IESC 6 · Supreme Court

THE SUPREME COURT

82/2002

Denham J.

Murray J.

Fennelly J.

IN THE MATTER OF JOHN GILL, A BANKRUPT

BETWEEN

JOHN GILL

Appellant

and

THE OFFICIAL ASSIGNEE IN BANKRUPTCY

PHILIP O’REILLY AND COMPANY LIMITED

THE GOVERNOR AND COMPANY OF THE BANK OF IRELAND

CLUNE LYNCH AND COMPANY

THE REVENUE COMMISSIONERS

Respondents/Notice Parties

JUDGMENT delivered on the 5th day of February, 2003, by FENNELLY J.

The appellant is a litigant in person. He was adjudicated a bankrupt in 1995. In 2001, he applied to the High Court to annul the order

of 1995, which adjudicated him a bankrupt. McCracken J rejected his application. He has appealed to this Court.

The Bankruptcy Act, 1988 codified the law of bankruptcy in Ireland. Section 11 of that act lays down the procedure for adjudicating a

person bankrupt. A creditor is entitled to present a petition to the High Court proving that a debt, in the form of a liquidated sum, of

at least £1,500 is owing to him by a debtor domiciled in the State.

The appellant was adjudicated a bankrupt on 28th July 1995 on the Petition of Philip O’Reilly and Company Limited. (hereinafter called

“the Petitioner”). Section 16 of the act allows a bankrupt, within three days (or such extended time as the Court allows) after service

of the order of adjudication on him, to show cause to the Court against the validity of the adjudication.

The history of the matter, as set out in the judgment of McCracken J, is not in controversy and is as follows:

“Background to the Bankruptcy

The Bankrupt is a building contractor carrying on business at Newmarket-on-Fergus in County Clare and on 23rd July, 1993 the

Petitioner obtained judgment against him in the Circuit Court in the sum £8,523.90 together with interest at Courts Act rates

from 1st January, 1994 to 14th March, 1994 and costs, which total sum under the judgment amounted to £10,935.86. The

Bankrupt made two payments to the Petitioner subsequent to the judgment on 18th March, 1994 and 18th July, 1994

amounting in all to over £2,000.

The Petitioner then issued a bankruptcy petition which is dated 26th July, 1994 but was not in fact filed until 21st October,

1994 and which was presented to the Court on 21st November, 1994. The petition claims that the Bankrupt committed an act

of Bankruptcy in that:-

‘The said John Gill has failed to pay to your Petitioner Philip O’Reilly and Company Limited the said sum of £8,935.86 due

as aforesaid and has failed to secure or compound for the same to the satisfaction of your Petitioner Philip O’Reilly and

Company Limited following service upon the said John Gill on the 11th July, 1994 of a bankruptcy summons issued under

seal of the High Court as your Petitioner has been informed and believes’

This petition was supported by an Affidavit of a Director of the Petitioner sworn on 12th August, 1994 which averred that the

Bankrupt was and still is indebted to the Petitioner in the sum of £8,935.86. This Affidavit is supported in the normal way by a

schedule setting out the original sums due under the judgment and the payments made by the Bankrupt and further stating:-

‘Neither your Petitioner, the said Philip O’Reilly and Company Limited nor any person or persons on its behalf hold or have

ever held a bond, bill of exchange, promissory note or security for the debt referred to in the first schedule hereto.’

The matter was adjourned before the Bankruptcy Court on a number of occasions following the presentation of the petition on

21st November, 1994, and the Petitioner made eight further payments between that date and June 1995 amounting in all to

£5,000. The matter finally came before the Court on 28th July, 1995 when the Bankrupt was adjudicated. At that date there

was a balance due to the Petitioner of £3,935.86.

Following his adjudication, the Bankrupt filed a statement of affairs dated 31st October, 1995 in which oddly enough he did not

list the Petitioner as a Creditor, but listed two unsecured Creditors namely, Clune Lynch Accountants at £2,400 and the

Collector General at an estimated £8,000. He also listed as a secured Creditor the Bank of Ireland for a sum just in excess of

£100,000”.

