:38:4 Q. Except --

20 13:38:45 A. So it is to protect the

21 13:38:4creditor's, sorry, it's to protect the

22 13:38:4creditor's interest.

23 13:38:5 Q. Except in this case there is

24 13:38:52no requirement to so inform creditors?

25 13:38:55 MR. WAXMAN: That misstates


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2 13:38:5 the record, counsel, because

313:38:5

there's been testimony in the case

4 13:39:0 that the company was not solvent so

5 13:39:02 this provision would not apply in

6 13:39:0 any instance. So I'm not sure what

7 13:39:0 you're trying to establish through

8 13:39:0 the way you phrased the question.

9 13:39:1 MR. O'NEILL: Let me ask a

10 13:39:1 different question. Withdraw that

11 13:39:1 question, let me ask a different


13 13:39:1 Q. Have you read the statement of

14 13:39:1affairs?

15 13:39:2 A. Yes.

16 13:39:2 Q. Do the directors in the

17 13:39:2statement of affairs declare that on the

18 13:39:256th of February the company was solvent?

19 13:39:2 A. Yes, I believe that is the

20 13:39:3case.

21 13:39:32 Q. Do you believe that is true?

22 13:39:3Can you form an opinion as to the

23 13:39:35veracity of that statement?

24 13:39:3 MR. WAXMAN: Which, that the

25 13:39:3 directors?


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2 13:39:4 Q. That the company was solvent?

313:39:42

MR. WAXMAN: Okay. So is he

4 13:39:43 of the view that the company is

5 13:39:4 solvent --

6 13:39:45 MR. O'NEILL: Yes.

7 13:39:45 MR. WAXMAN: -- regardless of

8 13:39:4 what the directors' views may be.

9 13:39:4 MR. O'NEILL: Yes.

10 13:39:5 A. From what I am aware of having

11 13:39:5looked at the documents afterwards and

12 13:39:5from discussions I have had with the

13 13:39:5special liquidators, I do not believe

14 13:39:5that is the case. Sorry, on the 7th of

15 13:40:0February I believe the company was

16 13:40:02insolvent.

17 13:40:03 Q. 6th of February?

18 13:40:03 A. 6th, I haven't examined --

19 13:40:05 Q. The day the directors were

20 13:40:0dismissed?

21 13:40:0 A. The directors --

22 13:40:0 Q. The directors were dismissed

23 13:40:1at 4:25 p.m. on the 6th.

24 13:40:1 A. That's incorrect.

25 13:40:15 Q. The statement of affairs state


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2 13:40:1so. The directors state so in the

313:40:1

statement of affairs.

4 13:40:1 And I believe, I'm sorry, I

5 13:40:2don't mean to impeach anyone, but Mr.

6 13:40:23Wallace says he was appointed on the 6th.

7 13:40:2 A. That's incorrect. Mr. Wallace

8 13:40:2said that at approximately 7:40 on the

9 13:40:37th of February he, himself and Mr.

10 13:40:3Richardson were appointed.

11 13:40:35 Q. Can you tell me when the prior

12 13:40:3directors of IBRC were dismissed?

13 13:40:4 A. They would have been dismissed

14 13:40:42on the appointment of the special

15 13:40:4liquidators on the 7th of February. They

16 13:40:4were most of the directors were informed

17 13:40:4on the 7th of February that their

18 13:40:52contracts of employment were terminated.

19 13:40:5 Q. So we have a difference of

20 13:40:5opinion between the statement of affairs

21 13:41:0and yourself?

22 13:41:02 A. I can only tell you what I

23 13:41:05know to be a fact.

24 13:41:0 Q. Okay, that's fine. Can we

25 13:41:3agree that all of the subsequent


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2 13:43:1the court to determine any question, and

313:43:12

that secondly the special liquidator can

4 13:43:15apply to the court to exercise all or any

5 13:43:1of the powers which the court might

6 13:43:1exercise if it was a court liquidation.

7 13:43:2 Under the stand -- I don't

8 13:43:2want to use the word stand. Under a

9 13:43:2typical court liquidation, any creditor

10 13:43:3or contributory could apply to the court

11 13:43:3in respect of the exercise of any powers.

12 13:43:3But that has been modified so that it is

13 13:43:4just the special liquidator who can apply

14 13:43:43under that second limb of the section.

15 13:43:4 Q. So it limits some rights of

16 13:43:5creditors under section 280 of the


18 13:43:53 A. It limits in respect of the

19 13:43:5exercise of any of the powers which the

20 13:43:5court might exercise. It doesn't limit

21 13:44:02the ability of the creditor to apply to

22 13:44:05court to determine any question in

23 13:44:0respect of the liquidation.

24 13:44:0 Q. Right. But it does limit the

25 13:44:1right of creditors to apply to the court


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2 13:44:15to exercise powers of the court, it

313:44:2

restricts that privilege to the special


5 13:44:23 A. It takes that provision, yes.

6 13:44:25 Q. And secondly, can you opine on

7 13:44:3the meaning of the revised section 280.1,

8 13:44:4specifically the language that says to

9 13:44:4determine any question arising in the

10 13:44:4winding up of IBRC within the meaning of

11 13:44:5the Irish Bank Resolution Corporation

12 13:44:55Act, okay, what is -- is there a

13 13:44:5limitation placed on this application by

14 13:45:0the meaning of the Irish Bank Resolution?

