Judgment
Title: | Bank of Ireland -v- O'Donnell & anor |
Neutral Citation: | [2015] IESC 89 |
Supreme Court Record Number: | 344/14 |
High Court Record Number: | 2010 6100 S |
Date of Delivery: | 12/08/2015 |
Court: | Supreme Court |
Composition of Court: | Denham C.J., MacMenamin J., Laffoy J. |
Judgment by: | Denham C.J. |
Status: | Approved |
Result: | Motion Dismissed |
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| Judgments by | Link to Judgment | Concurring | Denham C.J. | | Laffoy J., MacMenamin J. | |
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THE SUPREME COURTAppeal No. 344/14
Denham C.J.
MacMenamin J
Laffoy J.
The Governor and Company of Bank of Ireland
Plaintiff/Respondent
And
Brian O’Donnell and Mary Patricia O’Donnell
Judgment delivered on the 8th day of December, 2015, by Denham C.J.
1. Brian O’Donnell and Mary Patricia O’Donnell, the defendants/appellants, referred to as “the appellants”, have brought a motion against the Governor and Company of the Bank of Ireland, the plaintiff/respondent, referred to as “the respondent”.
2. The appellants have brought the motion seeking:-
3. In essence this is an application for leave to extend time to appeal the order of Kelly J. perfected on the 14th December, 2011.
Background facts
4. The application is grounded on an affidavit of Brian O’Donnell, who made the affidavit on behalf of the appellants, and referred to certain facts. He stated that he wished to apply to the Supreme Court to ask for the summary judgment order made on the 12th December, 2011, perfected on the 14th December, 2011, in the High Court, be voided or set aside. He stated that the proceedings were issued by the respondent on the 23rd December, 2010, with a return date of 5th January, 2011, to hear the application of the respondent to enter the application for summary judgment into the Commercial List.
Submissions of Appellants
5. The appellants state that the learned High Court judge did not make known any conflicts of interest or existing relationship with the respondent.
6. The appellants refer to the fact that there were a number of motions before Kelly J. and that on every occasion he decided in favour of the respondent.
7. At that time Kelly J. was running the Commercial List.
8. The appellants submitted that Kelly J. had an ownership stake in and a business relationship with Bank of Ireland.
9. The appellants allege objective bias on the part of Kelly J. arising out of his comments, the email correspondence between the respondent and the registrar of Kelly J. on the 13th September, 2011.
10. The appellants submitted that the judgment of 12th December, 2011, should not stand.
11. Reference was made to the decision of this Court in Goode Concrete [2013] IESC 39 and it was submitted that it should be applied.
12. The appellants seek an order extending time within which to appeal the order of the 12th December, 2011, on the grounds of lack of disclosure and objective bias.
Submissions of Respondent
13. The respondent has submitted that the relief sought by the appellants should not be granted, essentially for three reasons:-
(a) The appellants having been adjudicated bankrupt by order of the High Court on 3rd September 2013, have no locus standi to seek to appeal the judgment or to apply to extend time to bring such an appeal, any such standing vesting solely in the Official Assignee; and the application should accordingly be dismissed in limine.
(b) That, in any event, the appellants fail to satisfy any of the Éire Continental principles; in particular, where the appellants consented to the judgment and did not seek to raise any objection to the High Court entering judgment when they had ample opportunity to do so, they have no bona fide defence to the judgment, and accordingly no bona fide ground for appeal of the judgment; the identity of the High Court judge who entered the judgment is immaterial in the circumstances.
(c) It would, in any event, be wholly inequitable to permit the appellants to appeal at this juncture in circumstances where the judgment has formed the basis of the bankruptcy proceedings against the appellants (commenced in mid-2012) and of separate proceedings (commenced in July 2012) alleging a fraudulent scheme to frustrate enforcement of the judgment and where the validity of the judgment has never been challenged by the appellants in those proceedings.
Submissions of Official Assignee
14. The Official Assignee submitted that the appellants had not sought to have the Official Assignee bring the application to extend time to appeal, that he had not been served with the application, and that he had not received the papers until after the 10th October, 2014, when they were furnished by the respondent.
