SFS Markets Ltd v Fergus Rice

• Jurisdiction: Ireland
• Judge: Ms. Justice Costello
• Judgment Date: 16 January 2015
• Neutral Citation: [2015] IEHC 42
• Judgment citation (vLex): [2015] 1 JIC 1609
• Court: High Court
• Date: 16 January 2015

[2015] IEHC 42

THE HIGH COURT

2506 BANKRUPTCY

SFS Markets Ltd (Formerly Marketspreads Ltd) v Rice

BANKRUPTCY

Approved Judgment

No Redaction Needed

BETWEEN

SFS MARKETS LIMITED (FORMERLY MARKETSPREADS LIMITED)

PETITIONER

AND

FERGUS RICE

DEBTOR

Bankruptcy – s. 14(2) and s. 85C of the Bankruptcy Act 1988 - s. 157 of the Personal Insolvency Act 2012 – Annulment of Adjudication - Appeal

Facts: A debtor brought an application to annul an adjudication of Bankruptcy pursuant to s. 85C of the Bankruptcy Act 1988, as inserted by s. 157 of the Personal Insolvency Act 2012. The petitioner resisted the application on two grounds. Firstly, that the case was more appropriately a matter for appeal because the debtor contended that the trial judge had erred in law. The second ground relates to the equitable jurisdiction of the High Court and is directed towards reversing abuses of process and fraud. The debtor appealed the decision of the first High Court judge that declared him bankrupt on the same grounds that he asked the court to annul the adjudication.

Held by Costello J: The court was asked to annul an order of another High Court judge on the basis that she erred in law by failing to comply with the provisions of s. 14(2) of the Act of 1988. The statutory jurisdiction to annul an adjudication of bankruptcy is exceptional and limited. A debtor has a tight time limit to show cause to set aside an order of adjudication. The court said it would constitute an abuse of process to allow the debtor to base his application to annul an adjudication of bankruptcy on the same grounds used to appeal the decision of the first High Court judge. The debtor was therefore estopped from seeking to annul the adjudication of bankruptcy. The debtor had ample time to consult with a personal insolvency practitioner and prepare a personal insolvency arrangement in advance of the adjudication. The debtor was not allowed to rely on his failure to do this as a basis for an annulment of the adjudication or for an adjournment to advance the evidence required by s. 14(2). The inadequacy of the information provided by the debtor did not deprive the court of jurisdiction to adjudicate on the matter. The court concluded there was no failure on the part of the trial judge to comply with s. 14(2) and no basis upon which to annul the adjudication. The application to annul the adjudication was refused.

1 1. This is an application to annul an adjudication of bankruptcy dated 22 ^nd January, 2014, brought by the debtor pursuant to s. 85C of the Bankruptcy Act 1988, as inserted by s. 157 of the Personal Insolvency Act 2012, and/or the inherent jurisdiction of the court.

Background

2 2. A bankruptcy summons was issued by the judgment creditor, Marketspreads Ltd on the 4 ^th February, 2013, in the sum of €1,351,861.65, being the balance, including interest, due in respect of a consent judgment dated 28 ^th March, 2012, in proceedings entitled Marketspreads Limited v. Fergus Rice Rec. No. 2011/5207S. The bankruptcy summons was served on the debtor on 15 ^th February, 2013. The debtor issued a notice of motion seeking to dismiss the bankruptcy summons. The motion was hotly contested and 11 detailed affidavits were filed including three by the debtor. The motion was heard by Dunne J. on 11 ^th July, 2013. Written submissions were provided and the debtor was represented by solicitor and senior counsel. Dunne J. delivered a written judgment on 15 ^th January, 2014. She reviewed the facts in detail and refused the application to dismiss the bankruptcy summons.

3 3. The creditor had issued a petition to adjudicate the debtor a bankrupt on 2 ^nd May, 2013. The petition had been adjourned pending the determination of the motion to dismiss the bankruptcy summons. The petition was listed for hearing on 15 ^th January, 2014, but was adjourned by the court for one week to the 22 ^nd January, 2014. This was to allow the parties to consider the judgment and to allow the debtor to consider his options and to make any proposals he might wish to make to the petitioner to avoid the petition proceeding.