15 13:45:03 MR. WAXMAN: I'm sorry,

16 13:45:0 counsel, you mentioned section 281.

17 13:45:0 Did I hear you correctly?

18 13:45:0 MR. O'NEILL: No, 280.1.

19 13:45:1 MR. WAXMAN: Thank you.

20 13:45:12 Q. 280.1 puts a clause in arising

21 13:45:15in the winding up of IBRC within the

22 13:45:1meaning of the Irish Bank Resolution

23 13:45:2Corporation Act.

24 13:45:2 Does that parenthetical remark

25 13:45:2have any import?


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2 13:45:2 A. In my view, no. I think it is

313:45:3

there solely that the winding up of IBRC

4 13:45:3is as defined in the Irish Bank

5 13:45:4Resolution Corporation Act 2013.

6 13:45:4 Q. And the implication of the

7 13:45:4change in 180, section 2, other than an

8 13:46:0order annulling the making of the special

9 13:46:0liquidation order?

10 13:46:0 A. Yes.

11 13:46:0 Q. That means?

12 13:46:0 A. The court may make any order

13 13:46:1other than annulling the liquidation

14 13:46:1order that has been made on the 7th of

15 13:46:1February.

16 13:46:1 Q. So the court may not reverse

17 13:46:22the liquidation of IBRC?

18 13:46:2 A. The court under that section

19 13:46:2cannot annul the making of the order that

20 13:46:3had been made.

21 13:46:32 Q. And it took out,

22 13:46:3interestingly, 280 section 4 which are

23 13:46:43the penalties on the company for

24 13:46:5disobeying an order made under 280?

25 13:46:53 A. Under 280 subsection 3, which


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1 MARK TRAYNOR

2 13:46:5is that an office copy of an order

313:47:0

annulling the resolution has to be

4 13:47:02forwarded to the registrar of companies

5 13:47:0for registration. And section 284 which

6 13:47:0says if a company fails to comply with

7 13:47:0that.

8 13:47:1 Q. Right, understood.

9 13:47:1 A. -- there is an offense

10 13:47:13created.

11 13:47:13 Q. And this is because the order

12 13:47:1cannot be reversed by the court under

13 13:47:1section 280.2 the modification to 280.2?

14 13:47:22 A. That's correct.

15 13:47:23 Q. Now 282 and 282(a) have both

16 13:47:35been eliminated. What is the impact of

17 13:47:3that?

18 13:47:3 A. 282 first off is that -- 282

19 13:47:55refers to a voluntary winding up of the

20 13:47:5company so it doesn't refer to a court

21 13:47:5winding up and simply says that the

22 13:48:0voluntary winding up of the company shall

23 13:48:03not bar the right. So in a particular

24 13:48:0creditor's voluntary winding up, a

25 13:48:0creditor still has the right to apply to


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2 13:48:12the court if they wish to convert the

313:48:13

creditors voluntary winding up into a

4 13:48:13court winding up.

5 13:48:13 Q. Right.

6 13:48:1 A. That has been disapplied

7 13:48:1because this is not a voluntary creditors

8 13:48:2winding up. 282(a) is disapplied in

9 13:48:23terms of the inspection by the director

10 13:48:25of corporate enforcement who is the

11 13:48:2director that is defined, making an order

12 13:48:33for -- allowing him to inspect the books

13 13:48:35and papers.

14 13:48:3 Q. So that the director of

15 13:48:3corporate enforcement does not have the

16 13:48:4power to, in this case to inspect the

17 13:48:43books and papers of the company?

18 13:48:45 MR. WAXMAN: Because it's not

19 13:48:4 a voluntary winding up.

20 13:48:53 Q. Let's move on to section 286.

21 13:49:0Okay?

22 13:49:1 A. Yes.

23 13:49:1 Q. Antecedent transactions?

24 13:49:13 A. Yes.

25 13:49:13 Q. The Central Bank on the 18th


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1 MARK TRAYNOR

2 13:49:2of October took out a charge over the

313:49:2

assets of IBRC. Are you aware of that?

4 13:49:2 A. Yes.

5 13:49:2 Q. Are you aware of the

6 13:49:3circumstances of that charge, why they

7 13:49:3took out that charge?

8 13:49:3 MR. WAXMAN: As to why calls

9 13:49:4 for speculation.

10 13:49:42 MR. O'NEILL: Well, if he is,

11 13:49:43 I'm asking if he's aware of one.

12 13:49:45 A. I have read the charge and so

13 13:49:4I have read what's in the charge, plus

14 13:49:5and I wasn't present when the charge was

15 13:49:5being taken.

16 13:49:5 Q. So you have no knowledge of

17 13:49:5that?

18 13:49:5 A. I have no first time

19 13:49:5knowledge.

20 13:49:5 MR. WAXMAN: This is how it

21 13:49:5 works. He has to wait until you're

22 13:50:0 done answering a question before he

23 13:50:02 poses another one, and you have to

24 13:50:0 wait to answer a question until

25 13:50:0 he's done posing it. Because the


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1 MARK TRAYNOR

2 13:50:1 reporter cannot take down two

313:50:1

people speaking at the same time.