15. As to the question of whether he wishes to continue litigation commenced before the adjudication of bankruptcy, for the benefit of this estate, the Official Assignee has submitted that he has considered the litigation and in this case he does not wish to pursue it.
16. The Official Assignee submitted that the appellants could have brought an application to the High Court in bankruptcy requiring the Official Assignee to apply for the extension of time to appeal.
17. However, the Official Assignee accepted that the Supreme Court could consider an extension of time application, by its nature.
18. The Official Assignee submitted that the appellants did not have locus standi to bring this application. The Official Assignee submitted that all property of the bankrupts vests in the Official Assignee on the date of the adjudication of bankruptcy pursuant to s. 44 of the Bankruptcy Act, 1988, ‘the Act of 1988’. That property includes “things in action”, as provided for in s. 3 of the Act of 1988, which includes the right to litigate.
19. The Official Assignee submitted that it is clear from s. 44 of the Act of 1988, Quinn v. IBRC [2012] IEHC 261 and Heath v. Tang [1993] 4 All ER 694 that the right to appeal these proceedings vests in the Official Assignee.
20. The Official Assignee submitted that, having regard to Heath v. Tang [1993] 4 All ER 694 at 700, the fact that the judgment in question is the judgment upon which the petition of bankruptcy is based, is not relevant. The issue is one that affects the estate in bankruptcy, which is vested in the Official Assignee.
21. In this case the Official Assignee, while maintaining that the correct forum was elsewhere, submitted that if the parties and the Court believed that the matter could be determined more quickly and less expensively by the Court determining the motion for an extension of time he would not interfere.
Decision
22. This application relates to summary judgment proceedings commenced by the respondent on the 23rd December, 2010. The proceedings came on for hearing in the High Court on the 3rd March, 2011. The proceedings were settled by an agreement dated the 4th March, 2011. At that time the appellants were legally represented by solicitor and counsel.
23. Inter alia, the agreement acknowledged that the appellants had “no defence to the proceedings”, see Clause 3.3(a), and it provided for the making of payments. Also, in the Agreement, the appellants acknowledged that they had received legal advice prior to entering into the Agreement, see Clause 4.1.
24. At Clause 3.1 of the Agreement it is provided that the proceedings were to be:-
“adjourned generally with liberty to re-enter on 2 business days notice for the purpose of enforcing these Terms of Settlement”.
25. The matter was re-entered and orders made on the 12th December, 2011, by Kelly J. The appellants were not present, although a legal representative did attend but indicated that he had no instructions.
26. The matter in issue came before the High Court (Kelly J.) pursuant to the respondent’s notice of re-entry of proceedings dated the 7th December, 2011, for the following reliefs:-
“1. An Order re-entering these proceedings.
2. An Order by way of enforcement of clause 3.2 of the Settlement Agreement of the 4th day of March 2011 between the [respondent in this motion] and each of [the appellants], Avoca Properties Limited, Grey stoke Societé Anonyme and Vico Swiss Holdings AG (the ‘Settlement Agreement’) giving the [respondent] judgment against the [appellants] in the sum of €71,575,991.29 made up of the principal sum of €63,700,000 together with interest of €7,875,991.29.
3. An Order for the costs of the proceedings, including the costs of this application.”
27. On the 12th December, 2011, the learned trial judge ordered as follows:-
“And on reading said Notice the Affidavits of Service thereof the Affidavit of Des Hanrahan filed on the 7th day of December 2011 and the exhibits referred to in said Affidavit including the Settlement Agreement of the 4th day of March 2011.
And on hearing said Counsel
And a Solicitor from Whitney Moore Solicitors (the Solicitors on record for the
[appellants] ) attending in Court and intimating to the Court that his firm has received no instructions from the [appellants].
And the Court being satisfied that the [appellants] are fully on notice of this application both by reference to the service on Whitney Moore Solicitors (in accordance with the terms of the Settlement Agreement) and by reference to the service on Brian O’Donnell Solicitors and have chosen not to appear here today.
