Judgment
Title: | A.A. -v- B.A & anor and A.A. -v- C.D. & anor |
Neutral Citation: | [2015] IESC 102 |
Supreme Court Record Number: | 328, 373 & 485/09 |
High Court Record Number: | 1997 58 M |
Date of Delivery: | 11/09/2015 |
Court: | Supreme Court |
Composition of Court: | Denham C.J., Laffoy J., Charleton J. |
Judgment by: | Charleton J. |
Status: | Approved |
Result: | Other |
Details: | B.A no locus standi. Dismiss 2015 application. |
| Judgments by | Link to Judgment | Concurring | Laffoy J. | | Denham C.J., Charleton J. | Charleton J. | | | |
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An Chúirt Uachtarach
The Supreme Court
Record number 1997/58M
Appeal Nos: 328, 373 & 485/09
IN THE MATTER OF THE JUDICIAL SEPARATION AND FAMILY LAW REFORM ACT 1989 AND IN THE MATTER OF THE FAMILY LAW ACT 1995
BETWEENA.A.
APPLICANT/RESPONDENT
AND
B.A.
RESPONDENT/APPELLANT
AND BY ORDER THE OFFICIAL ASSIGNEE IN BANKRUPTCY
RESPONDENT
IN THE MATTER OF THE FAMILY LAW (DIVORCE) ACT 1996
BETWEEN
AND
A.A.
RESPONDENT/RESPONDENT
AND BY ORDER
C.D.
NOTICE PARTY
B.A.
APPLICANT/APPELLANT
Judgment of Mr Justice Charleton delivered on Monday the 9th day of November 2015
1. This judgment concurs with that of Laffoy J. Only a few observations are apposite as an addition to her reasoning in that judgment. The facts as therein stated are adopted.
Arguments advanced on the appeal
2. This preliminary issue is one of law. The Official Assignee asserts that the fact “that the trial judge or the Supreme Court made findings adverse to the bankrupt, or which reflected on his personal conduct does not of itself give the applicant any basis for making any claim [or] cause [that] claim to become a personal claim.” The Official Assignee is of the view that “there is no basis that is even stateable for overturning the decision of Irvine J in the High Court” and, further, that even were the decision of the Supreme Court on appeal to “be impugned, the launching of a second substantive appeal would be a matter for the Official Assignee.” Countering this BA, as bankrupt, argues, firstly, that the Official Assignee has no entitlement or standing to seek to prevent or impede any decisions in litigation he might make since the entire of his assets, wheresoever situated, had previously been vested in the United States of America trustee in bankruptcy. Thus, it is contended by BA that the Official Assignee has no interest in any proprietary right of BA since he does not control BA’s estate in bankruptcy; the claim being that BA’s estate never vested in that Irish official and nor could it due to the prior claims of the US official. Were this argument to be taken to its logical extreme, the entire of BA’s bankruptcy estate, being vested in the US trustee, has never, as to any part of it, come under the authority of the Official Assignee. Thus, BA claims, it is irrelevant to, and outside of the jurisdiction of, the Official Assignee as to whether any property of BA is diminished or added to in consequence of any success that BA may have on the course he proposes to take or as a result of any further order being made as to costs against him. Secondly, BA contends that even if the Official Assignee has any interest in any property of his in Ireland or elsewhere that he, BA, retains a personal right to vindicate wrongs done to him. As asserted on this appeal, the wrong consists, it is claimed, of an entitlement to overturn a finding integral to the judgement of Irvine J of 10th June, 2009, that he concealed assets in making discovery of relevant documents to AA in their initial matrimonial proceedings. This amounts to a finding, BA asserts, that his financial conduct and behaviour during the litigation was discreditable. He thus should have had the right, he claims, to participate in those family proceedings through the calling and examination of witnesses and by offering submissions to the court. On behalf of BA it is further asserted that once he raises any issue as to the alleged deprivation of fair procedures in a court case, this is personal to him and thus he retains the right to litigate it to conclusion notwithstanding any intervening bankruptcy. The vindication of all such rights, it is contended, is personal to BA and, as with other wrongs done to a bankrupt that specifically injure his person or the standing of his character, remain to be litigated by him personally and outside the direction or control of the Official Assignee.
3. The authorities make it clear that the position of the Official Assignee is correct and the counter arguments of BA are bound to fail.
Effect of adjudication in bankruptcy
4. The case argued on this appeal by BA is undermined by authority on the most fundamental level. 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 52(1) of the Property Services (Regulation) Act 2011], 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.