4 13:50:13 Perhaps these reporters can.

5 13:50:1 MR. O'NEILL: This one can.

6 13:50:15 MR. WAXMAN: But most

7 13:50:1 reporters can't. So wait and make

8 13:50:1 sure he's done asking his question

9 13:50:2 before you start to answer. The

10 13:50:22 best way to do that is to pause and

11 13:50:2 make sure he's actually finished.

12 13:50:2 Q. Do you have any knowledge at

13 13:50:3all of any of the transactions that took

14 13:50:35place regarding the promissory notes and

15 13:50:3the charge taken by the Central Bank?

16 13:50:45The issuance of the promissory notes

17 13:50:4first, do you have any knowledge of the

18 13:50:4issuance of the promissory notes by the

19 13:50:5Irish government to IBRC, to Anglo?

20 13:50:5 A. No, I do not have any

21 13:50:55knowledge of that.

22 13:50:5 Q. And do you have any knowledge

23 13:50:5at all about why or who instructed or who

24 13:51:03informed or asked the bank to, in

25 13:51:0addition to the collateral provided by


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2 13:51:12the promissory notes to also make a

313:51:15

charge to the Central Bank over the

4 13:51:1assets of IBRC?

5 13:51:1 A. No, I'm not aware of that.

6 13:51:2 Q. In a Companies Act, so we can

7 13:51:2avoid the word normal, in a Companies Act

8 13:51:2liquidation, if there was a suspicion

9 13:51:3that the party taking the charge was

10 13:51:4aware that the company was going to be

11 13:51:4liquidated, what would be the implication

12 13:51:4of that charge taken within six months of

13 13:51:5the liquidation?

14 13:51:52 MR. WAXMAN: Incomplete

15 13:51:53 hypothetical. You can answer, if

16 13:51:55 you can.

17 13:51:5 A. Well, I think what you're

18 13:51:5saying would -- that a liquidator would

19 13:52:03look at the charge that was taken in

20 13:52:0place to see whether it was a fraudulent

21 13:52:0preference within the meaning of section

22 13:52:1286.

23 13:52:1 Q. And what is a fraudulent

24 13:52:13preference within the meaning of section

25 13:52:15286?


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2 13:52:15 A. It is a charge or security put

313:52:1

in place which has the intention to favor

4 13:52:23one creditor over another.

5 13:52:2 Q. Have you examined the -- in

6 13:52:2your role in the liquidation, have you

7 13:52:2examined the charge put in place by the

8 13:52:3Central Bank in October of 2012 to make a

9 13:52:35determination that the nature of -- is

10 13:52:3that charge a fraudulent charge?

11 13:52:3 A. No, I have not.

12 13:52:4 Q. You have not. Has anyone

13 13:52:42asked you to do that?

14 13:52:43 A. No, I have not.

15 13:52:45 Q. So you --

16 13:52:4 A. Plus --

17 13:52:4 Q. You are not the legal advisor

18 13:52:4--

19 13:52:4 MR. WAXMAN: He's not done

20 13:52:5 answering.

21 13:52:5 Q. Sorry.

22 13:52:52 A. I have not done so because

23 13:52:53under the terms of section 12.3 of the

24 13:52:5IBRC Act the special liquidator cannot

25 13:52:5challenge that charge put in place as a


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2 13:53:0fraudulent preference.

313:53:02

Q. I see. Well good, because

4 13:53:0that's where we were going next, okay?

5 13:53:0What does the effect of the transfer of

6 13:53:1that charge to NAMA have upon the ability

7 13:53:1of anyone to challenge that charge?

8 13:53:1 MR. WAXMAN: Vague.

9 13:53:2 Q. Well, let's get to -- this is

10 13:53:23where we get into the section 12 of the

11 13:53:2IBRC Act which you just referred to.

12 13:53:32 A. Can I just check are we

13 13:53:33finished with the Companies Act?

14 13:53:35 Q. What?

15 13:53:3 A. Are we finished with the

16 13:53:4Companies Acts?

17 13:53:4 Q. No, not yet, but we will get

18 13:53:43back to it.

19 13:54:22 MR. WAXMAN: Before you ask

20 13:54:23 another question, counsel.

21 13:54:53 (Counsel and witness confer.)

22 13:54:53 Q. The meaning of section 12.3 of

23 13:54:5the IBRC Act which you've alluded to, can

24 13:55:03you describe what the effect of that

25 13:55:05clause is?


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2 13:55:15 A. Well it's that any obligation

313:55:1

incurred, security created, payment made

4 13:55:1or performed by IBRC in favor of the

5 13:55:22bank, and the bank is defined as the

6 13:55:23Central Bank of Ireland, and shall be

7 13:55:2taken to be valid and enforceable in all

8 13:55:2respects, and the validity and

9 13:55:32enforceability may not be challenged by

10 13:55:3any person including a special liquidator

11 13:55:3and shall not be invalidated or rendered

12 13:55:4void or voidable as against the bank, by

13 13:55:43any of the various sections there, A, B,

14 13:55:4C, D, E, F, G of section 212.3.

15 13:55:5 Q. So basically it eliminates the

16 13:55:5effect of section 286 of the Companies

17 13:56:02Act, correct?

