Re O'Shea, a bankrupt

• Jurisdiction: Ireland
• Judge: Ms. Justice Costello
• Judgment Date: 21 February 2018
• Neutral Citation: [2018] IEHC 181
• Docket Number: No. 3729
• Court: High Court
• Date: 21 February 2018

[2018] IEHC 181

THE HIGH COURT

BANKRUPTCY

Costello J.

No. 3729

IN THE MATTER OF THE BANKRUPTCY ACTS, 1988 TO 2015

IN THE MATTER OF PAUL O'SHEA

Bankruptcy – S. 61 & s.85 A of the Bankruptcy Act 1988, as amended – Judgment mortgage – Postponement of disposition of family home – Non-cooperation with Official Assignee

Facts: In the present application, the Official Assignee issued two motions for seeking an order pursuant to s. 61 of the Bankruptcy Act 1988, as amended, for sanctioning the sale of family home of the bankrupt and an order for the extension of bankruptcy period. The Official Assignee contended that the bankrupt had failed to cooperate with the Official Assignee and the realisation of the assets of bankruptcy.

Ms. Justice Costello granted an order for the sale of the family home of the bankrupt subject to the condition that such a sale should be postponed for a period of one year. The Court took into account the rights of the bankrupt's spouse and young dependent children of the bankrupt while making the said order. The Court adjourned the case with a request that the Official Assignee should deliver an affidavit update in the Court in relation to the progress of the bankruptcy. The Court held that there was a failure of cooperation on the part of the bankrupt with the Official Assignee.

JUDGMENT of Ms. Justice Costello delivered on the 21st day of February 2018

Introduction

1 The Official Assignee issued two motions which were heard together in the bankruptcy of Paul O'Shea ('the bankrupt'). The first motion sought an order pursuant to s. 61 of the Bankruptcy Act 1988, as amended, sanctioning the sale of the family home of the bankrupt and his spouse, Ms. Emer O'Shea situate at Davidstown, Castledermot, Co. Kildare comprised within Folio 38675F of the Register of Freeholders Co. Kildare ('the family home'). The second motion was brought pursuant to s. 85A and sought orders pursuant to subs. (3) that the bankruptcy period of the bankrupt should not stand discharged until after investigation and pending the making of a determination upon the application and an order pursuant to subs. (4) extending the bankruptcy period of the bankrupt to the fifteenth date of the date of adjudication or for such other term as may be deemed appropriate by the court.

Motion seeking the sanction of the sale of the family home

2 The bankrupt was adjudicated bankrupt on the 4th July, 2016. As a consequence of his adjudication all of his property vested in the Official Assignee pursuant to s. 44 of the Bankruptcy Act 1988 as amended. This included the family home which was comprised of within Folio 38675F of the Register of Freeholders Co. Kildare.

3 The bankrupt was registered as the sole owner of the lands comprised in Folio 38675F on 15th August, 2002. On 27th September, 2016 the Official Assignee was registered as the full owner.

4 The bankrupt has not cooperated in any way in the administration of his bankruptcy. He has sworn no statement of affairs nor completed a statement of personal information. As of 6th February, 2018 the Official Assignee was aware of only two creditors of the bankrupt, Kildare County Council claiming the sum of €7,580 and Danske Bank AS, the petitioning creditor who obtained a judgment against the bankrupt on 4th March, 2013 in the sum of €1,296,114.47 and claims to be a creditor for in excess of €1.5 million. It registered a judgment mortgage against the family home but has agreed to release that judgment mortgage. The petitioning creditor has a registered charge on other lands of the bankrupt comprised in Folio 976 of the County of Kildare.

5 The bankrupt took no part in the application. His wife, Ms. Emer O'Shea, was a notice party to the proceedings. She represented herself and swore three affidavits opposing the application of the Official Assignee. She stated that she is a homemaker and the mother of two young children aged 7 and 1. She instituted proceedings entitled 'The High Court Record No. 2015 3633P. between Emer O'Shea, plaintiff and Paul O'Shea, defendant' on 12th May, 2015 seeking a declaration inter alia that she has a 50% interest in the lands comprised in the family home. Her case is that she became involved with the bankrupt and prior to living at what is now the family home she invested all her savings and earnings in renovating a derelict old farm house in the farmyard to make the family home a habitable house. She said that the bankrupt made no contribution towards the renovation or upkeep of the family home. Despite many urgings so to do, she adduced no evidence to support her claim to a propriety interest in the family home and produced no vouching documentation or even bank statements indicating the source or amount of money invested by her.

