Re Reilly, a Bankrupt

• Jurisdiction: Ireland
• Judgment Date: 12 December 1942
• Date: 12 December 1942
• Court: Supreme Court

In re Reilly, a Bankrupt

In the Matter of HUGH REILLY, a Bankrupt in England

Supreme Court

Bankruptcy - Adjudication in England - Bankrupt registered owner of land in Éire éire - Effect of English adjudication - Deposit by bankrupt of land certificate by way of equitable mortgage - Certificate deposited after English adjudication - Subsequent order in aid of Irish Bankruptcy Court - Priorities as between Trustee in Bankruptcy (England) and mortgagee - Application to Éire éire of Bankruptcy Act, 1914 - Constitution of the Irish Free State, 1922 - Whether provisions purporting to vest Irish land in Trustee in Bankruptcy (England) are repugnant to Constitution - Construction of statute - Whether "elsewhere" an express reference to Ireland - Irish Bankruptcy and Insolvent Act, 1857 (20 & 21 Vict. c. 60),ss. 268, 269, 410; Bankruptcy (Ir.) Amendment Act, 1872 (35 & 36Vict. c. 58, ss. 70, 71); Bankruptcy Act, 1914 (4 & 5 Geo. 5, c. 59), s. 1, s. 18,sub-s. 1, ss. 53, 121, 122, 167, and s. 169, sub-s. 2; Local Registration of Title (Ir.) Act, 1891 (54 & 55 Vict. c. 66), ss. 34, 36, and s. 81, sub-s. 5;Constitution of the Irish Free State (Saorstat Éireann éireann) Act, 1922 (No. 1 of1922), Sch. 1, Art. 73.

Sect, 18, sub-s. 1, of the Bankruptcy Act, 1914, provides that in certain circumstances a debtor may be adjudicated bankrupt, "and thereupon the property of the bankrupt . . . shall vest in a trustee." Sect. 167 of the same Act defines "property" as including "every description of property, whether real or personal and whether situate in England or elsewhere."Sect. 169, sub-s. 2, of the Act provides that "This Act shall not, except so far as is expressly provided, extend to Scotland or Ireland."

In September, 1940, H. R. was adjudicated a bankrupt by an English County Court. H. R. was then the registered owner of certain lands in Éire éire.In December, 1940, H. R. deposited with the Ulster Bank, Ltd. (who had no notice of the adjudication in bankruptcy) the land certificate in respect of these lands as security for an overdraft. On the 5th June, 1941, H. R. agreed to sell the lands to D. On the 27th June 1941, on the applicationex parte of the Trustee in Bankruptcy (England) an order in aid of the English County Court was made by the High Court in Éire éire, recognising the appointment of the Trustee and declaring that the property of H. R. in Éire éire was vested in him. In October, 1941, the Trustee's title was registered in the Land Registry.

The Ulster Bank applied to the High Court (in Bankruptcy) in Éire éire for an order declaring the amount of H. R.'s overdraft with them to be well charged on his interest in the said lands and for an order confirming the sale of the lands to D. The Trustee in Bankruptcy (England) and the Official Assignee (Ireland) applied for an order 1, confirming the sale of the lands to D. and directing payment of the purchase-money to the Official Assignee, and 2, declaring the deposit by H. R. of the land certificate with the bank to be fraudulent and void and directing the bank to hand over the land certificate to the Official Assignee. These applications were heard together.

Held by Black J. that the bank's application must be refused and the application of the Trustee and the Official Assignee be granted, as s. 18, sub-s. 1, of the Bankruptcy Act 1914, applied to Ireland when passed and was continued in force by Art. 73 of the Constitution of 1922 and Art. 50 of the Constitution of 1937, and by virtue of it the lands in question were, on the adjudication in England, vested in the Trustee in Bankruptcy but subject to the provisions of the Local Registration of Title (Ir.) Act, 1891, and under that Act, although the Trustee in Bankruptcy must be regarded as a transferee"otherwise than for valuable consideration," there was no provision entitling the Bank, an unregistered chargeant, to priority over the Trustee.

The bank appealed to the Supreme Court.

Held by the Supreme Court (Sullivan C.J., Meredith, Geoghegan and O'Byrne JJ.; Murnaghan J. dissenting), that Black J. was correct as to the application of s. 18, sub-s. 1, of the Bankruptcy Act, 1914, to Éire éire, and as to the effect of that sub-section in vesting the lands in question in the Trustee in Bankruptcy subject to the provisions of the Local Registration of Title (Ir.) Act, 1891, Sullivan C.J. holding further, that, as regards that Act, the pre-existing equity of the Trustee must prevail over the equitable charge of the Bank, and accordingly that the decision of Black J. ought to be affirmed; Meredith J. (with whom Geoghegan J. concurred) holding that the unregistered title of the Trustee could not prejudice a bona fide equitable chargeant, deriving title from the registered owner; and, there being no evidence of actual fraud by the bankrupt and the Trustee being, at the date of the mortgage by deposit, in the position of an unregistered volunteer, the bank had priority, and accordingly the decision of Black J. ought to be reversed; O'Byrne J. holding that the Trustee was entitled to a "right"in the registered lands within the meaning of the Local Registration of Title Act and as this "right" was prior to that of the Bank in point of time it could not be postponed to the claim of the Bank, and accordingly that the decision of Black J. ought to be affirmed.