5. Section 61(2) of the Act of 1988 declares that the functions of the Official Assignee are “to get in and realise the property, to ascertain the debts and liabilities and to distribute the assets in accordance with the provisions of this Act.” In that regard subsection 3 gives to the Official Assignee the following powers:
(a) to sell the property by public auction or private contract, with power to transfer the whole thereof to any person or to sell the same in lots and for the purpose of selling land to carry out such sale by […] lease, sub-lease or otherwise and to sell […] any reversion expectant upon the determination of any such lease,
(b) to make any compromise or arrangement with creditors or persons claiming to be creditors or having or alleging themselves to have any claim present or future, certain or contingent, ascertained or sounding only in damages whereby the bankrupt or arranging debtor may be rendered liable,
(c) to compromise all debts and liabilities capable of resulting in debts and all claims, present or future, certain or contingent, ascertained or sounding only in damages, subsisting or supposed to subsist between the bankrupt or arranging debtor and any debtor and all questions in any way relating to or affecting the assets or the proceedings on such terms as may be agreed and take any security for the discharge of any debt, liability or claim, and give a complete discharge in respect thereof,
(d) to institute, continue or defend any proceedings relating to the property,
(e) to refer any dispute concerning the property to arbitration under the terms of section 11 of the Arbitration Act, 1954,
(f) to mortgage or pledge any property to raise any money requisite,
(g) to take out in his official name without being required to give security, letters of administration to any estate on the administration of which the bankrupt or arranging debtor would benefit,
(h) to agree a sum for costs where the Court so directs or where he considers that the amount which would be allowed on taxation would not exceed [€12,000],
(i) to agree the charges of accountants, auctioneers, brokers and other persons,
(j) to ascertain and certify to the Court the amount due in respect of a mortgage debt and the due priority thereof with power to the Court to vary such certificate,
(k) to draw out of the account referred to in section 84 (1) any sum not exceeding [€130] by way of indemnity in respect of costs incurred by him.
6. Causes of action sounding in damages that may benefit the estate of a bankrupt or may diminish it are under the control of the Official Assignee. A cause of action subsisting on adjudication in bankruptcy will thereby be stayed or dismissed unless the trustee in bankruptcy, here the Official Assignee, is willing to be substituted as the moving or responding party. Displacing a bankrupt from control over his former assets and liabilities places him in a position where the net benefit of his estate is made available for distribution to creditors. That estate is not to be increased through legal actions to enforce debt, even those which may be characterised as straightforward, save in circumstances where the Official Assignee regards it as appropriate that an action be taken. Nor is the estate of the bankrupt to be diminished by any creditor save in the lawful course of the gathering up and proper distribution of the property of the bankrupt. All of this is under the control of the Official Assignee. This is provided for in section 136 of the Act of 1988 thus:
7. This may be stated to be the principle of the separation of the estate of the bankrupt from his personal control. Its origin goes back as far as the first bankruptcy code. In modern legislation, as part of the status of bankruptcy, section 137 of the Act of 1988 provides for further protective powers which, in this instance, are vested in the Official Assignee:
(1) The Official Assignee may—
(a) where any proceedings against the bankrupt are pending in the High Court or on appeal in the Supreme Court, apply to the court in which the proceedings are pending for a stay of proceedings therein, and
(b) where any other proceedings are pending against the bankrupt, apply to the High Court to restrain further proceedings therein,
and the court to which the application is made may grant the application on such terms and for such period as it thinks fit.
(2) Where any proceedings against a bankrupt are stayed or restrained in pursuance of subsection (1), the following provisions shall have effect:
(a) the creditor shall not be liable for any costs incurred by the bankrupt or the Official Assignee in such proceedings;
(b) if the proceedings have been instituted against the bankrupt jointly with any other person, the proceedings against that other person shall not thereby be affected.
Redress for decisions in Bankruptcy
8. The Official Assignee is an officer of the High Court. The pursuit of his functions is pursuant to orders made by the High Court. Discharge from bankruptcy is ultimately a matter for that court. As a high administrative official, the Official Assignee is not left without recourse to the High Court in the discharge of his duties. Section 61(6) provides that he may “in cases of doubt or difficulty seek the directions of the Court in connection with the affairs of any bankrupt or arranging debtor.” Section 61(8) provides that the “powers and functions conferred on the Official Assignee by this section may be exercised and performed” by him where there is an “adjudication founded on a petition of a debtor” or otherwise where there is an adjudication, or where the time for showing cause has expired in the case of an adjudication “founded on a petition by a creditor” or “in the case of a vesting arrangement, on approval of the proposal by the Court.” It may be noted that several other provisions in the Act refer to the rights of family members and to those, necessarily contending, positions of the bankrupt and arranging debtor or to persons dying insolvent. This tends to be specific. The individual statutory sections rarely employ words of a more general kind. Section 61(7) contrasts with this in terms of affirming the powers of the High Court as the ultimate supervisor of the role of the Official Assignee:
The exercise by the Official Assignee of the powers conferred by this section shall be subject to the control of the Court, and any creditor or other person who in the opinion of the Court has an interest may apply to the Court in relation to the exercise or proposed exercise of those powers.
9. Under the Bankruptcy (Ireland) Amendment Act 1872, section 4, the then division of the High Court dealing in bankruptcy, the Court of Bankruptcy and Insolvency in Ireland, had “original jurisdiction, superintendence and control” over all matters in bankruptcy. In Ellis v Silber (1872-73) LR 8 Ch App 83, Lord Selborne declared the authority of the bankruptcy court thus:
That which is done in bankruptcy is the administration in bankruptcy. The debtor and the creditors, as the parties to the administration in bankruptcy, are subject to that jurisdiction. The trustees or the assignees, as the persons entrusted with that administration, are subject to that jurisdiction. The assets which come to their hands and the mode of administering them, are subject to that jurisdiction.
