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You are here: BAILII >> Databases >> Supreme Court of Ireland Decisions >> In the matter of Sean Dunne (a Bankrupt) [2015] IESC 42 (15 May 2015)
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Cite as: [2015] IESC 42
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Judgment
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THE SUPREME COURT [Appeal No. 535/2013] Denham C.J. Laffoy J. Charleton J. IN THE MATTER OF SEAN DUNNE (A BANKRUPT) Judgment of Ms. Justice Laffoy delivered on 15th day of May, 2015
Introduction
(b) the common law to the extent, insofar as is relevant, which will be considered later. 2. In broad terms, the issues on the appeal arise from the fact that Ulster Bank Ireland Limited (the Petitioner) on 12th February, 2013 presented a petition to the High Court to have Sean Dunne (the Appellant) adjudged bankrupt. Approximately six weeks later, on 29th March, 2013, the Appellant voluntarily filed for Chapter 7 Bankruptcy in the United States Bankruptcy Court, District of Connecticut (the US Bankruptcy Court). The parties to the appeal are the Appellant, as appellant, and the Petitioner, as respondent. The Official Assignee also participated in the appeal to assist the Court. One of the principal creditors of the Petitioner, the National Asset Loan Management Limited (NALM), also participated. Against that background, it is necessary to outline the procedural steps in the proceedings to date in some detail. Procedural steps 4. On the voluntary filing by the Appellant for Chapter 7 Bankruptcy in the US Bankruptcy Court on 29th March, 2013, Richard M. Coan (the Chapter 7 Trustee) was appointed the trustee of the Bankruptcy Estate of the Appellant and an automatic worldwide stay on any further proceedings in relation to the Appellant’s estate took effect. 5. While the Petitioner’s petition was still pending in the High Court, the Petitioner on 28th May, 2013 filed an amended motion with the US Bankruptcy Court for entry of an order granting limited relief from the automatic stay to permit the Petitioner to take all actions necessary -
(ii) to obtain an order adjudicating the Appellant “bankrupt” In the motion it was asserted as follows:
7. After the filing of the Appellant’s objection to the motion for relief from the automatic stay, the motion was heard in the US Bankruptcy Court by Judge Shiff on 4th June, 2013. The transcript of the hearing was before the High Court and is before this Court on the appeal. Judge Shiff granted the relief sought by the Petitioner on that day. The order was perfected on 12th June, 2013 and it ordered that the automatic stay was modified -
(b) to permit parties in interest to continue with the “Irish Bankruptcy Proceeding” and to take all actions necessary in connection with or relating to the Petitioner’s application to have the Appellant adjudicated “bankrupt” in the “Irish Bankruptcy Proceeding”, with the proviso “that nothing in this Order shall deprive this Court of jurisdiction over the [Appellant] or over the property of the bankruptcy estate; (c) to permit the parties in interest, in the event that the Appellant is adjudicated “bankrupt” in the “Irish Bankruptcy Proceeding”, “to attend and participate in any proceeding for the nominating and/or voting in respect of the appointment of a Trustee pursuant to s. 110 of the [Act of 1988], as amended, and to take all actions set forth under the laws of Ireland in connection therewith”.
9. Difficulties had been encountered by the Petitioner in serving the petition in the High Court proceedings on the Appellant, who at the time of the presentation of the petition was residing in Connecticut, pursuant to the order permitting service out of the jurisdiction. An order for substituted service was made by the High Court (Dunne J.) on 10th June, 2013 and it was perfected on 18th June, 2013, contemporaneously with the delivery of the order of Judge Shiff. The petition was listed for hearing in the High Court on Monday, 29th July, 2013. While there is a dispute as to whether the petition had been properly served on the Appellant, which will considered later, the petition was heard in the High Court on 29th July, 2013. The Petitioner was not represented at that hearing, although his U.S attorneys, Zeisler & Zeisler, were aware of the hearing on that day and had corresponded with the Petitioner’s solicitors on 26th July, 2013. That correspondence having been put before the High Court, an order was made by the High Court (Dunne J.) in which it was recorded that satisfactory proof had been given that the requirements of s. 11(1) of the Act of 1988 had been complied with and it was ordered that the Appellant be and was thereby adjudicated a bankrupt. 10. Having on 30th July, 2013 been granted an extension of time by the High Court, on 12th August, 2013, the solicitors on record for the Appellant filed in the High Court notice of the intention of the Appellant to show cause against the validity of the adjudication of bankruptcy made on 29th July, 2013 against him on the grounds that the order of adjudication against him is invalid and on the basis that the requirements set out in s. 11(1) of the Act 1988 had not been complied with. The grounds for those contentions, as particularised, may be subsumed under three headings. 11. First, it was contended that the Petitioner had failed to demonstrate that the High Court had jurisdiction to make the adjudication order and that it was not made in accordance with law having regard to the Appellant’s pre-existing bankruptcy in the United States of America, the validity of which had not been contested by the Petitioner. In support of the contention that there was lack of jurisdiction, it was asserted as follows: that the order was contrary to the principle that bankruptcy should take place by way of unitary proceedings; that the order purported to impose multiple bankruptcies upon the Appellant contrary to law, including private international law; that the order infringed upon and/or had the capacity to infringe upon the principle of the comity of nations; that the Petitioner’s petition was made in the knowledge that the order for relief against the worldwide stay pre-supposed the negotiation and presentation of an ad hoc bankruptcy protocol to the High Court in circumstances where no such protocol exists and where the High Court has no jurisdiction to consider or approve of such a protocol; and the adjudication of bankruptcy was unnecessary having regard to the possible availability of more appropriate alternative means with which to give effect to the bankruptcy process under way in the US Bankruptcy Court. 