Judgment
Title: | Killaly (a bankrupt) -v- The Official Assignee |
Neutral Citation: | [2014] IESC 76 |
Supreme Court Record Number: | 273/14 |
High Court Record Number: | 2342 |
Date of Delivery: | 12/19/2014 |
Court: | Supreme Court |
Composition of Court: | Clarke J., MacMenamin J., Charleton J. |
Judgment by: | Clarke J. |
Status: | Approved |
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| Judgments by | Link to Judgment | Concurring | Clarke J. | | MacMenamin J., Charleton J. | |
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THE SUPREME COURT [Appeal No: 273/2014]
Clarke J.
MacMenamin J.
Charleton J.In the Matter of Section 85A the Bankruptcy Act, 1988
In the Matter of Gerard Killally, a bankrupt
Gerard Killally, a bankrupt
Appellant
and
The Official Assignee
Respondent
Judgment of Mr. Justice Clarke delivered the 19th December, 2014.
1. Introduction
1.1 The bankruptcy regime in this jurisdiction has come under significant scrutiny in recent times, not least because of the fallout from the financial crisis. As a result of the very significant differences between the bankruptcy regimes in Ireland and other relevant jurisdictions, many investigated the possibility of seeking bankruptcy abroad. A bankruptcy tourism developed. In that context, a range of measures were introduced to amend the relevant law. One of those measures was the Personal Insolvency Act, 2012 ("the 2012 Act"). Part 4 of the 2012 Act was commenced by Ministerial order made on the 3rd December, 2013. One of the consequences of the amendments thereby brought about was to reduce the period during which a person was to remain undischarged from bankruptcy. The period had previously been 12 years. Amongst other changes introduced by the 2012 Act, all personal bankruptcies which had been of more than three years duration as of the 3rd December, 2013 were given the benefit of an automatic discharge from bankruptcy six months later (on the 3rd June, 2014) subject to the provisions of s.85A of the Bankruptcy Act, 1988 ("the 1988 Act") which was inserted into that act by s.157 of the 2012 Act.
1.2 The appellant ("Mr. Killally") had been adjudged a bankrupt more than three years prior to the 3rd December, 2013 (on the 27th July, 2009) and was, therefore, prima facie entitled to be discharged on the 3rd June of this year. The entitlement, however, to be so discharged is expressly, under s. 85(2) of the 1988 Act, as substituted by the 2012 Act, "subject to section 85A". Section 85A permits a court to specify a later date (not itself later than the eighth anniversary of the original making of an adjudication order in bankruptcy) as the date of discharge.
1.3 The respondent ("the Official Assignee") applied to the High Court for an order under s.85A postponing the discharge of Mr. Killally from bankruptcy. The motion seeking that order specified the grounds relied on as being that Mr. Killally had pleaded guilty to certain criminal offences. Those offences arose from the theft of property which should properly have been available to the Official Assignee to be used in dealing with Mr. Killally's estate. The High Court heard the application of the Official Assignee on the 26th May, 2014 and the Court (McGovern J.) ordered that Mr. Killally should not be discharged until the 3rd June, 2015, being one year after the default date by which he would, in the absence of an order of the Court, have been so discharged. Mr. Killally has appealed to this Court against that order. In so appealing, Mr. Killally has raised two issues to which I will now turn.
2. The Issues
2.1 The first issue was one of principle. In substance, Mr. Killally argued that the statutory regime properly understood and interpreted is designed only to allow for a postponement of the discharge of a bankrupt where such a postponement is necessary to enable further inquiries or actions to be made or taken by the Official Assignee in circumstances where it has been established that the bankrupt has not dealt properly with his bankruptcy in accordance with law and, it is said, where such inquiries or actions are necessary to ensure that the bankrupt's estate is properly dealt with. On that basis it was argued that s.85A is not intended to provide an additional punishment or sanction to be applied to a bankrupt for failure to cooperate or disclose but rather is designed to allow the Court to direct that the bankruptcy should continue beyond what might otherwise be its normal length where such extension is necessary, due to a default on the part of the bankrupt, to enable the bankruptcy to be properly conducted and concluded. In like manner, it was argued that the function of the Official Assignee, under s.61 of the 1988 Act, is to ensure that all of the assets of the bankrupt are secured and distributed in accordance with law. Such a function of the Official Assignee was said to be entirely consistent with the conferring on the Official Assignee of a role in applying to the Court for an extension of a bankruptcy to enable that task to be properly brought to a conclusion in circumstances where it had not proved possible to complete the relevant task in the normal or default time by virtue of wrongdoing on the part of the bankrupt. On the other hand, it was said that it is not part of the proper statutory function of the Official Assignee to invite the Court, even in the case of established wrongdoing, to extend the period of bankruptcy simply as a sanction or punishment for that wrongdoing.