Under section 44 of the act, “subject to the provisions of this Act, all property belonging to [the bankrupt] shall on the date of the

adjudication vest in the Official Assignee for the benefit of the creditors of the bankrupt.” As provided by section 61 of the act, “the

functions of the Official Assignee are to get in and realise the property, to ascertain the debts and liabilities and to distribute the

assets in accordance with the provisions of [the] act.”

By a Notice of Motion issued on 8th October 2001, the bankrupt applied to the High Court for:

“Liberty to enter the Defendant’s application against the decision to adjudicate the Defendant Bankrupt by the Adjudicator in

the herein bankruptcy matter dated 28th July 1995, which the Petition was entered and duly lodged by the Petitioner on or

about 14th of March 1994…”

McCracken J decided to treat this Notice of Motion as an application under section 85(5) of the Bankruptcy Act, 1988 for an order

annulling his adjudication on the basis that he should never have been adjudicated a bankrupt. Section 85(5) provides as follows:

“(5) 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, the opinion of the Court, he ought not to have been Bankrupt”.

It will be noted that the appellant had never sought to show cause against his adjudication.

McCracken J also dealt with certain debts in the bankruptcy, but there has been no appeal against his order in respect of these

matters.

It appears that the appellant argued in the High Court that the evidence presented to the Court on the date of his adjudication was

incorrect, going so far, indeed, as to claim that the affidavit used was perjured. This contention was based on the failure to adjust for

the payments which were made against the debt due to the Petitioner over the period from the original presentation of the Petition in

March 1994 up to 28th July 1995. This was, of course, entirely misconceived and McCracken J correctly pointed out that the

grounding affidavit was correct at the time when it was sworn. Furthermore, and more crucially, the Petitioner’s solicitors’ letter from

their Town Agent of 17th July 1995 records that counsel informed the Court on that day that the amount then outstanding was

£3,902.44. Although the Petitioner wished to proceed with the Petition, the judge allowed one further adjournment to 28th July 1995.

All these adjournments were, of course, in ease of the appellant, to enable him to reduce the debt. For the purposes of the Petition,

it was enough that he owed £1,500, a fact which the appellant does not contest.

The appellant went on to argue in the High Court that the Petitioners had security for the debt. McCracken J referred to some

correspondence cited by the appellant in purported support of this argument. It is quite clear that, as McCracken J correctly held,

there was no such security. At the most, the appellant was trying to buy time over a number of years and to persuade the Petitioners

that the money due to them would be forthcoming. None of this, as McCracken J correctly held, had any impact upon the liability for

the outstanding debt due on the date of adjudication.

McCracken J, having considered the merits of the application, held that he should not entertain it, in any event, because of the delay

by the appellant of more than five years in bringing the application. He pointed out that:

“During that time the Bankrupt has been in communication with the Official Assignee’s office regularly both personally and

through his solicitor and never raised the complaints which he now makes. When he was adjudicated he did not avail of the

provisions of Section 16 of the Bankruptcy Act, 1988 which provides that the Bankrupt may within time show cause against

adjudication and in effect he has consented to the Official Assignee taking possession of his assets.”

McCracken J cited the earlier decisions of the High Court: In the Matter of Sean Hussey (Hamilton P. Unreported 23rd September

1987); O’Maoileoin v the Official Assignee (Laffoy J. Unreported 21st December 1999). In the former case, Hamilton P (as he then

was) held:

“I am satisfied the [the bankrupt] is estopped by raising this or any other point with regard to his original adjudication at this

stage. The time for making objections as to the adjudication of Bankruptcy is on the motion to show cause and not at this

stage of the proceedings.”

McCracken J concluded:

“I am quite satisfied that a delay of over five years in the present case was both inordinate and inexcusable, and I am further

satisfied that the balance of justice is certainly against allowing this application, by reason of the advanced stage which has

been reached in the Bankruptcy.”