10. It was not proposed in the Bankruptcy Law Committee Report (Prl. 2714) under the chairmanship of Mr Justice Frederick Gardner Budd to diminish the general power of interested parties to apply to the High Court for decisions as to issues arising in the course of bankruptcy. Looking back to the 18th and early 19th centuries, a time when the trustee in bankruptcy might have been chosen by the main creditor of an insolvent person, a situation perhaps akin to the appointment of a liquidator on insolvency of a company in our time, it could be that conflicts of interest or personality issues might suggest to the trustee that a good cause of action should not be taken even though it would probably inure to the clear benefit of the estate in bankruptcy. It has always been the case that where the bankrupt is aggrieved by the refusal of a trustee in bankruptcy to prosecute a claim, he may make an application to the High Court. This can have the effect in clear cases of reversing that decision. Thereby such order as is necessary to meet the justice of the case may also be made. From the case law, it is a jurisdiction sparingly exercised. That principle is preserved in England in section 303(1) of the Insolvency Act 1986. This provision is mirrored by section 61(7) of the Act of 1988, quoted above. In Heath v Tang [1993] 1 WLR 1421 at page 1423, the historical observation by Hoffman LJ illustrates the difficulties of that time:
The rule that the bankrupt could not sue on a cause of action vested in his trustee was enforced with such rigour that he could not even bring proceedings claiming that the intended defendant and the trustee were colluding to stifle a claim due to the estate and which, if recovered, would produce a surplus. But in any case in which he was aggrieved by the trustee’s refusal to prosecute a claim he could apply to the judge having jurisdiction in bankruptcy to direct the trustee to bring an action, or to allow the bankrupt to conduct the proceedings in the name of the trustee.
11. In order to avoid any doubt, it should be noted that this appeal is the effective discharge of the entitlement of the bankrupt BA to access the courts under section 61(7) of the Act of 1988 to resolve an issue of controversy in the bankruptcy. BA has taken the view on this appeal that he should be entitled to attempt to upset through his own personal action the financial provisions made in favour of his ex-wife, AA, in the matrimonial proceedings. This decision by the Supreme Court is the answer to that question on which BA has sought a ruling as to the “exercise or proposed exercise of those powers” vested in the Official Assignee whereby that official of the High Court has declined to pursue the case which BA claims he should take. While the Official Assignee has refused, fundamentally BA challenges the power of the Official Assignee to control his estate and to thereby decide which cases to bring or decline to pursue.
Control over the estate in bankruptcy
12. The fundamental principle in regard to the control of a bankrupt’s estate is stated in Kisby on Bankruptcy (Dublin, 1876) at page 128. The decision of Laffoy J on this appeal is thus clearly based on sound authority. Control of the property of a bankrupt vests in the trustee in bankruptcy, now the Official Assignee. In the context of the then procedure of certification of conformity after final examination, the principle set forth by that authoritative text is of general application:
It was held in Motion v Moojen L.R. 14 Eq. 202, that an uncertified bankrupt cannot, as plaintiff, sustain a bill in equity to undo fraudulent treatment where the Court of Bankruptcy is competent to deal with the case. The proper course for a defendant to adopt in the event of an uncertified bankrupt filing such a bill, is to demur. The doctrine is an old one that a bankrupt who has not obtained his certificate cannot sue in the Court of Chancery, even though he should allege fraud and collusion in those who have charge of his property. See Heath v. Chadwick, 2 Phill. 649; Rochfort v. Battersby, 2 H.L. 407. The Court of Chancery will interfere, even at the bankrupt’s instance, if the bankrupt is not able, to relieve him against fraud… The disability of a bankrupt to sue is not a personal disability; but relates only to his property.
13. In Rochfort v Battersby 9 ER 1139; (1849) 2 HL Cas 388 a bankrupt had previously held an entitlement to estates in Ireland that were subject to an annuity in favour of his mother. These estates had been mortgaged to a creditor who later sought foreclosure. The issue in the action was whether the mortgage over the estate took priority over the annuity in favour of the bankrupt’s mother. The Lord Chancellor of Ireland decided the case in favour of the mother and the bankrupt appealed to the House of Lords in England. The key question was that which arises on this preliminary issue. The headnote to the case records it as a principle of law that an “insolvent debtor has not such an interest in property assigned under the Insolvent Debtors’ Acts, as to entitle him to enter into any litigation respecting it.” Lord Cottenham LC stated the rule in a passage which is worth recalling in this context. The relevant portion of the judgment appears at page 1147 of the English Reports thus:
The case of Collins v. Shirley (1 Russell and Myl. 638) [1830] brings the case, not more in principle, but more in point of fact, within the circumstances of the present case; and, as it seems to me, they are identically the same. There, a bill of foreclosure had been filed against the insolvent and his assignees, upon which the assignees disclaimed, and offered to release. The assignees claimed no benefit in the mortgage; the title of the mortgagee had been prior to their own, and they therefore abstained from litigating the point. The discussion arose upon a question of costs. The assignees withdrew from the contest, and it remained only between the insolvent and the mortgagee. “The Master of the Rolls held that the assignees were not entitled to their costs, but that Shirley had been made a party improperly, and ought therefore to have his costs.” That was identically the same as here. The assignees represented the property, and were therefore properly made defendants. But as to the insolvent, the Master of the Rolls, Sir John Leach, said, that he was improperly made a defendant; the consequence was, that the Court gave him his costs. Now all these cases refer to the state of the matter as it stands on this appeal, and shew that the insolvent under the Insolvent Debtors’ Act, is not considered by the Court as having any such interest in the property as entitles him to enter into any litigation respecting it. It cannot be stronger than this. We find a bill filed by the insolvent, alleging, upon the face of it, that there is a surplus, which practically is made use of by him to shew that he had an interest; but although the law would give him back again that surplus, if it should ultimately arise, the Court says, “ Although you have alleged that fact, a demurrer might be taken to that allegation on the ground that that fact does not, under the statute, give you such an interest as entitles you to sue upon it.” A demurrer is therefore held to be good to a bill filed by an insolvent, although lie alleges a probable surplus, and although he alleges combination and conspiracy to rob him, as between the assignees and the creditors. There cannot be a stronger proof therefore that the Courts have always considered these acts of Parliament as divesting the insolvent of all title and interest in the property, which would authorize and justify him in entering into any litigation respecting it. This objection ought to have been taken in the Court below, and the bill ought to have been dismissed as against the insolvent; but the Court did not adopt that course, but made a decree apparently as if the party had not been an insolvent at all, decreeing a foreclosure against him, which might ultimately lead to a redemption by him.