And the Court being satisfied that the Settlement Agreement has been breached and the [appellants] having consented to Judgment herein pursuant to the Settlement Agreement upon breach of same.
IT IS ORDERED AND ADJUDGED that the [respondent] do recover as against the [appellants] the sum of €71,575,991.29 together with the costs of these proceedings when taxed and ascertained to include the costs of this Re-Entry application.
This Judgment is CERTIFIED as a European Enforcement Order in accordance with Regulation EC) 805/2004.”
28. The appellants were adjudicated bankrupt by the High Court (Charleton J.) on the 23rd August, 2013. The appellants sought a stay, but this was refused on the 2nd September, 2013.
29. Once a person is declared a bankrupt their property rights in the estate vest in the Official Assignee.
30. Section 44 of the Bankruptcy Act, 1988, provides:-
“(1) Where a person is adjudicated bankrupt, then, subject to the provisions of this Act, all property belonging to that person shall on the date of adjudication vest in the Official Assignee for the benefit of the creditors of the bankrupt.
(2) Subject to the provisions of this Act, the title of the Official Assignee to any property which vests in him by virtue of subsection (1) shall not commence at any date earlier than the date of adjudication.
(3) The property to which subsection (1) applies includes—
(a) all powers vested in the bankrupt which he might legally exercise in relation to any property immediately before the date of adjudication;
(b) all property which was the subject of any conveyance or transfer which sections 57 , 58 and 59 declare void as against the Official Assignee, subject to the rights of any persons which are preserved by those sections.
(4) The property to which subsection (1) applies does not include—
(a) property held by the bankrupt in trust for any other person, or
(b) any sum which vests in the Official Assignee under section 7 (1) (a) of the Auctioneers and House Agents Act, 1967 , or section 30 (i) of the Central Bank Act, 1971 .
(5) Without prejudice to any existing principle or rule of law or equity, established practice or procedure in relation to damages or compensation recovered or recoverable by a bankrupt for personal injury or loss suffered by him, property which is acquired by or devolves on a bankrupt before the discharge or annulment of the adjudication order (in this Act called “after-acquired property”) shall vest in the Official Assignee if and when he claims it.”
31. The term “property” is defined in s. 3 of the Act of 1988, as amended by the European Communities (Personal Insolvency) Regulations 2002, as follows:-
“ ‘property’—
(a) includes money, goods, things in action, land and every description of property, whether real or personal,
(b) includes obligations, easements and every description of estate, interest, and profit, present or future, vested or contingent, arising out of or incident to property,
(c) in relation to proceedings opened in the State under Article 3(1) of the Insolvency Regulation, includes property situated outside the State, and
(d) in relation to proceedings so opened under Article 3(2) of the Regulation, does not include property so situated;”
Clearly this includes “things in action”, and thus the right to litigate is part of the property.
32. Consequently, any decision as to property rights is vested in the Official Assignee, including the decision to litigate, whether to commence litigation or continue litigation.
33. However, a bankrupt retains rights of litigation in personal matters.
34. Certain personal actions do not vest in the Official Assignee. As Hoffman L. J. said in Heath v. Tang [1993] 4 All ER 694 at p.697:-
“these include cases in which –
‘the damages are to be estimated by immediate reference to pain felt by the bankrupt in respect of his body, mind, or character, and without immediate reference to his rights of property’. See Beckham v Drake (1849) 2 HL. Cas 579 at 604, 9 ER 1213 at 1222 per Erle J. See also Wilson v. United Counties Bank Ltd [1920] AC 102, [1918 – 1919] All ER Rep 1035).”
35. In general the appropriate forum in which to seek, and in which to have a decision made, as to whether a bankrupt may initiate or continue proceedings, is by an application to the Official Assignee.
36. If the Official Assignee does not approve of the commencement, or continuation, of litigation then the bankrupt may apply to the Bankruptcy Court.