12. Secondly, it was asserted that the order had been obtained in breach of the Appellant’s procedural rights pursuant to Order 76 of the Rules of the Superior Courts 1986 (the Rules) and the Act of 1988, with specific reference to the Appellant’s entitlement to notice, including statutory notice. 13. Thirdly, the grounds on which it was contended that the requirements of s. 11(1) of the Act of 1988 had not been complied with were particularised as follows: that the Appellant was not domiciled in this jurisdiction and that he was domiciled in the United States of America; that the Appellant did not ordinarily reside and had not ordinarily resided in this jurisdiction for a period in excess of one year prior to the presentation of the petition; that the Appellant did not have a place of business in this jurisdiction and had not had for a period in excess of one year prior to the presentation of the petition; that the Appellant did not have a dwelling house in this jurisdiction and had not had for a period in excess of one year prior to the presentation of the petition; and that the Appellant had not carried on business in this jurisdiction, alone or as a member of a partnership, whether by means of an agent, manager or partner for a period in excess of one year prior to the presentation of the petition. 14. The motion to show cause was heard in the High Court by McGovern J. on affidavit evidence, primarily, although not exclusively, on affidavits of the Appellant and of Mr. Hurson on behalf of the Petitioner. Neither party sought to cross-examine any deponent of the other party. 15. The trial judge delivered judgment on 6th December, 2013. On that day the High Court ordered that the Appellant’s application to show cause be dismissed. It is against that order that the Appellant appeals to this Court. Judgment of the High Court
(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.” 18. The trial judge dealt with the issue as to the service of the petition on the Appellant first. He concluded (at para. 24) that, as submissions on the issue were made for the first time at the hearing of the motion to show cause and there was no new evidence on the issue of service, the Appellant could not argue that the evidence available on the hearing of the petition did not disclose proper service having been effected and that it was impermissible for the Appellant to seek to re-open the issue of service, because to do so would effectively amount to an appeal. He then stated:
(a) the debt owing by the debtor to the petitioning creditor . . . amounts to €1,900 or more, (b) the debt is a liquidated sum, (c) the act of bankruptcy on which the petition is founded has occurred within three months before the presentation of the petition, and (d) the debtor (whether a citizen or not) is domiciled in the State or, within three years before the date of the presentation of the petition, has ordinarily resided or had a dwelling-house or place of business in the State or has carried on business in the State personally or by means of an agent or manager, or is or within the said period has been a member of a partnership which has carried on business in the State by means of a partner, agent or manager.” 20. On the domicile requirement, having considered the judgment of Arden L.J. in Barlow Clowes v. Henwood [2008] EWCA Civ 577 (Barlow Clowes), the trial judge stated (at para. 46) that he was not satisfied that the Appellant had discharged the onus upon him to show cause for the adjudication to be set aside on the basis of domicile. Having referred to an e-mail sent by the Appellant to an officer of the Petitioner on 8th November, 2010, in which the Appellant stated that his domicile “is Ireland”, the trial judge stated:
21. In relation to the other requirements of para. (d) of s. 11(1), the trial judge found that the Appellant had failed to discharge the onus of proving that he had not ordinarily resided (para. 54), did not have a dwelling house (para. 60) or business (para. 71) in the State within the three years prior to 12th February, 2013. 22. The trial judge addressed the Appellant’s contention as to the lack of jurisdiction to make an adjudication order in paras. 72 to 88. He concluded that the Act of 1988 does not preclude a dual bankruptcy. Having outlined some of the provisions of the Chapter 7 Trustee’s statement in partial support of the Petitioner’s motion in the US Bankruptcy Court for a stay, he stated (at para. 84) that the courts in this jurisdiction must have regard to principles of comity and should be slow to ignore the express wishes of the Chapter 7 Trustee which were accepted by the US Bankruptcy Court in granting the stay which was sought. He stated (at para. 85) that, while the principle of unitary bankruptcy is one that should be followed, save in exceptional circumstances, he was of the view that, in the particular case before him, there were exceptional circumstances. These included that the Appellant had “contrived a situation” whereby the US Bankruptcy Court had become involved, when the Appellant knew that the Petitioner was taking steps to have him adjudicated a bankrupt in Ireland, that the US Bankruptcy Court had been persuaded to modify the stay, and that the Chapter 7 Trustee supported the Irish bankruptcy. The trial judge stated:
Notice of appeal 24. First, it is contended that the trial judge erred in law and in fact by approving the dual bankruptcy proposed by the Petitioner and by declining to exercise the discretion to annul the adjudication under s. 85C(1) of the Act of 1988. In elaborating on that ground, it is specifically contended that the trial judge erred in law and in fact in finding that there are no legal impediments to a dual bankruptcy in this jurisdiction, particularising matters which it is contended contradict that finding, by way of example, that the functions and powers of the High Court do not extend to negotiation, implementation, or approval of an “ad hoc protocol” or dual bankruptcy process. It is also asserted that -