2.2 The issues which arise under that heading are, therefore, directed to the proper interpretation of the personal bankruptcy code with particular reference to the role of the Official Assignee in seeking, and the Court in directing, an extension of the bankruptcy period. In particular, the issue is concerned with whether the relevant provisions include an entitlement on the part of the Official Assignee to seek, and the Court to direct, such an extension as a sanction for established wrongdoing.
2.3 Clearly, if Mr. Killally is correct in his contention under that heading, then it may well be that the Official Assignee had no jurisdiction to seek, and/or the Court had no jurisdiction to direct, an extension of Mr. Killally's bankruptcy unless there were further inquiries which needed to be made which would warrant such an extension. Such an extension could not, if the legislation is to be interpreted in that way, be directed simply because of established wrongdoing whose effects had already been remedied.
2.4 However, even if, contrary to those submissions, a general jurisdiction is found to exist to extend a period of bankruptcy in respect of completed and remedied acts of wrongdoing, it is argued on behalf of Mr. Killally that the sanction imposed in this case is disproportionate in circumstances where he has already been the subject of a criminal sanction for the same wrongdoing and where, in those circumstances, it is said that the imposition of an additional sanction would be disproportionate. As the issues which arise under that second question only properly arise in the event that there is jurisdiction in the first place, I turn to the question of jurisdiction.
3. Jurisdiction
3.1 The starting point has to be to consider the text of both sections 85 and 85A. S.85(2) is in the following terms:-
"(2) Subject to section 85A, a bankruptcy subsisting on the coming into operation of section 157 of the Personal Insolvency Act 2012 where the order of adjudication was made more than 3 years prior to the coming into operation of that section, shall stand discharged 6 months after that day unless the bankruptcy has otherwise been discharged or annulled."
3.2 As appears therefrom, s.85(2) is subject to s.85A which, as to the material part, is in the following terms:-
"85A. (1) The Official Assignee, the trustee in bankruptcy or a creditor of the bankrupt may, prior to the discharge of a bankrupt pursuant to section 85, apply to the Court to object to the discharge of a bankrupt from bankruptcy in accordance with section 85 where the Official Assignee, the trustee in bankruptcy or the creditor concerned believes that the bankrupt has—
(a) failed to co-operate with the Official Assignee in the realisation of the assets of the bankrupt, or
(b) hidden from or failed to disclose to the Official Assignee income or assets which could be realised for the benefit of the creditors of the bankrupt.
(2) An application under subsection (1) shall be made on notice to the bankrupt and where made by the trustee in bankruptcy or a creditor, notice shall also be given to the Official Assignee.
(3) Where it appears to the Court that the making of an order pursuant to subsection (4) may be justified, the Court may make an order that the matters complained of by the applicant under subsection (1) be further investigated and pending the making of a determination of the application the bankruptcy shall not stand discharged by virtue of section 85.
(4) Where the court is satisfied that the bankrupt has—
(a) failed to co-operate with the Official Assignee in the realisation of the assets of the bankrupt, or
(b) hidden from or failed to disclose to the Official Assignee income or assets which could be realised for the benefit of the creditors of the bankrupt,
the Court may where it considers it appropriate to do so, order that in place of the discharge provided for in section 85 the bankruptcy shall stand discharged on such later date, being not later than the 8th anniversary of the date of the making of the adjudication order, as the Court considers appropriate.
(5) Where the Court has made an order under subsection (4), no further application may be made under subsection (1).”
3.3 There is no controversy over s.85(2). Prima facie, on the facts of his case, under s.85(2) considered on its own, Mr. Killally was undoubtedly entitled to be discharged on the 3rd June of this year. However, equally clearly that entitlement is "subject to section 85A". Thus the real question concerns the circumstances in which an order under s.85A can be made.
3.4 The operative subsection is s.85A(4) which allows the Court "where it considers it appropriate to do so" to order a later date for discharge and, thereby, in effect, to extend the period of bankruptcy. In its terms the Court appears to be entitled so to do provided that either of the matters specified in subsection (4) are met, being either that it has been shown that the bankrupt has failed to cooperate with Official Assignee in the realisation of assets or has hidden or failed to disclose income or assets.
3.5 That subsection does not, in its terms, confine the making of an order to a situation where the Court is also satisfied that it is necessary to prolong the bankruptcy to enable inquiries to be made.
