O.S. (A Bankrupt)

• Jurisdiction: Ireland
• Judge: Ms Justice Baker
• Judgment Date: 05 March 2020
• Neutral Citation: [2020] IECA 71
• Date: 05 March 2020
• Court: Court of Appeal (Ireland)
• Docket Number: Appeal No.: 2017/489 2018/152

IN THE MATTER OF THE BANKRUPTCY ACT 1988-2016 (AS AMENDED)

IN THE MATTER OF O.S.

(A BANKRUPT)

BETWEEN/

O.B.

APPELLANT

- AND -

CHRISTOPHER LEHANE AS OFFICIAL ASSIGNEE

IN BANKRUPTCY IN THE ESTATE OF O.S.

RESPONDENT

[2020] IECA 71

Baker J.

Noonan J.

Power J.

Appeal No.: 2017/489

2017/522

2018/152

THE COURT OF APPEAL

Bankruptcy – Sale of premises – Family home – Applicant seeking to appeal orders made in the bankruptcy of her husband, sanctioning the sale of their principal private residence or family home – Whether the trial judge erred in law in failing to have regard to the provisions of the Family Home Protection Act 1976

Facts: The appellant appealed to the Court of Appeal against orders made in the bankruptcy of her husband (the Bankrupt), sanctioning the sale of their principal private residence or family home. The relevant orders under appeal were as follows: (a) the order of O’Connor J made on 9 October 2017 directing that both the Bankrupt and the appellant allow access to the respondent, Mr Lehane (the Official Assignee), or his agents to the dwelling house at Davidstown, Castledermot, County Kildare, comprised in Folio 38675F of the Register of Freeholders, County of Kildare, for the purpose of obtaining a valuation of the premises; (b) the order of Costello J made on 6 November 2017 directing the Bankrupt and the appellant that they, within twenty-one days of the date of the order or such further period as might be agreed, allow access to the said dwelling house for the purposes of obtaining a valuation thereof; (c) the order of Costello J made on 12 March 2018 following delivery of a reserved written judgment on 21 February 2018 by which she inter alia sanctioned the sale of the premises. Baker J proposed dealing with the third of the three orders, the substantive order by which the sale of the dwelling house was sanctioned by the court pursuant to s. 61 of the Bankruptcy Act 1988, as amended. The appellant appealed the substantial order on eight pleaded grounds: (a) that the trial judge erred in law in failing to have regard to the provisions of the Family Home Protection Act 1976 from which the appellant claimed to have derived rights (grounds no. 1, 2, 3, 4, 5); (b) that the trial judge failed to afford the appellant her rights to reside in the dwelling house, as this was her “family home” and entitled to protection under the Constitution (grounds 1, 2, 3, 4, and 6); (c) that the trial judge erred in her consideration of the registration of Danske Bank as owner of a charge under burden 5 on the Folio (grounds 2,5,6,7 and 8). The Official Assignee fully defended the appeal and argued that, as a matter of statute, he had standing under statute to bring an application under s. 61(4) of the Bankruptcy Act seeking an order for the sanction of the sale of the family home. Because he was registered as owner of the dwelling house as was apparent from the Folio, he argued that, whilst Danske Bank was the petitioning creditor, the rights of the Official Assignee do not derive from any interest of Danske Bank. He also argued that the 1976 Act did not impact on the interest of the Official Assignee and that there had been no denial of the rights of the spouse of the Bankrupt in the course of the hearing or in the judgment of the High Court.

Held by Baker J that the appellant failed on all the grounds of appeal advanced.

Baker J held that the appeal would be dismissed.

Appeal dismissed.

JUDGMENT of Ms Justice Baker delivered on the 5th day of March, 2020

1 O.B. has appealed orders made in the bankruptcy of her husband, O.S. (“the Bankrupt”), sanctioning the sale of their principal private residence or family home.