(b) erred in finding that the support of the Chapter 7 Trustee was a relevant factor to be taken into account, and (c) failed to consider, or adequately consider, in exercise of his discretion, whether the making of “orders in aid” provided for in s. 142 of the Act of 1988 was an appropriate alternative to the adjudication of bankruptcy. 25. Another ground centres on the finding that the Appellant was domiciled in this jurisdiction for the purposes of the Act of 1988. The finding in relation to domicile is the only finding in relation to compliance with the criteria stipulated in s. 11(1)(d) of the Act of 1988 which has been challenged. Therefore, the findings of the trial judge in relation to residence in, having a dwelling house or place of business in, and carrying on business in the State, which are not challenged, stand. 26. Finally, the Appellant challenges the findings of the trial judge in relation to service of the petition on the Appellant and, in particular, as regards compliance with the requirements of Order 76, rule 25 of the Rules and the finding that the issue of service could not be revisited as part of “a show cause” application without fresh evidence. Appellant’s submissions on the jurisdiction issue in outline
(b) whether the petition was properly served in accordance with the requirements of law and of the Rules, which will be referred to as the service issue. 29. As regards the Appellant’s further ground of appeal based on the “orders in aid” mechanism provided for in s. 142 of the Act of 1988, it seems to me that it could be regarded as a hybrid argument in that it may be deployed in support of the contention that the Court does not have jurisdiction or, alternatively, that, if the Court has jurisdiction, the trial judge did not exercise such discretion as he had under that jurisdiction properly. Given the multiplicity of issues which have to be addressed on this appeal, I do not consider it necessary or appropriate to determine in any definitive manner the question as to whether the Court has a residual discretion to refuse to make an adjudication order where compliance with the requirements of s. 11(1) of the Act of 1988 has been established and the regulatory requirements have been complied with, or, if it has, the circumstances in which it may be exercised, although those issues are touched upon in subsequent paragraphs of this judgment (cf. paras. 30, 34 and 36). The Petitioner’s submissions on the jurisdiction issue in outline 31. In relation to the recent English authorities relied on by the Appellant in support of the modified universalism argument, the Petitioner relies on the most recent decisions of the United Kingdom courts and, in particular, the decision of the U.K. Supreme Court in Rubin and Anor. v. Eurofinance SA and Ors. [2013] 1 AC 236 (Rubin) and also very recent judgments of the Privy Council delivered on 10th November, 2014 in Singularis Holdings Ltd. v. PricewaterhouseCoopers [2014] UKPC 36 (Singularis). The Petitioner also relies on the statement of the law contained in Dicey, Morris & Collins on The Conflict of Laws (2014, 15th Ed.) and, in particular, the principle summarised in what is called Rule 210. It is pointed out that the 15th edition post-dated most of the United Kingdom authorities on which the Appellant relies in support of his argument that the principle of modified universalism would be infringed, if this Court were to uphold the order of the High Court. Moreover, counsel for the Petitioner cite a range of authorities stretching over almost two centuries from 1814 to 1995 in which English courts have adjudicated a person a bankrupt in circumstances in which the person was already a bankrupt in another jurisdiction, that other jurisdiction sometimes being Ireland. Those authorities, it is submitted, are themselves consistent with the application of the principle of universality. 32. The Petitioner disputes the Appellant’s contention that there is no legal foundation for the proposed protocol arrangement between the Chapter 7 Trustee and the Official Assignee. Jurisdiction to make an adjudication order where there is a pre-existing bankruptcy: discussion Rule 210 33. While not oblivious to or ignoring the observations made in this Court by O’Donnell J. in Re Flightlease (Ireland) Limited (in voluntary liquidation) [2012] 1 IR 722, in relation to the rules set out in the previous edition (the 14th edition) of Dicey, Morris and Collins on The Conflicts of Law in the context of the application of so-called “Rule 36” under consideration in that case, nonetheless, I find so-called “Rule 210”, as formulated in the 15th edition, to be a useful starting point in addressing the jurisdiction issue. Rule 210 provides:
34. In the commentary on Rule 210, the editors state (at para. 31 - 019) as follows:
35. The effect and consequences of an English bankruptcy in such circumstances are addressed in subsequent rules in Dicey, Morris and Collins. To take one of many examples, Rule 214(2), which deals with the jurisdiction of foreign courts, provides that, subject to the effect of the EU Regulation, -
(a) he was domiciled in that country at the time of the presentation of the petition; or (b) he submitted to the jurisdiction of its courts, whether by himself presenting the petition or by appearing in proceedings.” 36. The decision in Artola Hermanos is useful in illustrating the distinction between the issue as to jurisdiction of a court to adjudge a debtor a bankrupt in circumstances where he has already been adjudicated a bankrupt in a foreign country and the effect and consequences of the creation of a concurrent bankruptcy. In that case, a firm, having its head office in Paris, had a branch establishment in England. The firm was declared bankrupt in Paris under the law of France, and a syndic was appointed to administer the estate. Subsequently a bankruptcy petition was presented against the partners in England and an order was made appointing an interim receiver. The syndic applied to the English court to discharge that order and to stay all further proceedings under the petition. There was no evidence as to the domicile of the members of the firm, but two of them resided in England, where the firm had large assets. The Court of Appeal held that the jurisdiction of the court being undoubted, the receiving order was rightly made. However, the fact that a prior bankruptcy had been commenced in a foreign country, not shown to be the country of domicile of the debtors, was no ground for staying the proceedings in England. Fry L.J., in a passage in his judgment referred to by counsel for the Petitioner stated as follows at p. 647:
37. In his judgment in Artola Hermanos, Fry L.J. (at p. 648) then went on to consider the effect of the concurrent bankruptcies and how they should be dealt with. He considered three possibilities, the first being that each forum would administer the assets locally situated within its jurisdiction, which he acknowledged gave rise to “several inconveniences”. The second was that every other forum should yield to the forum of the domicile and that the forum of every foreign country (i.e. not of the domicile), should act only as an accessory and an aid of the forum of the domicile, which possibility did not apply, there being no evidence that the bankrupts were domiciled in France. He ruled out the third possibility, namely, that the forum of the country in which the debtor had assets and which first adjudicated him bankrupt, although not the forum of the domicile, should be entitled to claim the assets from the tribunals of the other countries in which he had assets. That possibility he suggested was an entirely unreasonable one. 38. Of the very considerable number of English authorities from the nineteenth century and the early twentieth century which have been put before this Court by counsel for the Petitioner, I have analysed the decision of the Court of Appeal in Artola Hermanos because it illustrates the distinction to which I have already alluded between the jurisdiction to create a concurrent bankruptcy and the effect and consequences of so doing. An important aspect of the decision in Artola Hermanos, however, was that Lord Coleridge C.J., in his judgment, with which Fry L.J. agreed, made it clear that the Court was not deciding what was to be done with the English assets when they were collected, nor according to what law, the law of France or of England, they were to be administered amongst the creditors. He stated (at p. 646) as follows:
40. In the context of responding to the Appellant’s submission that the Act of 1988 does not confer any jurisdiction on the Official Assignee to enter into a protocol with the Chapter 7 Trustee or confer any jurisdiction on the High Court to approve of such a protocol, counsel for the Petitioner referred the Court to a passage from Goode on Principles of Corporate Insolvency Law (4th Ed., 2011) at para. 16 - 65, in which judicial co-operation in concurrent insolvent proceedings is considered and, in particular, the manner in which bankruptcy proceedings in the United Kingdom and concurrent Chapter 11 proceedings in the US Bankruptcy Court in the Southern District of New York in relation to the collapse of the Maxwell Group of companies were conducted in tandem, which will be considered later. However, at the risk of unnecessary repetition, it is not the Court’s function at this juncture to make any determination or, indeed, express any view on how, if it continues, the bankruptcy of the Appellant should be conducted. Jurisdiction exercised by the Irish courts 42. The earliest in time of those authorities is Ex parte Cridland [1814] 3 V & B 415. In that case the petitioner and his brother were in partnership as merchants in England and Ireland, the petitioner residing in Dublin and his brother residing in Leicester. The petitioner was declared a bankrupt in Ireland first. A short time later both the petitioner and his brother were declared bankrupts in England. It was held by the Lord Chancellor, Lord Eldon, that the joint bankruptcy in England was not superseded on the ground of a previous separate bankruptcy proceeding in Ireland. In other words, it was held that the two bankruptcies should subsist together. 43. The later authority is in Re O’Reardon [1873] L.R. 9 Ch. 74. In that case Mr. O’Reardon, in England, and Mrs. Murphy, in Ireland, had carried on business in partnership. Mr. O’Reardon was adjudicated a bankrupt in England and Mrs. Murphy was adjudicated a bankrupt in Ireland. Then they were jointly adjudicated bankrupts in Ireland, the same persons being appointed assignees as were assignees under Mrs. Murphy’s bankruptcy. The issue for the London bankruptcy court was by whom, whether the English trustee or the Irish assignees, monies realised from the sale of business assets of the partnership should be distributed. Mellish L.J. considered the effect of joint adjudication after separate adjudications, the separate adjudications being in two different jurisdictions. He stated (at p. 77):
On the simple ground of convenience, there is certainly no more reason why the English joint assets should be sent to Ireland than why the Irish joint assets should be sent to England. The English adjudication was first, the greater number of the joint creditors live in England, and there are considerable assets ready for distribution in England.” 44. Obviously, that passage is more concerned with the effect of a joint adjudication after separate adjudications, rather than with separate adjudications in different jurisdictions. However, what emerges is that no question arose as to the continued existence of two parallel bankruptcies in the two jurisdictions. 45. The decisions in Cridland and O’Reardon merely illustrate that after the Act of Union, and throughout the nineteenth century, the bankruptcy jurisdiction in Ireland and the bankruptcy jurisdiction in England were separate jurisdictions and under the English jurisdiction concurrent bankruptcies were permitted. Indeed, over two centuries later it is interesting to note the following observations of Lord Eldon in the Cridland case (at p. 417) in relation to the difficulties created by concurrent bankruptcy commissions across the Union:
It seems to me therefore, that now, the Union of the three Parts of the Kingdom having taken place, though their separate Laws still exist, there is no satisfactory Mode of solving these Difficulties without some legislative Regulation upon the Subject.”