3.6 It is also necessary in that context to consider the other provisions of s. 85A. It is clear that subsection (3) allows the Court, if it is satisfied that an order under subsection (4) might be justified, to order a further investigation in relation to a possible failure of cooperation or a hiding or failure to disclose assets. In such circumstances it seems clear that discharge from bankruptcy will be postponed "pending the making of a determination of the application". The application to which reference is made is an application under subsection (1) by the Official Assignee to object to the discharge of a bankrupt. Thus, it would seem that the combined effect of subsection (1) and subsection (3) is that one of the consequences of an application by the Official Assignee under subsection (1) is that the Court, if it is satisfied that there may have been a failure of cooperation or a hiding or a failure to disclose assets, can postpone the making of a final order on the Official Assignee's application and can direct an appropriate investigation under subsection (3). In those circumstances the discharge will be postponed until after the Court has finally made a decision on the Official Assignee's application which, one must assume, would await the results of the investigation ordered under subsection (3) unless the court were to subsequently consider that there was some good reason for not continuing with such investigation.
3.7 But what appears to be contemplated by subsection (4) is a different regime. While the combined effect of subsections (1) and (3) is to, in substance, allow for the postponement of discharge pending an investigation, the effect of an order being made under subsection (4) simpliciter is to postpone the discharge to a specified date. It is also clear that, once a final order under subsection (4) has been made, no further application for postponement can be brought by the Official Assignee for such an application is precluded by subsection (5). Thus there is a distinction between two possible ways of dealing with an established failure of cooperation or hiding or failure to disclose assets. First, the Court may postpone making any final order on the application of the Official Assignee and direct an investigation. Alternatively the Court may simply extend, on a once only basis, the period of the bankruptcy.
3.8 The existence of two separate strands might well suggest that they were intended to deal with two different sorts of circumstances. However, before reaching a concluded view on that question it is helpful to look at the corresponding United Kingdom legislation for both sides made reference to same in the course of their submissions.
3.9 The relevant legislation is the United Kingdom Insolvency Act, 1986 ("the UK Act"). Section 279 of same, in material part, provides as follows:-
3.10 The statutory regime in the United Kingdom is, therefore, somewhat different. What the Court in the United Kingdom is empowered to do is to make an order which stops time running either for a specified period or until a particular condition has been fulfilled. It is clear from the definitions contained within s.279 of the UK Act that "condition" includes a condition that the Court be satisfied of something. Thus, doubtless, in substance a court could direct inquiries to enable it to be satisfied of something material to the conduct of the bankruptcy and the one year period would stop running until the Court had been so satisfied. It is clear that, in both Ireland and the United Kingdom, the underlying basis for the making of any order derives from a failure of obligation on the part of the bankrupt. In the case of such failure it is also true that, in both cases, the Court has something of a choice. In Ireland, under s. 85A, it is a choice between directing an inquiry under subsection (3) (and postponing a final order) or making an order postponing discharge from bankruptcy under subsection (4). In the United Kingdom, under s.279, there is a choice between stopping time running either until a condition has been fulfilled or until a specific period has elapsed.
3.11 In construing s.279 of the UK Act, the Court of Appeal for England and Wales, in Bramston v. Haut [2013] 1 WLR, 1720, (per Kitchin L.J.) said the following concerning the purpose of the section:-
"51. A purpose of the power conferred by s.279 is therefore to extend the period of the bankruptcy and to ensure that the bankrupt continues to suffer the disabilities arising from his undischarged bankruptcy until he complies with his obligations. I accept the submission advanced by the Trustee that in this sense the power is intended to be penal in character and used for purposes connected with the functions of the official receiver and the trustee and to allow the trustee to get in, realise and distribute the bankrupt's estate in accordance with the provisions of Chapter IV.
52. Applying these principles in the context of the present appeal, it is clear that the order made by the judge on 3 April 2012 was not linked to the failure by Mr Haut to comply with his obligations; nor was it made to ensure that Mr Haut continued to suffer from the disabilities of being an undischarged bankrupt until he had fully complied with those obligations. Nor is it suggested that it was made for any other purpose that might be within s.279(3). Instead it was made to give Mr Haut time to put before the creditors in his bankruptcy an IVA proposal and thereafter secure the annulment of his bankruptcy order. That, it seems to me, was impermissible and outside the scope of the jurisdiction conferred by s.279(3)."
3.12 However, it must be noted that the context of that decision concerned a bankrupt who wished to remain in bankruptcy so that he might avail of the opportunity to make a voluntary arrangement with his creditors. The finding of the Court was that he could not.