14. In Wylie’s Judicature Acts (Dublin, 1906), another admired text that assists the elucidation of fundamental law, the principle is reaffirmed:
That where a sole plaintiff becomes bankrupt he cannot continue the suit; that any steps taken by him subsequently will be discharged upon the defendant’s application; that the assignee is must obtain an order to continue the proceedings in their own names, or in the names of the bankrupt, giving security of course, if from the state of the action that course be more convenient, as where the action had been set down for trial.
15. The rule elucidated by Laffoy J in her judgment on this appeal is therefore of long-standing. It also is one which has been consistently applied. Should a bankrupt consider that the assignee in bankruptcy has made an incorrect decision, the remedy is to apply to the court supervising the estate. According to Smith v Moffat (1865) LR 1 Eq 397, that should be the court before which the order was made. The case, however, does not comment on concurrent bankruptcies in differing jurisdictions, only on the availability of a remedy. In Heath v Tang the effect of these decisions was summarised at 1425 by Hoffman LJ as demonstrating that, as a matter of principle, a bankrupt cannot appeal from a judgment against him which is enforceable only against the estate vested in the trustee in bankruptcy.
16. Later in the judgement, Hoffman LJ comments on the necessity to consider modern legislation in the context of the prevailing conditions at the time of its passage. That decision affirms the continuation of the principle of divesting assets from the bankrupt. This is a result which the status of bankruptcy carries. At page 1427 he comments:
Nevertheless, the principal that the bankrupt is divested of an interest in his property and liability for his debts remains fundamental in the new code. The consequences for the bankrupt’s right to litigate do not seem to us inconvenient or productive of injustice. 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.
17. In the Bankruptcy Law Committee Report at paragraph 1.13.1, the purposes of bankruptcy are analysed. The authors of the report state:
The main objects of bankruptcy legislation are
(1) to secure equality of distribution and to prevent any one creditor obtaining an unfair advantage over the others,
(2) to protect bankrupts from indicative creditors by freeing them from the balance of the debts where they are unable to pay them in full, and to help rehabilitate them,
(3) to protect creditors not alone from debtors who prior to bankruptcy prefer one or more creditors to others but from the actions of fraudulent bankrupts,
(4) to punish fraudulent debtors.
18. Essential to the attainment of these purposes is that control over the estate in bankruptcy is transferred from the bankrupt to the Official Assignee. Thereafter, under the authority of the High Court, and subject to the entitlement of interested parties to refer issues to that court, the function of the Official Assignee is to collect in the property of the bankrupt and to manage the estate in bankruptcy. Central to that role is the function vested in the Official Assignee to make decisions as to what litigation should be continued, commenced or compromised for the benefit of the estate in bankruptcy. That principle has been previously applied by this Court in Siroko v Murphy [1955] IR 77. That was an appeal where the issue was whether a bankrupt could continue an action against the supplier of linseed oil where the alleged result of using it was that the plaintiff’s employee in his furniture workshop had contracted dermatitis, thereby opening a claim in compensation. Maguire CJ, after a consideration of the authorities, stated at page 80:
It is plain upon all the authorities, and, I may add, all the textbook writers, that when the plaintiff became a bankrupt this action, not being for a mere personal wrong, was by act of law assigned to the Assignee in Bankruptcy. The plaintiff thereupon became incapable of conducting it.
