[2017] IEHC 511
THE HIGH COURT
COMMERCIAL
[2014 No. 7820 P.]
CHRISTOPHER LEHANE AS OFFICIAL ASSIGNEE IN BANKRUPTCY IN THE ESTATE OF SEAN DUNNE
PLAINTIFF
DEFENDANT
JUDGMENT of Ms. Justice Costello delivered on the 26th day of July, 2017
Introduction
1. The defendant seeks liberty pursuant to O. 40, r. 1 of the Rules of the Superior Courts and/or pursuant the inherent jurisdiction of the court to cross-examine the plaintiff in relation to the contents of his affidavits sworn on the 28th January, 2017 and 23rd March, 2017 to ground his application for a worldwide Mareva injunction against the defendant restraining her from disposing of her assets up to a value of €50,000,000.
Background
2. The plaintiff is the wife of Sean Dunne. Sean Dunne filed for a Chapter 7 bankruptcy in the United States of America on the 29th March, 2013. He was also adjudicated a bankrupt in Ireland on the 29th July, 2013, and the plaintiff is the Official Assignee in bankruptcy in the estate of Sean Dunne (“the bankrupt”). There are thus two bankruptcy proceedings in two jurisdictions in respect of the bankrupt.
3. The Chapter 7 Trustee, Mr. Richard Coan, and the Official Assignee have each instituted the proceedings seeking to recover certain assets of the bankrupt into the estate of the bankrupt. In these proceedings the Official Assignee challenges certain share transfers and shareholder loans which he alleges were legally or beneficially owned by the bankrupt and were transferred by him to the defendant and/or companies controlled by the defendant. The Official Assignee says these transfers are void by virtue of the provisions of s. 59 of the Bankruptcy Act 1988 and/or by reason of s. 10 of the Irish Statute of Fraudulent Conveyances 1634 and various ancillary reliefs.
4. The proceedings have given rise to a number of applications and written judgments already. The issues raised are complex both factually and legally. The facts have been set out more fully in previous judgments. Here, I propose to set out only those matters that are relevant to the issues for decision in this judgment.
5. In her defence the defendant pleads inter alia that she and the bankrupt entered into an agreement dated the 23rd March, 2005, whereby, in consideration of her foregoing her career and waiving any future family law claims against future assets of the bankrupt and agreeing to raise the children of their marriage, the bankrupt agreed to transfer certain assets to her. At para. 34 she pleads: -
“As a part performance of the 2005 agreement on the basis of assets in lieu as agreed, the Bankrupt purchased and the Defendant accepted a property at Shrewsbury Road, Ballsbridge, Dublin 4 on or about July 2005. The Shrewsbury Road property was then valued at €58,000,000…”
6. This property is known as Walford. In his reply at para. 18 the Official Assignee denied that the purchase of Walford on Shrewsbury Road, Ballsbridge, Dublin 4 and/or the alleged gifting of Walford from the bankrupt to the defendant constituted an act of part performance of the 2005 agreement. He also pleaded that if Walford was transferred to the defendant in purported performance of the alleged agreements and the agreements are deemed void that he would seek an account and repayment of all properties or monies received allegedly in the implementation of the purported agreements.
7. The issue of the ownership of Walford and the legal and beneficial interests have played a considerable role both in these proceedings and in the administration of the bankruptcy of the bankrupt.
8. While the proceedings have been progressing since they were instituted in 2014, it was only on the 25th January, 2017, that the plaintiff sought and obtained an interim world wide Mareva injunction restraining the defendant from reducing her personal assets of whatever nature or kind and however derived including all assets in which she has any direct or indirect legal beneficial or other interest below the sum of €50,000,000 pending further order of the court. The Official Assignee explained that the application was brought because, as he said in para. 5 of his grounding affidavit, he recently came into possession of information about the alleged sale of Walford. He averred: -
“… Walford was nominally owned by Yesreb Holding Ltd (hereinafter “Yesreb”). I believe Yesreb to be owned and controlled by the Bankrupt and Gayle Dunne (hereinafter collectively “the Dunnes”) and to have been incorporated by their agents and utilised by them solely for the purpose of putting Walford beyond the reach of the Bankrupts creditors as part of a preplanned scheme. I believe they have now sold the asset with a view to ensuring that if judgment is obtained in these proceedings it will be frustrated.”
9. He explained that although the bankrupt was adjudicated in 2013, significantly more information in relation to his circumstances became available to him in 2016 in the context of the Official Assignee’s application to postpone the discharge of the bankrupt from bankruptcy. He also received information from various parties where applications were made pursuant to s. 21 of the Bankruptcy Act 1988 including solicitor’s files and information from the Revenue Commissioners in relation to the various transactions relating to Walford.
10. In support of this application the Official Assignee swore three affidavits, on the 25th January, 2017, the 23rd March, 2017, and the 3rd May, 2017. The defendant swore two affidavits, one on the 2nd March, 2017, and the other on the 25th April, 2017. On the 6th April, 2017, the defendant issued the motion seeking an order to cross examine the Official Assignee on his affidavits and an order deeming the transcripts of two s. 21 hearings inadmissible or on the alternative an order directing the two parties to attend for cross examination by the defendant’s counsel at the hearing of the application for the Mareva injunction.
