The appointment of inspectors to examine the affairs of NIBFSL was appropriate because of the extensive powers they would have, according to an affidavit made by Mr Paul Appleby, Principal of the Company law Administration section of the Department of Enterprise, Trade and Employment, on behalf of the Minister.

In the affidavit, read to the court by Ms Fidelma Macken SC, for the Minister, Mr Appleby said the application for the appointment of Mr Grace and Mr Blayney as inspectors arose from the Minister's belief that there were circumstances suggesting the company's affairs have been conducted with intent to defraud the Revenue Commissioners and/or for an unlawful purpose and/or for an unlawful manner.

He said there were allegations that NIBFSL has been involved in the effecting of policies of life assurance on behalf of its customers with Clerical Medical International. Together with a later acceptance by NIB that policies were also effected through NIBFSL, on behalf of NIB customers, with Scottish Provident International and Old Mutual International - which companies were not authorised to conduct insurance business in the State - this had given rise to the gravest of concerns.

The Minister had appointed an authorised officer, Mr Martin Cosgrove, to investigate these matters and, while his investigations were not complete, he had advised that, between 1990 and March 1998, a large number of insurance policies were effected and sold through NIBFSL to persons in the State with companies not authorised under the Insurance Acts to conduct such business.

Mr Appleby said it appeared some 499 of these policies were sold through NIBFSL with a total value at point of sale of about £48 million. However, some 43 of the policies were sold to non-Irish residents and 38 were sold as Unit Trusts to which insurance regulation was inapplicable.

Mr Appleby said these matters were currently being investigated by the Revenue Commissioner.

However, he believed the verification and tracing of the funds used to effect the insurance policies in question could only be conducted by a person with full investigate powers over NIB Limited and NIBFSL.

He believed the power to examine individual policyholder accounts was outside Mr Cosgrove's terms of reference as an authorised officer under the Insurance Act 1989.

He said this was why the minister believed it was "appropriate " to have the matter investigated by the officers appointed by the court.