Personal wrong
19. The next matter to be considered is if there is any exception to this principle which is applicable to the circumstances of this bankrupt. Here, BA seeks to assert that the decision in the family proceedings resulted in the condemnation of his character and the rejection of his evidence and is therefore a personal wrong against him. The authority of the Official Assignee over actions in which the bankrupt was interested or seeks to interest himself extends to all cases which affect the estate in bankruptcy. It is not an exception to the principle that some aspect of litigation which the bankrupt wishes to appeal, or otherwise continue, relates to the personal honesty of the bankrupt. In De Alwis v Luvit Foods International [2010] NZHC 418 (24 March 2010) a bankrupt sought to set aside a judgement entered in 2007 on the basis that there had been deception by the plaintiff. It was asserted by the bankrupt that as the judgement against him was founded on adverse findings of a personal nature that the right to set aside the judgement subsisted in him personally and not in the trustee in bankruptcy. Courtney J rejected the proposition that a bankrupt had a right to challenge a judgement debt because it was ostensibly based on fraud. The judge further rejected the proposition that any adverse finding of fact gave rise to any right of appeal in terms of human rights entitlements under the New Zealand Bill Of Rights Act 1990.
20. To the principle of control by the trustee in bankruptcy over all of the estate, and hence all the litigation of the bankrupt, there is a limited exception. This exception is expressly related to injury to the physical person and reputation of the bankrupt. In The Law of Insolvency (4th edition, 2009) by Professor Ian Fletcher, that distinction is drawn at paragraph 7-008 thus:
Furthermore, a distinction is made between proceedings which are designed to enforce a legal obligation owed by the debtor and those which are of a punitive character and brought on account of his personal misconduct. In the latter type of case – for instance proceedings for contempt of court for committal of defaulting trustee – the court of bankruptcy will not intervene.
21. On the positive side of the scale, in terms of what actions may be instituted or continued by a bankrupt notwithstanding the bankruptcy, a limited exception to the principle of disenabling any further action by the bankrupt survives, allowing the bankrupt to take proceedings in his own name. These exceptions are personal injury actions, as where the bankrupt was injured in a road traffic, or workplace, accident either before or after the bankruptcy or where the bankrupt has been attacked physically, as in assault or false imprisonment. In addition, it seems, a bankrupt may defend his character if he has been defamed. A bankrupt may also be personally liable for contempts against court proceedings and may be arrested and charged in the usual way if he is accused of having committed criminal offences. Counsel on behalf of BA referred in argument to the possibility of taking a race discrimination case. This, it has been recognised in England and Wales, can be an exception because the injury is to the person of the bankrupt as opposed to the trading nature of his estate. Alternatively, the claim may be a hybrid of both; see Khan v Trident Safeguards Ltd [2004] EWCA Civ 624; [2004] ICR 1591. The case of Ord v Upton [2000] Ch 352; [2000] 1 All ER 193 differentiated between a medical negligence claim against a doctor claiming damages for pain and suffering and a claim on the same ground for loss of earnings. Such a hybrid claim was under the control of the trustee in bankruptcy and not under the control of the injured party, it was held. Aldous LJ put the matter thus at page 361:
In modern parlance [the bankrupt] Mr Ord's claim is a single cause of action. However I cannot accept [counsel for the bankrupt’s] submission that the cause of action is personal. It is a claim for damages for injury to his body and mind and also his capacity to earn and can therefore be considered as a "hybrid" claim, in part personal and in part relating to property. I have come to the conclusion that such an action vested in the trustee. It would only have remained with Mr Ord if it fell within an exception established by the authorities to be excluded from the definition of property now found in section 436 of the Act of 1986. To do so it must relate only to a cause of action personal to the bankrupt. All causes of action which seek to recover property vest in the trustee whether or not they contain other heads of damage to which the bankrupt is entitled. The authorities … lead to that conclusion.
22. After a review of the precedents, the most germane of which are analysed in the judgment of Laffoy J herein or in the previous judgment of this Court in Siroko v Murphy, the judge then turned to what the duties were of the trustee in bankruptcy in circumstances where the trustee would pursue the action in loss of earnings for the benefit of the estate in bankruptcy and also recover damages for pain and suffering on behalf of the injured plaintiff. The conclusions of the Court of Appeal of England and Wales on this issue point to the overarching control of litigation which the trustee in bankruptcy is obliged to exercise over the estate of the bankrupt. At page 371 Aldous LJ stated:
The authorities are only consistent with the conclusion that the trustee is entitled to the damages for past and future loss of earnings and is not entitled to the damages for pain and suffering. As there is a single cause of action, it vested in the trustee. There is in my view nothing in that conclusion which imposes practical difficulties with which the law cannot deal. The trustee as constructive trustee would have to account to the bankrupt for the property which he obtained inadvertently or by arrangement in an action which vested in him for the benefit of the creditors. The idea that the cause of action should vest in the bankrupt would not be acceptable and compulsory joinder of both could lead to difficulties when the claim for loss of earnings was small compared with the potential costs of the litigation. In such a case the trustee, if the cause of action vested in him, would have to consider carefully his duty to the bankrupt and would probably, if requested, assign the cause of action to him.
23. Whatever the examples, the exception is one of principle: it relates solely to injuries against or offences to the physical person of the bankrupt or to attacks on his character which sound in damages in his favour or to personal actions as to his conduct which may result in committal or imprisonment for contempt of court or other criminal imprisonment or punishment. All of these exceptions are entirely unrelated to the size of the estate and its economic balance as to assets and debts on bankruptcy. While the exceptions to the rule of control over actions by the Official Assignee stated in section 61(2)(d) of the Act of 1988 are defined in case law, these exceptions are also entirely logical and consistent with the purposes and aims of the legislation. Thus, what can increase the amount of the estate in bankruptcy through litigation which results in the increase or decrease in what is available to creditors is entirely within the competence of the trustee in bankruptcy: what may cause personal consequences for the bankrupt in litigation related to his misconduct and what may compensate him for injuries and assault or defamation is within the remit of the bankrupt. These exceptions are not as to the economy of the estate in bankruptcy but are of matters personally to his benefit or detriment.