Submissions of the Defendant
10. The defendant seeks liberty to cross examine the plaintiff on his affidavits sworn to ground his application for a worldwide Mareva injunction restraining her from disposing of her assets up to a value of €50,000,000. The defendant points to the fundamental requirement that a plaintiff seeking a mareva injunction should make full and frank disclosure of all matters in his knowledge which are material for the judge to know (O’Mahoney v. Horgan [1995] 2 IR 411 at 416). As the plaintiff seeks equitable relief, the court may scrutinise his conduct and refuse the relief if the conduct is such that the court forms the view that it falls below that which is required when seeking a Mareva injunction. She says that she needs to cross examine the plaintiff to support her argument that the plaintiff made incorrect or overstated averments in his grounding affidavit, in particular, but also in his replying affidavits, of such gravity as would justify the court in refusing to grant a Mareva injunction even if one were otherwise warranted. She states that she needs to cross-examine the plaintiff in relation to these issues in support of this argument. Thus, she submits, cross examination of the plaintiff on his affidavit is part of her right to fair procedures before the court.
Cross-Examination
11. She states that cross-examination is necessary and desirable for the resolution of three broad issues: -
(1) There are conflicts of facts between the parties which require to be resolved, clarified or explained.
(2) Whether the court ought to excuse failure on the part of the plaintiff to disclose matters which the defendant says the plaintiff ought to have disclosed and inconsistencies in his evidence, and
(3) Whether and to what extent the sworn beliefs and allegations as to the Defendant’s dishonest behaviour and/or a conspiracy to dissipate her assets to defeat a judgment in these proceedings are in fact supported by the facts.
12. In her written submissions, she identifies eight matters which are appropriate for cross examination arising from the plaintiff’s grounding affidavit: -
(1) The Plaintiff has been guilty of culpable nondisclosure in failing to disclose material facts in his grounding affidavit to obtain interim relief;
(2) He has entirely mischaracterised the nature of the relationship between the Defendant and the Bankrupt, choosing to ignore all marital and family law issues;
(3) The Plaintiff’s allegations regarding the Defendant’s asset ownership to the sum of €50,000,000 are entirely speculative and the Defendant has denied owning assets to that arbitrarily conceived value;
(4) The defendant’s alleged interest in Yesreb Holdings Ltd (“Yesreb”);
(5) The lack of an evidential basis for the propositions and theories advanced by the Plaintiff;
(6) The use of corporate vehicles for legitimate tax planning purposes; and
(7) The beneficial ownership of Walford both prior to the 2013 sale to Yesreb and thereafter;
(8) Whether allegations and belief as to the Defendant’s dishonesty are still maintained by the plaintiff and can be supported.
13. In oral submissions she did not rely on all of these grounds but said that cross-examination of the plaintiff was necessary in relation to the following averments or omissions in the grounding affidavit: -
(1) The plaintiff’s averment as to the insolvency of the bankrupt in February 2008 is not substantiated.
(2) The statement that the defendant seeks to have all matters heard and determined in the United States. The defendant says this is incorrect as she made an offer to have all of the cases heard either in Ireland or the United States with the Chapter 7 Trustee and the Official Assignee both as plaintiffs.
(3) NALM sought and failed to obtain a Mareva injunction against the defendant in the United States in 2012 (prior to either of the adjudications of the bankrupt).
(4) The plaintiff’s averment that there was apparently no original of the 2005 agreement between the bankrupt and the defendant despite the fact that he was invited to inspect it at the offices of her solicitors.
(5) The plaintiff wrongfully stated that she pleaded that she received Walford as a gift when she states that it was for valuable consideration as set out in the 2005 agreement.
(6) The plaintiff failed to refer to the Matsack Agreement whereby the defendant appointed a nominee company in 2006 “to deal with Walford” through Matheson solicitors. This was material, according to the defendant, as it was consistent with her claim that she was the beneficial owner of Walford from the date of the contract to purchase it on 1st July 2005.
(7) The plaintiff did not disclose the fact that he had possession of an opinion on title obtained by Mr. Doran, a potential purchaser of Walford, from senior counsel who raised no issue that the alleged gift of Walford to the defendant was incomplete, while the plaintiff raised the issue in his affidavit.
(8) The plaintiff wrongfully – and demonstrably so – states that the defendant and the bankrupt each say that they have no knowledge of Yesreb. This is a misreading of the transcript of an examination of the defendant in relation to proceedings in the United States.
(9) The plaintiff’s conclusion that the statement by Yesreb to Mr. Doran’s solicitors that it had not received any communication from the Official Assignee in relation to Walford is patently untrue and that Yesreb cannot be relied upon to tell the truth is unwarranted.
(10) The plaintiff cannot sustain his allegation that the bankrupt and the defendant set about arranging their affairs so as to defeat creditors and therefore the averment is not a truthful averment.
(11) The plaintiff overstated his case in stating that the trust asserted by the defendant in respect of her interest in Walford from 2005 - 2013 “is a sham”.
(12) The plaintiff has not adequately explained why he is entitled to a Mareva injunction restraining the defendant from disposal assets below €50,000,000.
(13) The rejection by the plaintiff in his second affidavit of all of the defendant’s assertions that he overstated his case or failed to disclose material facts to the court by way of a general traverse.
(14) The plaintiff exhibited documents in his second affidavit which ought properly to have been disclosed in his grounding affidavit upon which he sought and obtained an interim injunction.
