The Bankruptcy Act, 1988, as Amended

• Jurisdiction: Ireland
• Judge: MR. JUSTICE MICHAEL PEART
• Judgment Date: 27 November 2017
• Neutral Citation: [2017] IECA 304
• Date: 27 November 2017
• Court: Court of Appeal (Ireland)
• Docket Number: Neutral Citation Number: [2017] IECA 304 Record Number: 2017/85

IN THE MATTER OF THE BANKRUPTCY ACT, 1988, AS AMENDED

AND IN THE MATTER OF SEAN DUNNE, A BANKRUPT 2478G

[2017] IECA 304

Neutral Citation Number: [2017] IECA 304

Record Number: 2017/85

THE COURT OF APPEAL

Cross-examination – Bankruptcy – Official Assignee – Bankrupt seeking cross-examination of Official Assignee in Bankruptcy – Whether the trial judge was correct in determining that the bankrupt’s application for leave to cross examine should be refused

Facts: On the 26th May 2016 the Official Assignee in Bankruptcy (OA) issued a notice of motion seeking the following reliefs against the bankrupt, Mr Dunne, pursuant to s. 85A of the Bankruptcy Act 1988: 1) an order upholding the objection of the OA pursuant to s. 85A(1) of the Bankruptcy Acts 1988 – 2015 to the discharge of the bankrupt from bankruptcy; 2) an order pursuant to s. 85A(3) that the bankruptcy shall not stand discharged until after conclusion of an investigation in relation to the assets of the bankrupt; 3) an order extending the bankruptcy period of Mr Dunne by five years, or such other period as the court deems appropriate, pursuant to s. 85A(4) on the basis that the bankrupt has failed to cooperate with the OA in the realisation of assets and failed to disclose information to the OA about income and assets which could be realised for the benefit of creditors; 4) an order under s. 85(D) for a bankruptcy payment order in the amount of €5000 per month for a period of five years. The bankrupt issued a notice of motion on the 31st January 2017 (returnable for the 1st February 2017) in which, inter alia, the following reliefs were sought: 1) an order pursuant to O. 76, r. 76(1) of the Rules of the Superior Courts (RSC) requiring the attendance of the OA for cross-examination on his affidavits sworn on the 25th May 2016, 15th November 2016, and 25th January 2017; 2) an order pursuant to O. 76, r. 73 RSC requiring the attendance of Mr Miltenberger for cross-examination on his affidavit dated 25th January 2017; 3) directions as to the time and venue for such cross-examination. Having heard the bankrupt’s application for leave to cross-examine on the 3rd February 2017, the High Court (Costello J) refused the application by order dated 13th February 2017. The bankrupt appealed to the Court of Appeal against that order.

Held by Peart J that it was necessary to determine whether leave to cross examine was required, and if so, under what Rule of Court; and, secondly, if the correct position was that the bankrupt required leave of the court, whether the trial judge was correct in determining that his application for such leave should be refused. Peart J held that the bankrupt was required to make an application for leave to cross-examine the OA, but under the provisions of O. 40, r. 1 RSC; the trial judge heard his application, albeit that leave was sought under O. 76, r. 76 and inter alia refused leave to cross-examine the OA. Peart J, having noted that the OA had given evidence of his belief or opinion which the High Court would be invited to take into account as relevant evidence and draw inferences adverse to the applicant, observed that this may culminate in findings which will have implications for the duration of the bankruptcy and, for that matter, the bankrupt’s ability to exit the bankruptcy process. As this evidence could not effectively be challenged absent the right of cross-examination, in Peart J’s view he ought as a matter of procedural fairness be entitled to cross-examine the OA in respect of basis for his beliefs or opinions.

Peart J held that the appeal should be allowed. He would instead grant the bankrupt leave pursuant to O. 40, r. 1 to cross-examine the OA on his affidavits in respect of his opinions and beliefs as they appear in those affidavits; in that regard he should serve a notice to cross-examine identifying those parts of the OA’s affidavits in respect of which he proposes to cross-examine.

Appeal allowed.

JUDGMENT OF MR. JUSTICE MICHAEL PEART DELIVERED ON THE 27TH DAY OF NOVEMBER 2017

1 On the 26th May 2016 the Official Assignee in Bankruptcy issued a notice of motion seeking the following reliefs against the bankrupt pursuant to section 85A of the Bankruptcy Act, 1988, as amended (‘the Act of 1988’):

1. An order upholding the objection of the Official Assignee in Bankruptcy pursuant to Section 85A (1) of the Bankruptcy Act 1988 – 2015 to the discharge of the bankrupt from bankruptcy.

