Quinn & Ors -v- Irish Bank Resolution Corporation Limited & Ors,  IEHC 261 (2012)
|Docket Number:||2011 4336P|
|Party Name:||Quinn & Ors, Irish Bank Resolution Corporation Limited & Ors|
THE HIGH COURT
COMMERCIAL[2011 No. 4336 P.]
CIARA QUINN, COLETTE QUINN, BRENDA QUINN,
AOIFE QUINN, SEÁN QUINN JR. AND PATRICIA QUINN PLAINTIFFSAND
IRISH BANK RESOLUTION CORPORATION LIMITED AND KIERAN WALLACEDEFENDANTS AND
SEÁN QUINN, DARA O’REILLY AND LIAM MCCAFFREYTHIRD PARTIES
JUDGMENT of Mr. Justice Kelly delivered on the 4
day of July, 2012
Does Seán Quinn (Mr. Quinn), the first named third party, who is a bankrupt, have an entitlement to defend these third party proceedings brought against him in circumstances where the Official Assignee in Bankruptcy (the Assignee) has declined to defend them? That is the question that I have to answer.
The plaintiffs in the action are all members of Mr. Quinn’s family (the family).
The first defendant was formerly known as Anglo Irish Bank Corporation (Anglo) and the second defendant (Mr. Wallace) was appointed as share receiver by Anglo on foot of a number of share pledges and charges on 14th April, 2011.
In these proceedings, the family seek a series of declarations of invalidity in respect of charges of shares and personal guarantees made between Anglo and members of the family. The charges and the guarantees were given in respect of borrowings which had been made on a colossal scale. The family also seek declarations of invalidity concerning the appointment of Mr. Wallace as share receiver.
It is not necessary for me to dwell in any detail upon the extremely serious allegations which are made by the family against Anglo in support of their claim for declaratory relief. The allegations have already been synopsised by Charleton J. in a judgment in these proceedings which he delivered on 23rd February, 2012,  IEHC 36. He said:-
“If a series of financial transactions can be called horrific, that epithet would apply to the allegations made as plaintiffs by the Quinns against Anglo and against Seán Quinn.”
Paragraph 74 of the family’s statement of claim pleads as follows:-
“The sole or dominant motivation of Anglo in making these advances was to support and maintain its share price. Anglo senior management, including its chief executive, supported and encouraged the [contracts for difference] position built up in Anglo shares for the said purpose (including the allocation by Anglo of a significant number of Anglo shares as part of a share placing on the 1st February, 2007, proportionate to what Mr David Drumm estimated to be Bazzely’s total exposure to Anglo at that time). The requirements of Anglo in this regard were further motivated by Anglo’s own knowledge that the affairs of the bank were being, and had been, managed in a fashion that paid no, or no adequate, heed to the requirements of corporate governance or the interests of its shareholders. It is the plaintiffs’ case that insufficient, misleading and inaccurate information was being made available to brokers, shareholders and potential investors, some of the details which are set out below.”
On 27th July, 2011, Anglo delivered a defence and counterclaim. Mr. Wallace delivered a defence on the same date. All of the wrongdoing alleged against Anglo is denied and there is a counterclaim against each member of the family.
On 10th October, 2011, I granted Anglo leave to issue and serve third party notices on each of the third parties.
The third party notice served on Mr. Quinn claims an indemnity from him in the following terms:-
“[Anglo] claims against you an indemnity against the plaintiffs’ claims, insofar as same are grounded on an assertion that securities in the form of share charges and personal guarantees that were obtained by the first defendant from the plaintiffs and which are the subject of the proceedings between the plaintiffs and the first defendant were invalid or otherwise unenforceable, on the grounds that same were obtained in circumstances of improvidence, undue influence, unconscionability or lack of autonomy, to such extent as the court shall determine to be just and equitable, on the grounds that any loss and damage as was allegedly sustained by the plaintiffs (all of which is denied) was caused wholly or alternatively was contributed to by reason of your breach of warranty of authority and/or negligent misstatement and/or negligent misrepresentation and/or deceit.”
The statement of claim fleshes out the factual basis upon which this claim is made. But it goes further. In addition to claiming an indemnity it also seeks damages for misrepresentation, breach of warranty of authority, fraud, negligence and conspiracy.
On 6th December, 2011, Mr. Quinn delivered a full defence to this statement of claim.
