Mars Capital Ireland DAC v Hunter

• Jurisdiction: Ireland
• Judge: Ms. Justice Emily Farrell
• Judgment Date: 29 February 2024
• Neutral Citation: [2024] IEHC 118
• Docket Number: Record No.: 2018/ 255 CA
• Court: High Court

Between:

Mars Capital Ireland D.A.C.

Plaintiff

and

James Hunter

Defendant

[2024] IEHC 118

Record No.: 2018/ 255 CA

THE HIGH COURT

CIRCUIT APPEAL

JUDGMENT of Ms. Justice Emily Farrell delivered on 29 ^th February 2024

1 This is an application by Mahon Sweeney Solicitors LLP, the solicitors for the Defendant, for an order under section 3 Legal Practitioners (Ireland) Act 1876 for a declaration that that firm is entitled to a charge over the costs awarded to the Defendant as against Mars Capital Ireland D.A.C. (the predecessor in title to the Plaintiff) by Power J. on 27 ^th January 2020.

2 The parties agree that I should make an Order substituting Mars Capital Finance Ireland D.A.C. as the Plaintiff in these proceedings, and I shall make that Order. Mars Capital Finance Ireland D.A.C. is the successor of Mars Capital Ireland D.A.C.. The original plaintiff in these proceedings was Irish Nationwide Building Society (INBS). A number of orders have been made substituting the plaintiff in these proceedings by reason of the sale of the loan and security, and/or merger of the plaintiff into Mars Capital Finance Ireland D.A.C..

Background and Procedural History

3 It is common case that the Defendant was declared bankrupt in the UK in 2004, which was before the creation and registration of the charge the subject of these proceedings. The INBS opted, as it was entitled to do, to rely on its security rather than abandon it and prove in the Defendant's bankruptcy. The INBS instituted proceedings for possession of the lands secured by the charge on the two folios. It did not name the Trustee in bankruptcy as a defendant. The order sought was a personal one against the Defendant. Similarly, the INBS sought the costs of the proceedings against the Defendant personally, not his Trustee.

4 An order for possession was made in favour of INBS on the 11 ^th January 2010.

5 An application was brought to substitute Mars Capital Ireland D.A.C. for the plaintiff in the proceedings, and for leave to issue execution in respect of the order for possession. The Circuit Court made an order on 12 ^th June 2017 substituting Mars Capital Ireland D.A.C. as plaintiff and the application for leave to issue execution was adjourned to 27 ^th July 2017 and subsequently to 14 ^th February 2018. The Plaintiff did not appear on that date, nor on the subsequent date of 26 ^th June 2018, and the application was struck out on that date.

6 The Plaintiff then appealed that “strike out” to the High Court. On 27 ^th January 2020, Power J. held that there was no decision of the Circuit Court capable of being appealed to the High Court as the Circuit Court had neither heard nor determined an application: [2020] IEHC 192. Therefore, she dismissed the appeal and the costs of the appeal were awarded to the Defendant. An application for a stay on the order for costs was refused by Power J. No application was made to permit the set-off of that costs order as against the previous costs order in favour of the Plaintiff.

7 The sum of €12,000 has been agreed in respect of the Defendant's costs of that appeal.

8 The Plaintiff brought a further application for leave to issue execution. This application was granted by the Circuit Court on 21 ^st October 2021, subject to a stay of six months. That order was appealed to the High Court by the Defendant. That appeal was dismissed by Simons J. on 17 ^th June 2022, with an Order for the costs of the appeal in favour of the Plaintiff, to be adjudicated in default of agreement. No application was made to allow for the set-off of that costs order as against the earlier costs order.

Position of the parties

9 The Defendant's solicitors, Mahon Sweeney Solicitors LLP maintains that they should be entitled to a charge over the costs order despite the Defendant's bankruptcy by reason of having represented the Defendant in the Plaintiff's appeal determined by Power J. on 27 ^th January 2020. They say that the costs order can properly be characterised as “property recovered or preserved” as a result of the appeal, and that it was recovered through the instrumentality of their services.

10 In correspondence, the Plaintiff stated that, in accordance with its asserted right to set-off, it would credit the agreed sum of €12,000 against the full balance of the debt due and owing by the Plaintiff to the Defendant. As I have said, no application had been made for a set-off and the Plaintiff now accepts that it is not entitled to set the costs orders off against the debt or costs orders made in its favour, unless there is an order of the Court to that effect. At paragraph 15 of the first affidavit sworn on behalf of the Plaintiff, it is accepted that the Court has a discretion which may be exercised in favour of the Defendant's solicitor, but the Court was urged not to do so.

11 Counsel for the Plaintiff confirmed that its principal argument remained that it should be allowed a set-off, as the Plaintiff is owed a significantly greater amount of money than the €12,000 due to the Defendant. However, in its second affidavit, the Plaintiff has contended that the court must refuse the relief sought by the Applicant for a different reason, that is the Defendant's status as a bankrupt. The deponent avers at paragraph 12 of her second affidavit that “ the Costs Order sought to be enforced in this application is not vested in the Defendant and is vested in the Defendant's bankruptcy estate”. I note that the deponent relies on the contents of an email from the firm which was appointed as the main insolvency practitioner for the Defendant, rather than any personal expertise in relation to UK Law.

12 The Plaintiff has appropriately withdrawn an initial objection based on the jurisdiction in which the application has been brought. It is clear from RHS Energy Limited v. ES Energy Limited [2019] IECA 146 that it is appropriate to bring the application in the High Court, which is the court that made the order for costs the subject of the application.

13 Another issue was raised by the Plaintiff regarding service of the application on the Defendant, who remains a client of the Applicant firm. An affidavit has been sworn by Sean Mahon, Solicitor of Mahon Sweeney Solicitors LLP, who states that he served the Defendant with a copy of the application and informed him of each adjourned date. I accept the submission made by the Plaintiff that this affidavit of service would not be sufficient for service of a motion by an opposing party, as no evidence of the service by registered post has been exhibited. However, not only is the deponent the Defendant's solicitor, he has clearly averred that he spoke with the Defendant since serving him with the application for the purposes of informing him of the adjourned date. I am satisfied that the Defendant is sufficiently aware of the application.

14 There is no evidence of service on the UK Trustee in Bankruptcy, but it is clear from the second affidavit sworn on behalf of the Plaintiff that the Trustee is aware of this application.

The Bankruptcy of the Defendant

15 As I have said, the Defendant was declared bankrupt in the UK (England and Wales) in 2004. It is not in dispute that the Defendant's bankruptcy in the UK was recognised in the State under Council Regulation 1346/2000 of 29 May 2000 on Insolvency Proceedings. This Regulation was repealed and replaced by Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings (recast).

16 It is submitted on behalf of the Applicant that the costs order is properly acquired after adjudication of bankruptcy and also that they are applying to enforce an “ in rem security interest” in the State. They refer to Article 5(1) of the Regulation of 2000 and section 44 of the Bankruptcy Act, 1988 (the Irish Act) (Article 5(1) of the Regulation of 2000 is recast in the same language in Article 8(1) of the Regulation of 2015). As such, the Applicant submits that the costs order would only vest in the Official Assignee if and when he claimed it: section 44(5) of the 1988 Act.

17 The Plaintiff contends that, as the costs order was made since the withdrawal of the United Kingdom from the EU, UK bankruptcy law is applicable but concedes that there is no evidence of UK law before the Court. Whilst an email from a UK qualified insolvency practitioner has been exhibited, this does not elevate the contents of that...