Danske Bank A/S t/a National Irish Bank v McFadden

• Jurisdiction: Ireland
• Court: High Court
• Judge: Ms. Justice Dunne
• Judgment Date: 21 September 2011
• Neutral Citation: [2011] IEHC 551
• Docket Number: [Bankruptcy No. 2460]
• Date: 21 September 2011

[2011] IEHC 551

THE HIGH COURT

[No. 655 P/2011]

Danske Bank A/S t/a National Irish Bank v McFadden

No Redaction Needed

BANKRUPTCY

IN THE MATTER OF A PETITION OF BANKRUPTCY AGAINST NIALL McFADDEN BY DANSKE BANK A/S TRADING AS NATIONAL IRISH BANK

BETWEEN

DANSKE BANK A/S TRADING AS NATIONAL IRISH BANK

APPLICANT

AND

NIALL McFADDEN

RESPONDENT

INSOLVENCY ACT 1986 S252 (UK)

RSC O.76 r20

RSC O.76 r20(2)

RSC O.124

RSC O.76 r20(1)

COMPANIES ACT 19631963 SCHED 1 TABLE A PART I REGULATIONS FOR MANAGEMENT OF A COMPANY LIMITED BY SHARES NOT BEING A PRIVATE COMPANY REG 115

COMPANIES (CONSOLIDATION) ACT 1908 SCHED 1 TABLE A REGULATIONS FOR MANAGEMENT OF A COMPANY LIMITED BY SHARES REG 76

O MAOILEOIN v OFFICIAL ASSIGNEE 1989 IR 647 1989/3/644

S (OC) (A DEBTOR), IN RE 1904 2 KB 161

DEBTOR (NO 478 OF 1908), IN RE 1908 2 KB 684

COLLIER, EX PARTE DAN RYLANDS LTD, IN RE 64 LT 742 1891 8 MORR 80

MIN FOR COMMUNICATIONS & O'C (M) v W (M) & W (R) 2010 3 IR 1 2009/44/10960 2009 IEHC 413

SHERLOCK (A BANKRUPT), IN RE 1995 2 ILRM 493 1995/12/3310

MURPHY (A BANKRUPT) v BANK OF IRELAND UNREP MCGOVERN 12.4.2011 2011 IEHC 541

BANKRUPTCY ACT 1988 S16

HUSSEY (A BANKRUPT), IN RE UNREP HAMILTON 23.9.1987 1987/6/1762

SOCIETY OF LLOYDS v LOUGHRAN UNREP FINLAY GEOGHEGAN 2.2.2004 (EX TEMPORE)

EEC REG 1346/2000 ART 25(1)

EUROPEAN COMMUNITIES (PERSONAL INSOLVENCY) REGS 2002 SI 334/2002

EEC REG 1346/2000 RECITAL 16

EEC REG 44/2001 ART 32

EEC REG 1346/2000 ART 25

EEC REG 1346/2000 ART 2(A)

EEC REG 1346/2000 ANNEX A

BANKRUPTCY ACT 1988 S87

EEC REG 1346/2000 ART 38

VIRGOS & SCHMIT REPORT ON THE CONVENTION ON INSOLVENCY PROCEEDINGS 3.5.1996 55

VIRGOS & SCHMIT REPORT ON THE CONVENTION ON INSOLVENCY PROCEEDINGS 3.5.1996 158

BANKRUPTCY ACT 1988 S89

SANFEY & HOLOHAN BANKRUPTCY LAW & PRACTICE 2ED 2010 488

VIRGOS & SCHMIT REPORT ON THE CONVENTION ON INSOLVENCY PROCEEDINGS 3.5.1996 PARA 200

VIRGOS & SCHMIT REPORT ON THE CONVENTION ON INSOLVENCY PROCEEDINGS 3.5.1996 PARA 201

VIRGOS & SCHMIT REPORT ON THE CONVENTION ON INSOLVENCY PROCEEDINGS 3.5.1996 PARA 262

EEC REG 1346/2000 ART 3(1)

BANKRUPTCY

Practice and Procedure

Petition on behalf of Danish body corporate - Petition not in compliance with Rules of Superior Courts - Petition not sealed or signed - No obligation on Danish companies to have company seal - Petition executed by authorised attorneys under power of attorney - Petition signed in accordance with applicant's own rules - Whether terms of rule mandatory or descriptive - Penal nature of bankruptcy proceedings - Obligation to comply strictly with requirements of bankruptcy code - Absence of assertion of prejudice - Debt not denied - Whether irregularity should prevent continuation of proceedings - Interim protection order obtained in United Kingdom - Petition in Ireland presented during currency of English order - Order of English High Court discharged before hearing of petition in Ireland - Jurisdiction of High Court - Effect and purpose of order for protection - Meaning of preservation measures for purpose of Insolvency Regulation - Effect and purpose of preservation measures - Whether interim order preservation measure within meaning of Insolvency Regulation - Society of Lloyds v Loughran (Unrep, Finlay Geoghegan J, 2/2/2004) followed - O'Maoileoin v Official Assignee [1989] IR 647; In re OCS [1904] 2 KB 161; In re a Debtor [1908] 2 KB 684; Minister for Communications v W(M) [2009] IEHC 413, [2010] 3 IR 1; In Re Sherlock [1995] 2 ILRM 493 and Murphy v Bank of Ireland [2011] IEHC 541, (Unrep, McGovern J, 12/4/2011) considered - Rules of the Superior Courts 1986 (SI 15/1986), O 76, r 20 and O 124 - European Communities (Personal Insolvency) Regulations 2002 (SI 334/2002) - Bankruptcy Act 1998 (No 27), ss 87 and 88 - Council Regulation (EC) No 1346/2000, recital 16, arts 16, 25.1 and 38 - Council Regulation (EC) No 44/2001, art 32 - Petition allowed to proceed (2011/655P - Dunne J - 21/9/2011) [2011] IEHC 551

