Irish Bank Resolution Corporation Ltd (in special liquidation) v Fitzpatrick

• Jurisdiction: Ireland
• Judge: Ms. Justice Baker
• Judgment Date: 29 November 2017
• Neutral Citation: [2017] IEHC 715
• Docket Number: [2014 No. 4230 P.]
• Court: High Court
• Date: 29 November 2017

BETWEEN

IRISH BANK RESOLUTION CORPORATION LIMITED

(IN SPECIAL LIQUIDATION)

PLAINTIFF

AND

CATRIONA FITZPATRICK

DEFENDANT

[2017] IEHC 715

Baker J.

[2014 No. 4230 P.]

THE HIGH COURT

Practice & Procedure - Banking & Finance - Interest in secured properties - Leave to deliver interrogatories - O.31, r. 2 of the Rules of the Superior Courts - Necessity - Litigation efficiency

Facts: Following the institution of proceedings by the defendant to claim beneficial interests in various assets held in security by the plaintiff, the plaintiff now sought leave to deliver the interrogatories. The defendant refused to answer any of those interrogatories.

Ms. Justice Baker refused to grant leave to the defendant. The Court held that there would not be any litigation efficiency if the plaintiff was allowed to deliver the interrogatories. The Court observed that the case was of complex nature and both the parties would adduce the evidence at trial. The Court found that the interrogatories sought to be delivered related to the defendant's intention at relevant times and such questions were impermissible.

JUDGMENT of Ms. Justice Baker delivered on the 29th day of November, 2017

1 Mrs. Fitzpatrick has made a claim to a beneficial interest in various investment assets held in the sole name of her husband, Sean Fitzpatrick, over which the plaintiff Irish Bank Resolution Corporation ('IBRC') holds security. IBRC seeks declaratory and other relief against Mrs. Fitzpatrick regarding those claims.

2 This judgment is given in the application by IBRC for leave to issue six individual questions by way of interrogatories relating to the claim by Mrs. Fitzpatrick to an interest in the relevant assets, and regarding the dates on which she had or formulated her intention to claim an interest in those assets or when she notified such intention.

3 The case is to be heard by way of the determination of a number of issues set out in an issue paper directed by me following case management hearings. The issue paper relates to some matters arising in other proceedings to be heard in conjunction with the present proceedings bearing record number 2012 No. 5413P commenced by Christopher Lehane, the Official Assignee in bankruptcy against Mrs. Fitzpatrick, her husband, and two of their children; and other proceedings bearing record number 2012 No. 47M commenced by Mrs. Fitzpatrick under s. 36 of the Family Law Act 1995 against her husband and Mr. Lehane.

4 The application for leave to deliver interrogatories is opposed and Mrs. Fitzpatrick has refused to answer any of the interrogatories sought to be directed to her.

The background facts

5 The background to the proceedings is a loan agreement entered into between Anglo Irish Bank ('Anglo'), Mr. Fitzpatrick, Mrs. Fitzpatrick and three of their adult children on 11th February, 2009, by which they borrowed the sum of €87m by way of renewal and restructuring of existing facilities with Anglo.

6 IBRC as successor in title of Anglo asserts that the purpose, or one of the purposes, of the loan agreement was to improve the security position of Anglo, and to provide additional security over then encumbered assets held by Mr. Fitzpatrick in his sole name.

7 The loan agreement provided for the limitation of recourse against Mrs. Fitzpatrick and the three adult children of the couple, such that the recourse of Anglo against those parties was limited to their interest in the asset identified to Anglo and excluding assets held in the sole name of Mrs. Fitzpatrick. IBRC asserts that the factual basis of the agreement, and the intention of the parties, was that the assets in the sole name of Mr. Fitzpatrick were to be made available to meet the obligations of Mr. Fitzpatrick.

8 Mr. Fitzpatrick was adjudicated bankrupt on 12th July, 2010, and has since been discharged.

9 IBRC is the largest secured and unsecured creditor in the bankruptcy.

10 After her husband was adjudicated a bankrupt Mrs. Fitzpatrick asserted a claim to a beneficial interest in nineteen properties and investment funds held in the sole legal title of her husband. That claim is articulated in the proceedings.

The proceedings

11 The statement of claim seeks a declaration that Mrs. Fitzpatrick has no beneficial interest in the assets in her husband's sole name, and that the agreement made between Anglo and Mrs. Fitzpatrick contained an implied term she would not make a claim on the assets, that she is estopped by convention from making the claim as she, her servants or agents, misrepresented to Anglo that the relevant assets were entirely owned by her husband, and a declaration that part of a loan agreement be rescinded on the grounds of mutual or unilateral mistake.