2. An order pursuant to Section 85A(3) that the bankruptcy shall not stand discharged until after conclusion of an investigation in relation to the assets of the bankrupt;

3. An order extending the bankruptcy period of Mr Dunne by 5 years, or such other period as this Court deems appropriate, pursuant to Section 85A(4) of the Bankruptcy Acts 1988 – 2015 on the basis that the bankrupt has failed to cooperate with the Official Assignee in the realisation of assets and failed to disclose information to the Official Assignee about income and assets which could be realised for the benefit of creditors;

4. An Order under Section 85 (D) for a bankruptcy payment order in the amount of €5000 per month for a period of five years;

2 Section 85A of the Act of 1988 provides as follows:

(1) The Official Assignee, the trustee in bankruptcy or a creditor of the bankrupt may, prior to the discharge of a bankrupt pursuant to section 85, apply to the Court to object to the discharge of a bankrupt from bankruptcy in accordance with section 85 where the Official Assignee, the trustee in bankruptcy or the creditor concerned believes that the bankrupt has:-

(a) failed to co-operate with the Official Assignee in the realisation of the assets of the bankrupt, or

(b) hidden from or failed to disclose to the Official Assignee income or assets which could be realised for the benefit of the creditors of the bankrupt.

(2) An application under subsection (1) shall be made on notice to the bankrupt and where made by the trustee in bankruptcy or a creditor, notice shall also be given to the Official Assignee.

(3) Where it appears to the Court that the making of an order pursuant to subsection (4) may be justified, the Court may make an order that the matters complained of by the applicant under subsection (1) be further investigated and pending the making of the determination of the application the bankruptcy shall not stand discharged by virtue of section 85.

(4) where the court is satisfied that the bankrupt has –

(a) failed to co-operate with the Official Assignee in the realisation of the assets of the bankrupt, or

(b) hidden from or fails to disclose to the Official Assignee income or assets which could be realised for the benefit of the creditors of the bankrupt,

the Court may where it considers it appropriate to do so, order that in place of the discharge provided for in section 85 the bankruptcy shall stand discharged on such a later date, being not later than the eighth anniversary of the date of the making of the adjudication order, as the Court considers appropriate.

(5) Where the court has made an order under subsection (4), no further application may be made under subsection (1).

(6) The making of an order under this section shall not prevent an application being made for discharge or annulment under section 85B.’

3 The OA's s. 85A motion has not yet been determined because the bankrupt wishes first to cross-examine the OA and another deponent, Mr Miltenberger (the U.S. trustee in bankruptcy having carriage of the U.S. bankruptcy of Mr Dunne), in relation to their affidavits sworn in support of the s. 85A motion.

4 The OA filed three affidavits in support of his motion – the initial grounding affidavit sworn on the 25th May 2016, a second affidavit sworn on the 15th November 2016 in reply to the bankrupt's replying affidavit sworn on the 12th October 2016, and a third affidavit sworn on the 25th January 2017 in reply to the second affidavit of the bankrupt sworn on the 28th November 2016.

5 Having received the OA's third affidavit, the bankrupt issued a notice of motion on the 31st January 2017 (returnable for the 1st February 2017) in which, inter alia, the following reliefs were sought:

1. An order pursuant to Order 76, rule 76 (1) of the Rules of the Superior courts requiring the attendance of the Official Assignee, Christopher D. Lehane, for cross-examination on his affidavits sworn on the 25th May 2016, 15th November 2016, and 25th January 2017.

2. An order pursuant to Order 76, rule 73 of the Rules of the Superior Courts requiring the attendance of Timothy Miltenberger for cross-examination on his affidavit dated 25th January 2017;

3. Directions as to the time and venue for such cross-examination.

6 Pending the determination of the bankrupt's motion – and any cross-examination that may be permitted - the OA's s. 85A motion has been adjourned.

7 Having heard the bankrupt's application for leave to cross-examine on the 3rd February 2017, the High Court (Costello J.) refused the application by order dated 13th February 2017. Her reasons for so refusing are stated in her written judgment of the same date ( [2017] IEHC 66). The present appeal is against that order. There are two aspects to it. Firstly, it is necessary to determine whether leave to cross examine was required, and if so, under what Rule of Court; and, secondly, if the correct position is that the bankrupt required leave of the court, whether the trial judge was correct in determining that his application for such leave should be refused.

Did the bankrupt require leave of the Court to cross-examine deponents?

8 Notwithstanding that he had been directed to bring an application for leave to cross-examine these deponents, the bankrupt argued in the High Court that he was entitled to serve notice to cross-examine on both the O.A. and Mr Miltenberger under O....