18 13:56:03 A. It limits it, but a creditor

19 13:56:0can still challenge the provisions of

20 13:56:0that section as being unconstitutional if

21 13:56:12they believe that it affects their

22 13:56:1rights.

23 13:56:1 Q. We will get to that, the

24 13:56:1constitutionality.

25 13:56:1 But in terms of other than a


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2 13:56:2challenge of constitutionality, it seems

313:56:25

pretty pervasive, this section, in terms

4 13:56:2of its restriction of any right to

5 13:56:32challenge the actions of the security

6 13:56:3given or taken with regard to the assets

7 13:56:42by IBRC or the Central Bank?

8 13:56:4 MR. WAXMAN: Is that an

9 13:56:45 argument or a question?

10 13:56:4 MR. O'NEILL: It's a question.

11 13:56:4 Q. I mean it's pretty pervasive,

12 13:56:5pretty much covered everything from ultra

13 13:56:5vires to fraudulent preference; is that

14 13:56:5correct?

15 13:56:5 A. It does, but it's a provision

16 13:56:5of the act that Parliament implemented.

17 13:56:5 Q. I understand that. So let's

18 13:57:02get on then. I think we're pretty much

19 13:57:0finished with the Companies Act I wanted

20 13:57:1to deal with.

21 13:57:1 Actually the only issue I

22 13:57:1wanted to deal with is section 301. What

23 13:57:3is the implication of section 301, the

24 13:57:4impact -- 301(a), I'm sorry.

25 13:57:5 A. Is that in respect of a


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2 13:57:52creditors meeting which takes place as

313:57:53

part of a creditors voluntary winding up,

4 13:57:5if there is a potential conflict of

5 13:57:5interest that would be disclosed to the

6 13:58:0meeting. But that is in the context of a

7 13:58:03creditors voluntary winding up.

8 13:58:0 Q. Which we've established this

9 13:58:0is not a creditors voluntary winding up?

10 13:58:1 A. That is correct.

11 13:58:12 Q. All right. The rest is not

12 13:58:1particularly important.

13 13:58:25 Let's talk about

14 13:58:2constitutional law for a moment. This

15 13:58:3has been raised in your revised statement

16 13:58:3and several times in the past.

17 13:58:3 Can you explain, first off,

18 13:58:4who has the right to challenge the

19 13:58:4constitutionality of an Irish law?

20 13:58:4 A. Any person.

21 13:58:5 Q. Any person, a Frenchman, a

22 13:58:53German, a Greek? Can a Greek citizen

23 13:58:5challenge the rights of -- challenge the


25 13:59:02 MR. WAXMAN: I understand


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2 13:59:03 you're a lawyer, of course. If you

313:59:05

are not an expert on constitutional

4 13:59:0 law, you might want to make that

5 13:59:0 clear in your answers. But to the

6 13:59:13 extent you feel qualified to answer

7 13:59:15 the particular question, you should

8 13:59:1 do so.

9 13:59:1 A. I don't know the answer as to

10 13:59:1whether a Greek person can, can challenge

11 13:59:22or not. I don't have sufficient

12 13:59:2knowledge of that.

13 13:59:25 Q. So you don't know whether a

14 13:59:2person who is not Irish has a right to

15 13:59:3challenge an Irish statute under the

16 13:59:35Irish constitution?

17 13:59:3 A. I'm not aware of that.

18 13:59:3 Q. If one were to challenge the

19 13:59:4statute, how would one go about it?

20 13:59:43 MR. WAXMAN: Vague.

21 13:59:4 Q. Let me say as an attorney, to

22 13:59:5challenge the constitutionality of an

23 13:59:52Irish, piece of Irish legislation, how

24 13:59:5does one proceed?

25 13:59:5 A. One typically proceeds by


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2 14:00:0issuing proceedings against Ireland and

314:00:03

the attorney general. The attorney

4 14:00:05general is the office which typically

5 14:00:0drafts the legislation in question and

6 14:00:1would be the legal advisor to the

7 14:00:13government.

8 14:00:1 Q. Okay. And that is filed in

9 14:00:1which court?

10 14:00:1 A. The High Court.

11 14:00:2 Q. And the High Court will then

12 14:00:25decide that issue?

13 14:00:2 A. Yes.

14 14:00:2 Q. And are there provisions in

15 14:00:3The Irish Bank Resolution Act relating to

16 14:00:33challenges of the constitutionality of

17 14:00:35the act?

18 14:00:3 A. Sorry, I don't quite

19 14:00:4understand your question.

20 14:00:4 Q. In challenging the application

21 14:00:43of the act, are there restrictions on the

22 14:00:4court's consideration of such challenges

23 14:00:53in the act?

24 14:00:5 A. I am not aware of that.

25 14:01:02 Q. Bear with me for one second.


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2 14:01:1Can I refer you to section 8 on page 9 of

314:01:2

the act.

4 14:01:2 A. Yes.

5 14:01:33 Q. Now this deals with injunctive

6 14:01:35relief, not a constitutional challenge.

7 14:01:3But I presume this would be a challenge

8 14:01:4under section 280 of the act.

9 14:01:42 MR. WAXMAN: Now I'm confused.

10 14:01:4 MR. O'NEILL: I'm sorry. I'm

11 14:01:45 going backwards, I apologize.

