Official Assignee in Bankruptcy in the Estate of Sean Dunne v Dunne

• Jurisdiction: Ireland
• Judge: Mr. Justice Gerard Hogan
• Judgment Date: 30 January 2018
• Neutral Citation: [2018] IECA 7
• Date: 30 January 2018
• Court: Court of Appeal (Ireland)
• Docket Number: Neutral Citation Number: [2018] IECA 7 Record No. 2016 No. 187

BETWEEN/

CHRISTOPHER LEHANE AS OFFICIAL ASSIGNEE IN BANKRUPTCY

IN THE ESTATE OF SEAN DUNNE

PLAINTFF / RESPONDENT

- AND -

GAYLE DUNNE

DEFENDANT / APPELLANT

[2018] IECA 7

Neutral Citation Number: [2018] IECA 7

Record No. 2016 No. 187

THE COURT OF APPEAL

Fair procedures - Cross-examination - Forum conveniens - Appellant seeking leave to cross-examine counsel for bankruptcy trustee on his affidavit of laws - Whether fair procedures required that appellant's counsel should have the opportunity of cross-examining counsel for bankruptcy trustee on his affidavits of law

Facts: The defendant/appellant, Ms Killilea-Dunne, is the wife of Mr Dunne. Both are Irish citizens and reside in the US. Proceedings were commenced by the plaintiff/respondent, Mr Lehane, the Official Assignee in bankruptcy in the estate of Mr Dunne, in September 2014. He sought, inter alia, a declaration that the transfer of certain shares in an entity known as Mavior from Mr Dunne to Ms Dunne in October 2008 amounted to a fraudulent transfer. The Official Assignee sought a similar declaration in respect of the transfer of ownership of a hotel known as the Lagoon Beach Hotel, in Cape Town, South Africa. The statement of claim filed on the 12th December 2014 recited that the proceedings were brought by the Official Assignee on behalf of the estate and with the support of the Trustee in Bankruptcy in the US, Mr Coan. The Chapter 7 of the US (Federal) Bankruptcy Code Trustee also sought similar relief against Ms Dunne (and several other defendants) in the US courts where it was contended that several transfers made by Mr Dunne to Ms Dunne and then on to certain other parties amounted to fraudulent transfers. By motion dated the 11th March 2015 Ms Dunne sought to have the Irish proceedings struck out or stayed by reason either of the doctrine of forum non conveniens or as an abuse of process. Central to her argument that the US courts were the appropriate forum were, first, the contention that US bankruptcy law had the effect of vesting the assets in the Chapter 7 Bankruptcy Trustee rather than the Official Assignee so that the latter no longer had any title to advance the Irish proceedings and, second, that the Chapter 7 Trustee would not be bound by the outcome of the proceedings, thus giving rise to the possibility that the matter might be re-litigated before the US courts. In the context of the forum conveniens arguments, affidavits of law had been sworn by both Mr Miltenberger on behalf of the Chapter 7 Trustee, and by Mr Ostrow on behalf of Ms Dunne regarding aspects of US bankruptcy law. Ms Dunne then brought a motion pursuant to Ord. 40, r.1 seeking leave to cross-examine Mr Miltenberger on his affidavit of laws. In a judgment delivered on the 19th February 2016 Costello J rejected the argument that Ms Dunne should be allowed to cross-examine Mr Miltenberger. So far as the duplication/ res judicata issue was concerned, Costello J likewise did not consider it necessary to permit the cross-examination of Mr Miltenberger on his affidavits on this issue either. In her second judgment delivered on the 27th July 2016 Costello J rejected Ms Dunne's forum conveniens and abuse of process arguments. Ms Dunne appealed to the Court of Appeal against both decisions.

Held by Hogan J that, having considered Re Dunne [2015] IESC 42, it was manifest that fair procedures required that Ms Dunne's counsel should have the opportunity of cross-examining Mr Miltenberger on his affidavits of law pursuant to Ord. 40, r. 1 if the questions of US law are properly to be determined. Hogan J held that a similar facility must be extended to the Official Assignee in respect of the affidavit of law sworn by Mr Ostrow.

Hogan J held that Ms Dunne's appeal against the decision of Costello J delivered on the 27th February 2016 in respect of the cross-examination issue must be allowed. Hogan J held that the subsequent judgment of Costello J delivered on the 27th July 2016 in respect of the forum conveniens question must be vacated. Hogan J remitted these matters to the High Court so that the forum conveniens issue could be determined afresh.

Appeal allowed.

JUDGMENT of Mr. Justice Gerard Hogan delivered on the 30th day of January 2018

I.

1 The defendant in these proceedings, Ms. Gayle Killilea-Dunne, is the wife of Mr. Seán Dunne. The couple married in 2004 and both are Irish citizens. It would appear that both Mr. Dunne and Ms. Dunne currently reside in the US.

