Launceston Property Finance dac v Wright

JurisdictionIreland
JudgeMs. Justice Costello
Judgment Date18 October 2018
Neutral Citation[2018] IEHC 574
CourtHigh Court
Docket Number[2018 No. 5993]
Date18 October 2018

[2018] IEHC 574

THE HIGH COURT

BANKRUPTCY

Costello J.

[2018 No. 5993]

BETWEEN
LAUNCESTON PROPERTY FINANCE DAC
PLAINTIFF
AND
DAVID WRIGHT
DEFENDANTS

Bankruptcy summons – Dismissal – Constitutional rights – Defendant seeking to dismiss bankruptcy summons – Whether pursuing bankruptcy proceedings when the defendant was insolvent violated his constitutional rights

Facts: The plaintiff, Launceston Property Finance dac (the creditor), issued a bankruptcy summons against the defendant, Mr Wright (the debtor), in the sum of €1,742,842.27 on the 23rd April, 2018. The debtor brought an application to the High Court to dismiss the bankruptcy summons dated 3rd May, 2018 pursuant to s. 8(6) of the Bankruptcy Act 1988. The debtor asserted that he was not indebted to the creditor in any sum amounting to more than €20,000. He argued that the receiver could not have been properly appointed over the secured properties by reason of the discrepancy between the two versions of the mortgage which he exhibited to the court. He argued that there were errors in the computation of the interest charged on the loans originally taken out with Anglo Irish Bank Corporation Plc. He claimed that he had not been afforded credit for rent collected by the receiver. He argued that the creditor had produced inconsistent versions of the statement of account and that therefore, by inference, the judgment must be unenforceable as obtained in error or by fraud. He argued that pursuing bankruptcy proceedings when he was insolvent violated his constitutional rights or his rights under Article 6 of the European Convention on Human Rights.

Held by Costello J that the issue of the validity of the security the debtor agreed to grant to his lender when he borrowed the monies the subject of the summary judgment was not an issue which could arise in relation to the validity of the bankruptcy summons. Costello J held that the debtor had not shown that the interest actually charged was other than the rate the bank was contractually entitled to charge. Costello J noted that, in relation to the claim that the debtor had not been afforded credit for rent collected by the receiver, the creditor notified the debtor of the fact that it was crediting him with rent paid by a tenant of one of the secured properties in the sum of €16,400; if that had not been properly credited, it was open to the debtor to dispute the figures relied upon by the creditor and to make this point to the trial judge. Costello J held that it was clear that he did not do so. Costello J noted that, on the debtor’s own case, the difference between the two versions of the statement of account, even if unexplained, amounted to no more than €300.00; it was held by the Supreme Court in Murphy v Bank of Ireland [2014] 1 IR 642 that a bankruptcy summons was valid provided it did not claim a sum greater than that actually owing to the creditor. Costello J held that that the bald assertion by the debtor that he was not indebted to the creditor in any sum amounting to more than €20,000 could not be accepted. Costello J held that, in circumstances where the debtor had been afforded an opportunity to present his case at trial and had been afforded an opportunity to appeal the decision, his constitutional rights and his rights under Article 6 of the European Convention on Human Rights had been vindicated and upheld by the High Court and the Court of Appeal.

Costello J held that she would refuse the application to dismiss the bankruptcy summons.

Application refused.

JUDGMENT of Ms. Justice Costello delivered on the 18th day of October 2018
1

Launceston Property Finance DAC (‘the creditor’) issued a bankruptcy summons against Mr. David Wright (‘the debtor’) in the sum of €1,742,842.27 on the 23rd April, 2018. The debtor brought an application to dismiss the bankruptcy summons dated 3rd May, 2018 pursuant to s. 8 (6) of the Bankruptcy Act, 1988 as amended. This is my decision in respect of the application.

The legal provisions
2

Section 8 (5) and (6) of the Bankruptcy Act, 1988 provides:

‘(5) A debtor served with a bankruptcy summons may apply to the Court in the prescribed manner and within the prescribed time to dismiss the summons.

(6) The Court—

(a) may dismiss the summons with or without costs, and

(b) shall dismiss the summons if satisfied that an issue would arise for trial.’

3

The Supreme Court recently considered the relevant test in Minister for Communications, Energy and Natural Resources v. Wood and Wymes [2017] IESC 16. At pp. 3 and 4 of the judgment of the court delivered by Dunne J. she held:

‘It is mandatory on the Court to dismiss the summons having regard to the provisions of s. 8(6)(b) if an issue arises on the summons. There is no choice in this matter. The summons must be dismissed. That begs the question as to what is an issue that could give rise to the dismissal of a bankruptcy summons. In Minister for Communications v. M.W. McGovern J. described the test to be applied in deciding whether an issue would arise for trial as follows: “…this is a real and substantial issue and which is, at least, arguable and which has some prospect of success.” (at para. 24). In two subsequent decisions of the High Court, I accepted that this was the appropriate approach to be taken in considering whether an issue would arise for trial. ( See Allied Irish Banks plc v Yates [2012] I.E.H.C. 360 at p. 29 and Marketspreads Ltd. v O'Neill and Rice [2014] I.E.H.C. 14 at p. 32.)

Thus, in order for an application to dismiss a bankruptcy summons to succeed, the issue raised by an applicant must be a real and substantial issue. It should not be fanciful or unreal. It may be an issue of fact or law. If the issue raised is an issue of fact it must have some credibility. If, for example, the applicant for an order pursuant to s. 8(6)(b) of the Act of 1988 denies that he owes the money sought in a bankruptcy summons but has already suffered judgment in that amount, then the conclusion that he or she did not owe the money would simply not be credible…’

The judgment continues:

a mere assertion that an issue arises would be insufficient to succeed in an application to dismiss a bankruptcy summons but any evidence of fact which would, if true, arguably give rise to an issue that requires to be litigated outside the bankruptcy proceedings would be sufficient to establish that the bankruptcy summons should be dismissed.’ (emphasis added)

4

The test set out by the Supreme Court is of course binding upon this court and I have applied it in a number of previous applications to dismiss bankruptcy summonses.

The debt

The creditor sued the...

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