Criminal Assets Bureau v Kelly

• Jurisdiction: Ireland
• Judge: O'Sullivan J,O'Higgins J.
• Judgment Date: 13 April 2000
• Neutral Citation: [2000] IEHC 113
• Court: High Court
• Docket Number: No. 1998 456 R,No. 423 R/1998
• Date: 13 April 2000

Criminal Assets Bureau v Matthew Kelly

BETWEEN

THE CRIMINAL ASSETS BUREAU

PLAINTIFF

AND

MATTHEW KELLY

DEFENDANT

[1999] JILL-HC 060402

No. 1998 456 R

THE HIGH COURT

Abstract:

Revenue - Inspector of Taxes - Chargeable persons - Constitution - Administration of justice - Practice - Summary judgment - Remission to plenary hearing - Whether bankrupt was a chargeable person - Whether inspector of taxes involved in administration of justice - Whether reliance on certificate or report of inspector of taxes unconstitutional - Whether time limit for appeal of notice of assessment unconstitutional - Whether real or bona fide defence - Whether presence of factual dispute precludes summary disposal of case - Bankruptcy and Insolvency Act 1857 (20 & 21 Vict. c.60), ss 267, 268 - Bankruptcy Act 1988 (No 27), s 44(5) - Taxes Consolidation Act 1997 (No 39), ss 52, 933, 966 - Income Tax Act 1967, s 416(6) - Taxes Consolidation Act 1997 (No 39), ss 933, 966 - Rules of the Superior Courts 1986 (SI No 15 of 1986), Order 37 rule 7 - Bunreacht na hÉireann, 1937 Articles 34, 40.3

The plaintiff instituted proceedings against the defendant seeking payment of unpaid tax liabilities and applied for summary judgment. The defendant sought to have the matter remitted for plenary hearing. The defendant argued that that the presence of factual disputes in the matter precluded the summary disposal of the case. O’Higgins J held that in general the presence of a factual dispute did not preclude the summary disposal of a case. However it seemed that in relation to the vesting of property in the official assignee the defendant had raised issues which should be resolved by way of plenary hearing and accordingly O’Higgins J made an order to this effect.

1 JUDGMENT of O'Higgins J. delivered the 4th day of June 1999.

2 This is a Motion by the Criminal Assets Bureau for summary judgment in the sum of ££2,950,866.12 against the Respondent. The proceedings are brought in the name of the Criminal Assets Bureau pursuant to the provisions of the Criminal Assets Bureau Act, 1996 Order 37 Rule 7 and reads as follows:-

"Upon the hearing of any such Motion by the Court, the Court may give judgment for the relief to which the Plaintiff may appear to be entitled or may dismiss the action or may adjourn the case for plenary hearing as if the proceedings had been originated by plenary summons, with such directions as to pleadings or discovery or settlement of issues or otherwise as may be appropriate, and generally may make such Order for determination of the questions in issue in the Action as may seem just."

3 Counsel for the Applicant is pressing the Court for summary judgment. Counsel for the Respondent submits that the matter should be remitted for plenary hearing. In First National Commercial Bank Plc. v. Anglin (1996) 1 IR page 75, Murphy J. approved the test for granting leave to defend laid down in the Banque de Paris v de Naray (1984) 1 Lloyd's Reports 21 as summarised in the headnote thereto which is contained in his judgment at page 79:-

"The mere assertion in an affidavit in the given situation which was to be the basis of a defence did not, of itself provide leave to defend. The Court had to look at the whole situation to see whether the Defendant had satisfied the Court that there was a fair or reasonable probability of the Defendants having a real or bona fide defence."

4 On the Plaintiff's affidavits and the exhibits referred to therein the Applicants have established a prima facie case. However in the affidavit filed by Mr McGrattan in paragraph 5 he says:-

"The affidavits filed by the Criminal Assets Bureau do not fully set out the sequence of events in this matter. I say that dating as far back as 1997 there were on-going negotiations with the Revenue Commissioners concerning the settlement of Mr Kelly's liability. There has been no proper response to the proposed settlement arrangement based on pound for pound discharge of the Bankrupt's debts. Various offers were initiated by the tax payer and indeed the assessments now purporting to be final and conclusive were raised while the Inspector of Taxes and his colleagues were fully aware of meetings at which a finality of all matters concerned had been concluded with the exception of two matters upon which the Revenue Officials were to return to the tax payer. I say that the representatives of the CAB/Revenue Commissioners intimated to me that while negotiations were ongoing there was no need to appeal these assessments and that they were prepared to allow the tax payer to finalise his affairs with the Revenue Commissioners by negotiation."