Right to be heard
24. BA also asserts the right to be heard. This is curious, given the circumstances. He has been heard. At the family proceedings in both 2001 and 2009, BA was fully represented. The letters from the trustee in bankruptcy in the United States of America clearly assumes this as a fact. More importantly, the order of the High Court of 21st December, 2001, recites the dates of the hearing and the attendance of “counsel for the applicant [BA] and counsel for the respondent [AA]”. The order also references the production of affidavits, pleadings and documents and recites that the court had “heard the oral evidence of the witnesses whose names are set forth” in an attached schedule of witnesses.
25. It may be the case that a witness to proceedings who is not represented as a party to litigation may be disbelieved or may be disregarded. Sometimes, it can happen as well that the comments of a trial judge disparage a witness as to their character or truthfulness. The task of courts, however, is to seek out the truth in the competing claims of the parties to litigation and as between those who are called, or who are compelled, by court process to attend and testify. It is an inevitable and inescapable part of the work of judges that they may be required to believe or to disbelieve a witness whose testimony is essential to arriving at a correct decision. A witness in a seriously contested case will, no doubt, have any allegation or counter fact that may undermine his or her testimony put by counsel for the opposing party. This constitutes some opportunity to speak to what the judge may eventually have to decide.
26. In this case, however, the argument advanced as to fair procedures becomes entirely theoretical. In the arrangement of his financial affairs, BA entered into a marriage with AA and, in the ordinary course of human life, that marriage failed. Family courts faced with matrimonial breakdown recognise that the parties are before it because they could not agree on mutually acceptable solutions to difficult problems such as child care and the division of financial resources. Such family issues as were before the High Court were there in the context of the exercise of the fullness of procedures that are characteristic of a plenary hearing. This point therefore fails.
Constitutional rights
27. BA, in common with every citizen, has under the Constitution a right to litigate. That right, however, is not absolute. It may be subject to the circumstances in which it is sought to assert access to the courts. Here, economic difficulties have put BA in the position where his assets are insufficient to meet his liabilities and where the personal insolvency provisions in Irish law were invoked by his creditors. This has had the result that his entitlements to litigate are curtailed. Litigation can take different forms and it may also be restricted in accordance with constitutional norms. In ordinary circumstances, a citizen may choose to commence actions which may be genuine in character but which may carry little prospect of success. A person in business may choose not to answer a valid claim against him or her on the basis of a realistic appraisal of where the facts of the matter stand but, instead, proceed to defend an action in the hope that it might go away, the plaintiff may run out of funds, or that lies may supply a defence. Deceit, mischief and delay are familiars of litigation. The courts have procedures for striking out cases which have no prospect of success and also enable businesses or people who have liquidated claims to access summary judgment procedures. Both are subject to strict conditions. These procedures curtail some of the more negative aspects of litigation. The necessity to discharge litigation efficiently may channel or curtail other rights to a substantial degree. Ultimately, a case may involve a judge trying to strip away irrelevant or misleading aspects of a problem in order to get to the truth of a claim.
28. A person whose estate is in bankruptcy is not devoid of rights. Decisions as to the gathering in of the estate and the necessary pursuit of, or defence of, litigation remain. Control is through the necessary process of bankruptcy of the estate transferred from a bankrupt to the Official Assignee. This is by reason of the personal insolvency that has necessitated the adjudication in the first place. The Official Assignee is entitled to make decisions in pursuit of the preservation or augmentation of the estate in bankruptcy. Those decisions will be made by a public official who is responsible and whose interest is focused on the rights of creditors and on fairness to the bankrupt. Sensible decisions in aid of the early resolution of the gathering in phase of bankruptcy which exclude speculative litigation can only inure to the benefit of the creditors and to the ultimate good of the bankrupt. The sooner and the more efficiently the process of insolvency is conducted, the better chance the bankrupt has that the system will enable discharge. As commented on earlier in this judgment, it has always been the case under our bankruptcy legislation that the process is under the ultimate authority of the High Court. Consequently, the right to litigate continues to subsist through the decisions that are made by the Official Assignee. The bankrupt is not without a remedy should an unjustifiable decision be made. Where there is a real disagreement, whereby real economic sense may be seen in either defending an action against the estate in bankruptcy or in pursuing litigation that realistically and probably will yield a benefit to that estate, either the bankrupt or the Official Assignee may access the High Court under section 61(7) of the Act of 1988. This simple procedure enables the High Court to overrule or confirm the Official Assignee. In cases of genuine doubt, the ultimate power of the courts over the bankruptcy process enables the decision to be either affirmed or, instead, substituted with an appropriate direction. This appeal is an example of that process.