46. It would appear that any Irish judges who were subjected to the distress of having to deal with concurrent bankruptcies did not record their thoughts in judgments. In any event, no judgment of an Irish court, either before or after 1922, in relation to concurrent bankruptcies has been put before this Court. In the Budd Report the existence of a foreign dimension to a bankruptcy is considered in a number of respects. Most importantly for present purposes, it is considered in Chapter 53, which deals with auxiliary provisions or orders-in-aid. In para. 53.10.1 the different concepts which underlie the approach to international insolvency are adverted to as follows:
49. Another foreign dimension in relation to Irish personal insolvencies which is addressed in the Budd Report is the law in relation to vesting of property in foreign countries, which is alluded to in the passage from paragraph 53.10.1 quoted earlier and is also dealt with in para. 9.1.3, where it is stated:
51. A more relevant point is the definition of “property” in the Act of 1988. The definition of “property” in s. 3 of the Act of 1988 as originally enacted provided as follows:
(a) includes money, goods, things in action, land and every description of property, whether real or personal, (b) includes obligations, easements and every description of estate, interest, and profit, present or future, vested or contingent, arising out of or incident to property, (c) in relation to proceedings opened in the State under Article 3(1) of the Insolvency Regulation, includes property situated outside the State, and (d) in relation to proceedings so opened under Article 3(2) of the Regulation, does not include property so situated.” 52. The question to which the amendment of the definition of property in s. 3 gives rise is whether the absence of the words “and whether situate in the State or elsewhere” in relation to proceedings which are not subject to the EU Regulation means that the Oireachtas intended that property situated outside the State would not vest in the Official Assignee in accordance with s. 44. When the definition of “property” is read in the context of s. 44(1), in my view, that conclusion is not open. The effect of s. 44 is to vest “all property belonging to” the person adjudicated a bankrupt without indicating any limitation by reference to the location of the property. It will be recalled that the rationale for including the words “whether situate in the State or elsewhere” in the definition of property in the draft Bill annexed to the Budd Report was so that it would be apparent to a foreign court that under Irish law property vested in the Official Assignee included property outside the State, not that the inclusion of those words was necessary to vest “all property belonging to” a bankrupt in the Official Assignee. Modified universalism: recent authorities 53. Taking an overview of the provisions of the Act of 1988, in my view, the Act, as amended, cannot be interpreted as excluding the High Court from adjudicating a person a bankrupt solely by reason of the fact that he or she has been adjudicated a bankrupt by the court of a foreign country. However, having regard to the fact that so much emphasis was placed by counsel for the Appellant on the principle of modified universalism, it is appropriate to make some comments on the application of the principle. First, none of the recent authorities relied on by counsel for the Appellant concerned the jurisdiction of a court in the United Kingdom to adjudge a person a bankrupt who had already been adjudged bankrupt in a foreign country. In general, those authorities concerned the enforcement of insolvency judgments of foreign courts. The Cambridge Gas case concerned the jurisdiction of a court in the Isle of Man to give assistance to the Official Committee of Unsecured Creditors pursuant to an order made in proceedings in the United States under Chapter 11 of the United States Bankruptcy Code. As was subsequently noted by the United Kingdom Supreme Court in the Rubin case, this Court in Flightlease did not follow the decision of the Privy Council in Cambridge Gas. Secondly, none of the authorities relied on by counsel for the Appellant involved personal insolvency. Rather they involved corporate insolvencies. Thirdly, some of the authorities concerned the application of a statutory provision in force in England and Wales, s. 426 of the Insolvency Act 1986, a provision somewhat analogous to s. 142 of the Act of 1988, save that it provides that the power to assist extends to “a relevant country” and its application under consideration in one authority was to “a relevant country”, namely, Australia. Fourthly, some of the authorities involved consideration of the UNCITRAL Model Law. 54. At a more general level, there is a very helpful exposition of the development and effect of the principle of modified universalism in the judgments of the United Kingdom Supreme Court and, in particular, in the judgment of Lord Collins of Mapesbury on the appeal from the Court of Appeal in Rubin. Lord Collins did not disavow the dictae of Lord Hoffman in Cambridge Gas or in his speech in the House of Lords in In Re HIH Casualty and General Insurance Limited [2008] 1 WLR 852. In the latter, Lord Hoffman stated (at para. 30):
Lord Collins (at para. 115) characterised the question as one of policy: should there be a more liberal rule for avoidance judgments in the interests of the universality of bankruptcy and similar procedures and he answered the question in the negative. He stated (at paras. 128 and 129):
56. As the United Kingdom Supreme Court noted in Rubin, in Flightlease this Court declined to follow Cambridge Gas. In his judgment in Flightlease, with which the other judges of this Court concurred, Finnegan J. stated (at para. 66):
Deployment of principle of modified universalism by the Appellant 58. On this appeal, what the Appellant is endeavouring to achieve is to preclude the Petitioner from having the Appellant adjudicated a bankrupt in this jurisdiction. In determining whether the Appellant is entitled to do so, as was stated by the Privy Council in Singularis, this Court can only act within the limits of its own statutory and common law powers. As already stated, I am satisfied that nothing in the Act of 1988 precludes the High Court from making an order pursuant to s. 14(1) adjudicating the debtor a bankrupt, notwithstanding that he has been adjudicated a bankrupt in a foreign country, nor has any common law jurisdiction to that effect, which could be exercised in this jurisdiction, been pointed to. It remains to consider whether the jurisdiction of the High Court is in any way impeded by either the Appellant’s contention that there is no lawful means by which the Official Assignee can negotiate the proposed ad hoc bankruptcy protocol or, alternatively, on the ground that the objective of the Petitioner partly supported by the Chapter 7 Trustee could be achieved by seeking an order in aid.
