Bank of Ireland & Anor -v- O'Donnell & Anor, [2013] IEHC 395 (2013)

Parts:Bank of Ireland & Anor, O'Donnell & Anor
Reporting Judge:Charleton J.
Docket Number:2012 736 P & 2012 737 P
 
FREE EXCERPT

THE HIGH COURT

BANKRUPTCY2012/736P

IN THE MATTER OF A PETITION FOR ADJUDICATION OF BANK OF BANKRUPTCY BY THE GOVERNOR AND COMPANY OF THE BANK OF IRELAND OF IRELAND AGAINST BRIAN O’DONNELL

THE HIGH COURT

BANK OF BANKRUPTCY2012/737P

IN THE MATTER OF THE PETITION FOR ADJUDICATION OF BANK OF BANKRUPTCY BY THE GOVERNOR AND COMPANY OF THE BANK OF IRELAND OF IRELAND AGAINST MARY PATRICIA O’DONNELL

Judgment of Mr. Justice Charleton delivered on the 23rd day of August 2013.

The Bank of Ireland petition to have Brian O’Donnell and Mary Patricia O’Donnell adjudicated bankrupt. The application arises out of a debt by way of borrowing or guarantee of borrowing amounting to €71,575,991.29. This debt is proven. Judgment in that sum was entered by consent of the debtors by Kelly J. on the 12th December, 2011.

There are six questions for determination on the hearing of this petition:

1) is the date for adjudicating the centre of main interest of a debtor the date of presentation of the petition in bankruptcy or is it the date of the hearing of that application;

2) is the centre of main interest of the debtors Ireland or is it England;

3) if the centre of main interest has changed from Ireland to England is it ascertainable by creditors;

4) is the service of the petition in bankruptcy defective;

5) are there defects in the bankruptcy petition;

6) if there are such defects, can these be excused.

Firstly, a concise general background with a chronology of some pertinent dates.

Background

The debtors in these proceedings are husband and wife. Brian O’Donnell is a distinguished solicitor who established his own practice, Brian O’Donnell & Partners, in Dublin in 1999 after practicing in a large Dublin law firm. Mary Patricia O’Donnell is a medical doctor and has a specialisation in psychiatry. In addition to their respective legal and medical careers, the debtors engaged in the business of property investment. They held directorships in a number of companies established for this purpose; including Vico Capital Limited, Avoca Properties Limited, Georgian Corporate Limited, Recess Property Limited and Menlo Property Limited. They also hold shareholdings in companies outside Ireland. In related proceedings by the Bank of Ireland, an issue has arisen as to whether the legal ownership of some of these shareholdings is in trust for their children. The relevant properties are in Dublin, London, Washington and elsewhere. These issues cannot be resolved herein. By investments through these and other commercial entities, as well as personal investments, the debtors apparently acquired a substantial property portfolio. In Ireland, properties at 61/62 Merrion Square, Dublin; 61/62 Fitzwilliam Lane, Dublin and 84 Ailesbury Road, Dublin, were registered in the joint names of the debtors. In or about 1997 the debtors acquired a house called Gorse Hill, Killiney, Co. Dublin, demolished it and built a residence on the site in or about the year 2000 which, the Court was told, was valued at €30m at the height of Ireland’s nationally ruinous property overvaluation. According to the Bank of Ireland, this property was the family home where the debtors lived with their children until the 29th December, 2011. Investment was also made in a country estate called Gortdrishagh House in Oughterard, Co. Galway. It has a small strip of land near or beside it of about 2ha. These properties were, it seems, owned by Vico Limited, an Isle of Man company, and Avoca Properties Limited respectively. Brian O’Donnell also has a 50% interest in a property at Merchants Arch, Wellington Quay, Dublin city and owns a 20% interest in two plots of land at Cratloekeel, Co. Clare.

The debtors’ portfolio also ostensibly included substantial properties in the England, the United States, France, and Sweden. These seem to include: a building at 15 Westferry Circus, Canary Wharf, London, owned by Hibernia (2005) Limited; an office block at 17 Columbus Courtyard, Canary Wharf, London, owned by Fourteen Ninety Two Limited; a house called Bishop’s House at 8 Barton Street, London owned by Vico Barton Limited; the Sanctuary Buildings, Westminster London, owned by Redicent Limited; a château in Courcheval, France called Chalet Hermine, owned by Greystoke SA; a property at 2099 Pennsylvania Avenue, Washington, United States owned by Vico 2099 LLC; and an office block known as the Fatburen Buildings in Stockholm, Sweden owned by Myrtleville AB. Sorting out the shareholdings, as to beneficial or legal interest, is far from easy and the debtors have joined issue with the Bank of Ireland as to the substance of what they or their children in fact have any entitlement to. That is a matter for another day and is not now before this Court.