14. The defendant submitted that the court had a discretion whether to permit cross examination of a deponent on his affidavit. Counsel submitted it was unfettered and must be exercised fairly. While this is an interlocutory application and a party generally is required to establish exceptional circumstances to justify cross- examination of a defendant at an interlocutory hearing, this was an exceptional case. The defendant referred to the Director of Corporate Enforcement v. Seymour [2006] IEHC 369 where O’Donovan J. held that the court may order that a deponent be cross-examined on his or her affidavit where it is necessary to resolve material conflicts of facts disclosed in affidavits. The defendant referred to the recent decision of Baker J. in Somague Engenharia S.A. & Wills Bros. Ltd v. Transport Infrastructure Ireland [2015] IEHC 723. She deduced a number of principles from Seymour including: -
“d. The discretion must nonetheless be exercised only if cross-examination is necessary for disposing of the issues
e. There may be examined not merely facts taken in the narrow sense but also the construction, or interpretation, or conclusions that a person draws from those facts, and cross-examination may be permitted in those circumstances even if there is no real dispute as to those material facts.
f. Thus opinions and conclusions may be tested by cross-examination both as to their reliability or reasonableness as the case may be.”
15. She emphasised the fact that O’Donovan J. suggested that the discretion of the court should only be exercised when cross examination is necessary for the disposing of the issues for determination by the court.
16. The defendant referred to the decision of McGovern J. in XL Fuels Group Limited & anor v. Curran & ors [2015] IEHC 715. In that case, the second named plaintiff, the receiver appointed to the first named plaintiff, made serious allegations against the first named defendant regarding his failure to cooperate with the receivership process and alleged obstruction. He sought interlocutory injunctions and the first named defendant was prepared to consent to interlocutory orders in the terms sought in the notice of motion. The issue for the court was whether, if the first named defendant was willing to submit to orders sought by the plaintiffs in the motion for interlocutory relief, there were any circumstances in which it can be necessary for him to be cross examined on his affidavit filed in response to such a motion. In answer to the question the court said: -
“I think the answer must be yes insofar as the court has a discretion. The motion for interlocutory relief which is shortly to be heard by the court is a step being taken by the receiver to preserve and collect assets of the first named plaintiff so that he can deal with them in the receivership. In the face of serious allegations made about misappropriation of company assets and their use in a ‘phoenix company’ which was set up simultaneously with the commencement of the receivership, it is important that the court should resolve the conflicts of fact between the receiver and the first defendant as soon as possible and preferably at the time of the hearing of the interlocutory motion.”
The defendant submitted that in light of the seriousness of the allegations made against her the court should order cross-examination of the plaintiff.
17. The primary ground for seeking to cross examine the plaintiff is to test his alleged material nondisclosures to the court in his grounding affidavit and his “overstatement” of his case against her. She refers to case law which emphasises the importance of nondisclosure in the context of mareva relief. In Bambrick v. Cobley [2006] I.L.R.M. 81 Clarke J. approved of the passage by Brown-Wilkinson V.C. in Tate Access Floors Inc. v. Boswell [1991] Ch. 512 at p. 532 as follows: -
“No rule is better established, and few more important, than the rule (the golden rule) that a plaintiff applying for ex parte relief must disclose to the court all matters relevant to the exercise of the court’s discretion whether or not to grant relief before giving the defendant an opportunity to be heard. If that duty is not observed by the plaintiff, the court will discharge the ex parte order and may, to mark its displeasure, refuse the plaintiff further inter partes relief even though the circumstances would otherwise justify the grant of such relief.”
18. The defendant drew the court’s attention to a decision of the court of Alberta in Royal Bank of Canada v. Boussoulas 2010 ONSC 4650 (Can LII) Stinson J. as providing an example of a situation where the court refused to grant a Mareva injunction to a plaintiff to which it would otherwise be entitled, because the plaintiff had overstated its case in making many unsupported allegations in its many motions, affidavits and pleadings. The plaintiff alleged there was a strong prima facia case that the defendants defrauded the plaintiff of $3.8 million and that the defendants obtained over half the total amount borrowed from the plaintiff on the basis of a fraudulent equipment appraisal. In submissions to court, no mention was made of any evidence of fraud but the plaintiff did not resile from and relied upon its allegations of fraud. The court held that the plaintiff had made certain grave allegations that were shown to be untrue or wrong:
(i) That the defendants fraudulently borrowed over $4 million from the plaintiff between 2005 and 2008. The supposed fraudulent conduct only commenced in 2008 after most of the money had been advanced.
(ii) That the defendants obtained over half of the total amount borrowed on the basis of a fraudulent equipment appraisal was untrue; the appraisal had been obtained by the plaintiff in January 2008 after most of the money had been advanced. There was material misstatement and no evidence of the participation of any of the defendants in the appraisal.
(iii) A deponent who swore the key affidavit lacked personal knowledge of what transpired, failed to qualify his “evidence” which was unsupportable and misleading in relation to a highly material and damaging allegation.
(iv) One deponent swore that significant funds of one company had been diverted to another company but under cross-examination he admitted he had no evidence of this. Several times he was forced to concede under cross examination that he had no personal knowledge or evidence to support his beliefs or conclusions in his affidavits that he stated as facts. His affidavits included numerous occasions in which he went beyond stating facts within his personal knowledge without proper qualification explaining that they were either hearsay or surmise on his part.
