Sean Dunne (a Bankrupt)

• Jurisdiction: Ireland
• Court: Supreme Court
• Judge: Ms. Justice Laffoy
• Judgment Date: 15 May 2015
• Neutral Citation: [2015] IESC 42
• Docket Number: [Appeal No. 535/2013]
• Date: 15 May 2015

In the Matter of Sean Dunne (A Bankrupt)

[2015] IESC 42

Denham C.J.

Laffoy J.

Charleton J.

[Appeal No. 535/2013]

THE SUPREME COURT

Insolvency – Bankruptcy – Pre-existing overseas proceedings – Whether domestic Courts had jurisdiction – Whether s 11 of Bankruptcy Act 1988 complied with

The appellant had been served with a bankruptcy petition by Ulster Bank Limited. A few weeks later, the appellant had applied for Chapter 7 Bankruptcy in the United States Bankruptcy Court. This had the effect of placing a stay on the existing proceedings. The petitioner was granted permission by the US Court to continue the domestic proceedings notwithstanding the stay, and an adjudication of bankruptcy was made. The appellant now appealed.

Ms Justice Laffoy, the other Justices concurring, stated that the proceedings raised important issues for insolvency law, as the appellant suggested the US Bankruptcy order prevented an adjudication order domestically. Having considered the submissions on the matter, the Court was satisfied that the High Court had sufficient jurisdiction to hear the petition and make an adjudication order provided the statutory requirements of the 1988 Act were complied with. In the appellant”s case, the Court agreed with the High Court that the appellant had been properly served and that the 1988 Act had been complied with.

The appeal would therefore be dismissed.

Judgment of Ms. Justice Laffoy delivered on 15th day of May, 2015

Introduction

1 This appeal raises a fundamental question in relation to the operation of the law on bankruptcy, that is to say, personal insolvency as distinct from corporate insolvency, in this jurisdiction. Although it is disclosed in the Bankruptcy Law Committee Report, a report of a committee under the chairmanship of Budd J., which was established on 23rd August, 1962 and which reported in 1972, which will be referred to as ‘the Budd Report’, that legislation governing bankruptcy in Ireland has been on the statute books since as long ago as 1772, it is very surprising that there is no record of the principal issue addressed on this appeal having been raised and addressed before the courts in Ireland previously. Having said that, it is important to emphasise from the outset the sources of current law on bankruptcy in this jurisdiction. Apart from Council Regulation (E.C.) No. 1346/2000 which, in the case of personal insolvency is transposed in this jurisdiction by the European Communities (Personal Insolvency) Regulations 2002 (S.I. 334 of 2002), the combined effect of which is hereafter referred to as the ‘EU Regulation’, which has no application to the circumstances on this appeal, the main sources are:

(a) the Bankruptcy Act of 1988 as amended (the Act of 1988), which was, as originally enacted, largely based on the recommendations contained in the Budd Report; and

(b) the common law to the extent, insofar as is relevant, which will be considered later.

In particular, unlike the position which prevails in other states, for example, the United States of America and the United Kingdom, the UNCITRAL Model Law on Cross-Border Insolvency has no application in the State.

2 In broad terms, the issues on the appeal arise from the fact that Ulster Bank Ireland Limited (the Petitioner) on 12th February, 2013 presented a petition to the High Court to have Sean Dunne (the Appellant) adjudged bankrupt. Approximately six weeks later, on 29th March, 2013, the Appellant voluntarily filed for Chapter 7 Bankruptcy in the United States Bankruptcy Court, District of Connecticut (the US Bankruptcy Court). The parties to the appeal are the Appellant, as appellant, and the Petitioner, as respondent. The Official Assignee also participated in the appeal to assist the Court. One of the principal creditors of the Petitioner, the National Asset Loan Management Limited (NALM), also participated. Against that background, it is necessary to outline the procedural steps in the proceedings to date in some detail.

Procedural steps

3 The Petitioner's petition, which was filed in the High Court on 12th February, 2013, disclosed that the Appellant is indebted to the Petitioner in the sum of €164,586,493.05 plus continuing interest and costs representing the total outstanding on foot of a judgment of the High Court against the Appellant dated 21st May, 2012, in respect of which debt the Petitioner did not, nor did any person on its behalf, hold any mortgage, charge or lien on the debtor's estate or any part thereof as security for that debt, although it was disclosed that the Petitioner held security in respect of other indebtedness of the Appellant to it. The petition also disclosed that the Appellant had within three months before the presentation of the petition committed an act of bankruptcy, in that an execution order which was sent to the Sheriff of the City of Dublin for execution was returned marked ‘No Goods – Nulla Bona’ and dated 5th December, 2012. The facts set out in the petition were verified by Niall Hurson (Mr. Hurson), a bank official employed by the Petitioner, by affidavit sworn on 12th February, 2013 and endorsed on the petition. By order of the High Court (Dunne J.) dated 12th February, 2013 it was ordered, inter alia, that the Petitioner be at liberty to serve the petition out of the jurisdiction on the Appellant.

