McFeely v Official Assignee in Bankruptcy

• Jurisdiction: Ireland
• Court: Court of Appeal (Ireland)
• Judge: MR. JUSTICE MICHAEL PEART
• Judgment Date: 02 February 2017
• Neutral Citation: [2017] IECA 21
• Docket Number: Neutral Citation Number: [2017] IECA 21 Record Number: 2016/327
• Date: 02 February 2017

[2017] IECA 21

THE COURT OF APPEAL

Peart J.

Peart J.

Hogan J.

Hedigan J.

Neutral Citation Number: [2017] IECA 21

Record Number: 2016/327

IN THE MATTER OF SECTION 85 OF THE BANKRUPTCY ACT 1988

AS AMENDED

AND IN THE MATTER OF THOMAS MCFEELY,

AN UNDISCHARGED BANKRUPT – 2431

BETWEEN/

THOMAS MCFEELY

APPELLANT

AND

OFFICIAL ASSIGNEE IN BANKRUPTCY

RESPONDENT

Bankruptcy – Extension – Unlawful admission of evidence – Appellant seeking to appeal against an order extending the period of his bankruptcy – Whether trial judge wrongfully admitted evidence that was illegally obtained

Facts: The appellant, Mr McFeely, appealed to the Court of Appeal against an order made by Costello J on the 1st June 2016 in which she extended the period of his bankruptcy until 30th May 2020. In a reserved judgment she stated that she was reducing the maximum period permissible under s. 85A of the of the Bankruptcy Act 1988 very slightly on account of the age of the appellant, who was aged 67 at that time: [2016] IEHC 299. That order was made on foot of an application by the respondent, the Official Assignee, under s. 85(1) of the 1988 Act. In his affidavit grounding the application the Official Assignee stated that the appellant had failed to co-operate with him, or had failed to disclose assets belonging to his estate, or had sought to hide those assets. The appellant argued on this appeal that the trial judge erred in a number of respects: 1) she wrongfully admitted into evidence certain documents which he stated were illegally obtained and removed from the premises of Coalport Building Company Ltd at 1, Holles Street, Dublin 2; 2) by admitting the said materials into evidence she failed to give appropriate and balanced consideration to the need to uphold the integrity of the bankruptcy regime; 3) by admitting the materials she failed to consider the appellant’s personal and property rights derived both from the Constitution and the European Convention on Human Rights, and failed to uphold and vindicate those rights; 4) she applied a disproportionate sanction by failing to properly consider the judgment of Clarke J in Killally (a bankrupt) v The Official Assignee [2014] 4 IR 365 in which a 12 month extension of bankruptcy was ordered, and failed to take account of the fact that for most of the first 12 months following the date of his adjudication, and in breach of a legitimate expectation in this regard the Official Assignee made no contact with the appellant; 5) she failed to consider certain mitigating features such as the alleged misconduct of the Official Assignee (by entering the premises without first obtaining a warrant entitling him to do so), and the age of the appellant; 6) she erred in failing to consider or appreciate that while the wording of s. 85A of the 1988 Act gives a power to the Official Assignee to make an application for an extension of the bankruptcy, it does not mandate that he does so; 7) she erred by considering that part of the failure to co-operate with the Official Assignee was by not providing his home address.

Held by Peart J that the trial judge was correct in concluding that the Official Assignee was entitled to rely, in so far as he did, on the information gained from documents and material seized when he gained entry, albeit unlawfully, to the Holles Street premises. Peart J held that there was ample evidence adduced by the Official Assignee which justified the conclusion for the purposes of the s. 85A application that the appellant failed to comply with his statutory obligations of co-operation under s. 19 of the 1988 Act. Peart J held that the trial judge was correct to conclude that the arguments relating to the reviewability of the Official Assignee’s decision to bring an application under s. 85A for an extension of bankruptcy were unstateable and without authority to support them. Peart J held that the trial judge was justified in ordering the extension of 4 years and 10 months, allowing a small deduction of two years on account of the appellant’s age, given the level of non co-operation established.

Peart J held that he would dismiss the appeal.