In these circumstances the court held that notwithstanding the fact that the plaintiff had a strong prima facia case against the defendants, the court concluded that the plaintiff’s conduct of the proceedings was such as to disentitle it to the relief sought: -
“Misstatements and overstatements of evidence such as those mentioned above impair and impede the court in performance of its function, and are to be strongly discouraged.”
19. The defendant submitted that in dealing with the motion for a Mareva injunction, the court must resolve the factual disputes between the parties and must also allow for the belief of the plaintiff to be tested by reference to the grounds for that asserted belief. She says that the plaintiff’s case for a Mareva injunction hinges on an allegation of dishonesty made against her in the absence of any tangible evidence of any intention on her part to dissipate assets to render herself judgment proof. She says the allegation of dishonesty almost entirely arises from inferences from the actions of persons other than the defendant and from the defendant’s use of a corporate structure to hold her assets for the purpose of tax minimisation. She says she is entitled to test the basis for the state of belief of the plaintiff that she is engaged in a conspiracy to dissipate her assets. It cannot be presumed on the basis of a collection of assumptions and averments as to the plaintiff’s belief to that effect.
20. The cumulative effect of the overstatements and nondisclosures in this case, where a worldwide Mareva injunction freezing assets up to the value of €50,000,000 was sought, made this case quite exceptional. Cross-examination was required in order to assess the culpability of the plaintiff for these over statements and nondisclosures. It was necessary so that the judge dealing with the interlocutory motion could decide whether, in the exercise of equitable jurisdiction, the court would refuse the plaintiff the relief sought.
Exclusion of Evidence
21. Secondly, and separately, the defendant sought to exclude transcripts of the evidence given by two solicitors to the Official Assignee pursuant to investigations into the estate of the bankrupt which he conducted pursuant to s. 21 of the Bankruptcy Act 1988. These are Mr. Patrick Sweetman of Matheson Solicitors and Mr. Donald McAuliffe of Donald McAuliffe and Company. They each were former lawyers of the bankrupt and acted on his behalf in relation to the acquisition of Walford (in the case of Mr. Sweetman) and the subsequent sales of Walford (in the case of Mr. McAuliffe). The defendant says that they were also her lawyers and that they both have an agency relationship with her involving confidential and privileged communications.
22. These latter points were not pursued at the hearing of the motion. The sole basis upon which it has sought to exclude the transcripts of the two witnesses was in order to redress what would otherwise amount to an unfair procedure.
23. She asserts that the plaintiff’s use of his powers for the purpose of prosecuting the proceedings is an abuse of his information gathering role and the deployment of material in these proceedings is thus unlawful. Section 21 investigations cannot be used for the purposes of pursuing litigation advantages against a party other than the bankrupt. She asserts that in order to redress this imbalance the transcripts should be excluded from evidence. In this regard, she relies upon the decisions of the Supreme Court in The State (Hegarty) v. Winters [1956] I.R. 320 and Galway City Council v. Samuel Kingston Construction Ltd & anor [2010] IESC 18.
Submissions of the Plaintiff
Cross-Examination
24. The plaintiff submitted that the law in relation to cross-examination of deponents on their affidavits was well settled. The court has discretion whether or not to permit such cross-examination. The leading case of the Director of Corporate Enforcement v. Seymour establishes that there should be a material conflict of fact arising from the affidavits sworn and that a resolution of the conflict is necessary for the purpose of disposing of the issues the court has to determine.
25. It was submitted that there was very little actual conflict of fact on the affidavits. The Official Assignee in his grounding affidavits sets out his investigation into the affairs of the bankrupt and in particular into the transactions concerning Walford, he sets out what he has found as a result of those investigations and then he sets out his conclusions. In truth, the defendant does not so much wish to cross-examine him on the facts he deposes to, but rather wishes to cross-examine him in relation to the conclusions and inferences he draws from those facts and to cross-examine him on matters which he did not disclose in his affidavit, and the reasons for these omissions.
26. The plaintiff highlighted the important distinction in the authorities between cross-examination on affidavits where the procedure in question will result in a final order, and an application to cross-examine deponents in respect of interlocutory applications. He points out that in an application for an interlocutory injunction, the court does not make a final determination on the facts in the case, which await determination at the end of the full trial.
27. The plaintiff relies upon the dictum of Clarke J. in the Supreme Court in I.B.B. Internet Services Limited v. Motorola Limited [2013] IESC 53 when the court held that the court considering an application such as the current one must decide whether there are “exceptional circumstances” which require cross-examination on an interlocutory application. He stated: -
“7.3 … the cases relied on were all cases where the court was required to make a final order and where, therefore, the substantive rights and obligations of all interested parties were to be finally determined. Insofar as the making of a final order requires a court to take a view on the facts, and insofar as material facts may be the subject of conflicting evidence placed before the court on affidavit and where the contested facts have a bearing on the order which the court will have to make, then the comments made in those cases clearly apply.
7.4 However, there are sound reasons of principle and policy as to why, save in exceptional circumstances, courts should not contemplate cross-examination in interlocutory matters...”
28. The plaintiff submitted that the basic test to obtain Mareva relief is (a) that [the Plaintiff] has an arguable case that he will succeed in the action, and (b) the anticipated disposal of the defendant’s assets is for the purpose of preventing the plaintiff from recovering damages and not merely for the purpose of carrying on a business or discharging lawful debts (see O’Mahony v. Horgan).