Danske Bank A/S trading as National Irish Bank v McFadden

Facts: The respondent received a bankruptcy summons in relation to the sum of €8,901,657.31 with interest claimed by the applicant. The respondent applied to strike out the applicant"s petition on the basis that the bankruptcy petition put before the court had a number of irregularities as it failed to comply with Order 76, Rule 20 of the Rules of the Superior Court specifically the requirement for the petition to have been signed by two directors or a director and company secretary. The applicant stated that their Board of Directors were based in Denmark and they had delegated power of attorney to a Mr Healy and a Mr Gallen to act on their behalf in the Irish branch. The power of attorney permitted them to appoint additional individuals to fulfil that function which they did when they appointed a Mr Lavelle and a Mr Leonard to act on behalf of the company in these proceedings. It was therefore stated that when these two individuals signed the petition, they did so in compliance with Order 76, Rule 20 of the Rules of the Superior Court.

The respondent also questioned the court"s jurisdiction to hear the matter since the adoption of EC No. 1346/2000 (the 'Insolvency Regulations") into Irish law. The respondent had obtained an interim order of protection in the United Kingdom pursuant to s. 252 of the Insolvency Act 1986 and now claimed that this barred the Irish court from adjudicating on the petition since there had already been a ruling made in a foreign jurisdiction. The protection order was in place when the petition was originally brought but expired on the 19 ^th July 2011.

Held by Dunne J that when drafting a bankruptcy petition, it was necessary for it to be accurate due to the fact the Bankruptcy Code was penal in nature. In the present case, Order 76, Rule 20 of the Rules of the Superior Court applied to the applicant"s petition and it was clear that the manner in which it was signed was not in compliance with that set down. There was certainly no explanation advanced by the applicant to explain why two directors could not have signed. However, there didn"t appear to be any prejudice caused to the respondent by this failure therefore the court"s general discretion under Order 124 of the Rules of the Superior Court was used to allow the petition to proceed.

In terms of the second issue advanced, it was held that the key issue to decide was whether the interim order of protection that was gained by the respondent in the United Kingdom could be deemed as a preservation measure as laid down in the Insolvency Regulations. It was clear from these regulations that preservation measures were those that sought to protect the estate of a debtor for the benefit of the creditors. A protection order on the other hand was designed to protect the debtor"s estate from creditors. The fundamental difference between the two meant that the interim order of protection could not be regarded as a preservation measure as laid down in the Insolvency Regulations. The court therefore had jurisdiction to consider the application.

Application to strike out Bankruptcy Petition refused.

1 JUDGMENT of Ms. Justice Dunne delivered the 21st day of September 2011

2 This is an application by Danske Bank trading as National Irish Bank ("the Bank") to have Niall McFadden adjudicated bankrupt in respect of a debt of €8,901,657.31 together with interest thereon. The Bank holds security in the sum of €750,000 in respect of the indebtedness of the debtor. The Act of Bankruptcy relied on is a return of no goods by the Sheriff of the 14 ^th March, 2011 and the petition for bankruptcy was presented on the 1 ^st June, 2011.

3 An affidavit verifying the matters set out in the petition herein was sworn by Michael Leonard on the 31 ^st May, 2011. In that affidavit Mr. Leonard set out details of the judgment obtained by the Bank against the respondent on the 29 ^th July, 2010. There was a stay on the judgment which has since expired.

4 Mr. Leonard describes himself in the verifying affidavit as "joint Attorney and senior Credit Manager" of the Bank. He stated that he was duly authorised to make the affidavit on behalf of the Bank.

5 When this matter first came before the court on the 27 ^th June, 2011, a number of issues were raised on behalf of the respondent. The first of the issues related to the petition itself. It was contended that there were a number of irregularities in respect of the petition and that it did not comply with the Rules of the Superior Courts ("RSC"). An issue was also raised in respect of the respondent's centre of main interest but that issue was not necessary to deal with in the course of the hearing before me. It is an issue that may have to be dealt with at a later stage.

6 The other significant issue raised related to the jurisdiction of this Court to deal with the matter by reason of the adoption into Irish law of EC No. 1346/2000 ("The Insolvency Regulation"). The question that arises relates to the fact that at the time of presentation of the petition, it appears that the respondent had obtained an interim order of protection in the United Kingdom pursuant to s. 252 of the Insolvency Act 1986, which provides, inter alia, that "no bankruptcy petition relating to the respondent may be presented or proceeded with". Accordingly, the second issue that arises is whether this Court can deal with the petition for adjudication of the respondent as a bankrupt when the petition was presented during the currency of the order of the High Court of Justice in the United Kingdom. It is relevant to note that at the time of the hearing before me on the 21 ^st July, 2011, the interim order of protection had come to an end, but it was in force at the date of presentation of the petition, the interim order having been made on the 18th May,...