3.13 First, it is important to note that the passage cited from para. 51 of the judgment of Kitchin L.J. refers to "a purpose" of the power and also refers to the intention or purpose of the power "in this sense" being penal in character and required to be used for purposes connected with getting in, realising and distributing the bankrupt's estate. For obvious reasons Kitchin L.J. concluded that Mr. Haut's application could have no connection with that purpose for it was clear that Mr. Haut's sole intention in making the application was to give him an opportunity to enter into a voluntary arrangement. It is significant Kitchin L.J. went on, in the course of para. 52, to say the following:- "nor is it suggested that it was made for any other purpose that might be within s. 279(3)". Thus, it is not clear to me Kitchin L.J. was excluding the possibility that there might not be, in the context of other cases, other purposes to be found within s.279 beyond the one identified being to facilitate the completion of the bankruptcy. Given that there was, at least on Mr. Haut's case, (and he was the applicant) no question of him being in default, then it is clear that no question of a purely punitive or sanctioning extension of bankruptcy could have arisen on the facts of that case.
3.14 Some further light on the interpretation of the UK Act can be found from the judgment of the Chancellor in Shierson & anor v. Rastogi (a bankrupt) [2007] EWHC 1266 (Ch). At paragraph 65 of his judgment the Chancellor said the following:-
"65. It is clear from the terms of s.279 that postponement of discharge is linked to a failure to comply with the obligations imposed on a bankrupt by Part IX. But is the purpose of the power to postpone a discharge to provide an incentive to full compliance? Or is it that the disabilities arising from being an undischarged bankrupt should, in the public interest, continue until there has been full compliance? I doubt whether, on the facts of this case, it is necessary to reach a final conclusion on those questions. But in my view the purpose of the power is the latter, even though its effect may be to achieve the former. Were it otherwise I would have expected Parliament to have made discharge conditional on full compliance."
3.15 However, it is clear from the remainder of the judgment that the issue as to the proper interpretation of the purpose of s.279 of the UK Act was not decisive. The Court went on to hold that there clearly were uncompleted inquiries which would have justified an extension of the bankruptcy in that case, irrespective of the proper interpretation of the section. As appears from the passage cited, Shierson does not, in fact, reach any concluded view on the purpose of the section.
3.16 In any event it does not seem to me that, because of the significant difference in wording between the relevant Irish and UK legislation, the interpretation placed on s. 279 of the UK Act is of particular assistance in attempting to construe s. 85A of the 1988 Act.
3.17 For the reasons already set out I am satisfied that s. 85A involves two potentially different approaches which the Court can apply depending on the circumstances of the case. Where, as a result of an established failure to cooperate, hiding or failure to disclose, the Court feels that further inquiries require to be made, then the Court can postpone making an order under s. 85A(4) and direct inquiries under s. 85A(3). The Court can, thereafter, consider what to do about making a substantive order under s. 85A(4) in the light of the progress and results of the relevant inquiries.
3.18 On the other hand, the Court can, independently of directing any inquiries, and, it seems to me, independently of taking the view that such inquiries might be required, simply extend the period of bankruptcy as a sanction to reflect the established failure to cooperate, hiding or failure to disclose relevant assets. It is, of course, the case, as the Court of Appeal in the United Kingdom pointed out, that a suspension of discharge from bankruptcy of that nature is necessarily penal in character and it follows that any wrongdoing would require to be clearly established before the jurisdiction is invoked and further that the extent of any extension of the period of bankruptcy ordered by the Court would have to be proportionate to the established wrongdoing.
3.19 It is of some relevance to note that s. 123 of the 1988 Act, as amended from time to time and most recently by s.158 of the 2012 Act, provides that various actions or inactions on the part of a bankrupt amount to a criminal offence. On that basis, it was argued for Mr. Killally that the proper consequence of a culpable failure on the part of a bankrupt either to cooperate with the Official Assignee or to disclose assets is that criminal proceedings be brought. On that basis it was argued that s.85A should not be construed as creating a parallel jurisdiction to impose sanctions for such failure on a bankrupt. It was further argued that the only circumstances where it was proper to invocate s.85A was where some level of further inquiry or action were required for. In the absence of such requirement, it was said that the imposition of an additional sanction under s.85A in respect of a completed and, in particular remedied, breach of obligation by the bankrupt would amount to an impermissible form of double sanction.