6 Many of her submissions were directed towards attacking the loan issued by Danske Bank to the bankrupt and the charge of Danske Bank over Folio KE976. On the basis of an allegation that the bankrupt was not indebted to the petitioning creditor, or because the security held by the petitioning creditor was invalid she alleged that the Official Assignee had no standing to bring the proceedings.

7 Danske Bank, the petition in creditor, obtained a judgment from the High Court on 4th March, 2013. The judgment creditor petitioned for the bankruptcy of the bankrupt. By order of the High Court he was adjudicated a bankrupt on 4th July, 2016. The title of the Official Assignee in these proceedings springs from the order of adjudication and s. 44 of the Bankruptcy Act, 1988 as amended. He is registered on the folio as the full owner. His title is not based upon any charge held by Danske Bank and therefore whether or not that charge is void by reason of the provisions of the Family Home Protection Act 1976 as amended does not arise.

8 The notice party says that she is not bankrupt. She is not a debtor. She is an innocent party and the property in question is the family home of herself and her two young children. Sale of the property would be disproportionate in the circumstances as it would render her and her children homeless. Postponement of an order for sale would afford her no assistance for the same reason.

The principles applicable

9 Section 61(4) and (5) of the Bankruptcy Act 1988 provides as follows:

'(4) Notwithstanding any provision to the contrary contained in subsection (3), no disposition of property of a bankrupt, arranging debtor or person dying insolvent, which comprises –

(a) a family home within the meaning of the Family Home Protection Act, 1976, of the bankrupt or bankrupt's spouse, or

(b) a shared home (within the meaning of the Civil Partnership and Certain rights and Obligations of Cohabitants Act 2010) of the bankrupt or the bankrupt's civil partner (within the meaning of that Act),

shall be made without the prior sanction of the court, and any disposition made without such sanction shall be void.

(5) On an application by the Official Assignee under subs. (4) for an order for the disposition of a family home or shared home, the court, notwithstanding anything contained in this or any other enactment shall have power to order postponement of the sale of the family home or shared home, as the case may be, having regard to the interests of the creditors, spouse or civil partner (within the meaning of the Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010), and any dependants, of the bankrupt, arranging debtor or person dying insolvent, as the case may be, as well as to all the circumstances of the case.'

10 The Official Assignee may not dispose of the family home of a bankrupt or of the bankrupt's spouse without obtaining the prior sanction of the court to the disposition. Any disposition made without such sanction shall be void. On an application by the Official Assignee to sanction a disposition of the family home of the bankrupt or the bankrupt's spouse, the court has power to order postponement of the disposition of the family home. It may do so having regard to:

(1) the interest of the creditors,

(2) the spouse of the bankrupt,

(3) any dependents of the bankrupt and

(4) all the circumstances of the case.

In effect the court is asked to balance the interests of the creditors against the interests of the spouse and dependents of the bankrupt.

11 In Rubotham v. Young (unreported, High Court, McCracken J., 23rd May, 1995) McCracken J. accepted that if a discretion is to be exercised in favour of the family of a bankrupt this must only be in exceptional circumstances. In balancing the interests of the creditors on the one hand, and the interests of the spouse and the dependents of the bankrupt on the other hand, and all the other circumstances of the case, he held as follows:

'As far as the creditors are concerned, the bankrupt was adjudicated almost seven years ago, and the creditors have been paid nothing, and will be paid nothing unless and until the family home is sold. Even then, they will not be paid in full, and there will be no funds available to meet any claim they might have in relation to interest to compensate them for the long delay. On the other hand, the spouse and dependents have lived in the house, in reality at the expense of the creditors, for almost seven years, and while at the time of the adjudication, some of the children were minors, they are now all of full age, although two of them are unemployed.'

He held that in effect there had been a postponement of sale of seven years and he postponed the sale for a period of four months to allow the spouse and the adult children residing in the family home a reasonable opportunity of acquiring a new house with her share of the proceeds of sale.

11 In Rubotham v. Duddy (unreported, High Court, Shanley J., 1st May, 1996) the court confirmed that it may only exercise the power to order a postponement of sale when it has had regard...