4 4. On 22 ^nd January, 2014, senior counsel for the debtor applied for an adjournment of the petition pending an appeal of the judgment of Dunne J. in relation to the refusal of the application to dismiss the summons. In the alternative he applied for an adjournment of the petition to 17 ^th February, 2014, to allow the debtor an opportunity to consider his options. The court refused the application to adjourn the petition pending the hearing of an appeal. The court refused an application for an adjournment to allow the debtor further time to consider the options open to him. The court noted that the petition had been before the court for some time. Dunne J. indicated that she was surprised to be told on the morning of 22 ^nd January, 2014, that there was more information which the debtor wished to pursue. The court found the debtor's applications surprising and disturbing and noted that it seemed to involve pursuing points which could and should have been dealt with before. She stated that it appeared that the debtor was not actually engaging with the circumstances in which he found himself and the "other options" alluded to were unrealistic. If she thought something practical could be done with the benefit of an adjournment she would adjourn the matter. There was no reality, however, in what the debtor was talking about and there seemed to be little merit in adjourning the matter. The court and indeed senior counsel for the debtor, accepted that the petitioner's proofs were in order and so she adjudicated him a bankrupt.

5 5. The petition had been before the court since 2 ^nd May, 2013. The debtor accepted in his affidavit of 28 ^th November, 2014, at para. 21 that he " had been advised by counsel in advance of 22 ^nd January 2014 of the nature of a Personal Insolvency Arrangement ('P.I.A.") and of [his] eligibility for same."

6 6. It was common case that counsel for the debtor did not refer to the provisions of s. 14(2) of the Act of 1988, as amended, at the hearing on 22 ^nd January, 2014.

7 7. The debtor had exhibited a statement of affairs dated 20 ^th July, 2012, in his affidavit before the court on the motion to dismiss the bankruptcy summons. He did not avail of the opportunity to exhibit a more up to date or a more complete statement of affairs despite the refusal of the application to dismiss the bankruptcy summons and the adjournment of the hearing of the petition for one week. He did not consult a personal insolvency practitioner in relation to the possible alternatives open to him other than bankruptcy notwithstanding the fact that the petition had been served on him some seven months earlier and that he had been expressly advised of the nature of a personal insolvency arrangement and of his eligibility for such an arrangement. Even though the debtor failed to adduce additional evidence in relation to his assets and liabilities, there was evidence before the court regarding these matters when the court came to adjudicate upon these matters. The court was also entitled to have regard to the fact that, for whatever reason, he had chosen not to file a further affidavit updating his statement of affairs, nor did he inform the court of any proposals he wished to make to deal with his situation as an alternative to bankruptcy.

8 8. The debtor does not make the case that he could not have consulted a personal insolvency practitioner or prepared a draft personal insolvency arrangement proposal before the 22 ^nd January, 2014. He only sought to do so after 22 ^nd January, 2014, for the first time.

9 9. The debtor appealed the order of Dunne J. of 22 ^nd January, 2014, by a notice of appeal dated 11 ^th February, 2014. In para. 39 of his affidavit grounding the present application the debtor accepts that the same issue as he raises in this application arises in his appeal. On 21 ^st July, 2014, the debtor issued this motion seeking to annul the adjudication of bankruptcy pursuant to s. 85C of the Bankruptcy Act 1988 and/or the inherent jurisdiction of the court. He also sought various orders staying the realisation of his estate pending the appeal and/or pending the determination of this motion. These were withdrawn and were not pursued at the hearing before this court.

10. The jurisdiction to annul an adjudication of bankruptcy

Section 85C(1) of the Bankruptcy Act 1988, as amended, provides as follows:-

2 2 "85C.-(1) A person shall be entitled to an annulment of his adjudication-

(a) where he has shown cause pursuant to section 16, or

(b) in any other case where, in the opinion of the Court, he ought not to have been adjudicated bankrupt."

Section 85C(1) reproduces s. 85(5) of the Act of 1988 prior to its amendment.

Section 85C(1) (and s. 85(5) before that) is intended to give statutory effect to the previously existing jurisdiction of the High Court to annul a bankruptcy on equitable grounds or under its inherent jurisdiction. In O'Maoileoin (A Bankrupt) v. Official Assignee [1999] IEHC 75 Laffoy J. confirmed that the court had an equitable jurisdiction to annul a bankruptcy which had existed for over a century before the coming into effect of the Bankruptcy Act 1988. It is important to note that it is a discretionary jurisdiction in that the court may annul adjudication where in the opinion of the court a person ought not to have been adjudicated bankrupt. In Re Gorham [1924] 2 I.R. 46 Pirn J. identified three circumstances where it would be proper to exercise the inherent jurisdiction of the court to annual a bankruptcy. These were where there was a doubt as to whether the bankrupt was alive at the time of the adjudication, where the bankruptcy had been obtained by fraud or where the bankruptcy was an abuse of the process of the court....