3.20 On behalf of the Official Assignee, on the other hand, it was contended that the personal bankruptcy regime relies to a significant extent on individual bankrupts to cooperate fully with the Official Assignee and the process. In those circumstances it is said that it is entirely appropriate for the Oireachtas to consider, for the purposes of discouraging non-compliance, that the Court should be empowered, in an appropriate case, to extend the period of bankruptcy in cases of significant failure of compliance. In my view that argument is well-founded. Unlike its counterpart in the United Kingdom, s.85A speaks entirely of failures in the past and makes no reference to continuing failures. Clearly, however, such activities as failing to cooperate or hiding assets while referred to in the past tense in the section may be alleged to be continuing as of the date of an application to court. What cannot be done is to invoke s.85A where the bankrupt is already discharged from their state. Fundamentally, however, there is nothing in the language used to suggest that the section cannot be applied as a penalty or sanction to be imposed on a bankrupt for a sufficiently serious failure of compliance. Such an interpretation is entirely consistent with the need to impose a significant discouragement to prevent bankrupts from failing to comply with their clear obligation to cooperate.
3.21 In passing I should add that it does not seem to me that the fact that Mr. Killally himself applied for his own bankruptcy changes the situation one way or the other. It is obviously the case, as counsel for the Official Assignee pointed out, that there are few benefits to bankruptcy from the perspective of the potential bankrupt but that one benefit is the protection afforded from creditors. It might, in that context, be said that there is a particular duty on persons who seek bankruptcy themselves and thus, if successful, obtain protection from their creditors, to cooperate with the bankruptcy process. Be that as it may, s.85A does not make any distinction between persons who become bankrupt on their own application and those who are adjudicated on the application of a creditor.
3.22 Before finally concluding on this aspect of the case, I should address some of the further arguments put forward on behalf of Mr. Killally in favour of the construction which he seeks to place on s. 85A. First counsel for Mr. Killally draws attention, correctly so far as it goes, to the fact that there is an absolute limitation on the making of any order which would have the effect of extending the period of bankruptcy beyond its eighth anniversary. Thus, as he points out, a person who had been in bankruptcy for a period of seven years and six months prior to the 3rd December, 2013, could not have had any order made under s. 85A for any such order would have had the effect of extending his bankruptcy beyond the 3rd June, 2014, and to make such an order would have breached the eighth anniversary rule. However, it does not seem to me that this point has any relevance to the construction issue with which this Court is concerned. The eighth anniversary rule applies equally to a case where it might be suggested that a bankruptcy might be extended as a sanction, on the one hand, or for the purposes of an inquiry, on the other. If, as Mr. Killally argues, the sole remitted purpose of the making of an order under s.85A is to facilitate compliance, then the eighth anniversary rule interferes with that purpose just as much as it would interfere with the imposition of an extension as a means of sanction.
3.23 Next, it is contended that the role of the Official Assignee under s.61 of the 1988 Act is to get in and distribute the estate of the bankrupt in accordance with law. That much is certainly true. On that basis it is argued that the exercise by the Official Assignee of the power conferred by s. 85A must be confined to that end. However, the Official Assignee is given the power to apply to the court under s. 85A(1) provided that the Official Assignee can properly allege a failure to cooperate or a hiding or failure to disclose assets. The power is not expressly stated to be limited to cases where, as a result of such wrongdoing, further inquiries or action requires to be taken. It seems to me to follow that s. 85A itself provides authority to the Official Assignee to bring an appropriate application before the court where the Official Assignee is of the view that it will be possible to establish such absence of cooperation or hiding or failure to disclose assets. Whether to impose the sanction is, of course, a matter for the court and not the Official Assignee.
3.24 Thus, I am satisfied that, at the level of principle, s. 85A confers on the Official Assignee a function of bringing to the attention of a court any alleged failure to cooperate, hiding or failure to disclose with a view to inviting the court to consider whether it should exercise its jurisdiction under s. 85A(4) to extend the time during which the bankruptcy should remain undischarged. This is an alternative to the jurisdiction of the Official Assignee to bring such an application in circumstances directed towards inviting the court to require further investigation thus postponing any discharge from bankruptcy while the progress of any such investigation is under review. It follows that, in my view, the Official Assignee had standing to bring this application and, at the level of broad principle, the court had jurisdiction to extend the period of Mr. Killally's bankruptcy in the light of any established failure to cooperate, hiding or failure to disclose assets.
3.25 It should also be noted that Mr. Killally accepts that a person in bankruptcy should not be immune from punishment for failure to cooperate or the hiding or failure to disclose assets. However, it is suggested that any sanction in that regard must be found in the criminal law. On that basis it is said that s. 85A cannot be used to impose a sanction which, while civil in nature, is undoubtedly of very serious consequence. I do not doubt that it is proper to characterise the consequences of bankruptcy (and thus the consequences of any extension of the period of bankruptcy) as very serious. In that context it is well settled that it is necessary that all procedures leading to a proper adjudication in bankruptcy are fully complied with (see for example, O'Maoileoin v. Official Assignee [1989] 1 I.R. 647 and Murphy v. Bank of Ireland [2014] IESC 37). However, it does not follow that it is not permissible for the Oireachtas to impose a civil consequence for a failure to cooperate or hiding or failure to disclose assets and that such consequence can involve an extension of the bankruptcy period even where there are no further inquiries to be carried out. For the reasons which I have already sought to analyse I am satisfied that, on its proper construction, that is precisely what s. 85A seeks to do. It does, however, have to be recognised that, by virtue of the serious consequences of an extension of bankruptcy, any sanction so imposed must be proportionate to the wrongdoing on which it is based.