29. The plaintiff placed particular emphasis on the observations of O’Sullivan J. in Bennett Enterprises Inc and others v. John Lipton and others [1999] 2 IR 221 when he observed that:-
“I consider that direct evidence of an intention to evade [the defendant’s obligation to the plaintiff] will rarely be available at the interlocutory stage. I consider it is legitimate for me to consider all the circumstances in relation to the case…”.
The learned trial judge accepted that it was permissible to point to a number of matters and allege that they collectively gave rise to a reasonable apprehension that assets will be dissipated with a view to depriving the plaintiffs of their monies in the event that they succeeded in their action.
30. The plaintiff submits that this is particularly apposite to this litigation. He is the Official Assignee in bankruptcy in respect of the estate of the bankrupt. He has no first hand knowledge of the transactions, the subject matter of these proceedings and the application for a Mareva injunction. His information is derived from the bankrupt in the first place and thereafter from his own investigations into the affairs of the bankrupt. Of course, given the dual bankruptcy in this case, much of his information has been derived from the Chapter 7 Trustee in the United States and proceedings conducted in the United States, either by creditors of the bankrupt or by the chapter 7 trustee.
31. It is submitted that the plaintiff has set out in detail his investigations and the result of those investigations. He has then stated his conclusions. If his conclusions are unwarranted or he has overstated inferences to be drawn, he submits that the court is in a position to deal with this in the normal way. All of the material upon which his conclusions are based has been exhibited to the court.
32. He submits that cross-examination is not necessary in the circumstances of this case where the court hearing the application for a Mareva injunction will be in a position to make its own assessment of the evidence adduced. He says that as this is an interlocutory application, the onus rests upon the defendant to satisfy the court that exceptional circumstances exist such as would warrant cross-examination of him at the hearing of an interlocutory application, and that she has not done so.
33. He says the court hearing the application will either find that there has been material non disclosure by the plaintiff in his affidavits or it will not. Cross-examination of the plaintiff does not add anything to this issue.
34. He says that the defendant seeks to cross-examine the plaintiff in relation to matters which are peculiarly within her knowledge and in relation to matters of which the plaintiff has no direct knowledge. These include the nature of the relationship between the defendant and the bankrupt, the total value of the assets transferred by the bankrupt to the defendant, the extent of her assets, the beneficial ownership of Walford (both prior to the 2013 sale to Yesreb and thereafter) and her use of corporate vehicles for legitimate tax planning purposes. He points out that his information in relation to the defendant’s alleged interest in Yesreb is based upon the information he has put together from his investigations and the information which the defendant has set out in her affidavit. It is difficult to see what the plaintiff is to be cross-examined about in respect of these matters, which are peculiarly within her knowledge, rather than upon his conclusions based upon his incomplete knowledge of the affairs of the bankrupt and the defendant.
35. Items 5 and 8 of the matters identified by the defendant in her written submissions as matters which are appropriate for cross-examination are “The lack of an evidential basis for the propositions and theories advanced by the Plaintiff” and “Whether allegations and belief as to the Defendant’s dishonesty are still maintained by the plaintiff and can’t be supported.” The plaintiff submits that cross-examination for these purposes is not necessary for the court to determine an issue which will arise for decision at the hearing of the application for an interlocutory injunction.
36. It was submitted that the case of Royal Bank of Canada v. Boussoulas was of no assistance to the defendant. It clearly could be distinguished on its facts. The Official Assignee had made plain in his affidavits the facts as they were known to him and had exhibited the relevant material and then had clearly drawn his own inferences. He did not present his inferences or surmises as facts to the court, as occurred in Royal Bank of Canada. Neither did he swear to the truth of matters which could be shown to be untrue in very material respects. For all these reasons leave to cross examine the plaintiff should not be granted.
Exclusion of Evidence
37. In relation to the application to exclude the transcripts of the interviews conducted by Mr. Sweetman and the evidence given by Mr. McCauliffe, it was submitted there was no basis advanced for excluding this evidence. The Official Assignee submitted that the purpose of s. 21 of the Bankruptcy Act 1988 was to enable him to gather information in circumstances where parties might not otherwise assist him in carrying out his functions as Official Assignee of a bankrupt. As such, he must be in a position to use the information obtained, if relevant, in furtherance of his administration of the estate of a bankrupt. It therefore followed that the Official Assignee must be entitled to use this information as required in the administration of the estate including in recovery actions such as the present proceedings.
Discussion
38. The defendant does not point to conflicts of fact in the affidavits which will require to be resolved by the court in order to determine the application for a Mareva injunction. She therefore cannot say that cross examination of the plaintiff is necessary for disposing of the issues for determination of the court as is required by the decisions in Director of Corporate Enforcement v. Seymour and Somague Enenhariasa v. Transport Infrastructure Ireland.
39. Her case is based upon the alleged overstatement of the plaintiff’s case and the nondisclosure of relevant material which the defendant asserts evinces such a level of recklessness or culpability such as could justify a court withholding a Mareva injunction which it was otherwise minded to grant.
40. It is clear from the decision in Seymour that cross-examination to ascertain the “mindset” of deponent may be permitted if it is relevant to the issues to be determined by the court. What then is the relevance of the mindset of the plaintiff to the issues for determination by the court in the injunction application?