29. In so far as it has emerged on the oral argument of this appeal that, in some way, the right to a good name of BA was undermined by the judgment of Irvine J and the affirmation of that judgment by this Court on appeal, it must also be born in mind that family proceedings are conducted in anonymity. Such effects as there might be in relation to BA’s character are confined to the parties to the litigation. Further, it is asserted on behalf of BA that there is some kind of personal entitlement once any issue of fair procedures is raised to access the courts despite the opposition of the Official Assignee and to proceed to try an issue that concerns the estate. That cannot be correct. In virtually any case which goes to plenary hearing multiple questions as to fair procedures or the admission or exclusion of evidence might conceivably be raised. Where there is a genuine issue which has had a real effect on the outcome of a case, the rights of a potential litigant are not lost. Instead, it is for the Official Assignee to assess whether a substantial point has been raised which will have the probable effect of increasing the estate in bankruptcy. If such a prospect is genuine, and fact based, it is for the Official Assignee to consider pursuing it. In the event of disagreement, an application can be made to the High Court, as it was made in this case. In so far as it is contended that rights under Article 6(1) of the European Convention on Human Rights will be infringed through some form of denial to “a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law”, those rights remain to be exercised through the sensible filter of the Official Assignee and subject to the direction of the High Court.
30. It is to be noted that in Luordo v. Italy [2003] ECHR 372 a bankrupt in Italy was subject to quite similar disabilities as is BA in this jurisdiction. The decision of the European Court of Human Rights in this regard is of interest. The applicant claimed that the loss of “capacity to take legal proceedings was highly damaging” to him and also asserted a conflict of interest. The answer of the Italian government claimed that such restrictions were necessary in the protection of third party rights, namely creditors. At paragraph 85, the Court noted that Article 6(1) guaranteed the right to institute proceedings in disputes over civil rights and obligations but that this right might be restricted. It was “subject to limitations permitted by implication, in particular where the conditions of admissibility of an appeal are concerned, since by its very nature it calls for regulation by the State, which enjoys a certain margin of appreciation in this regard”; citing Ashingdane v. United Kingdom, judgment of 28th May, 1985. The issue must be whether those limitations “restrict or reduce a person’s access in such a way, or to such an extent, that the very essence of the right is impaired”. Such restrictions, according to the court, should “pursue a legitimate aim” and there should also be “a reasonable relationship of proportionality between the means employed and the aim to be achieved”; citing Levages Prestations Services v. France, judgment of 23rd October, 1996. In that case while the purpose of the restriction was justified, the consequence of unlimited restriction over 14 years was considered disproportionate on the particular facts.
31. Fundamentally, in this case, it should be born in mind that the assertion of wrong sought to be litigated by BA has been subject to independent analysis by the Official Assignee. There is no merit in the point raised and nothing has been urged on this appeal which would cloth it in either substance or with any realistic prospect of success.
Interest of the Official Assignee
32. How the estate is divided up and whether the United States of America has priority is not a matter that is now before this Court. The reality to be faced here is that under the Act of 1988, BA has been declared bankrupt in this jurisdiction. The High Court is entitled only to act on the basis of the legislation conferring authority on the courts of this jurisdiction. As activity in the bankruptcy list has increased since the economic crash of 2008, it has become apparent that citizens of Ireland who are financially pressed have, on occasion, considered the possibility of bringing themselves under the ostensible authority of insolvency regimes in other jurisdictions. This is not the place to comment on any such trend beyond the reiteration of the primacy of the duty of our courts to uphold the laws of Ireland. There is no principle contained in the Act of 1988 whereby it may be said that our courts may simply cede jurisdiction to foreign authority. As to what level of cooperation may be achieved between the United States trustee in bankruptcy and the Official Assignee in Ireland is, in the first instance, a matter for those officials. Ultimately, it is subject to an appropriate ruling by the High Court in the event of any dispute of substance. Their first task is to gather in under their control the estate of the bankrupt. The claim by BA that the Official Assignee has no interest in the estate of this bankrupt because of the prior adjudication in bankruptcy under a foreign legal system has not been demonstrated. Recently, in the appeal entitled In the Matter of Sean Dunne, (a Bankrupt) [2015] IESC 42, the claim was made that the Official Assignee in Ireland had no jurisdiction to deal with the assets of the bankrupt where there had been a prior foreign bankruptcy order. Laffoy J at paragraph 63 commented that:
… there have been a number of recent decisions of the High Court in this jurisdiction which recognise that at common law an inherent jurisdiction exists, deriving from the underlying principle of universality of insolvency proceedings, by virtue of which the courts in this jurisdiction can give recognition to insolvency proceedings in a foreign jurisdiction and act in aid of the court in that jurisdiction: In Re Drumm (a bankrupt) [2010] IEHC 546; Fairfield Sentry Limited (in liquidation) & Anor. v. Citco Bank Nederland and Ors. [2012] 1 IEHC 81; and In Re Mount Capital Fund Limited (in liquidation) & Ors. [2012] 2 I.R. 486. However, if the High Court had jurisdiction to adjudge the Appellant a bankrupt on the petition of the Petitioner, and assuming the Petitioner established compliance with the criteria necessary to give it entitlement to such an order, there is absolutely no basis in law on which the High Court could abstain from exercising its jurisdiction on the ground that, instead of exercising its entitlement, the Petitioner should have attempted to persuade the Chapter 7 Trustee to pursue the order in aid route.