12 By my order made on 3rd March, 2015, ten issues were directed to be tried and subsequent case management directions have provided for the sequential delivery of witness statements and legal submissions to reflect the fact that it is agreed that the burden of proof in the first issues lies on Mrs. Fitzpatrick, and in the remaining issues on IBRC.

13 The first issue, in respect of which Mrs. Fitzpatrick bears the burden, relates to whether Mrs. Fitzpatrick is entitled to a beneficial interest in the assets held in the sole name of her husband based on the presumption of advancement or because the assets were acquired from joint savings or joint borrowings.

14 Issues two to ten, the burden in respect of which lies on IBRC, relate to the meaning of the recourse provisions contained in the loan agreement, whether the loan agreement contained an implied term that Mrs. Fitzpatrick would not make any claim to the assets in the sole name of her husband, whether an estoppel arises, whether the non-recourse provision is void and of no effect by reason of the provisions of s. 59 of the Bankruptcy Act 1988, as amended, or by virtue of s. 10 of the Conveyancing (Ireland) Act 1634, or s. 74(3) of the Land and Conveyancing Law Reform Act 2009.

15 As can be seen, at least some of the issues to be resolved at the hearing concern the knowledge of Mrs. Fitzpatrick of her asserted beneficial title in the assets in her husband's sole name, and the extent of that interest at the time of the loan agreement, and when her husband was adjudicated bankrupt.

The interrogatories

16 The interrogatories sought to be delivered are as follows:-

(i) Was not the defendant aware of her interest in the 'Assets' (as defined in the Appendix hereto) prior to 27th January, 2009?

(ii) Did not the defendant attempt to claim a beneficial interest in the Assets at the date of the representation made by the defendant's advisers, Bernard Somers and Associates on 27th January, 2009?

(iii) Was not the defendant aware of her interest in the Assets prior to 4th February, 2009?

(iv) Did not the defendant attempt to claim a beneficial interest in the Assets at the date of executing the facility letter dated 4th February, 2009?

(v) Did not the defendant intend to claim a beneficial interest in the Assets prior to the adjudication in bankruptcy of Sean Fitzpatrick on 12th July, 2010?

(vi) Had not the defendant advised Sean Fitzpatrick of her intention to claim a beneficial interest in the Assets prior to his adjudication in bankruptcy on 12th July, 2010?

17 The reference to the date of 27th January, 2009 is to the date of the letter from Somers and Associates on behalf of Mr. Fitzpatrick, Mrs. Fitzpatrick, and their three adult children which made a proposal for the amendment of their existing arrangements with Anglo.

18 The reference to the letter bearing the date of 4th February, 2009 is to the facility letter from Anglo containing the terms and conditions by which the then existing facilities were renewed and varied.

The principles governing the grant of leave

19 Save in the case of a claim grounded on fraud or alleged breach of trust, a party may with leave of the court, deliver interrogatories in writing for the examination of the opposite party, relating 'to any matters in question in the cause or matter'. Order 31, Rule 2, provides that leave shall be given only where the interrogatories are 'considered necessary either for disposing fairly of the cause or for saving costs'.

20 A number of judgments of the Superior Courts dealing with the principles that govern the making of an order giving liberty to deliver interrogatories have been referred to in argument. Two judgments of appellate courts bookend these authorities: the first judgment in time being that of the Supreme Court in J&LS Goodbody Limited v. Clyde Shipping Company Limited (Unreported, 9th May, 1967), [1967] JIC 0901, the judgment of Walsh J. The last judgment in time is that of the Court of Appeal in McCabe & Anor v. Irish Life Assurance plc & Anor [2015] IECA 239, [2015] 1 I.R. 346.

21 A number of authorities between 1995 and 2000 explored the parameters of the jurisdiction. In general, the threshold requirement for the granting of leave is that the interrogatories be relevant to the cause or matter, and that they be considered necessary.

22 What is 'necessary' has arguably given rise to some tension in the authorities. The earliest High Court judgment in time, is that of Costello J. in Mercantile Credit Company of Ireland Limited & Anor v. John Heelan & Ors [1994] 2 I.R. 105. There, Costello J. suggested that the use of evidence given in reply to interrogatories 'is an exception which must be justified by some special exigency in the case which, in the interest of doing justice, requires the exception to be allowed'. (at p. 110)

23 Some disagreement occurred in the course of the hearing as to whether the test identified by Costello J. is different from that in the later authorities, or as was argued by counsel for the applicant, there has been a move away from that approach towards that identified in particular in the recent...