In his notice of appeal from the judgment and order of McCracken J, the appellant puts forward grounds which may be summarised as

follows:

1. The figures before the Court on 28th July 1995 were incorrect;

2. The appellant had, through his solicitors given the Petitioner “guarantees and undertakings, promissory notes and

assets….and a guarantee of a cash payment….that the balance due and owing namely £3,904.86 would be available on 01st

July 1995…;”

3. The appellant had got permission from the Official Assignee to negotiate settlements with his creditors;

4. That the Examiner/Adjudicator was negligent in adjudicating him bankrupt;

5. On the date of adjudication, the figure used was £8,935.76, which was incorrect;

6. there was not good reason to adjudicate him bankrupt because there were sufficient assets available to pay the debts;

7. A proper statement of affairs was not available on the day of adjudication.

Clearly, several of these grounds are irrelevant and unsustainable: it was the Court that adjudicated the appellant a bankrupt; no

question of a statement of affairs arises on the day of adjudication. Section 19(c) of the Act requires the bankrupt to file a

statement of affairs after adjudication. As McCracken J said in his judgment, the appellant filed a statement of affairs on 31st

October 1995. Even granting the greatest possible latitude to the appellant, the only meaningful point that can be extracted from the

grounds of appeal is the suggestion that assets were made available or could have been made available to satisfy the debt. The

appellant has sought by a motion to introduce new evidence to expand on this argument. He has, in the meantime, dispensed with

the services of his solicitors, who were not in Court for the hearing of the appeal. The burthen of the complaint is that the solicitors

were negligent, or even in collusion with the Petitioner, and that the order adjudicating the appellant a Bankrupt should not have been

made: there were sufficient assets to discharge the debt. Both the solicitors and the Petitioner were fully aware of this. The appellant

has sworn in the affidavit used to admit allegedly “new vital and important evidence” that he was “made BANKRUPT by the negligence

and misconduct of my former legal advisers...”

It is important not to forget the fact that the appellant seeks to rely, many years after his adjudication in bankruptcy, on material of

which he necessarily must have been aware at the time. Hence, his motion should be defeated on the ground of delay and the

allegedly new evidence was not new: he has been aware of it at all relevant times.

However, even assuming that the Court should give the appellant the benefit of considering the substance of his case, it is clear that

it is entirely devoid of merit. The appellant fully and clearly accepted at the hearing of the appeal that, at the date of the

adjudication, a sum of more than £3,000 remained unpaid to the Petitioners. The failure to pay this sum, on demand, amounted to an

act of bankruptcy. Whether the appellant had other assets is irrelevant. If he had, it was up to him to use them to pay the debt. Nor

does it avail him to blame his former solicitors. Any complaint of the bankrupt against his solicitors is a matter between him and them.

This is not to imply that there is any merit in the allegations made, simply that it is irrelevant to the present case.

Finally, I would say that, even if there were merit in the appellant’s case, it would certainly be defeated on the ground of delay. In

the case of Re Sean Hussey, mentioned above, it was established that there were several technical defects affecting the correctness

and regularity of the original adjudication; in that case there was a delay of only two years, before the application for annulment.

Hamilton P said:

“However, I am satisfied that it is not open to the Bankrupt to rely on this point at this stage to have the adjudication of a

bankruptcy annulled.

He did not raise the point on the motion to show cause, allowed the bankruptcy to proceed, allowed the realisation of the

assets to proceed, allowed the proof of debt sittings to proceed, allowed the interim dividend herein before referred to to be

paid, negotiations with his creditors for the purpose of making an offer of composition after bankruptcy and generally the

bankruptcy to proceed in the ordinary way, and allowed the Official Assignee to continue to fulfill his statutory functions in this

regard from the date of adjudication.

I am satisfied that he is thereby estopped from raising this or any other point with regard to his original adjudication of

bankruptcy is on the motion to show cause and not at this stage of the proceedings.”

The machinery of bankruptcy commences with the adjudication and the automatic vesting of the bankrupt’s assets in the Official

Assignee. Creditors are restrained from pursuing remedies for their debts other than through the bankruptcy. The appellant submitted

his statement of affairs and took no step to show cause against the bankruptcy itself. Matters took their normal course. The

realization of the estate of the bankrupt proceeded in the normal way. Assets were investigated and creditors proved their debts. The

Official Assignee entered into a contract for the sale of part of the property of the bankrupt. This cannot be undone without

extremely compelling reasons. None exist in this case.

In my view, the learned High Court judge was correct to refuse the application. The application to admit new evidence in this Court is

also without merit. The suggested evidence is not new and, further, is not such as would affect the outcome of the appeal. It is

irrelevant. It cannot be admitted.

In my view the appeal should be dismissed.