12 14:01:4 MR. WAXMAN: Are we out of

13 14:01:4 constitutionality?

14 14:01:4 MR. O'NEILL: No, we're not

15 14:01:4 out of constitutionality yet.

16 14:01:5 Q. I want to go back to the

17 14:01:5section 280. A case brought under

18 14:01:5section 280 may be brought, as you point

19 14:01:5out, I believe, by the special

20 14:02:02liquidators or by any creditor?


22 14:02:0 Q. Fine. In bringing such a

23 14:02:0case, what is the application of section

24 14:02:18 of the IBRC Act?

25 14:02:12 A. The application of section 8


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2 14:03:1something, can you give me an estimate,

314:03:15

an idea of what other kinds of actions

4 14:03:1would be taken to restrain or force the

5 14:03:2liquidator to do something other than

6 14:03:23injunctive relief?

7 14:03:25 A. No. If you're looking to

8 14:03:2restrain the liquidator from doing

9 14:03:3something, then obviously injunctive

10 14:03:32relief would be the primary way to do it.

11 14:03:3 Q. How about to compel him?

12 14:03:3 A. You could seek a mandatory

13 14:03:3injunction to force him to do something,

14 14:03:4yes.

15 14:03:4 Q. So in all of those cases

16 14:03:45injunctive relief would be sought?

17 14:03:4 A. If you're seeking to either

18 14:03:4restrain or force the liquidator to do

19 14:03:52something, yes.

20 14:03:5 Q. And what is the implication of

21 14:03:55section 8 as to injunctive relief?

22 14:03:5 A. Section 8 sets out a

23 14:04:03limitation on the part to grant

24 14:04:05injunctive relief in that a court when

25 14:04:0looking at the normal test for applying


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2 14:04:0an injunction would also have to take

314:04:1

into account the public interest.

4 14:04:13 Q. And the public interest is,

5 14:04:15what does that mean?

6 14:04:1 A. It's not defined.

7 14:04:2 Q. Public interest strikes me as

8 14:04:2defined as the purposes of this act.

9 14:04:3 A. I see it says in considering

10 14:04:3the public interest the court shall have

11 14:04:35regard to the purpose of the act, yes.

12 14:04:3 Q. And the purposes of this act

13 14:04:3are?

14 14:04:3 A. To -- well there's, they're

15 14:04:4set out at the start of the act so rather

16 14:04:43than seek to summarize, they are to

17 14:04:4provide for the orderly winding up of the

18 14:04:4affairs of IBRC, to help address the

19 14:04:5serious disturbance in the economy and to

20 14:04:55maintain the functioning of IBRC to

21 14:04:5support the financial stability of the

22 14:04:5state and to support the stability of the

23 14:05:0Irish financial system. They are set out

24 14:05:03at the start.

25 14:05:0 Q. Yes, I understand. Have there


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2 14:05:0been any attempts under section 280, to

314:05:12

your knowledge, to seek injunctive relief

4 14:05:1against the special liquidators?

5 14:05:1 A. There have been no

6 14:05:1applications that I am aware of under

7 14:05:2section 280. There have been

8 14:05:23applications brought under section 6 of

9 14:05:2the act to issue proceedings against the

10 14:05:2special liquidators in which injunctive

11 14:05:3relief has been set out as one of the

12 14:05:33reliefs being sought, and there has also

13 14:05:3been an application in existing

14 14:05:3litigation that was in being before the

15 14:05:42liquidation in which an injunction was

16 14:05:45sought and that is -- currently judgment

17 14:05:4is reserved on that.

18 14:05:5 Q. I understand. Are there any

19 14:05:5cases -- have any cases been brought

20 14:05:5under section 280 against the special


22 14:05:5 A. No, not that I'm aware of.

23 14:05:5 Q. So there are no cases pending

24 14:06:02against the special liquidators, there's

25 14:06:0no cases?


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2 14:06:0 A. There's no cases under section

314:06:0

280. There are cases against the special

4 14:06:0liquidators and the company in special

5 14:06:1liquidation.

6 14:06:1 Q. And what are those? What

7 14:06:13provisions of the law are those cases

8 14:06:15brought under?

9 14:06:1 A. Well, for instance, I'm

10 14:06:2referring to cases which have been, where

11 14:06:23applications have been brought under

12 14:06:2section 6 to issue proceedings against

13 14:06:2the bank in special liquidation. They

14 14:06:2don't necessarily refer specifically to

15 14:06:3section 280 but they would be seeking

16 14:06:32different reliefs against the company in

17 14:06:35special liquidation.

18 14:06:3 Q. And what other provisions can

19 14:06:3they seek such relief under?

20 14:06:4 A. Well, they could claim breach

21 14:06:43of contract. They can claim specific

22 14:06:4performance.

23 14:06:4 There is a variety of

24 14:06:4different reliefs depending on it. There

25 14:06:52are certain borrowers who would be


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2 14:06:5claiming misrepresentation and fraud by

314:06:5

the bank prior to liquidation. So

4 14:06:5there's cases that are, that were ongoing

5 14:07:02that have been continued post the 7th of

6 14:07:0February.

7 14:07:0 Q. I see. But after the 7th of

8 14:07:0February you're aware of no cases brought

9 14:07:0against the bank under the Companies Act?

