Killally (a bankrupt) v The Official Assignee

JudgeMr. Justice Clarke
Judgment Date19 December 2014
Neutral Citation[2014] IESC 76
CourtSupreme Court
Docket Number[Appeal No: 273/2014],[S.C. No. 273 of 2014]
Date19 December 2014

In the Matter of Section 85A the Bankruptcy Act, 1988

In the Matter of Gerard Killally, a bankrupt

Gerard Killally, a bankrupt
The Official Assignee

[2014] IESC 76

[Appeal No: 273/2014]


Insolvency – Personal insolvency – Bankruptcy – Theft of assets by bankrupt – Discharge of bankrupt – S 85A Bankruptcy Act 1988

Facts: The appellant had been made bankrupt in 2009. Following the elapse of the period of bankruptcy, the appellant had sought to be discharged. The respondent contended that as the appellant had stolen property which should have been available to the respondent, the Court should extend the statutory period of bankruptcy by virtue of s 85A of the Bankruptcy Act 1988. The High Court had found for the respondent, and the appellant now sought to challenge this decision.

Clarke J, the other Justices agreeing, stated that the case raised two issues. Firstly, the appellant argued that s 85A was not intended to create additional punishment for the bankrupt individual. Secondly, that if this was not the case, then the sanction decided by the High Court was excessive. On the first issue, the Court was satisfied that s 85A did indeed grant standing for the application made by the respondent at first instance. On the evidence before the Court, the Court was further satisfied the sanction decided by the High Court was indeed proportionate.

The appeal was therefore dismissed.

Mr. Justice Clarke
Judgment of Mr. Justice Clarke delivered the 19th December, 2014.

1. Introduction


The bankruptcy regime in this jurisdiction has come under significant scrutiny in recent times, not least because of the fallout from the financial crisis. As a result of the very significant differences between the bankruptcy regimes in Ireland and other relevant jurisdictions, many investigated the possibility of seeking bankruptcy abroad. A bankruptcy tourism developed. In that context, a range of measures were introduced to amend the relevant law. One of those measures was the Personal Insolvency Act, 2012 ("the 2012 Act"). Part 4 of the 2012 Act was commenced by Ministerial order made on the 3rd December, 2013. One of the consequences of the amendments thereby brought about was to reduce the period during which a person was to remain undischarged from bankruptcy. The period had previously been 12 years. Amongst other changes introduced by the 2012 Act, all personal bankruptcies which had been of more than three years duration as of the 3rd December, 2013 were given the benefit of an automatic discharge from bankruptcy six months later (on the 3rd June, 2014) subject to the provisions of s.85A of the Bankruptcy Act, 1988 ("the 1988 Act") which was inserted into that act by s.157 of the 2012 Act.


The appellant ("Mr. Killally") had been adjudged a bankrupt more than three years prior to the 3rd December, 2013 (on the 27th July, 2009) and was, therefore, prima facie entitled to be discharged on the 3rd June of this year. The entitlement, however, to be so discharged is expressly, under s. 85(2) of the 1988 Act, as substituted by the 2012 Act, "subject to section 85A". Section 85A permits a court to specify a later date (not itself later than the eighth anniversary of the original making of an adjudication order in bankruptcy) as the date of discharge.


The respondent ("the Official Assignee") applied to the High Court for an order under s.85A postponing the discharge of Mr. Killally from bankruptcy. The motion seeking that order specified the grounds relied on as being that Mr. Killally had pleaded guilty to certain criminal offences. Those offences arose from the theft of property which should properly have been available to the Official Assignee to be used in dealing with Mr. Killally's estate. The High Court heard the application of the Official Assignee on the 26th May, 2014 and the Court (McGovern J.) ordered that Mr. Killally should not be discharged until the 3rd June, 2015, being one year after the default date by which he would, in the absence of an order of the Court, have been so discharged. Mr. Killally has appealed to this Court against that order. In so appealing, Mr. Killally has raised two issues to which I will now turn.