41. The court will need to decide firstly whether the plaintiff has an arguable case that he will succeed in the action. The court will reach its own conclusions on this matter on the basis of all of the affidavits and exhibits. Insofar as the plaintiff sets out his conclusions and inferences which he draws from the material he has exhibited, the court will be similarly placed to make its own independent assessment and draw its own conclusions. Therefore, even if the plaintiff has overstated the proper inferences or conclusions to be drawn from the information to be found in the exhibits, cross examination is not required in order for the court to reach its own conclusion as to whether or not the plaintiff has an arguable case.
42. Secondly, the court will then have to consider whether the anticipated disposal of the defendant’s assets is for the purpose of preventing the plaintiff from recovering damages (it awarded) and not merely for the purpose of carrying on a business or discharging lawful debts. In Bennett Enterprises Inc. O’Sullivan J. made it clear that the court is entitled to consider all of the circumstances in relation to the case. It would thus be for the court to draw its own inferences and to decide for itself whether or not the plaintiff has made out a case that the defendant is removing or has attempted to remove assets from the jurisdiction with a view to evading her obligations to the plaintiff in the event that he succeeds in this action. Whether or not the plaintiff has overstated his conclusions as to the risk in this regard is not therefore relevant, as the court will make its own determination based on those facts and not rely upon the inferences or conclusions in the plaintiff’s affidavits.
43. It is only if the court is satisfied as to both of these requirements, that any question could arise as to whether there could be grounds for refusing the injunction sought on the basis of the application of equitable principles.
44. It was predominantly in relation to this aspect of the argument that the defendant advanced her case for leave to cross examine the plaintiff on his affidavits. The defendant emphasised the obligation of a plaintiff applying for ex parte relief to disclose to the court all matters relevant to the exercise of the court’s discretion whether or not to grant the relief before giving the defendant an opportunity to be heard, as stated in O’Mahoney v. Horgan and Bambrick v. Cobley. She argued that while one or two of the omissions or overstatements or errors might be excused by the court, cumulatively they amount to culpable behaviour on the part of the plaintiff. In order for the court to be able to assess whether it should mark its displeasure at this behaviour by refusing the plaintiff inter partes relief, even though the circumstances would otherwise justify the grant of such relief, the plaintiff should be cross examined on his affidavit.
Omissions
45. The defendant identified five omissions from the plaintiff’s affidavits which she said ought to have been disclosed to the court as part of his obligation to disclose all matters relevant to the exercise of the court’s discretion. These are (i) the opinion of senior counsel on Yesreb’s title to Walford procured for Mr. Doran, (ii) the bankrupt’s and the defendant’s letters of wishes of 2007, (iii) the Matsack agreement, (iv) the failure of NALM to obtain a Mareva injunction against the bankrupt in the United States in 2012 and (v) evidence to support his contention that the bankrupt was insolvent in 2008.
46. (i) The opinion of senior counsel for the benefit of Mr. Doran is his opinion on the basis of his instructions which in turn derived from the vendor’s solicitors. It appears to be based upon premises which are at odds with the positions asserted by both the defendant and the plaintiff in this case. The opinion treats the purchase by the bankrupt of Walford in July 2005 as a gift to the defendant. She, on the other hand, has asserted that it was not a gift but that she gave valuable consideration for the property. The Official Assignee believes that the bankrupt remained at all times the equitable owner of Walford, despite the various entities involved in the title. The opinion of the senior counsel concludes that the transaction was completed in 2005/2006 notwithstanding the 2013 conveyance, whereas the plaintiff believes that it only completed in 2013. Finally, the opinion states that the Official Assignee has raised no issue in relation to the 2005/2006 transaction. In the light of the history of these proceedings, and the conduct of the bankruptcy, this unqualified statement is surprising. In light of the facts as they have now been presented to the court, this opinion has either been overtaken by events or further facts have been elicited which would mean that it could not be relied upon without giving counsel an opportunity to reconsider it in the light of these additional facts. It seems to me therefore that the failure to exhibit what is in effect an outdated opinion (notwithstanding the fact that it is dated August, 2016) does not give rise to a need for cross-examination. The failure to do so did not breach the requirement to disclose all matters relevant to the exercise of the court’s discretion in the circumstances.
47. I have reached a similar conclusion in relation to both the Matsack agreement and the letters of wishes. It was submitted that neither of these are documents of title. They may be evidence upon which the parties may rely upon at the trial of the action, but I do not believe that it is necessary to set before the court all evidence in the hands of the deponent provided that the party has otherwise complied with the obligation set out in Tate Access Floors to disclose all matters relevant to the exercise of the court’s discretion whether to grant the interim relief sought. At para. 53 of his grounding affidavit the plaintiff quotes from an affidavit of the bankrupt sworn on the 12th October, 2016, where he states that Walford: -
“… was held in trust by me for my wife Gail Dunne until 9 October 2006 when Matsack Nominees Ltd a nominee company controlled by the partners of Matheson Solicitors, assumed the role of trustee.”
The plaintiff disclosed the existence of that agreement and of the importance attributed to it by the bankrupt and the defendant, even though he did not exhibit the agreement. A court will be able to assess for itself the weight to attribute to such omission without the need for cross-examination to explain the failure to exhibit the agreement referred to in the affidavit. Likewise, the weight to be attributed to the failure to disclose what is, on its face, in the nature of a will, in respect of a person who is not deceased, is a matter for the court hearing the interlocutory application.
