Ennis Property Finance Designated Activity Company v Carney

• Jurisdiction: Ireland
• Judge: Ms. Justice Irvine
• Judgment Date: 20 February 2019
• Neutral Citation: [2019] IECA 71
• Docket Number: Record Number: 2018/346
• Court: Court of Appeal (Ireland)
• Date: 20 February 2019

BETWEEN/

ENNIS PROPERTY FINANCE DESIGNATED ACTIVITY COMPANY

PETITIONER/RESPONDENT

- AND -

DOMINIC CARNEY

RESPONDENT/APPELLANT

[2019] IECA 71

Irvine J.

Irvine J.

Edwards J.

Baker J.

Record Number: 2018/346

THE COURT OF APPEAL

Bankruptcy summons – Improper motive – Premature proceedings – Appellant seeking to dismiss bankruptcy summons – Whether the respondent commenced the bankruptcy proceedings for an improper motive

Facts: The High Court (Costello J), by judgment and order of the 16th July, 2018, refused the application of the appellant, Mr Carney, to dismiss the bankruptcy summons issued against him on the 22nd May, 2017. Mr Carney appealed to the Court of Appeal against that judgment and order. Mr Carney submitted that the High Court judge ought to have concluded that the respondent, Ennis Property Finance Designated Activity Company, commenced the bankruptcy proceedings for an improper motive, namely to deny him his right to pursue his proceedings against Mr Costelloe, the receiver appointed by Ennis over the assets of Philisview Property Ltd. Mr Carney submitted that the bankruptcy proceedings were premature because bankruptcy is a “nuclear option” and one which should not be deployed until the creditor has exhausted all other remedies. Mr Carney further maintained that the High Court judge erred in law in failing to set aside the bankruptcy summons on the basis that the proceedings would not achieve the objects of the bankruptcy legislation. Mr Carney submitted that the High Court judge erred in law in concluding that there had been proper compliance with the Rules of the Superior Courts. Mr Carney submitted that there was no good reason why the application made by Ennis to extend time and obtain substituted service had not been made the previous Friday, i.e. 16th June, 2017 or indeed any day after the 6th June, 2017 when Ennis’s third effort at personal service failed. Finally, according to Mr Carney, the balance of justice favoured setting aside the bankruptcy summons as he had “way more to lose” than Ennis.

Held by Irvine J that the High Court correctly concluded that Mr Carney had not established any lawful basis which would justify setting aside the bankruptcy summons.

Irvine J held that the appeal would be dismissed.

Appeal dismissed.

JUDGMENT of Ms. Justice Irvine delivered on the 20th day of February 2019

1 This is an appeal brought by Mr. Dominic Carney against the judgment and order of the High Court (Costello J.) of the 16th July, 2018.

2 By her judgment and order, the High Court judge refused Mr. Carney's application to dismiss the bankruptcy summons issued against him on the 22nd May, 2017.

The background facts

3 By guarantee in writing dated the 3rd June, 2005, Mr. Carney guaranteed the debts of a company, Philisview Property Limited (Philisview’) to the extent of €100,000. The beneficiary of that guarantee was Bank of Scotland (Ireland) Limited which had loaned considerable sums to Philisview.

4 In October 2010, Bank of Scotland (Ireland) Limited merged with Bank of Scotland plc and later, by purchase deed dated the 29th November, 2014 and deed of assignment dated the 20th April, 2015, Ennis Property Finance Limited acquired the aforementioned loan and the security provided by Mr. Carney.

5 On the 10th May, 2016, Ennis Property Finance Limited commenced summary summons proceedings against Philisview, Mr. Carney and Mrs. Niamh Carney. Later, Ennis Property Finance Limited changed its name to Ennis Property Finance Designated Activity Company (‘Ennis’). The title to the proceedings was amended to reflect that change on the 14th November, 2016. On the 27th February, 2017, Ennis obtained judgment against Mr. Carney for the sum of €100,000 on foot of the aforementioned guarantee.

6 On the 22nd May, 2017, Ennis issued the within bankruptcy summons.

7 On the 31st May, 2017, Mr. Carney, having failed to appeal the judgment granted against him on the 27th February, 2017 within the time provided by the Rules of the Superior Courts (‘RSC’), applied to the Court of Appeal to extend the time within which he might do so. He was unsuccessful in that application in circumstances where the Court concluded that he had not demonstrated any arguable ground of appeal.