Authority to enter into an ad hoc protocol 59. The Appellant’s argument that in bankruptcy proceedings in this jurisdiction there is no lawful means by which the Official Assignee could negotiate and obtain approval of what is referred to as a bespoke ad hoc protocol is premised on the proposition that the powers of the Official Assignee and the jurisdiction of the High Court in relation to personal insolvency derive entirely from the provisions of the Act of 1988. In this regard, counsel for the Appellant pointed to the following provisions of the Act of 1988:
(b) s. 61(2), which provides that 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 and it is emphasised that it is expressly provided that those functions are exercisable “in accordance with the provisions of this Act”; (c) s. 61(3), which lists the powers the Official Assignee shall have in performance of his functions, including the power to make any compromise or arrangement with creditors and the power to compromise all debts and liabilities; and (d) s. 81, which deals with preferential payments and sets out the debts which “shall be paid in priority to all other debts”, which it is contended is mandatory and cannot be adjusted to accommodate the Chapter 7 Trustee. 60. Counsel for the Petitioner in response, cite the decision of the English High Court in Re P. MacFadyen & Co. [1908] 1 KB 675, which was a case in which there were dual bankruptcies, one in England and the other in Madras in India, in which the English court held that it had jurisdiction to sanction an agreement between the trustee and bankruptcy in England and the Official Assignee in Madras for pooling all the assets and distributing them rateably amongst the English and foreign creditors, notwithstanding that the Bankruptcy Act 1883 contained no express provision authorising such a scheme. 61. Counsel for the Petitioner also rely on the commentary in Goode (op. cit.) referred to earlier for the suggestion that protocols in relation to cross-border insolvencies appear to be quite standard. Having referred to co-operation between the English bankruptcy court and the US Bankruptcy Court in the insolvency of the Maxwell Group companies, which occurred over twenty years ago, Goode states (at para. 16 - 65):
62. While I do not accept that, if the order of the High Court adjudicating the Appellant a bankrupt was properly made, the administration of the estate of the bankrupt will be a largely procedural matter, as suggested by the trial judge, and I anticipate that, on the contrary, it is likely to give rise to very complex issues, including issues of a substantive nature, I consider that it is not necessary, and it would not be appropriate, for the Court to express any view at this juncture as to whether and how those matters might be resolved. In particular, it is to be borne in mind that the proponents on this appeal are the Appellant, the bankrupt debtor, and the Petitioner, who is only one creditor, albeit one of two creditors, the other being NALM whose support it has, which this Court was told are due 99% of the debts owed by the Appellant. Of particular significance is the fact that the Chapter 7 Trustee is not before this Court, although this Court is fully aware of the basis on which Judge Shiff modified the worldwide stay to enable the bankruptcy proceedings in this jurisdiction to be pursued by the Petitioner. Order in aid as an alternative to dual bankruptcy 63. While s. 142 of the Act of 1988 is of no assistance to the Chapter 7 Trustee, there have been a number of recent decisions of the High Court in this jurisdiction which recognise that at common law an inherent jurisdiction exists, deriving from the underlying principle of universality of insolvency proceedings, by virtue of which the courts in this jurisdiction can give recognition to insolvency proceedings in a foreign jurisdiction and act in aid of the court in that jurisdiction: In Re Drumm (a bankrupt) [2010] IEHC 546; Fairfield Sentry Limited (in liquidation) & Anor. v. Citco Bank Nederland and Ors. [2012] 1 IEHC 81; and In Re Mount Capital Fund Limited (in liquidation) & Ors. [2012] 2 I.R. 486. However, if the High Court had jurisdiction to adjudge the Appellant a bankrupt on the petition of the Petitioner, and assuming the Petitioner established compliance with the criteria necessary to give it entitlement to such an order, there is absolutely no basis in law on which the High Court could abstain from exercising its jurisdiction on the ground that, instead of exercising its entitlement, the Petitioner should have attempted to persuade the Chapter 7 Trustee to pursue the order in aid route. Whether the Court has jurisdiction to make an adjudication order where there is a pre-existing bankruptcy in a foreign jurisdiction: conclusion Domicile issue 66. The ascertainment of the domicile of the Appellant as at the date of the presentation of the petition, 12th February, 2013, is governed by Irish law as the lex fori (c.f. Re Adams Deceased [1967] I.R. 424). As happened in the High Court, counsel for the Appellant relies primarily on the judgment of Arden L.J. in Barlow Clowes as a statement of the relevant legal principles and counsel for the Petitioner broadly accepts those principles but places particular emphasis on certain principles. In her judgment, Arden L.J. outlined ten principles, which are derived from Dicey, Morris and Collins on Conflict of Laws (14th Ed., 2006). The principles on which counsel for the Petitioner lay emphasis are the following:
(v) Every person receives at birth a domicile of origin . . . (vi) Every independent person can acquire a domicile of choice by the combination of residence and an intention of permanent or indefinite residence, but not otherwise . . .”