4 On the voluntary filing by the Appellant for Chapter 7 Bankruptcy in the US Bankruptcy Court on 29th March, 2013, Richard M. Coan (the Chapter 7 Trustee) was appointed the trustee of the Bankruptcy Estate of the Appellant and an automatic worldwide stay on any further proceedings in relation to the Appellant's estate took effect.

5 While the Petitioner's petition was still pending in the High Court, the Petitioner on 28th May, 2013 filed an amended motion with the US Bankruptcy Court for entry of an order granting limited relief from the automatic stay to permit the Petitioner to take all actions necessary –

(i) to perfect service upon the Appellant, and

(ii) to obtain an order adjudicating the Appellant ‘bankrupt’

in the proceedings pending in the High Court.

In the motion it was asserted as follows:

‘Because this Court has no jurisdiction over assets, creditors, or evidence located in Ireland or elsewhere (or at least no ability to meaningfully exercise any jurisdiction that arguably exists), a parallel bankruptcy case in Ireland (and likely elsewhere) is absolutely critical for the efficient administration of this case.’

It was further asserted as follows:

‘It is worth noting that this Motion does not seek recognition of the Irish Bankruptcy Proceedings, or an order finding that the Irish Bankruptcy Proceedings is the foreign main proceeding or the “primary” bankruptcy proceeding. The parties expect that a comprehensive cross-border protocol will be necessary in this case resolving the jurisdictional and legal interests and conflicts amongst the various locales wherein the [Appellant's] assets and liabilities are located ….’

6 On 31st May, 2013 the Chapter 7 Trustee filed a statement in partial support of the Petitioner's motion for relief from the worldwide stay. In the final paragraph of the statement (at para. 45) the Chapter 7 Trustee's position was summarised as follows:

‘The Trustee believes that an Irish estate representative is necessary. The Trustee has every reason to believe that he will be able to negotiate an ad hoc protocol with the Irish estate representative for approval by this Court and the Irish High Court that will allow for the efficient liquidation of the [d]ebtor's assets and the fair distribution to creditors, wherever located.’

Accordingly, the Chapter 7 Trustee requested that the Court grant the Petitioner's motion for relief from the stay ‘for the limited purpose of allowing the Irish Proceedings to advance to the appointment of an Irish estate representative and the negotiation of an ad hoc protocol for presentation to this Court and the Irish High Court’.

7 After the filing of the Appellant's objection to the motion for relief from the automatic stay, the motion was heard in the US Bankruptcy Court by Judge Shiff on 4th June, 2013. The transcript of the hearing was before the High Court and is before this Court on the appeal. Judge Shiff granted the relief sought by the Petitioner on that day. The order was perfected on 12th June, 2013 and it ordered that the automatic stay was modified –

(a) to permit the Petitioner and/or its successors and assigns to take all actions necessary under Irish law to perfect service upon the Appellant in the ‘Irish Bankruptcy Proceeding’;

(b) to permit parties in interest to continue with the ‘Irish Bankruptcy Proceeding’ and to take all actions necessary in connection with or relating to the Petitioner's application to have the Appellant adjudicated ‘bankrupt’ in the ‘Irish Bankruptcy Proceeding’, with the proviso ‘that nothing in this Order shall deprive this Court of jurisdiction over the [Appellant] or over the property of the bankruptcy estate;

(c) to permit the parties in interest, in the event that the Appellant is adjudicated ‘bankrupt’ in the ‘Irish Bankruptcy Proceeding’, ‘to attend and participate in any proceeding for the nominating and/or voting in respect of the appointment of a Trustee pursuant to s. 110 of the [Act of 1988], as amended, and to take all actions set forth under the laws of Ireland in connection therewith’.

The order specifically provided that –

‘… except as explicitly set forth herein the Automatic Stay shall not be modified or waived, and no party-in-interest in this case shall, except by leave of this Court, take any affirmative action in the Irish Bankruptcy Proceeding that violates the terms of the Automatic Stay.’

8 On 14th June, 2013 the Appellant appealed the order of...