Ennis Property Finance DAC/Pepper Finance Corporation (Ireland) DAC v Patrick McLaughlin

• Jurisdiction: Ireland
• Judge: Mr. Justice Robert Haughton
• Judgment Date: 03 November 2021
• Neutral Citation: [2021] IECA 292
• Court: Court of Appeal (Ireland)
• Docket Number: Court of Appeal Record Number: 2021/49

In the Matter for a Petition for Adjudication of Bankruptcy of Patrick McLaughlin

Between/

Ennis Property Finance DAC/Pepper Finance Corporation (Ireland) DAC

Petitioner/Respondent

and

Patrick McLaughlin

Respondent/Appellant

[2021] IECA 292

Noonan J.

Haughton J.

Murray J.

Court of Appeal Record Number: 2021/49

[Bankruptcy Number: 4573]

THE COURT OF APPEAL

Bankruptcy – Protective certificate – Acknowledgement of debt – Appellant seeking to dismiss the bankruptcy summons and the order adjudicating the appellant a bankrupt – Whether the trial judge was entitled to have regard to a protective certificate as an acknowledgement of debt

Facts: The respondent/appellant, Mr McLaughlin, appealed to the Court of Appeal from orders of the High Court (Humphreys J) spoken on 11 February 2021 and confirmed in a written judgment delivered on 5 March 2021. The appeal was limited to the orders made dismissing the appellant’s application to dismiss the Bankruptcy Summons, and the order dated 11 February 2021 adjudicating the appellant a bankrupt. The appeal raised the issue as to whether the trial judge was entitled to have regard to a Protective Certificate (PC) issued by the Circuit Court under the Personal Insolvency Act 2012 (as amended) as an acknowledgement of debt for the purposes of the bankruptcy proceedings.

Held by Haughton J that, in circumstances where the PC was produced by or on behalf of the appellant, and relied upon by him to his advantage in the High Court, and to the disadvantage of the petitioner/respondent, Pepper Finance Corporation (Ireland) DAC, the appellant was thereafter estopped from pursuing any argument, whether in the High Court or before the Court of Appeal, to the effect that the contents of the PC could not be relied upon by the respondent as an acknowledgment and record of accepted debt. Haughton J held that the trial judge was entitled to rely on the PC and the admission by the appellant of debt in the Prescribed Financial Statement, such that it was no longer open to him to deny that liability. Haughton J held that there was ample evidence before the trial judge from which he could conclude that the Bankruptcy Summons was valid and effective, and a sound basis on which to adjudicate the appellant bankrupt.

Haughton J dismissed the appeal and affirmed the orders of the High Court dismissing the appellant’s application to dismiss the Bankruptcy Summons, and the adjudication of the appellant as a bankrupt. Haughton J proposed that the respondent be entitled to its costs of the appeal.

Appeal dismissed.

JUDGMENT of Mr. Justice Robert Haughton delivered on the 3rd day of November 2021

Introduction

1 This is an appeal from orders of the High Court (Humphreys J.) spoken on 11 February 2021 and confirmed in a written judgment delivered on 5 March 2021. As the Notice of Appeal states, the appeal is limited to the orders made dismissing the appellant's application to dismiss the Bankruptcy Summons, and the order dated 11 February 2021 adjudicating the appellant a bankrupt.

2 The appeal raises the issue as to whether the trial judge was entitled to have regard to a Protective Certificate (“PC”) issued by the Circuit Court under the Personal Insolvency Act, 2012 (as amended) (“the Act of 2012”) as an acknowledgement of debt for the purposes of the bankruptcy proceedings.

Background

3 The background to these proceedings is that by five separate letters of sanction all dated 7 April, 2008 Bank of Scotland Ireland Limited agreed to advance monies to the appellant and his wife on a joint and several basis. These credit facilities totalled €3,204,011.65, and the appellant and his wife signed and accepted the loan agreements on 13 April, 2008. Pursuant to the said loan agreements funds were advanced to the appellant and his wife, and were drawn down on 8th May, 2008, and attributed to accounts for the dates on which existing facilities had previously expired.

4 The borrowers defaulted on the loan agreements, and on 30 September 2013 the High Court (Birmingham J.) granted judgment against them in the amount of €4,022,734.92 in favour of Bank of Scotland Plc – see Kavanagh v McLaughlin [2013] IEHC 453 unreported, High Court, Birmingham J., (“the judgment proceedings”).

5 The McLaughlins appealed that judgment to the Supreme Court, which dismissed the appeal, and that decision is reported as Kavanagh v McLaughlin [2015] IESC 27. The judgment of Clarke J. at para. 2.2 notes that –

“On the morning of the appeal when the Court assembled, counsel (who had not previously been instructed in the case) appeared on behalf of the McLaughlins and indicated that he felt in some difficulty, by reason of the lateness of his instructions in the case, in being able to adequately present his clients' case”.