2 The relevant orders under appeal are as follows:

(a) the order of O'Connor J. made on 9 October 2017 directing that both the Bankrupt and the appellant allow access to the Official Assignee or his agents to the dwelling house at Davidstown, Castledermot, County Kildare, comprised in Folio 38675F of the Register of Freeholders, County of Kildare, for the purpose of obtaining a valuation of the premises. The appeal of that order was filed on 27 October 2017 and bears appeal record number 2017/489;

(b) the order of Costello J. made on 6 November 2017 directing the Bankrupt and the appellant that they, within twenty-one days of the date of the order or such further period as might be agreed, allow access to the said dwelling house for the purposes of obtaining a valuation thereof. That order is substantively in the same form as the order made on 9 October 2017 by O'Connor J. The appeal of that order was filed on 16 November 2017 and bears appeal record number 2017/522;

(c) the order of Costello J. made on 12 March 2018 following delivery of a reserved written judgment on 21 February 2018 by which she inter alia sanctioned the sale of the premises. The notice of appeal was filed on 18 April 2018 and bears appeal record number 2018/152.

3 For the purpose of this judgment, I propose dealing with the third of the three orders set out above, the substantive order by which the sale of the dwelling house was sanctioned by the court pursuant to s. 61 of the Bankruptcy Act 1988, as amended (“the Bankruptcy Act”).

Bankruptcy

4 The Bankrupt was adjudicated bankrupt on 4 July 2016.

5 As a result of the adjudication, all property of the Bankrupt vested in the Official Assignee pursuant to s. 44 of the Bankruptcy Act:

“(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) - (3) […].

(4) The property to which subsection (1) applies does not include—

(a) property held by the bankrupt in trust for any other person”.

6 At the time of the bankruptcy, the Bankrupt was registered as sole owner of the dwelling house and lands comprised in Folio 38675F, County Kildare, and the Folio shows that he became registered as full owner on 15 August 2002. Christopher Lehane, the Official Assignee in bankruptcy, is shown as registered on 27 September 2016, and it is safe to assume that his registration as owner was made pursuant to the statutory provisions and following the adjudication in bankruptcy.

7 Certain facts are not in dispute. The appellant resides in the dwelling house with three young children. She was not, at the time of the High Court hearing, but asserts that she is now separated from the Bankrupt to whom she is married since 2009. The couple have small children. The appellant herself is not a bankrupt nor was she a borrower from Danske Bank the petitioning creditor or to any other relevant creditor. She never created any security over the dwelling house and, save for the judgment mortgage of Danske Bank, the property is unencumbered.

8 The appellant describes herself as a homemaker and says that she does not have gainful employment outside of the home. She claims to have a beneficial interest in the dwelling house in which she and her husband resided with their children until the matters later here explained. She commenced proceedings against her husband on 12 May 2015 in the High Court, record number 2015/3633 P, seeking a declaration that she is entitled to a 50% interest in the premises. At the date of the hearing of the motion before Costello J. and at the date of the hearing of the appeal those proceedings have not progressed further than the institution of a plenary summons. The pleadings were not exhibited or otherwise made available at the hearing of the appeal.

9 Registered burdens appear on the Folio, including a lis pendens registered on 26 May 2015 on account of the proceedings of the appellant.

10 The appellant represented herself before Costello J. or on appeal, and the Bankrupt took no part in the proceedings. Three affidavits from her comprised her evidence for the purposes of the hearing of the motion dated 20 June 2017 by which the Official Assignee sought an order pursuant to s. 6(4) of the Bankruptcy Act to sanction the sale of the dwelling house and ancillary orders seeking possession for the purpose of facilitating the sale, directions in regarding to the sale, and an order seeking access for the purpose of a valuation. The motion also sought consequential orders including an order for the taking of accounts and enquires as to encumbrances and priorities.

The statutory provisions

11 Section 61 of the Bankruptcy Act 1988 in its material parts provides as follows:

“61 (1) This section applies to every bankruptcy matter and vesting arrangement.

…

(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 the 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 subsection (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 disposition 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.”

The judgment...