5 It is fair to say that this is hotly contested by the Applicants. There is a conflict of evidence which, if resolved in the Respondent's favour, would afford him a possible defence. Mr Forde submits that although there is a provision for a notice to cross-examine in summary proceedings, the very presence of a factual dispute precludes summary disposal of the matter. I do not accept that submission. The provision for notice to cross-examine in my view indicates that the Court may resolve issues of fact in summary proceedings, I reject the submission of Mr Forde that notice of cross-examine is more a means of making it clear that one does not accept the averments in the affidavits of the other side, I also reject the contention that cross-examination is permitted only where the Court is of the view that there is no defence but allows the Defendant to give evidence in order to prevent an injustice by the summary judgment.

6 I accept the Court can deal with factual issues other than by sending the whole case to plenary hearing in the appropriate circumstances.

7 In the case of Prendergast v. Biddle, an unreported judgment of the Supreme Court in 1957, Lavery J. said:-

"The procedure by summary summons is provided in order to enable speedy justice to be done in particular cases where there is either no issue to be tried or the issues involved are simple and capable of being easily determined."

8 Mr Forde also submits that he has an arguable case in law and submits therefore that if that case should go to trial, he argues that it would be unfair for a Court to make a determination of fact in these proceedings when in any event there is going to be a trial. Mr Nesbitt however argues that it is a "stand alone" issue.

9 Mr Forde quotes the White Book and submits that leave to defend should be given where a difficult question of law is raised or where he has a fair and arguable point to make. Nevertheless, if the point is clear and if the Court is satisfied that there is not really an arguable case leave to defend would be refused. The power to give summary judgment under Order 14 is "intended only to apply to cases where there is no reasonable doubt that the Plaintiff is entitled to judgment, and where therefore, it is inexpedient to allow the Defendant to defend for mere purposes of delay", ( Jones v. Stone [1894 AC 122]). The White Book states that as

"a general principle, where a Defendant shows that he has a fair case for defence on reasonable grounds for setting up a defence, or even a fair probability that he has a bona fide defence, he ought to have leave to defend."

10 Mr Forde's legal grounds of defence are as follows:-

Bankruptcy Point

11 Section 52 of the 1997 Act defines a chargeable person as "persons or bodies receiving or entitled to the income in respect of which the tax is charged". He submits that while Mr Kelly physically received the income, he did not legally receive it. He submits that the person receiving the income, to which sub-section 52 means a person is legally entitled to the income, and not a person who merely physically receives it. He submits that although Mr. Kelly physically received the income, it was not legally his and he should not be liable to pay tax on it.

12 Prior to July 1998, when the Bankruptcy Act, 1998 came into force, the after-acquired property of the bankrupt was governed by Section 267 and 268 of the Irish Bankruptcy and Insolvency Act, 1857, Section 267 of the 1857 Act vests in the Assignees for the time being "all the personal estate and effects of a bankrupt present and future wherever the same may be and all property which he may purchase or may come to him (including all that is due or to be due to him)" before such bankrupt has obtained his certificate, while Section 268 vests all his real estate in them.

13 Counsel argued that such profits as may have been generated by Mr Kelly's activities prior to 3rd July, 1998 were not his in any sense as they automatically vested in the Official Assignee. The Plaintiffs argue, however, that notwithstanding the fact that the section appears to be absolute, property did not vest in the Assignees unless they elected to take it. However, it seems to me that the Defendant has raised a fair point for argument and that that matter would have to be decided on the plenary hearing.

14 After July 1998 the position is governed by the Bankruptcy Act, 1998 according to which:

"Property which is acquired by or devolves on a bankrupt before (his) discharge … shall vest in the Official Assignee if and when he claims it."

15 In this case the Official Assignee did claim some property. In those circumstances, it is argued that the Defendant is not a chargeable person as defined by Section 52 of the Taxes Consolidation Act, 1997. It is argued that he is not "a person or body of persons receiving or entitled to the income in respect of which tax … is charged". This does not appear to me to be an arguable point. It is clear that the Defendant received and was entitled to receive the income - the fact that it could later be claimed by the Official Assignee does not seem to me to be relevant.

The Constitutional Arguments.

16 1. Is the inspector...