10 14:07:12 A. No. What I'm saying is and to

11 14:07:15be clear is I am not aware of any cases

12 14:07:1which specifically seek directions of the

13 14:07:2court under section 280 of the Companies

14 14:07:25Act.

15 14:07:25 MR. WAXMAN: If you're going

16 14:07:2 to switch topics, why don't we take

17 14:07:2 our first break.

18 14:07:2 MR. O'NEILL: Sure.

19 14:07:3 (A recess was had.)

20 14:20:43 Q. On the issue of constitutional

21 14:20:5law, so if we go back, a plaintiff brings

22 14:21:03a case in the High Court, correct?

23 14:21:0 A. Correct.

24 14:21:0 Q. Against the attorney general?

25 14:21:1 A. And Ireland.


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2 14:21:12 Q. And Ireland. And what are the

314:21:1

criteria for the High Court in deciding

4 14:21:2that case?

5 14:21:22 A. I wouldn't be an expert in

6 14:21:2constitutional law so I don't know what,

7 14:21:2what are the tests that they look at.

8 14:21:2 Q. And if the High Court decides

9 14:21:33that the law is -- this is all very

10 14:21:35hypothetical. Have there been any

11 14:21:3constitutional challenges to the IBRC?

12 14:21:3 A. No.

13 14:21:4 Q. There have not been. In your

14 14:21:43view, how long does a -- do you have any

15 14:21:4knowledge of how long a constitutional

16 14:21:4challenge may take?

17 14:21:5 A. I think it varies as to the

18 14:21:5particular act in question, as to the

19 14:21:5particular sections of the act that

20 14:21:5people are seeking to have a

21 14:22:0constitutional view on. For instance, I

22 14:22:02am aware of one case last year where a

23 14:22:0terminally ill lady sought to challenge

24 14:22:13and that was heard within three weeks or

25 14:22:15four weeks.


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2 14:22:15 So the courts do try and

314:22:1

facilitate challenges. And if people can

4 14:22:2show extreme urgency, they usually

5 14:22:23facilitate them with an early hearing

6 14:22:25date.

7 14:22:2 Others can take a lot longer.

8 14:22:2 Q. I'm actually familiar with

9 14:22:3that case, very, actually, intimately.

10 14:22:35 In that case, the High Court

11 14:22:3ruled against the challenger?

12 14:22:42 A. Yes.

13 14:22:43 Q. And the case went to the

14 14:22:45Supreme Court?

15 14:22:4 A. I'm aware of that.

16 14:22:4 Q. Yes.

17 14:22:4 A. Yes.

18 14:22:4 Q. And the Supreme Court has not

19 14:22:5decided that case; is that correct?

20 14:22:52 A. No the Supreme Court has

21 14:22:53decided that case.

22 14:22:53 Q. That's right, they did decide.

23 14:22:5So that was rather expedient?

24 14:22:5 A. Yes.

25 14:22:5 Q. Have you ever challenged the


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314:23:0

MR. WAXMAN: Personally or on

4 14:23:0 behalf of a client?

5 14:23:0 Q. Obviously on behalf of a

6 14:23:0client? Sorry.

7 14:23:1 A. No, I have not.

8 14:23:12 Q. All right. Let's, if we will,

9 14:23:2move to the duties of a liquidator and in

10 14:23:2particular with regard to the former

11 14:23:3directors of the company. If a

12 14:23:4liquidator was aware that the former

13 14:23:4directors were accused of fraud, and I

14 14:23:53say the previous directors of a company

15 14:23:55they were appointed to liquidate, what is

16 14:23:5the duty of the liquidator in such a

17 14:23:5case?

18 14:24:0 MR. WAXMAN: Incomplete

19 14:24:02 hypothetical and it's unclear what

20 14:24:05 you mean by accused. I assume it

21 14:24:0 would depend upon whom. I suppose

22 14:24:0 it would depend upon what the basis

23 14:24:1 for the accusations were, if

24 14:24:12 there's a madman in a penitentiary

25 14:24:15 it might not.


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2 14:24:15 Q. A citizen has sworn out a

314:24:1

warrant with the police alleging fraud on

4 14:24:2behalf of the directors?

5 14:24:2 MR. WAXMAN: Is the citizen

6 14:24:25 mentally competent?

7 14:24:2 MR. O'NEILL: Yes, it is a

8 14:24:2 mentally competent individual who

9 14:24:2 has sworn out a warrant with the

10 14:24:3 police alleging fraud by the former

11 14:24:3 directors.

12 14:24:32 MR. WAXMAN: And do they have

13 14:24:33 personal knowledge of the things

14 14:24:3 that they are swearing to?

15 14:24:35 MR. O'NEILL: They swear to

16 14:24:3 it.

17 14:24:3 Q. What are the duties of a

18 14:24:3liquidator in the case where they have

19 14:24:3such a case, where the warrant has been

20 14:24:43sworn out with the police alleging fraud

21 14:24:45by the directors?

22 14:24:4 MR. WAXMAN: If there is

23 14:24:4 sufficient information in that

24 14:24:4 hypothetical you should answer it.

25 14:24:4 But if there's not, you should make


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2 14:24:5 clear what else you would need to

314:24:53

know in order to answer the

4 14:24:5 question.