3.26 That leads to the second question as to whether the extension of one year imposed on the facts of this case was appropriate in all the circumstances including the fact that Mr. Killally had already been the subject of a criminal sanction for much (or on one view for all) of the relevant wrongdoing.
4. Was the Sanction Proportionate?
4.1 There are two principal points relied on by Mr. Killally under this heading. First, he draws attention to the fact that he has already been the subject of a criminal sanction arising out of the allegation of theft which formed the basis of the Official Assignee's application to postpone his discharge from bankruptcy. The facts relevant to this point can be briefly stated. Mr. Killally sold kitchen equipment (between October, 2010 and February, 2011) which had vested in the Official Assignee as part of Mr. Killally's estate as a bankrupt. In that regard he was charged with theft and came before the Circuit Criminal Court (His Honour Judge Hunt) on the 12th November, 2012.
4.2 Mr. Killally pleaded guilty at his arraignment. He then, prior to his sentencing hearing, paid into the bankruptcy office the full value of the relevant goods. His Honour Judge Hunt had deferred sentencing for two weeks and remanded Mr. Killally in Cloverhill Prison for that period. Mr. Killally appears to place some reliance on the fact that his time in prison was a harrowing experience which caused him to end up in a padded cell. However, I find it difficult to see how that account is of any relevance to the issue which this Court has to decide. Mr. Killally had been guilty of a significant offence of theft and the sentencing judge, quite properly and well within his jurisdiction, took the view that he should be remanded in prison pending a considered view as to the appropriate sentence to be imposed.
4.3 In any event, on the 26th November, 2012, His Honour Judge Hunt imposed a sentence of three years imprisonment with the full term suspended but also directed that Mr. Killally serve 240 hours of community service. Mr. Killally has completed that period of community service.
4.4 Against that background Mr. Killally argues that he has already, as it were, paid the price for his acts of theft. In those circumstances it is argued that the imposition of a second penalty or sanction against him, by means of the extension of his period of bankruptcy as a result of an order under s. 85A, is either impermissible in principle or is disproportionate.
4.5 It is at this point necessary to touch on an issue which arose before the trial judge concerning a contention that Mr. Killally had failed to disclose pensions. Such a failure could, potentially, have been relevant in one of two ways. First, it might have been argued that, while the consequences of Mr. Killally's theft had been finally dealt with in the criminal process (not least by his repayment of the proceeds), further inquiries needed to be made in relation to the pensions issue thus justifying an order under s. 85A(4) even if that provision were to be construed in the manner contended for by Mr. Killally. Second, it might have been said that the failure to disclose in respect of the pensions was itself a further item of wrongdoing which could and should have properly been taken into account by the trial judge in assessing whether to make an order under s. 85A and also, if persuaded to make such an order, in determining the period of postponement to be provided for.
4.6 In that context it is appropriate to note the order sought in the motion brought before the bankruptcy judge. The motion was in the following terms:-
"1. An order postponing the automatic discharge of the bankrupt due on the 3rd day of June 2014 for a period of 12 months and that the bankrupt accordingly be discharged from bankruptcy as of the 3rd day of June 2015 on the basis that the bankrupt has been convicted of having stolen assets from his bankruptcy estate by order of the Circuit Criminal Court (Midland Circuit) dated the 13th day of November 2012."
4.7 In passing it should be noted that a second, uncontroversial, order was sought and granted requiring a continuing payment of €433 per month for a period of two years. Nothing turns on that second order.
4.8 It first should be noted that the only basis suggested in the motion for the making of an order under s.85A was the criminal conviction to which reference has already been made. Furthermore, there was no reference to any other basis for seeking an order under s.85A to be found in the body of the grounding affidavit sworn in support of the motion. The only reference to the pensions issue was to be found in a letter (dated 14th May, 2014) which had been written by the Official Assignee to Mr. Killally in advance of bringing the application to the Court. The letter in question was exhibited in the grounding affidavit. In that letter, and having made reference to the criminal proceedings, it is suggested that it was proposed to seek to extend Mr. Killally's bankruptcy for this reason (being the criminal conviction) "and for failing to disclose assets, namely two pensions which were subsequently found by my office".