48. It will be for the judge hearing the interlocutory application to assess the relevance of the fact that in 2012, when far less was known of the affairs of the bankrupt and the defendant, one of its creditors, NALM, failed to obtain a Mareva injunction in the United States. Five years later a more complete, though by no means clear, picture has emerged. Significantly, many of the events in respect of which the Official Assignee makes complaint in these proceedings and, in particular, in this application, occurred subsequent to the failed application in the United States. In those circumstances, the failure to refer to a failed application by one of the creditors of the bankrupt does not require to be assessed by cross-examination at an interlocutory hearing.
49. Finally, it was said that the plaintiff ought to have indicated the basis upon which he claimed that the bankrupt was insolvent at the time when most if not all of the transfers of property by the bankrupt to the defendant took place. The issue of the solvency of the bankrupt and when he became insolvent is clearly a matter that will require detailed evidence at the hearing of the trial of this case. It is not a matter upon which the court would require further information as is suggested by the defendant in relation to a Mareva injunction. This is quintessentially not an issue to be determined at the injunction hearing and therefore, the failure to adduce fuller, (or any) evidence as to the date of the insolvency of a bankrupt is not a matter in respect of which I will exercise my discretion to permit cross examination.
Culpable Errors
50. The defendant pointed to a number of errors in the plaintiff’s affidavits which the plaintiff either accepted or did not contest. Firstly, in para. 27 of his grounding affidavit, the plaintiff quoted in full the 2005 agreement and stated “There is apparently no original of this agreement available.” The defendant, in fact, had confirmed that she had the original agreement and that it was available for him to inspect at her solicitor’s offices. The plaintiff accepts this, and apologised and explained how the error had occurred while drafting the affidavit and was not then detected. It is for the judge hearing the application to decide whether or he or she accepts that explanation . Cross-examination is not required.
51. Secondly, the plaintiff said that the defendant wanted the litigation to take place in the United States. She says this is incorrect in light of the correspondence which was exchanged between her solicitors and the plaintiff’s solicitors following my judgment refusing to dismiss these proceedings on the basis of forum non conveniens.
52. The situation is more nuanced. She appealed the decision to the Court of Appeal where she is maintaining her argument as to forum non conveniens. Subsequent to lodging her appeal, she offered to have the issues tried either in Ireland or in the United States, provided that there were joint plaintiffs, the plaintiff and the Chapter 7 Trustee. Her preference was for the United States. The plaintiff’s solicitors responded to this letter with a counter offer which was not accepted by the defendant and at present, no agreement has been reached between any of the parties on case management issues for the progression of litigation in both Ireland and the United States. Meanwhile, the defendant is continuing her appeal against the decision refusing to strike out these proceedings and thus is maintaining, in the context of these proceedings, her position that matters should be tried in the United States. Therefore, the error (if such it be) in the plaintiff’s affidavit could not be described as either grave or even misleading. Cross-examination is not required in respect of this issue either.
53. The defendant complains that the plaintiff misrepresented her defence by stating that she pleads that she received Walford as a gift from the bankrupt. In para. 26 of his affidavit he states: -
“In the Defence it is pleaded at para. 33 and 34 that Walford was given to Gayle Dunne in part performance of the transfers.”
Thus, the court’s attention is drawn to the specific plea and where it is to be found. Further, in para. 30, he states:
“… Ms. Dunne has pleaded that it was gifted to her in part performance of the 2005 Agreement and that the gifting to her of Walford strengthens in some way the enforceability of the 2005 Agreement...”
At paragraph 32 the plaintiff then states: -
“The defendant’s position as pleaded is that the transfer to her was a gift which occurred in 2005.”
The defendant alleges that this is an error and does not properly reflect her case. This is so and it is an error, but her position was correctly stated in the preceding paragraphs I have cited. I do not believe that cross examination is required in the circumstances.
54. The matters to which the defendant takes gravest exception are the plaintiff’s repeated averments that she and the bankrupt has stated on oath that they have no knowledge or connection with Yesreb; that the Yesreb declaration is false and that Yesreb cannot be relied upon to tell the truth that neither she nor the bankrupt had any interest in Walford since 2013 and the trust in relation to Walford is a sham. She states that these four averments are very damaging and are false and can be shown not to be borne out by the evidence adduced by the plaintiff.
55. The only evidence that supports the contention that she averred that she had “no knowledge or connection with Yesreb” is an extract from a transcript of her evidence given to the Chapter 7 Trustee’s counsel. She was asked: -
56. I agree with the defendant that to conclude from this evidence that the defendant has said that she has no connection with or knowledge of Yesreb is simply incorrect. She said what she said. The overstatement gives a misleading impression. However, the potential harm that could have been caused is remedied by the fact that in paras. 90 and 91 the plaintiff set out in full the basis upon which he concludes that she is not being frank with either him or the Chapter 7 trustee in relation to Yesreb and her knowledge of Yesreb. In particular, he quotes in full the exchange I have quoted above.
57. It is also noteworthy that the defendant revealed in her replying affidavit that Yesreb was not a third party Cypriot company with which she had no connection. She says she lent it the money to enable it to purchase Walford from her in 2013. According to her affidavit, the ultimate beneficial owner of Yesreb is John Dunne, her stepson, and he holds the company for the benefit of himself and the three children to the marriage of the defendant and the bankrupt. The defendant maintains, contrary to the assertions of the plaintiff, that neither she nor the bankrupt have had an interest in Walford since 2013. She says his statements in that regard are false or overstatements to a culpable degree.