The Issues


The first issue was one of principle. In substance, Mr. Killally argued that the statutory regime properly understood and interpreted is designed only to allow for a postponement of the discharge of a bankrupt where such a postponement is necessary to enable further inquiries or actions to be made or taken by the Official Assignee in circumstances where it has been established that the bankrupt has not dealt properly with his bankruptcy in accordance with law and, it is said, where such inquiries or actions are necessary to ensure that the bankrupt's estate is properly dealt with. On that basis it was argued that s.85A is not intended to provide an additional punishment or sanction to be applied to a bankrupt for failure to cooperate or disclose but rather is designed to allow the Court to direct that the bankruptcy should continue beyond what might otherwise be its normal length where such extension is necessary, due to a default on the part of the bankrupt, to enable the bankruptcy to be properly conducted and concluded. In like manner, it was argued that the function of the Official Assignee, under s.61 of the 1988 Act, is to ensure that all of the assets of the bankrupt are secured and distributed in accordance with law. Such a function of the Official Assignee was said to be entirely consistent with the conferring on the Official Assignee of a role in applying to the Court for an extension of a bankruptcy to enable that task to be properly brought to a conclusion in circumstances where it had not proved possible to complete the relevant task in the normal or default time by virtue of wrongdoing on the part of the bankrupt. On the other hand, it was said that it is not part of the proper statutory function of the Official Assignee to invite the Court, even in the case of established wrongdoing, to extend the period of bankruptcy simply as a sanction or punishment for that wrongdoing.


The issues which arise under that heading are, therefore, directed to the proper interpretation of the personal bankruptcy code with particular reference to the role of the Official Assignee in seeking, and the Court in directing, an extension of the bankruptcy period. In particular, the issue is concerned with whether the relevant provisions include an entitlement on the part of the Official Assignee to seek, and the Court to direct, such an extension as a sanction for established wrongdoing.


Clearly, if Mr. Killally is correct in his contention under that heading, then it may well be that the Official Assignee had no jurisdiction to seek, and/or the Court had no jurisdiction to direct, an extension of Mr. Killally's bankruptcy unless there were further inquiries which needed to be made which would warrant such an extension. Such an extension could not, if the legislation is to be interpreted in that way, be directed simply because of established wrongdoing whose effects had already been remedied.


However, even if, contrary to those submissions, a general jurisdiction is found to exist to extend a period of bankruptcy in respect of completed and remedied acts of wrongdoing, it is argued on behalf of Mr. Killally that the sanction imposed in this case is disproportionate in circumstances where he has already been the subject of a criminal sanction for the same wrongdoing and where, in those circumstances, it is said that the imposition of an additional sanction would be disproportionate. As the issues which arise under that second question only properly arise in the event that there is jurisdiction in the first place, I turn to the question of jurisdiction.




The starting point has to be to consider the text of both sections 85 and 85A. S.85(2) is in the following terms:-

"(2) Subject to section 85A, a bankruptcy subsisting on the coming into operation of section 157 of the Personal Insolvency Act 2012 where the order of adjudication was made more than 3 years prior to the coming into operation of that section, shall stand discharged 6 months after that day unless the bankruptcy has otherwise been discharged or annulled."


As appears therefrom, s.85(2) is subject to s.85A which, as to the material part, is in the following terms:-

"85A. (1) The Official Assignee, the trustee in bankruptcy or a creditor of the bankrupt may, prior to the discharge of a bankrupt pursuant to section 85, apply to the Court to object to the discharge of a bankrupt from bankruptcy in accordance with section 85 where the Official Assignee, the trustee in bankruptcy or the creditor concerned believes that the bankrupt has—

(a) failed to co-operate with the Official Assignee in the realisation of the assets of the bankrupt, or

(b) hidden from or failed to disclose to the Official Assignee income or assets which could be realised for the benefit of the creditors of the bankrupt.

(2) An application under subsection (1) shall be made on notice to the bankrupt and where made by the trustee in bankruptcy or a creditor, notice shall also be given to the Official Assignee.

(3) Where it appears to the Court that the making of an order pursuant to subsection (4) may be justified, the Court may make an order that the matters complained of by the applicant under subsection (1) be further investigated and pending the making of a determination of the application the bankruptcy shall not stand discharged by virtue of section 85.

(4) Where the court is satisfied that the bankrupt has—

(a) failed to co-operate with the Official Assignee in the realisation of the assets of the bankrupt, or

(b) hidden from or failed to disclose to the...

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