4.9 On that basis Mr. Killally complained that there was no evidence either before this Court or before the High Court as to the details of the relevant pensions, their value or whether they were amenable to seizure by the Official Assignee. Insofar as it might be said that it was necessary to carry out further investigations into those pensions, Mr. Killally argued that the Official Assignee had been aware of the existence of those pensions for some time and that Mr. Killally should not be prejudiced by what is said to have been a delay on the part of the Official Assignee in carrying out any necessary inquiries. In that context reliance was placed on Grace v. Ireland [2007] IEHC 90, where Laffoy J. accepted that delay on the part of organs of the State which had the effect of prolonging a bankruptcy would amount to a breach of Article 6.1 of the European Convention on Human Rights. Thus, it was argued, there could not be a legitimate order made under s. 85A for the purposes of carrying out inquiries where those inquiries could and should have been completed at an earlier stage, for to make such an order in such circumstances would amount to a prolongation of bankruptcy deriving from delay on the part of an organ of the State.
4.10 However, given that, in my view, it is unnecessary for a judge of the High Court, in making an order under s. 85A to postpone discharge from bankruptcy, to be satisfied that inquiries remain to be made, it does not seem to me to be necessary to address this aspect of the issue since the trial judge was entitled to direct such a postponement under s. 85A on the basis of established wrongdoing.
4.11 Insofar as the pensions issue might be said to have been relied on as an additional ground of wrongdoing to justify the making of an extension order under s. 85A, it is said that no complaint concerning, or evidence in relation to, the pensions issue was put before the High Court on the application made by the Official Assignee. In those circumstances it is said that it would be a breach of fair procedures to allow the High Court to take into account any alleged breach of obligation in respect of the pensions issue in assessing the overall culpability of Mr. Killally.
4.12 I am satisfied that it would not, in all the circumstances of this case, be appropriate to take into account any breach of obligation in respect of the relevant pensions in determining whether an order should be made under s.85A or in determining the scale or scope of any such order should one be made. It is true, as counsel for the Official Assignee pointed out, that Mr. Killally did not respond to the letter from the Official Assignee raising the pensions issue. Likewise, it is also correct to note that Mr. Killally did not file any replying affidavit in relation to the motion. However, given that the grounds for reliefs specified in the motion before the court were confined to the criminal conviction for theft it does not seem to me that, on the facts of this case, the issue of the pensions was properly before the Court as a potential ground for making an order extending bankruptcy. In different proceedings, where an issue, such as the failure to disclose pensions mentioned in the Official Assignee's letter in this case, was properly brought before the court then, it might well be said, given the obligations of cooperation which lie on a bankrupt, that a significant onus would rest on the bankrupt to engage with the question if he wished the Court to have significant regard to his side of the story in determining what action, if any, to take under section 85A.
4.13 However, on the facts of this case it seems to me that the pension issues were not properly before the court as part of the potential grounds for making an order under section 85A. The decision of the trial judge needs to be assessed, therefore, on the basis of the issue which was properly before the court being the theft of assets which had properly formed part of the bankruptcy estate. Having determined that the High Court had, at the level of general principle, a jurisdiction to make an order under s.85A in respect of such a matter, the second issue which arises is as to whether the trial judge was correct, in the circumstances of this case, to make the order which he did.
5. Proportionality of the Sanction
5.1 The starting point must be the reasoning of the trial judge himself. In a note supplied to this Court dated the 2nd July, 2014 the trial judge said the following:-
"I have signed Counsel's Note and approve it on the basis that it, broadly speaking, represent what occurred. I would add one further note of my own. I acceded to the application of the Official Assignee, principally on the ground that the integrity of the bankruptcy process must be maintained and can only be maintained by parties cooperating totally with the Official Assignee and the Examiner's Office. I was satisfied that this as not the case here."
5.2 There is nothing in either that note or, indeed, in the agreed note of what transpired at the hearing, to suggest that McGovern J. placed any significant reliance on the pensions issue. It is clear that counsel for Mr. Killally argued, correctly in my view, that the pensions issues was not truly before the Court. A counter argument was put forward by the Official Assignee. The trial judge did not expressly resolve that argument but it seems to me that, if McGovern J. had been inclined to take the pensions issue into significant account, he would have resolved that argument expressly in favour of the Official Assignee.