Held by Murnaghan J. that the decision of Black J. ought to be reversed, as s. 18, sub-s. 1, of the Bankruptcy Act, 1914, never had the effect of vesting land in Ireland, on an adjudication in bankruptcy in England, in such a way as to deprive a bona fide holder of a charge, created before any order in aid had been made by the High Court in Ireland, of his rights acquired by such charge, as, ex. gr. by a deposit of the Land Certificate.

Accordingly the Supreme Court (Murnaghan, Meredith and Geoghegan JJ.; Sullivan C.J. and O'Byrne J. dissenting) reversed the decision of Black J. and granted the application of the bank.

Motions on Notice.

The following statement of the facts is taken from the judgment of Black J.:—

The bankrupt, Hugh Reilly, in this case was adjudicated bankrupt in the County Court of Newcastle-on-Tyne, England, on the 17th September, 1940. At that date he was the owner of three lots of land in Éire éire. These lots were:— (a) three farms in respect of which he was registered as owner under the Local Registration of Title (Ir.) Act, 1891, all of which three farms he had purchased before the end of August, 1940; (b) another piece of land which had been assigned to him by deed, dated 25th November, 1939; and (c) a third parcel of land in respect of which at the date of the adjudication he was also registered as owner under the said Act. For convenience I shall refer to these three pieces of land respectively as Lot 1, Lot 2, and Lot 3.

On the 30th December, 1940, the bankrupt, ignoring the English adjudication, lodged the land certificate in respect of Lot 3 with the Ulster Bank, Ltd., by way of equitable deposit as security for an overdraft.

On the 5th of June, 1941, an agreement was entered into for the sale of Lot 3 to one, John H. Duke, for the sum of £600. The purchaser paid a deposit of £150 to the auctioneer, a Mr. O'Rorke, who had sold the land by auction, and this sum of £150 is now in the hands of Mr. O'Rorke.

The balance of the purchase money remains to be paid. I am satisfied by an affidavit filed on behalf of the Ulster Bank that, at the time of the said deposit with them of the said land certificate in respect of Lot 3, the bank had no notice of the bankruptcy.

On the 14th June, 1941, the English County Court, in which the adjudication had taken place, requested this Court to act in its aid in the bankruptcy matter in accordance with the well known procedure provided for by s. 122 of the Bankruptcy Act, 1914 (1) and the corresponding section (s. 71) of the Bankruptcy (Ir.) Amendment Act, 1872 (2).

In accordance with this request, on the 27th June, 1941, an order was made by this Court recognising the appointment of William Sinclair Martin as Trustee of the property of the said bankrupt wherever situate, and declaring that all the property of the said bankrupt, real, chattel real and personal, within the area of Éire éire was vested in the said Trustee, without prejudice as regards the chattels real, to the right of the said Trustee of disclaimer thereof, and further ordering that the officers of the Court, including the Official Assignee, do act in aid and be auxiliary to the Newcastle-on-Tyne County Court in this matter.

Enquiries made by the Official Assignee (Ireland), after the making of the said order in aid (3) on the 27th June, 1941, disclosed the facts above mentioned as to the bankrupt's

Irish property. In the course of these enquiries a claim was made by the Ulster Bank, Ltd., to a charge upon the lands specified in Folio 13719, Co. Leitrim (being the lands hereinbefore described as "Lot 3"), whereof the bankrupt was on the 1st August, 1940, registered as owner in fee simple, subject to a Land Commission annuity of £7 5s. 4d. A claim was also made by George V. Maloney, of Arva, Co. Cavan, solicitor, who had acted as solicitor for the bankrupt in the purchase of the three lots of land above-mentioned and in the sale of Lot 3 to the said John H. Duke, to a lien for his solicitor's costs upon certain documents of title relating to each of the three lots of land. By arrangement these claims were brought before the Court by two motions, which were heard together.

The motion by the Trustee in Bankruptcy and the Official Assignee claimed:—(1) A direction that the lands of the bankrupt, other than Lot 3, should be sold. (2) Confirmation of the sale of Lot 3 to John H. Duke and certain directions as to payment to the Official Assignee of the purchase money. (3) A direction that the Ulster Bank, Ltd., should hand over to the Official Assignee the land certificate and any other documents of title in their...