The Supreme Court rejected the suggestion that the matter be adjourned.

6 The loan facilities were transferred by Bank of Scotland Plc to Ennis Property Finance DAC (“Ennis”) on 20 April, 2015. The McLaughlins brought counter proceedings against Ennis, entitled Patrick McLaughlin & Roseann McLaughlin v Ennis Property Finance Limited & Tom Kavanagh [2016 9951P] (“the Plenary Proceedings”). A Statement of Claim was not delivered until 10 November, 2020. In these proceedings the McLaughlins challenge the validity of the appointment by Bank of Scotland plc of the second named defendant (Tom Kavanagh, of Deloitte) as receiver and all actions taken by him, including the collection of rent, and the validity of sales undertaken by Ennis of two of the four properties provided by the McLaughlins' as security for the said borrowings. The Plenary Proceedings seek 93 separate reliefs, and the court was advised that there is currently an application pending before the High Court in which the defendants seek to dismiss the Plenary Proceedings.

7 By order dated 11 June 2018 Ennis was substituted into the judgment proceedings in place of Bank of Scotland.

The Bankruptcy proceedings

8 Ennis made statutory demands for the outstanding sum of €2,006,898.01 on 7 August 2018. When those demands were not met, Ennis applied for Bankruptcy Summonses, on foot of an affidavit sworn by Albert Prendiville, a company director, on 25 October, 2018. That affidavit deposes to the judgment for €4,064,138.01 plus costs in the judgment proceedings, and at para. 6 avers that–

“The total amount outstanding on foot of the aforementioned judgment has been reduced by €2,057,240 by virtue of sums recovered by [Ennis] as detailed on the attached schedule, leaving a balance due on foot of the said judgment by you, Patrick McLaughlin, to [Ennis] of €2,006,898.01. In this regard, I beg to refer to a spreadsheet detailing the sums …”

9 On foot of that application the High Court (Pilkington J.) issued two Bankruptcy Summons dated 19 November 2018, one of which is addressed to the appellant, based on a debt of €2,006,898.01. The Particulars of Demand in the Bankruptcy Summons state that Ennis “…is not claiming interest on the said sum notwithstanding its entitlement to same”.

10 The Petition then issued on 18 February 2019, and is verified by the sworn declaration of John Burke, a director of Ennis also dated 18 February 2019. The Petition sets out the debt as follows:-

“3. The aforesaid sum of €2,006,898.01 in respect of which the debtor is indebted to your Petitioner constitutes the judgment sum of €4,064,138.01 less total sums of €2,057,240.00 recovered by your Petitioner though its securities since the date of judgment.”

The Petition indicates that Ennis holds security for payment of the sum namely mortgages over 40a Kerrymount Rise, Foxrock, Dublin 18 and 12 Hawthorn Manor, Blackrock, County Dublin, with estimated values of €750,000 and €615,000 respectively. The Petition then relies on the Bankruptcy Summons issued on 19 November 2018, and its service on the appellant, and at para. 5 states that –

“… Since that date, the Debtor has failed to pay the said sum and the debt has not been secured or compounded, as your Petitioner has been informed and believes.”

The Petition therefore prays that the appellant be adjudged a bankrupt. It is clear from this that the act of bankruptcy relied upon was the failure of the appellant to pay Ennis on foot of the Bankruptcy Summons.

11 The Second Schedule to the Petition sets out particulars of realisations by Ennis of two further properties which were security for the debts. The first of these is 40 Kerrymount Rise, Foxrock, Dublin 18, where the sale closed on 20 February 2017 and the net sale proceeds were €594,789. The second is “Latona” Dalkey Road, Dublin 18, where the sale was closed on 17 November 2016 and the net sales proceeds were €1,462,451. As the schedule demonstrates the combined total of the net sales proceeds from these two sales comes to €2,057,240.00, that is the figure in respect of which credit was given by Ennis against the total amount of the debt for which judgment was given by Birmingham J., and it explains how the balance of €2,006,898.01 is claimed in the Bankruptcy Summons.

12 On 21 December 2018 the appellant issued a Notice of Application to Dismiss Bankruptcy Summons. In the grounding affidavit which he swore on 21 December 2018 he raises issues in relation to service on him of the application for the substitution of Bank of Scotland plc. by Ennis. This was not an argument that appears to have been pursued in the High Court, and is not the subject of any Ground of Appeal.

13 In para. 9 the appellant denies that he is indebted to the Petitioner in the sum of €2,006,898.01 “as indicated or at all”. He then avers, that without prejudice to the foregoing arguments, the sales entered into by the Petitioner “were grossly undervalued”, and that he is arranging valuations.

14 In para. 10 he alleges that Bank of Scotland plc. “hugely overcharged me in relation to my accounts”, and that he is arranging to have...