5 14:25:0 Q. A gentleman named Ganley has

6 14:25:1sworn out a warrant against the former

7 14:25:13directors of Anglo Irish Bank and IBRC

8 14:25:1alleging fraud.

9 14:25:1 A. I'm not aware of that case.

10 14:25:22 Q. Okay. If there is a reason to

11 14:25:2suspect that there had been fraud, what

12 14:25:3is the duty of the liquidator?

13 14:25:32 A. Well in terms of what the

14 14:25:3liquidator has to do is, and using your

15 14:25:3example as a case, I am not aware whether

16 14:25:4Mr. Ganley has made a claim to the

17 14:25:4liquidator directly that there has been

18 14:25:4fraud. If there is a claim made by any

19 14:25:4person in respect of that, then the duty

20 14:25:5of the liquidator would be to investigate

21 14:25:52that.

22 14:25:53 Q. Okay.

23 14:25:53 A. As part of the ongoing

24 14:25:55investigation which Mr. Wallace referred

25 14:25:5to this morning in terms of reporting


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2 14:25:5then to the director of corporate

314:26:0

enforcement about the actions of the

4 14:26:02former directors.

5 14:26:03 Q. Okay. So the liquidator would

6 14:26:0have a duty to investigate. What about

7 14:26:1the concept of reporting criminal acts

8 14:26:1discovered to the police?

9 14:26:1 A. Yes, I believe the liquidator

10 14:26:2would have a duty to do that.

11 14:26:2 Q. Do you know is the liquidator

12 14:26:25investigating the claims by Mr. Flynn

13 14:26:2that he has been defrauded by the bank

14 14:26:2and by Mr. Ganley that fraud occurred?

15 14:26:33 A. The first -- if you take Mr.

16 14:26:3Ganley first, as I mentioned to you a few

17 14:26:3moments ago I am not aware of anything

18 14:26:4that Mr. Ganley has made a claim directly

19 14:26:42to the liquidators in. I certainly have

20 14:26:4not been copied or have seen any papers

21 14:26:4from Mr. Ganley claiming fraud against

22 14:26:5any person.

23 14:26:5 In respect of Mr. Flynn, I'm

24 14:26:53aware that Mr. Flynn has sought to issue

25 14:26:55the proceedings in the Southern District


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2 14:26:5of New York. I am not aware directly of

314:27:0

claims made directly to the liquidator

4 14:27:03about overcharging in Mr. Flynn's case

5 14:27:0and asking the liquidator to do anything

6 14:27:0in that regard. I'm not aware directly

7 14:27:1of that.

8 14:27:1 Q. So are you aware that the

9 14:27:1liquidator is doing anything with regard

10 14:27:2to the investigation of potential fraud

11 14:27:23by Anglo and/or IBRC?

12 14:27:2 A. I know that the liquidators

13 14:27:2are looking into the actions of the

14 14:27:3former directors as part of their ongoing

15 14:27:33investigative, and that is still ongoing,

16 14:27:3that has not been concluded.

17 14:27:3 Q. And this is vis-a-vis fraud as

18 14:27:3well as other things?

19 14:27:3 A. It would take the ambit of all

20 14:27:4of the actions of the directors.

21 14:27:4 MR. WAXMAN: Remember, you

22 14:27:4 have to let him finish asking his

23 14:27:4 question before you start answering

24 14:27:4 it, even if you know what he's

25 14:27:5 going to ask. Just give him the


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2 14:27:5 courtesy of allowing him to finish

314:27:53

his question.

4 14:27:5 Q. Who are you retained by in

5 14:27:5this Irish proceeding?

6 14:28:0 A. By the special liquidators.

7 14:28:0 Q. You were not retained by the

8 14:28:0minister, you were retained by the

9 14:28:0special liquidators?


11 14:28:0 Q. And you were -- and your firm

12 14:28:0is paid by the special liquidators, not

13 14:28:12by the minister?

14 14:28:13 A. That is correct.

15 14:28:13 MR. WAXMAN: Pause, make sure

16 14:28:15 he's done and then answer the


18 14:28:1 Q. And when were you retained?

19 14:28:2 A. We were retained on the

20 14:28:2appointment of the special liquidators on

21 14:28:2the 7th of February, 2013.

22 14:28:2 Q. Were there any communications

23 14:28:3between yourself and KPMG or the special

24 14:28:33liquidators prior to the 7th of February?

25 14:28:3 A. The first time I heard about


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2 14:28:3the proposed special liquidation was on

314:28:4

the afternoon of the 6th of February.

4 14:28:42That was when I first heard of it.

5 14:28:45 Q. And I think I've asked this

6 14:28:5question but I can't remember.

7 14:28:55 MR. WAXMAN: I'll help you

8 14:28:5 with that.

9 14:28:5 Q. Are you familiar at all with

10 14:29:0the nature of the promissory notes issued

11 14:29:03by the Irish government to the bank?

12 14:29:05 MR. WAXMAN: Asked and

13 14:29:0 answered. You can answer again.

14 14:29:0 A. I'm not aware.

15 14:29:0 Q. You're not aware.

16 14:29:1 MR. O'NEILL: I don't think I

17 14:29:12 have any more questions. Thank

18 14:29:1 you. Very good. I appreciate it.