33. On the ultimate issue asserted, that the Official Assignee had no authority to gather in the estate, because the High Court could not make any adjudication in bankruptcy due to the prior foreign bankruptcy, the decision of this Court appears at paragraph 64 of Laffoy J’s judgment:
Emphasising once again that on the Appellant’s application to the High Court to show cause following the making of the adjudication order on the Petitioner’s petition, apart from compliance with the requirements of the Act of 1988 and, in particular, s. 11(1) of that Act and the procedural requirements in relation to service of the petition, the issue for the High Court was, and the issue for this Court on the appeal is, whether under Irish law the High Court has jurisdiction to adjudge a debtor a bankrupt, notwithstanding that he or she has already been adjudged a bankrupt by the court of a foreign jurisdiction, for the reasons set out above I am satisfied that the High Court has such jurisdiction. Accordingly, on the jurisdiction point, I am satisfied that the High Court had jurisdiction, having regard to the circumstances of this case, to entertain and determine in favour of the Petitioner the petition, provided the statutory and procedural requirements were complied with by the Petitioner. That conclusion is not informed in any way by the fact that it was the Appellant who, after the Petitioner had presented its petition to the High Court, voluntarily initiated the Chapter 7 bankruptcy proceedings in the US Bankruptcy Court. Nor is it informed by the conduct of the Chapter 7 proceedings. It is determined solely by what I consider to be the correct application of Irish law.
34. Reading the older cases cited earlier in this judgment and referencing the textbooks of another age calls to mind that controversies that then arose due to the choice by creditors of trustees in bankruptcy who might favour their view. A reading of the report by Mr Justice Budd, twice referenced earlier, may elucidate that many of the reforms of the past were necessitated by scandal and that these, in turn, arose due to the manipulation of the bankruptcy system. In this jurisdiction, we have an official trustee tasked with the independent and fair discharge of the collection and distribution of all of the estate of the bankrupt. He fulfils that task in exemplary fashion. His authority, exercised under that of the High Court, is not to be automatically ceded merely because a foreign power has been persuaded to take up a jurisdiction where it may be that virtually all of the relevant assets in realty lie outside the boundaries of that court system. Were such an alienation of authority possible, the clear risk would be that some systems might be more favourable to debtors than others or even that there might be a system enabling the return of assets to a bankrupt notwithstanding that the estate in bankruptcy is insufficient to meet liabilities. Such possibilities would caution against unthinkingly adopting such a principle. Even so, whether such a principle is positive to such a proposition or not, a matter not for decision today, the duty under the Act of 1988 remains clear: once a person is adjudicated bankrupt in Ireland, the provisions of the legislation are to be followed.
35. It is also correct to record agreement with Laffoy J on the issue of proof. Since BA apparently asserts that the Official Assignee has no standing to bring any application in bankruptcy, the lack of proof as to the effect of the US bankruptcy as a matter of foreign law is also fatal to the argument advanced on his behalf.
Result
36. In the family proceedings BA, as a bankrupt, has claimed to be entitled to challenge orders made by the High Court by appeal to this Court. The grounds upon which any such challenge is proposed to be mounted has been assessed by the Official Assignee in Bankruptcy as unstatable. That decision was challenged by notice of motion before this Court. Solely at issue on this appeal has been the legal standing of BA, as a person who is now a bankrupt, to pursue issues that impact on the value of his estate in bankruptcy. Essentially, in a bankruptcy administration, he seeks to displace the Official Assignee. That cannot happen.
37. It has always been part of the bankruptcy code that upon adjudication in bankruptcy all decisions affecting the estate of the bankrupt transfer from the bankrupt to the trustee in bankruptcy. This long-standing principle is enshrined in section 44(1) of the Bankruptcy Act 1988. Under section 61 of the Act of 1988, decisions as to existing or prospective litigation cease to be those of the bankrupt but, instead, are to be made by the Official Assignee. To this general principle there are limited exceptions whereby a bankrupt may personally pursue damages claims for defamation or for injuries to or assaults on his person and may be personally imprisoned for crimes, for example contempt of court or fraud. This judgment offers no comment as to the source of funding of any such litigation. Central to the case made by BA is that a High Court judgment in family proceedings concluded that some property had been concealed by him at the time of an earlier proceeding between himself and his wife, AA, which concealment was contrary to orders of discovery. The result of that judgment, affirmed on appeal by this Court, was that BA, not then in bankruptcy, had a higher financial liability to his ex-wife AA. That liability came out of his general economic resources. On adjudication in bankruptcy, which came later, it is for the Official Assignee to decide if there is any real and probable prospect of seeking to overturn that High Court judgment and the judgment of this Court on appeal affirming it. By reason of the bankruptcy, the Official Assignee has control over the estate in bankruptcy of BA and has the authority to decide if any such litigation should or should not be pursued. In this instance, the prospect of any benefit to the estate in bankruptcy is characterised by the Official Assignee as unstatable. Nothing on this appeal has demonstrated even the possibility of a contrary view.
38. The preliminary issue should therefore be resolved in favour of the Official Assignee.