Appeal dismissed.

JUDGMENT OF MR. JUSTICE MICHAEL PEART DELIVERED ON THE 2ND DAY OF FEBRUARY 2017

1 To be declared bankrupt is one of the more unfortunate things that can happen over the course of a lifetime. Not only is it perceived to be a blot on one's escutcheon, but it has also certain practical implications. For example, the bankrupt cannot access credit, and neither may he be a director of a limited liability company. On the other hand, bankruptcy can provide an opportunity to begin again, in the sense that the debts owed to existing creditors disappear, after the Official Assignee, in whom the bankrupt's estate will have vested, has realised the assets of the estate, and used the proceeds to settle the debts owing to creditors on a pro rata basis, and usually for much less than full value.

2 This process necessarily takes time. The length of time will depend on the extent to which the bankrupt does or does not cooperate with the Official Assignee in the disclosure of his assets, including the provision of a complete and accurate statement of affairs, and comply generally with the obligations imposed by the statutory scheme upon the bankrupt.

3 Section 85 of the Bankruptcy Act, 1988 as amended (‘the 1988 Act’), provides that a bankruptcy will be automatically discharged after a period of three years from the date on which the bankrupt is declared bankrupt. Once discharged he may once again try to access credit, become a director of a limited liability company, and generally speaking attempt to get going again in business, or otherwise earn a living, should he so wish, freed from the burden of the debts which had earlier overcome him.

4 However, circumstances may evolve during the currency of the bankruptcy which justify that three year period of bankruptcy being extended by up to a further five years under the provisions of s. 85A of the 1988 Act, the relevant provisions of which provide:

‘(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 …

(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 Official Assignee income or assets which could be realised for the benefit of the creditors of the bankrupt,

the Court may where it considers it appropriate to do so, order that in place of the discharge provided for in section 85, the bankruptcy shall stand discharged on such later date, being not later than the 8th anniversary of the date of the making of the adjudication order, as the Court considers appropriate.’

5 If the maximum extension of 5 years is applied, it follows that the entire period of the bankruptcy will have been 8 years in total from the date of adjudication. Given that the appellant was adjudicated bankrupt by order of Dunne J. on the 30th July 2012, his bankruptcy could not be extended beyond 30th July 2020 under these provisions.

6 The present appeal is against an order made by Costello J. on the 1st June 2016 in which she extended the period of bankruptcy until 30th May 2020. In a reserved judgment delivered on that date stated that she was reducing the maximum period permissible under the section very slightly on account of the age of the appellant, who was aged 67 at that time: see Re McFeely, a bankrupt [2016] IEHC 299. That order was made on foot of an application by the Official Assignee under s. 85(1) of the Act of 1988. In his affidavit grounding the application the Official Assignee stated that the appellant had failed to co-operate with him, or had failed to disclose assets belonging to his estate, or had sought to hide those assets.

7 More specifically, the grounds relied upon by the Official Assignee in this regard are set forth in the judgment of Costello J. as follows:

(1) The appellant refused to furnish the Official Assignee with his actual address throughout the period of his bankruptcy;

(2) the appellant failed to disclose his interest in seven apartments as a development referred to as Aras na Cluaine, he failed to hand over documents relating to the seven apartments, and he failed to disclose that the documentation was held by a company which acted as his agent, Coalport Building Company Ltd.; and

(3) the appellant failed to disclose his interest in units 12–16, Old Saw Mills Industrial Estate, Lower Ballymount Road, Dublin 12, he failed to hand over documents relating to those five units, and he failed to disclose that the documentation was held by a company which acted as his agent, Coalport Building Company Ltd.

8 Having considered the affidavit evidence adduced by both the Official Assignee and the appellant, and having considered the legal submissions made by each party, the trial judge reached the following overall conclusion:

‘26. In my judgment there is ample, cogent evidence which establishes clearly that the bankrupt has failed to co-operate with the Official Assignee in relation to the realisation of his assets and has hidden assets from or failed to disclose assets to the Official Assignee in breach of his statutory obligations. This has been...