2 Prior to the banking crash of 2008 Mr. Dunne was a major property developer in this State. One immediate effect of the crash was, unfortunately, that his various construction and development companies experienced massive losses, thus triggering - or, at least, potentially triggering - enormous personal liabilities for him in respect of personal guarantees which he had given to various credit institutions in respect of the liabilities of those companies.

3 At some point in 2009 Mr. Dunne left Ireland for Switzerland. He later moved from Switzerland to the US where he settled in Greenwich, Connecticut. On the 29th March 2013 Mr. Dunne filed a voluntary petition for relief under Chapter 7 of the United States (Federal) Bankruptcy Code in the US Bankruptcy Court. On that day, one Richard Coan, was appointed the Chapter 7 Bankruptcy Trustee. Mr. Coan is a partner in the firm of Coan, Lewendon, Gulliver and Miltenberger LLC., a law firm based in New Haven, Connecticut.

4 Another partner in that law firm, Mr. Miltenberger, acts for Mr. Coan in the US bankruptcy proceedings. Mr. Miltenberger has sworn affidavits of law in these proceedings. As we shall see in due course, a central issue which arises in this appeal is whether Ms. Dunne is entitled to an order permitting her to cross-examine Mr. Miltenberger on certain issues of US bankruptcy law which, she contends, arises from affidavits which he filed in these proceedings and which must necessarily be determined as part of her forum conveniens application.

5 I will, of course, return to the issue presently but it is necessary now to return to our overall narrative. On the 12th February 2013 ( i.e., some six weeks prior to the application before the US Bankruptcy Court), one of Mr. Dunne's two major creditors, Ulster Bank Ireland Ltd, applied to the High Court to have Mr. Dunne adjudicated bankrupt. Those proceedings were initially adjourned on a number of occasions because of difficulties with proof of service. The other major creditor is National Asset Loan Management Ltd. ('NALM') which acquired the loans of the various Dunne corporate entities. The total amount of indebtedness is estimated to be in the region of some €700m.

6 Mr. Dunne was ultimately adjudicated a bankrupt by the High Court on the 29th July 2013, i.e., some four months after the bankruptcy filing in the US Bankruptcy Court. The respondent, Mr. Lehane, is the Official Assignee in bankruptcy in the estate of Mr. Dunne. While Mr. Dunne appealed to the Supreme Court against that adjudication, the High Court order was affirmed by the Supreme Court in May 2015: see Re Dunne [2015] IESC 42.

7 The present proceedings were commenced by the Official Assignee in September 2014. He seeks, inter alia, a declaration that the transfer of certain shares in an entity known as Mavior from Sean Dunne to Gayle Dunne in October 2008 amounts to a fraudulent transfer. The Official Assignee seeks a similar declaration in respect of the transfer of ownership of a hotel known as the Lagoon Beach Hotel, in Cape Town, South Africa. The statement of claim filed on the 12th December 2014 recites that the proceedings 'are brought by the Official Assignee on behalf of the estate and with the support of the Trustee in Bankruptcy in the United States, Mr. Richard Coan.'

8 As it happens, however, the Chapter 7 Trustee is also seeking similar relief against Ms. Dunne (and several other defendants) in the US courts in proceedings known as Adversary Complaint 15-5019 where it is contended that several transfers made by Mr. Dunne to Ms. Dunne and then on to certain other parties amount to fraudulent transfers. There is really no dispute between the parties but that these US proceedings substantially overlap with the present Irish proceedings, not least because, as Costello J. found in her judgment, a declaration that the Mavior shares were fraudulently transferred is also sought in these proceedings: see Lehane v. Dunne [2016] IEHC 690. This has given rise to two significant issues. First, what is the effect of US bankruptcy law so far as the Irish proceedings is concerned and, specifically, if the effect of US law is to vest the entire bankruptcy estate in the Chapter 7 Trustee and, then assuming that such an order would be recognized by our courts, does the Official Assignee have any continuing standing to prosecute these present proceedings? Second, even if the Official Assignee has such a standing, does the determination of the Irish proceedings create a res judicata or collateral estoppel such as would bind the Chapter 7 Trustee from re-litigating the matter in the US courts?

9 It should also be observed that Mr. Coan had also commenced proceedings known as Adversary Complaint 15-5020 solely as against Ms. Dunne in respect of the Mavior shares and debt. According to Mr. Miltenberger these proceedings have been voluntarily dismissed in view of the existence of the present proceedings in this jurisdiction. Ms. Dunne's legal expert, Mr. Ostrow, however, has pointed out that this dismissal is on a without prejudice basis, so that by reference to the Federal Rules of Civil Procedure, the Trustee 'can commence a new adversary procedure asserting the same claim.'

II.

10 By motion dated the 11th March 2015 Ms. Dunne brought a motion seeking to have the Irish proceedings struck out or stayed by reason either of the doctrine of forum non...