5.3 In any event, it seems to me that the proportionality of the sanction imposed by McGovern J. must be seen in the light of the reasons which he gave in the note to which reference has already been made. It is clear that the trial judge took the view that the integrity of the bankruptcy process requires total cooperation by persons in bankruptcy and that a significant failure of such cooperation must point towards a sanction being imposed. It should also be noted that, as pointed out by counsel for the Official Assignee, the maximum sanction which was open to the trial judge, if in the light of the eighth anniversary rule, would have been to prolong Mr. Killally's bankruptcy by a period of just in excess of three years (until the 26th July, 2017). The sanction imposed was, of course, one of a single year's prolongation although it must be noted that such was the period of postponement sought by the Official Assignee.
5.4 It is also necessary to have regard to the fact that Mr. Killally has been the subject of a criminal penalty in respect of what is substantially the same wrongdoing. Even though, for the reasons already analysed, I am satisfied that there is jurisdiction to make an order under s.85A in respect of completed and remedied wrongdoing, it is appropriate for a judge in considering whether, and if so to what extent, to exercise the powers conferred under s.85A to consider any other sanctions or consequences which may arise in the context of the case under consideration. Where the wrongdoing is completed and remedied and where, therefore, the extension of bankruptcy is not being sought for the purposes of further inquiries or action but rather is being sought as a sanction, then it is appropriate for the Court to look at all the consequences on the bankrupt in assessing the appropriate measures to put in place.
5.5 It follows that it is necessary to have regard to the fact that Mr. Killally was subject to criminal sanction and has fully borne the burden of that sanction. It does not seem to me that there is any reason in principle, however, why an additional civil sanction cannot be imposed provided that, in all the circumstances of the case, the totality of the consequences for Mr. Killally cannot be said to be disproportionate. There are many situations in which there may be both criminal and civil consequences of the same wrongdoing. Even where the civil consequences are more in the nature of a sanction rather than in compensating a person who has suffered loss, such remains possible. A person may be subject, for example, to disciplinary proceedings or loss of benefits or licence, arising out of the same set of circumstances which can give rise to a criminal conviction. It follows that there is no reason in principle why there cannot be, subject to overall proportionality, both civil and criminal consequences of the same act. It is, therefore, necessary to assess the trial judge's view of the seriousness of the matter with which he was faced.
5.6 The trial judge was entitled to take the view, as he clearly did, that this was a serious breach of the obligation placed on Mr. Killally to cooperate with the Official Assignee and not to seek to gain personal advantage by the sale of equipment which should have formed part of his estate for bankruptcy purposes. The seriousness of that breach needs to be measured in the light of the correct view taken by the trial judge that the maintenance of the integrity of the bankruptcy process is of the utmost importance and requires to be encouraged by the imposition of sanctions for breach. In the light of those considerations, and notwithstanding the fact that Mr. Killally had already been sentenced by the criminal courts, I am of the view that it was within the range of sanctions open to the trial judge in all the circumstances of this case to impose, by way of additional civil sanction, an extension of one year on Mr. Killally's bankruptcy.
5.7 This Court should only interfere with the assessment of a trial judge as to the appropriate sanction to impose under s.85A where either the trial judge has been guilty of some significant error of principle in the way in which the trial judge approached the question in the first place or where the sanction is, in this Court's view, outside the range of sanctions which the trial judge could proportionately regard as appropriate. In this case I am not satisfied that there is any such error of principle and I am also satisfied that the sanction (which was, of course, less than one third of the maximum sanction which could have been imposed) was within the range of sanctions which could have been proportionately imposed.
6. Conclusions
6.1 For the reasons set out in this judgment I am, therefore, satisfied that, on its proper construction, s.85A of the 1988 Act confers on the Official Assignee a jurisdiction to seek, and on the High Court a jurisdiction to impose, a postponement of the entitlement of a bankrupt to be discharged provided that the Court is satisfied that a failure to cooperate or a hiding or failure to disclose assets, in accordance with the terms of the section, has been established. That jurisdiction exists even though any wrongdoing thus established may be completed and, indeed, remedied. It is not necessary, in order for the jurisdiction to arise, that it be established that there are further inquiries to be made or action to be taken for the purposes of furthering the getting in and distribution of the estate of the bankrupt. I am, therefore, satisfied that a jurisdiction arose to make the order in this case.
6.2 I am also satisfied that the sanction of an extension of one year to the bankruptcy of Mr. Killally did not involve any error in principle on the part of the trial judge and was not outside the range of sanctions which were, in all the circumstances of this case, proportionately open to the trial judge to impose. In so holding I have excluded from consideration, as a matter not properly before the High Court, any issues connected with the suggestion that Mr. Killally may have failed to disclose pensions to the Official Assignee. I am not, however, satisfied that the pensions issue played any material part in the trial judge's adjudication.
6.3 In those circumstances I would dismiss the appeal and affirm the order of the trial judge.