37. As Hoffman L.J. said in Heath v. Tang at p. 701:-
“The consequences for the bankrupt’s right to litigate do not seem to us inconvenient or productive of justice. The bankruptcy court acts as a screen which both prevents the bankrupt’s substance from being wasted in hopeless appeals and protects creditors from vexatious challenges to their claims.”
38. In this case the extension of time application is in relation to the proposed appeal in a case about property claimed to be owned by the appellants who are bankrupts. It is not personal litigation. It is thus a matter for the Official Assignee.
39. In spite of the appropriate forum for an application regarding litigation by a bankrupt being an application to the Official Assignee, or thereafter an application to the Bankruptcy Court, in the special circumstances of this case, the Court exercises its discretion and determines the application for an extension of time for leave to appeal in this case.
40. However, it is emphasised that the appropriate route is to request the Official Assignee to commence or continue litigation. If the Official Assignee refuses then the bankrupt may apply to the Bankruptcy Court. The Bankruptcy Court may then assess the situation, with the benefit of submissions from the Official Assignee. All such applications should be made in that manner. Thus, if there are claims where the litigation may be hybrid, i.e. some of which relates to the estate and some of which may be personal claims, the Bankruptcy Court can hear and determine such applications. However, it was accepted that in the circumstances of this case that the Supreme Court should hear and determine an application seeking an extension of time.
However, for clarity, it is stressed that applications in relation to proceedings in an estate in bankruptcy, either commencing or continuing litigation, are firstly a matter for the Official Assignee, and thereafter the Bankruptcy Court.
41. The only issue for the Court to determine is whether the appellants have locus standi to move the application.
42. In the proceedings in issue, the order of the High Court of 12th December, 2011, relates to property in the estate of the appellants, who are bankrupts. Thus, the property is vested in the Official Assignee. Therefore, it is for the Official Assignee to determine whether these proceedings are to be continued or not.
43. The appellants do not have locus standi to bring this application, the property and the right to litigate being vested in the Official Assignee.
44. The appellants raised the issue that the order of the 12th December, 2011, founded the bankruptcy decision. I am satisfied that this is not relevant. I agree with, and would apply, the analysis in Heath v. Tang [1993] 4 All ER 694 where Hoffmann L.J. stated at p. 700:-
“Is there anything different about the judgment upon which the bankruptcy petition was founded? It is submitted that the difference is that in such a case the bankrupt does have an interest, because if he can get rid of the judgment he may be able to have the bankruptcy order annulled on the ground that it should never have been made. Whether it is set aside or not will depend upon whether apart from the judgment the bankrupt would have been solvent or whether an order would in any event have been made on the application of supporting creditors: see Re Noble (a bankrupt), ex p the bankrupt v Official Receiver [1964] 2 All ER 522, [1965] Ch 129. On the other hand, it may equally be said that if only the bankrupt could pursue a claim for a large sum which he claims to be owing to him he would be able to pay all his creditors and have the bankruptcy annulled on that ground. It is clear, however, that this is not a ground upon which he may bring proceedings. Furthermore, an exception for the petitioner’s judgment would give rise to anomalies in cases in which the defence was a claim of set-off, such as the applicant Mr. Heath asserts in this case.”
45. The appellants have made submissions raising issues of objective bias of the High Court judge, and fraud in relation to the parties. On these issues I agree with the analysis of Hoffman L.J. in Heath v Tang where he stated at p. 701.
“[The bankrupt] criticises the conduct of the trial and contends that the decision against him was obtained by false evidence and fraud. The trustee does not wish, or is not in a position, to pursue the appeal. In my judgment [the bankrupt] has no locus standi to do so and his application must be refused.”
The fundamental principle in law is that the right to litigate is vested in the Official Assignee and it is for him to decide whether to litigate or not.
46. Accordingly, in this case the right to seek an extension of time for leave to appeal vests in the Official Assignee. The appellants have no locus standi.
47. The Official Assignee has indicated that he does not intend to proceed with this appeal.
48. Consequently, I would dismiss the application of the appellants on the grounds that they do not have locus standi to bring the motion.