8 On the 19th June, 2017, Ennis applied ex parte to the High Court seeking an extension of time for service of the bankruptcy summons and also for an order for substituted service. That application was supported by an affidavit sworn on the 16th June, 2017 by Ms. Jennifer Clarke, solicitor and partner with the firm of Messrs. L.K. Shields solicitors. In her affidavit she stated that a number of attempts had been made to serve Mr. Carney with the bankruptcy summons at his address at 23A, Dunlocha Cottages, Blackrock, Cork, but that these had proved unsuccessful. She further stated that she was satisfied that Mr. Carney was seeking to evade service to frustrate Ennis pursuing its outstanding debt. Ms. Clarke referred to the difficulties experienced in seeking to serve Mr. Carney with documents in other proceedings and she exhibited orders of the Court made in those proceedings and wherein substituted service had been granted by ordinary pre-paid post at the aforementioned address.

9 Accordingly, on Monday the 19th June, 2017, Costello J. granted the 28 day extension of time that had been sought and made an order permitting the bankruptcy summons to be served by ordinary pre-paid post.

10 In response, by application dated 19th July, 2017, Mr. Carney applied to have the petition dismissed. He did so based on his affidavit sworn on 19th July, 2017. The principal issues raised by Mr. Carney in that affidavit may be summarised as follows:-

(i) he wanted to appeal the judgment obtained by Ennis on foot of the guarantee, and he protested that Ennis's solicitors had been aware of that fact when they issued the bankruptcy summons;

(ii) he was entitled to notice of Ennis's application for substituted service, given that he had not consented to the order proposed;

(iii) Ennis was not the beneficiary of the guarantee;

(iv) Ennis had appointed a receiver, Mr. Gearoid Costelloe, over the assets of Philisview and he had failed to realise their value;

(v) he had discharged the guarantee by providing a promissory note to Bank of Scotland Ireland;

(vi) Ennis had not acted with clean hands. It had pursued the bankruptcy proceedings in breach of his constitutional rights in circumstances where it was not the holder in due course of any loan note/agreement or guarantee.

11 It should be stated that what was set out in Mr. Carney's grounding affidavit was expanded upon in written submissions which he filed with the Court in advance of the hearing of his application by Costello J.

12 By her order dated the 16th July, 2018, the High Court judge refused Mr. Carney's application to dismiss the bankruptcy summons. In her judgment she set out the circumstances in which the Court might accede to such an application. In particular, she relied upon the judgment of Dunne J. in The Minister for Communications, Energy and Natural Rescoures v. Wood [2017] IESC 16 and at para. 4 of her judgment summarised the guidance to be found in the leading authorities.

13 Commencing at para. 14 of her judgment the High Court judge dealt sequentially with the issues raised by Mr. Carney for her consideration and concluded, for the reasons therein set forth, that no lawful basis had been made out to support his claimed entitlement to have the bankruptcy summons set aside.

14 Costello J. concluded that many of the arguments raised by Mr. Carney were not open for consideration given that Ennis had obtained judgment on foot of the guarantee and he had no subsisting appeal against that judgment. Thus, both the standing of Ennis to maintain the bankruptcy proceedings and its entitlement to the benefit of the guarantee had finally been determined.

15 The High Court judge also rejected the procedural arguments advanced by Mr. Carney based upon his interpretation of the RSC. She concluded that no irregularity had been established in respect of the order of the Court made on the 19th June, 2017. The High Court judge was satisfied that the application was properly brought in accordance with the provisions of O. 76, r. 14(1) and O. 122, r. 3. Likewise, she rejected the submission made by Mr. Carney that the application made for substituted service had to be made on notice to the person who could not be served. This was not what was required under O. 76, r. 14(1).

16 In the course of her judgment the High Court judge also concluded that there was no merit to Mr. Carney's submission that if he was adjudicated a bankrupt he would be deprived of his property rights under the Constitution because he would then be unable to pursue the receiver for the return of certain chattels which he maintained the receiver was wrongfully withholding. She concluded that the property right relied upon by Mr. Carney was a chose in action that would form part of his estate if adjudicated a bankrupt. It followed that it would be for the official assignee to decide whether or not to pursue the proceedings against the receiver for the benefit of his estate. The normal consequences of adjudication did not, the High Court judge concluded, amount to a depravation of Constitutional or other property rights.

17 Finally, the High Court judge concluded that, as no issue of European law was engaged in the proceedings, there was no basis for any reference to the Court of Justice of the European Union under Art. 267 of the Treaty on the Functioning of the European Union. Likewise, the proceedings before her did not fall within the class of case in respect of which a case stated to the Court of Appeal might be appropriate.

The Appeal

Mr. Carney submissions

18 Mr. Carney submits that the High Court judge ought to have concluded that Ennis...