Danske Bank v O'Shea

• Jurisdiction: Ireland
• Judge: Ms. Justice Costello
• Judgment Date: 19 December 2016
• Neutral Citation: [2016] IEHC 732
• Docket Number: [3729]
• Court: High Court
• Date: 19 December 2016

IN THE MATTER OF A PETITION IN BANKRUPTCY PRESENTED BY DANSKE BANK A.S. TRADING AS DANSKE BANK

IN THE MATTER OF PAUL O'SHEA A BANKRUPT

BETWEEN

DANSKE BANK A/S TRADING AS DANSKE BANK

PETITIONER

AND

PAUL O'SHEA

RESPONDENT

[2016] IEHC 732

Costello J.

[3729]

THE HIGH COURT

BANKRUPTCY

Bankruptcy – Banking and finance – S. 16 of the Bankruptcy Act, 1988 – O. 76, r. 19(1) (a) of the Rules of the Superior Courts 1986 – Show cause application – Compliance with requirements of s. 11(1) of the Bankruptcy Act, 1988

Facts: The respondent/bankrupt had filed the present application pursuant s. 16 of the Bankruptcy Act, 1988 seeking to show cause as why he had been adjudicated bankrupt. The bankrupt argued that since he was in the prison, the bankruptcy summons was not duly served upon him and it was not appropriate to make an ex-tempore judgment in his absence. The petitioner/bank claimed that there was no good cause to file the present application and that the petition for adjudication of bankruptcy was filed as the bankrupt failed to pay the huge amount of debt.

Ms. Justice Costello refused the application filed by the bankrupt. The Court observed that there was compliance with the requirements of o. 76, r. 19(1)(a) of the Rules of the Superior Courts 1986 as the petition for adjudication of bankruptcy contained a statement that showed the nature of debt and that it remained unpaid. The Court was satisfied that the creditor was bonafide trying to recover monies due to it from the respondent. The Court held that the objection concerning ex-tempore ruling of the High Court was a matter to be dealt by way of appeal. The Court found that there had been service of bankruptcy summons to the bankrupt in the prison and he could have brought the application to set aside those summons within prescribed time-limit, which he failed to do so.

JUDGMENT of Ms. Justice Costello delivered on the 19th day of December, 2016

1 On 4th July, 2016, the debtor was adjudicated a bankrupt on foot of the petition presented by the petitioner. The bankrupt says that the order of adjudication was served on him on 13th October, 2016. On 18th October, 2016, he brought an application pursuant to s.16 of the Bankruptcy Act, 1988 seeking to show cause.

2 The order of adjudication was pronounced on 4th July, 2016. The bankrupt accepts that the order of adjudication was served on him on 13th October, 2016. His application to show cause was made on 18th October, 2016. Strictly speaking, therefore, his application was made out of time. No application was made to extend the time pursuant to s.16(1) of the Act of 1988. At the time, the bankrupt did not have the benefit of legal representation and he may have believed that his application was within time. The Court has a discretion to extend the time up to 14 days. In the circumstances I am prepared to extend the time and to accept that it has been brought within the time allowed by the Court which is less than 14 days from the date of service of the order of adjudication.

3 Section 16 of the Act of 1988, as amended, provides as follows: –

‘16.—(1) The bankrupt may, within three days or such extended time not exceeding fourteen days as the Court thinks fit from the service of the copy of the order of adjudication on him, show cause to the Court against the validity of the adjudication.

(2) On an application to show cause under subsection (1) the Court shall, if within such time the bankrupt shows to its satisfaction that any of the requirements of section 11 (1) have not been complied with, annul the adjudication and may, in any other case, dismiss the application or adjourn it on such conditions as the Court thinks fit, having regard to the interests of the bankrupt, his creditors and any persons who might advance further credit to him.’

4 In Harrahill v. Kennedy [2013] IEHC 539 Dunne J., considered the nature of an application to show cause against the validity of the adjudication under s.16. At para 21 it is stated:—

‘Showing cause is, in my view, something other than raising an issue which has to be litigated elsewhere. In ‘Bankruptcy Law and Practice’ (2nd Ed.), Sanfey and Holohan expressed the view at para. 2.102 that ‘the court has to be satisfied that it is just and equitable to annul the adjudication.’ That seems to me to be a helpful approach to adopt in cases where the application to show cause against the validity of the adjudication arises in circumstances other than a failure to comply with the criteria set out in section 11(1)…

The test under s. 16(2) is, as I have said, slightly different [to that in s. 8(6)(b)] and I am satisfied that apart from a failure to comply with the criteria set out in s.11(1) the court can annul the adjudication if satisfied that it is just and equitable having regard to the interests of the bankrupt, his creditors and any persons who might advance further credit to him. Raising an issue that could be tried elsewhere does not seem to me to be the correct basis upon which to consider an application under section 16(2).