Meanwhile, Mr. Quinn, on 10th November, 2011, presented a bankruptcy petition to the High Court of Northern Ireland seeking his adjudication as a bankrupt. The petition was heard by the Master in Bankruptcy who acceded to the application. In his petition, Mr. Quinn asserted that although not then a resident of Northern Ireland, his centre of main interest was at Derrylin, Co. Fermanagh.
On 17th November, 2011, Anglo filed an application in the High Court in Northern Ireland to annul the bankruptcy on the basis that that court lacked jurisdiction to open main bankruptcy proceedings under Article 3(1) of EC Regulation 1346/2000. It asserted that the ex parte bankruptcy order had been obtained through misrepresentation and/or non-disclosure.
Anglo’s application came for hearing before Deeny J. who reserved judgment. On 10th January, 2012, that judge, in a comprehensive judgment, acceded to Anglo’s claim and annulled Mr. Quinn’s bankruptcy in Northern Ireland.
Thereafter, Anglo applied to have Mr. Quinn adjudicated a bankrupt in this jurisdiction and succeeded in so doing.
Following adjudication, the Assignee instructed counsel to appear in this litigation and I was informed that it was not the intention of the Assignee to defend Anglo’s claim made against Mr. Quinn in these third party proceedings.
On 22nd February, 2012, Anglo brought a motion before the court seeking directions concerning the hearing of the third party proceedings. In particular, Anglo asked the court what, if any, further steps should be taken in the third party proceedings against Mr. Quinn in circumstances where he had been adjudicated a bankrupt and the Assignee did not intend to defend the proceedings. As an alternative, I was asked to make an order that Mr. Quinn be deemed to admit the validity of and be bound by any judgment and/or decision given in the action and on any question specified in the third party notice. In the further alternative, I was asked that, in the event of Anglo being held liable in respect of all or part of the plaintiff’s claim, that an order be made that Mr. Quinn be deemed to admit liability in respect of the indemnity and contribution and further relief claimed against him in the third party notice and that Anglo be at liberty to proceed by way of a motion for judgment in default against Mr. Quinn.
When this motion first came on for consideration by the court on 27th February, 2012, Mr. Quinn appeared and indicated a desire to argue that he should be permitted to defend Anglo’s third party proceedings. The matter was adjourned to enable him to prepare to argue that proposition. When the application came to hearing, Mr. Quinn was represented on a pro bono basis by senior and junior counsel.
This is my judgment on the question which I identified in the first paragraph of this judgment.
Effect of Adjudication as a Bankrupt
Section 44 of the Bankruptcy Act 1988 (the 1988 Act) is contained in Part III of that Act. That Part is headed “Administration of Property”. The subheading is “Effect of Adjudication on Bankrupt’s Property”. Section 44 provides as follows:-
“(1) Where a person is adjudicated bankrupt, then, subject to the provisions of this Act, all property belonging to that person shall on the date of adjudication vest in the Official Assignee for the benefit of the creditors of the bankrupt.
(2) Subject to the provisions of this Act, the title of the Official Assignee to any property which vests in him by virtue of subsection (1) shall not commence at any date earlier than the date of adjudication.
(3) The property to which subsection (1) applies includes –
(a) all powers vested in the bankrupt which he might legally exercise in relation to any property immediately before the date of adjudication;
(b) all property which was the subject of any conveyance or transfer which sections 57 , 58 and 59 declare void as against the Official Assignee, subject to the rights of any persons which are preserved by those sections.
(4) The property to which subsection (1) applies does not include –
(a) property held by the bankrupt in trust for any other person, or
(b) any sum which vests in the Official Assignee under section 7 (1) (a) of the Auctioneers and House Agents Act, 1967 , or section 30 (i) of the Central Bank Act, 1971 .
(5) Without prejudice to any existing principle or rule of law or equity, established practice or procedure in relation to damages or compensation recovered or recoverable by a bankrupt for personal injury or loss suffered by him, property which is acquired by or devolves on a bankrupt before the discharge or annulment of the adjudication order (in this Act called ‘after-acquired property’) shall vest in the Official Assignee if and when he claims it.”
The word “property” is defined in s. 3 of the 1988 Act, as amended by the European Communities (Personal Insolvency) Regulations 2002, as including things in action. Things in action, of course, include litigation.
These statutory provisions divest a bankrupt of his property automatically upon adjudication by operation of law. The bankrupt no longer maintains any interest in the property.
As is clear from the section, the property vests in the Assignee. What are the Assignee’s powers in respect of the property?
The Assignee’s Powers
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