In order to finance these investments, the debtors borrowed huge sums of money and became heavily indebted to a number of creditors, including the Bank of Ireland. From 2008 to the date of this judgment, residential property in Ireland declined to about one third of its exaggerated value and development land declined to agricultural prices, if rural, or about one twentieth of its value if in urban areas. This much has been obvious from the many cases heard by this Court over the last five years. This overvaluation of property prices left the debtors in severe financial distress. On the 23rd December, 2010 the Bank of Ireland commenced summary proceedings against the debtors seeking judgment for the sum of €69,379,394.87 in respect of unpaid borrowings made to them, or guaranteed by them, in respect of corporate entities. On the second day of the hearing of those proceedings, the 4th March, 2011, a settlement agreement was reached between the Bank of Ireland and the debtors pursuant to which the debtors agreed to judgment being entered against them if they failed to satisfy a number of obligations including complying with a repayment schedule. When, for whatever reason, commitments under that agreement were not in fact met, the Bank of Ireland applied for judgment and this, under the terms of the agreement, was to be on consent. This was entered by Kelly J. on the 12th December, 2011 in the amount of €71,575,991.29 and costs. The Bank of Ireland’s solicitors then wrote to the debtors on the 22nd December, 2011 requesting a statement of affairs. A short time later, on the 29th December, 2011, Brian O’Donnell and Mary Patricia O’Donnell travelled to the United Kingdom by ferry and apparently began to reside at the property at 8 Barton Street, London. It is asserted that on the 6th January, 2012 they met with David Rubin & Partners, Insolvency Practitioners, to discuss filing for bankruptcy in the UK. On the 19th January, 2012 the Bank of Ireland’s solicitors received a letter from London based solicitors Edwin Coe LLP informing them that they had been retained by the debtors and requesting a further six weeks to complete a statement of affairs referable to the judgment debt. The letter stated that David Rubin of David Rubin & Partners had been instructed to complete the relevant statement of affairs. This statement of affairs was sent on the 23rd February, 2012 together with an individual voluntary arrangement proposal for the debtors which was rejected by the Bank of Ireland as entirely unacceptable; apparently due to a proposal contained therein that assets over which the Bank of Ireland had appointed receivers would be returned to the debtors on the basis that they were best placed to realise a return on them.

On the 27th March, 2012, at the hearing before the High Court in Ireland of a motion for examination of the debtors, counsel for the debtors informed the High Court that the couple had presented bankruptcy petitions in London that morning. The motion for examination in the High Court was granted. Cross examination as to the financial affairs of Brian O’Donnell took place on the 17th, 18th, 24th and 25th April and 5th July, 2012. Meanwhile, on the 4th April, 2012 an order for fieri facias in respect of the property at Gortdrishagh House, Oughterard, dated the 2nd April, 2012 was sent to the county registrar for the county of Galway for enforcement. On foot of the seizure of certain goods pursuant to this order by the county registrar, the Bank of Ireland executed a bankruptcy petition in Ireland against Brian O’Donnell on the 25th May, 2012 which was presented to the Examiner’s Office on the 1st June, 2012. A petition in respect of Mary Patricia O’Donnell was presented on the 7th June, 2012. On the 1st June, 2012 the Bank of Ireland had applied to be joined as a party to the UK petitions for the purpose of challenging the assertion that the debtors’ centre of main interest was London. The Bank of Ireland was joined to those London proceedings on the 14th June, 2012. By agreement between the parties, the Irish proceedings were adjourned pending the outcome of the petitions before the bankruptcy division of the High Court in London.

That bankruptcy hearing commenced before Newey J. on the 27th November, 2012 and continued over seven days on the 27th, 28th, 29th, 30th November and 3rd, 4th, 6th December, 2012. Newey J. delivered judgment on the 21st December, 2012 finding that as of the 27th March, 2012, the date on which the petitions were presented in London, the debtors’ centre of main interest was not in England. Notices of appeal were filed on the 11th January, 2013 seeking to appeal the orders of Newey J. of the 21st December, 2012. On the 18th January, 2013 the debtors both filed a notice for review, rescission or variation of Newey J.’s orders of the 21st December pursuant to s.375(1) of the Insolvency Act 1986. This is a kind of reconsideration application. That review was heard on the 5th March, 2013. On the 6th March, Newey J. dismissed the applications on the basis that the debtors had not demonstrated the existence...

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