58. It seems to me that it would be difficult so to conclude on the basis of the evidence the plaintiff placed before the court in his affidavit. He did not have a clear picture of these events and it seemed to him that there was some connection between the bankrupt, the defendant and Yesreb, but initially Yesreb had been portrayed as a third party Cypriot company, rather than an entity with apparently close connections to the bankrupt and the defendant. In light of the emerging picture in relation to Yesreb and the fact that the plaintiff was obliged to piece together information as best he could in relation to the sale to Yesreb in 2013 and the onward sale by Yesreb in 2016 and the fact, as now disclosed by the defendant, that the ultimate beneficiary of Yesreb is the son of the bankrupt rather than either the bankrupt or the defendant, and that he in turn holds it in trust for the benefit of the children of the bankrupt and the defendant and himself, the plaintiff’s misstatement of the situation is (a) explicable (b) redeemed by his full account of the facts upon which he based his conclusion and is a matter which the trial judge may assess without the need for cross-examination. The court ultimately was not misled by the plaintiff’s characterisation of the evidence of the defendant as the entire basis for the plaintiff’s conclusions, overstated as they were, were before the court.
59. In para. 86 of his affidavit, the plaintiff quotes an email of the 5th September, 2011, from the defendant to Mr. Seamus Reddan who acted as the agent of the bankrupt and the defendant in relation to Walford. In the email the defendant stated “as you know the property is held in trust…”. The plaintiff states that he believes that the trust referred to in the affidavit is a sham. He says this on the basis that there was no trust document in 2011/2012 when Ms. Goodman B.L. furnished tax advices to Mr. McAuliffe. No trust is referred to in the defence filed in these proceedings. The statutory declaration sworn by the bankrupt in August, 2016 in relation to Walford makes no reference to a trust. On this basis, it seems to me that the plaintiff has set out the basis for his belief that the reference in the email of September, 2011 to the trust was a sham. It will ultimately be a matter for the court at trial to decide whether this is so. If he overstated his conclusions, he has in no way misled the court as the basis upon which he reached those conclusions is set out in full.
60. In reply, the defendant says that this conclusion is not borne out by the fact that there is a declaration of trust and there is the Matsack agreement. It would appear that there are arguments for believing that the Matsack agreement is not a document of title and therefore cannot constitute a trust. It was not listed as a document of title by Matheson Solicitors when they transferred their file to Mr. McAuliffe. In senior counsel’s opinion on the title to Walford prepared for Mr. Doran, he reaches the same conclusion concerning the Mastack agreement.
61. The defendant placed greatest emphasis upon the bald assertion by the plaintiff that the declaration by Yesreb was false and that Yesreb cannot be relied upon to tell the truth. She states that this is not borne out by the four documents exhibited by the plaintiff.
62. It may be that the judge hearing this matter may conclude that these statements are incorrect and possibly that there are unwarranted. However, critically, the entirety of the evidence upon which the plaintiff bases his conclusion are exhibited before the court and are relatively easy to read and digest. Therefore, while these matters may ultimately amount to very significant and possibly damaging overstatement of the position in relation to Yesreb, all of the relevant material is before the court which can make its own assessment in relation to it. Therefore, it is not a matter upon which cross-examination of the defendant is required in order to assess his alleged culpability in making these averments in relation to the particular evidence in question.
Exclusion of Evidence
63. As was pointed out by counsel for the Official Assignee, the purpose of s. 21 is to assist the Official Assignee in his administration of the estate of a bankrupt. In particular it is to assist in gathering relevant information relating to the trade, dealings, affairs or property of the bankrupt. It is clearly the purpose of the section that information so acquired may be used for the purpose of gathering in any assets of the bankrupt which may not have been handed over to the Official Assignee. Inherent in this function is the fact that the Official Assignee may use the information acquired, if necessary, in court proceedings to recover assets for the benefit of the estate of the bankrupt. It makes little sense if he could not use the information in recovery proceedings. There is nothing in the section to suggest that he should be constrained in any way in the use he makes of information obtained pursuant to examinations made under s. 21 of the Bankruptcy Act 1988.
64. There is no unfairness, as alleged by the defendant, in this situation. All of the property and rights to property of the bankrupt vest in the Official Assignee upon the adjudication, but the Official Assignee is not the bankrupt. By definition he does not have the same knowledge or information regarding the affairs of the bankrupt as the bankrupt himself. The purpose of this provision is to ensure that the bankruptcy process is not frustrated by lack of cooperation by either the bankrupt or any other person who may have knowledge or information relevant to his or her trade, dealings, affairs or property. This provision is designed to redress an imbalance which otherwise could exist to the detriment of creditors of the bankrupt. I do not believe that fair procedures or other equitable principles require that transcripts of evidence obtained pursuant to s. 21 should be excluded from proceedings against parties other than the bankrupt where the Official Assignee maintains those proceedings for the benefit of the estate.
Conclusion
65. Essentially, the defendant has failed to establish exceptional circumstances why cross-examination should be permitted at the hearing of an interlocutory injunction. There is a clear distinction to be drawn between this case and other cases where it is alleged that parties have failed to disclose material which ought to have been put before the court when seeking ex parte relief. I have no reason to believe that a court would not be in a position to assess the culpability or the gravity of the matters identified by the defendant upon the evidence before the court. I also see no merit in the application to exclude from the evidence before the court the transcripts of the evidence of Mr. Sweetman or Mr. McAuliffe. I therefore dismiss the application.