19 14:29:1 Thank you. You actually seemed to

20 14:29:1 know something.

21 14:29:2 MR. HENKIN: Off the record.

22 14:29:2 (Discussion was held off the

23 14:29:2 record.)

24 14:30:03 EXAMINATION BY MR. HENKIN:

25 14:30:0 Q. Mr. Traynor, my name is Doron


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2 14:30:3Henkin, I'm counsel for Castleway and

314:30:3

Walnut, and I have a few questions for

4 14:30:3you as well.

5 14:30:4 A. Sure.

6 14:30:4 Q. Do you know when the IBRC came

7 14:30:4into existence as an entity?

8 14:30:4 A. I think it came into existence

9 14:30:5in, let me just -- I think it came into

10 14:30:5existence in 2011, I think what was known

11 14:31:02as the Old Irish Corporation and Irish

12 14:31:05Nationwide Building Society merged. I

13 14:31:0think it was pursuant to -- it was either

14 14:31:12010 or 2011. I don't have the exact

15 14:31:12date. I know I think it's in the papers.

16 14:31:1I can't recall at this moment.

17 14:31:15 Q. Do you know what happened as

18 14:31:23an entity matter to old Anglo, Anglo

19 14:31:2Irish Bank PLC? Does it still exist as

20 14:31:2an entity?

21 14:31:3 A. Yes, it is still -- it is now

22 14:31:35IBRC.

23 14:31:3 Q. It is --

24 14:31:3 A. It --

25 14:31:3 Q. Go ahead, I don't mean to cut


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2 14:31:4you off.

314:31:4

A. And I apologize, I was about

4 14:31:42to cut you off. It was re-registered as

5 14:31:45a limited company first and then as part

6 14:31:4of it it was then brought in to Irish

7 14:31:53Bank Resolution Corporation Limited.

8 14:31:53 Q. Let me take that a step at a

9 14:31:55time. What do you mean by re-registered?

10 14:31:5 A. It was a public limited

11 14:31:5company, a PLC and it re-registered as a

12 14:32:02private company limited by shares which

13 14:32:0we have under Irish law.

14 14:32:0 Q. And was that achieved by

15 14:32:0virtue of statute?

16 14:32:1 A. Yes.

17 14:32:1 Q. And that would be the 2010 --

18 14:32:15 A. I think it was --

19 14:32:1 Q. -- credit act?

20 14:32:1 A. Yes, I think it was the Credit

21 14:32:2Stabilization Act 2010.

22 14:32:2 Q. Have you paid any attention

23 14:32:4yourself to the Castleway or Walnut loan

24 14:32:45matters?

25 14:32:4 MR. WAXMAN: Vague, but you


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2 14:35:3and whether it was appropriate or

314:35:43

adequate?

4 14:35:4 MR. WAXMAN: I'll instruct the

5 14:35:45 witness not to answer. You're now

6 14:35:4 asking the witness what are the

7 14:35:4 matters that his client has asked

8 14:35:5 him to advise them on. That's not

9 14:35:53 proper, counsel.

10 14:35:55 Now if you want to rephrase it

11 14:35:5 so that it's by someone other than

12 14:35:5 the special liquidators, some

13 14:36:0 outside party, I guess that would

14 14:36:0 be okay. But I don't think that's

15 14:36:03 what you had in mind.

16 14:36:0 (Instruction not to answer.)

17 14:36:05 Q. Well let's try it a different

18 14:36:0way.

19 14:36:0 Do you believe that it is

20 14:36:0within the scope of the special

21 14:36:15liquidators' activities to review,

22 14:36:1whether or not you've actually done so,

23 14:36:1the question of the adequacy of

24 14:36:22consideration that was paid for those

25 14:36:23loans?


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2 14:37:55 A. Traynor 1.

314:37:5

Q. Traynor 1. You were

4 14:37:5discussing the purposes of the act, and

5 14:38:0I'm not sure where we were -- what you

6 14:38:0were looking at at that point. Were you

7 14:38:0looking at the preamble?

8 14:38:1 A. Yes.

9 14:38:12 Q. Which is on --

10 14:38:13 A. Yes.

11 14:38:1 MR. WAXMAN: Let him finish

12 14:38:15 asking the question, even if you

13 14:38:1 know what it is he's going to ask,

14 14:38:2 just to make sure the question

15 14:38:2 doesn't change while the lawyer is

16 14:38:2 framing it. Don't be in a rush.

17 14:38:2 MR. HENKIN: It wouldn't have

18 14:38:3 changed. Okay.

19 14:38:3 Q. I'd like you also to look at

20 14:38:33section 3 of the act.

21 14:38:3 MR. WAXMAN: Can you give us a

22 14:38:4 page?

23 14:38:4 Q. Which is page number 5.

24 14:38:43 MR. WAXMAN: Thank you.

25 14:38:4 Q. Do you see a list of purposes


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2 14:38:5there as well?

314:38:52

A. Yes, I do.

4 14:38:53 Q. Which of these purposes relate

5 14:39:0to the interests of creditors of the

6 14:39:0IBRC?

7 14:39:0 A. Sorry --

8 14:39:0 MR. WAXMAN:

transcript mark traynor ibrc delaware chapter 15 04.11.2013

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