5 Thus if the bankrupt establishes that there was a failure to satisfy the requirements of s.11(1) of the Act of 1988, then the court shall annul the adjudication. If not, then the court must consider whether it would be just and equitable so to do having regard to the interests of the bankrupt, his creditors and any persons who might advance further credit to him.

6 Section 11(1) of the Act provides as follows:—

‘11.—(1) A creditor shall be entitled to present a petition for adjudication against a debtor if—

(a) the debt owing by the debtor to the petitioning creditor (or, if two or more creditors join in presenting the petition, the aggregate amount of debts owing to them) amounts to more than €20,000,

(b) the debt is a liquidated sum,

(c) the act of bankruptcy on which the petition is founded has occurred within three months before the presentation of the petition, and

(d) the debtor (whether a citizen or not) is domiciled in the State or, within 3 years before the date of the presentation of the petition, has ordinarily resided or had a dwelling-house or place of business in the State or has carried on business in the State personally or by means of an agent or manager, or is or within the said period has been a member of a partnership which has carried on business in the State by means of a partner, agent or manager’

7 The petition was presented by Danske Bank A.S. trading as Danske Bank on 12th January, 2016. The petition was signed by its duly authorised officers pursuant to a power of attorney, Mr. Peter Hughes and Mr. Grellan Dunne in the presence of Ms. Rachel Keane, a solicitor of the Legal Department of Danske Bank A.S. The petition was based upon a judgment of the High Court of 4th March, 2013, in the matter entitled ‘The High Court, No.2012/2388S between Danske Bank A/S (trading as National Irish Bank), plaintiff and Paul O'Shea, defendant’. The combined total of the amount outstanding inclusive of interest calculated to 5th January, 2015, was €1,487,016.15.

8 The act of bankruptcy relied upon was the failure to pay the sum referred to in a bankruptcy summons dated 9th March, 2015. The bankruptcy summons was served upon the bankrupt in accordance with an order of substituted service which I made on 12th October, 2015. I ordered that the time for service of the bankruptcy summons be extended for 28 days from 12th October, 2015. I also ordered that:—

‘…service of the bankruptcy summons by delivering a copy thereof and annexed particulars of demand together with a copy of this Order and a copy of the Affidavit for Bankruptcy Summons to the Governor or Deputy Governor of Shelton Abbey Prison and showing the said Governor or Deputy Governor the original of the said Bankruptcy Summons be good and sufficient service of the said summons on Paul O'Shea provided that at the time of such service the said Paul O'Shea is detained in the said prison…’

9 The first argument in relation to the application to show cause concerned service of the bankruptcy summons and whether the debtor had committed an act of bankruptcy. It is not disputed that the bankrupt was detained in prison on 22nd October, 2015, when Mr. Michael Lynchehaun served the Governor of Shelton Abbey Prison in accordance with the terms of the order of 12th October, 2015. The Governor confirmed that the bankrupt was detained in Shelton Abbey Prison at that time.

10 At the hearing of the petition to adjudicate him bankrupt, the debtor raised the issue that he was not served with the summons and, that even if he had been served with the summons, given the fact that he was in prison at the time and so could do nothing about it, this was fundamentally unfair and therefore he should not be considered to have committed an act of bankruptcy.

11 On that occasion, I noted that the debtor averred that he had not been served with the summons and he gave no explanation as to why he did not move to have the summons set aside following his release. I accepted that there had been compliance with the terms of the order. Thus he was deemed to have been duly served with the bankruptcy summons. This matter has been ruled upon previously by me.

12 In relation to the question of his inability to pay the sum demanded on the summons within the 14 days allowed, I held that this is a matter set out in the legislation and not a matter for the discretion of the court. It is a matter for the legislature to amend the legislation if it sees fit. I ruled that an act of bankruptcy had occurred in accordance with the Bankruptcy Act, 1988, as amended.

13 In the hearing before me on the application to show...