68. There is an aspect of the evidence adduced by the Appellant on the issue of domicile on the basis of which, if this Court was required to do so, I would find it impossible to reach a determination that the Appellant has proved that, as a matter of probability, he was not domiciled in the State on 12th February, 2013, on the basis that, as asserted by him, he had abandoned his domicile of origin and had acquired a domicile of choice in the United States of America. This arises from the Appellant’s affidavit sworn on 16th September, 2013, which specifically addressed the domicile issue in response to the averments in an affidavit sworn by Mr. Hurson on 28th August, 2013. The Appellant averred that his then current visa status in the United States of America was “that of an E2 - non-Immigrant visa holder”, his eligibility for the “investor visa” having arisen from the fact that his wife made an investment in “her US business Mountbrook USA LL.C, which is a development company”. He further averred that he had at all times understood that the E2 visa was indefinitely renewable and that it was possible that he could remain in the United States forever on that visa. However, he averred that, notwithstanding the fact that the E2 visa might be renewed indefinitely, it did not entitle him to “permanent residence” in the United States, as that term is understood in US immigration law. Since permanent residence was a necessary pre-requisite to obtaining US citizenship, he had “initiated the process to obtain a green card” and he had been advised that, if he obtained it, he would be eligible for United States citizenship after a further five years. The Appellant averred that, in order to achieve that, he had retained the services of a United States based immigration lawyer, Bruce Morrisson, a former member of the US House of Representatives, to assist him in obtaining a “green card” as a pre-cursor to obtaining United States citizenship. 69. The Appellant in that affidavit exhibited a letter dated 10th September, 2013 from Mr. Morrisson, which was addressed to the solicitors on record for the Appellant in these proceedings. In the letter Mr. Morrisson stated:
A person can acquire a domicile of choice without naturalisation . . .. On the other hand, citizenship is not decisive . . .” 72. Apart from that point, a large number of factual matters are relied on by the Petitioner in support of its contention that the Appellant has not discharged the onus of proving that he has acquired a domicile of choice in the United States of America. Some of those factual matters were also outlined by the trial judge in his judgment. Many of those matters demonstrate a continuing connection between the Appellant and this jurisdiction such as to lead to the conclusion that he has not established that he has abandoned his domicile of origin permanently and indefinitely. Service issue
“Every petition by a person other than the debtor shall be served, not less than seven days before the hearing of the petition, by delivering to the debtor personally a copy of such petition and by showing to the debtor at the time of such service the sealed original, or shall be served in such substituted manner as the court may direct. The petitioner shall file in the proper office an affidavit of service of the petition not later than two clear days before the hearing.” (b) Application of time limitations is governed by Order 122 of the Rules. Rule 9, which has been invoked by the Appellant, insofar as it is relevant for present purposes, provides as follows: “Service of summonses, pleadings, notices, orders, and other proceedings, shall be effected before the hour of five o'clock in the afternoon, except on Saturdays, when it shall be effected before the hour of one o'clock in the afternoon. Service effected after five o'clock in the afternoon on any weekday except Saturday shall, for the purpose of computing any period of time subsequent to such service, be deemed to have been effected on the following day. . . .” (c) Order 124 of the Rules addresses the effect of non-compliance and rule (1) provides: “Non-compliance with these Rules shall not render any proceedings void unless the Court shall so direct, but such proceedings may be set aside either wholly or in part as irregular, or amended, or otherwise dealt with in such manner and upon such terms as the Court shall think fit.” (d) Order 9, Rule 15, which deals with service, provides: “In any case the court may, upon just grounds, declare the service actually effected sufficient.” 75. In support of the Appellant’s contention that the adjudication order should be annulled because the petition was not served on the Appellant in accordance with the requirements of the Rules, the Court is referred to a number of authorities, the earliest being O’Maoileoin v. Official Assignee [1989] I.R. 647. There, Hamilton P., having reviewed earlier authorities, stated at follows (at p. 654):
76. There is a distinction, in my view, between the statutory requirements in relation to the form, content and service of a bankruptcy summons, service of which is designed to give rise to the existence of an act of bankruptcy, on the one hand, and the requirements of the Rules in relation to service of petitions, whether to wind up a company or to have a person adjudicated a bankrupt, on the other hand. That distinction is referred to in a passage from the judgment of Finlay Geoghegan J. in Society of Lloyds v. Loughran [2004] IEHC 1 on which the Appellant also relies. There the issue was whether a bankruptcy petition should be struck out on the grounds that the petitioner, a body corporate, had failed to comply with Order 76, rule 20(2), which requires the bankruptcy petition to be sealed with the seal of the body corporate and signed by two directors or one director and the secretary. Finlay Geoghegan J. stated:
For the purpose of exercising my discretion under O. 124 it is relevant that there is no prejudice asserted on behalf of the debtor by reason of the failure of Lloyds to seal and sign the petition in compliance with O. 76, r. 20.” 77. As regards the factual circumstances of the service of the petition on the Appellant, I propose starting with the order for substituted service made by the High Court (Dunne J.) on 10th June, 2013, following numerous attempts to have the petition personally served on the Appellant in Connecticut. The order for substituted service made under Order 76, rule 25 of the Rules ordered service of the petition and other documents by hand delivery of true copies thereof to -
(b) Ziesler & Zeisler at their address, 78. The Appellant having changed address, service at his old address in Greenwich pursuant to the order for substituted service could not, as counsel for the Appellant contend, have been effective. The Petitioner relies on service by delivery to the offices of Zeisler & Zeisler. Zeisler & Zeisler would have been aware that the petition had issued from the High Court on 12th February, 2013 and that it would be served when the procedural matters in the US Bankruptcy Court in relation to the modification of the worldwide stay were dealt with, which ultimately happened on 18th July, 2013. I propose to outline the service on the Petitioner at the offices of Zeisler & Zeisler in accordance with the order for substituted service by reference to what is stated in a letter dated 26th July, 2013 from Zeisler & Zeisler to the Petitioner’s solicitors. 79. On 18th July, 2013 a package addressed to the Appellant and marked “Strictly Private & Confidential To be Opened by Addressee Only” was delivered to the office of Zeisler & Zeisler. In that package, which included copies of the petition and other documents, there was notification by reference to the enclosed covering letter, which was dated 18th June, 2013, that the hearing of the petition was to take place on 1st July, 2013. Subsequently, on 22nd July, 2013 at approximately 4.30pm Eastern time (the time zone in which Connecticut lies and which the Appellant equates with approximately 9.30pm Irish time) a letter was delivered to Zeisler & Zeisler which referred to the petition having been served on the office of Zeisler & Zeisler on 18th July, 2013. As a result of that letter Zeisler & Zeisler learned that the hearing of the petition was on 29th July, 2013. On 25th July, 2015 the Appellant attended at the offices of Zeisler & Zeisler, at which stage the package delivered on 18th July, 2013 was opened. Zeisler & Zeisler stated in the letter that the Appellant had only then “become formally aware” that the petition was listed for hearing on 29th July, 2013. It was also stated that he did not have time before that day to properly instruct his Irish attorneys to act on his behalf, but that it was the Appellant’s intention to take further advice in Ireland in relation to the documents which had been received and in relation to the jurisdiction of the High Court to entertain a bankruptcy application against him. It was requested that the letter of 26th July, 2013 be brought to the attention of the High Court on 29th July, 2013 and it was commented that, obviously, the Appellant would need and was entitled to time to deal with and respond to the many complex legal, procedural and jurisdiction issues arising from the Petitioner’s filing. 80. There was no appearance on behalf of the Appellant before the High Court on 29th July, 2013, so that no adjournment of the hearing of the petition was sought on his behalf. The letter of 26th July, 2013 from Zeisler & Zeisler was put before the Court. The position of the Petitioner is that the High Court (Dunne J.) was satisfied that there had been compliance with the order for substituted service and, indeed, although not recited in the order of 29th July, 2013, it is implicit that that was the case. 81. On the following day, 30th July, 2013, the solicitors now on record for the Appellant appeared before the High Court and applied for an extension of time within which the Appellant might file a notice to show cause against the validity of the order of 29th July, 2013. That application was acceded to and things moved on from there. Counsel for the Petitioner make the point that the Appellant did not appeal the finding made on 29th July, 2013 that there had been compliance with the order for substituted service and suggested that it is impermissible for the Appellant to seek to re-open the question of the validity of service at this juncture. Indeed, as already recorded, the trial judge concluded (at para. 24 of his judgment) that, in the absence of some fresh evidence, it is impermissible for the bankrupt to seek to re-open the question of the validity of service, because that would effectively amount to an appeal. In particular, he concluded that, having regard to the contents of s. 85C(1)(b) (formerly s. 85(5)(b)) of the Act of 1988, a challenge to the adjudication on the basis of service in the case before him would be permissible only if there was some new evidence that had not been available before the judge who made the adjudication. 82. At the outset, I expressed approval of the approach adopted by the trial judge in treating the application of the Appellant on the basis of being an application pursuant to s. 16 in combination with what is now s. 85C(1)(b) of the Act of 1988, subject to a reservation in relation to the procedure adopted, which will be addressed at the end of the judgment. Determining the appropriateness of the pragmatic approach adopted by the trial judge involves considering from a procedural perspective whether the issues raised by the Appellant, other than the issues as to compliance with the requirements of s. 11(1)(d), of which only one remains on the appeal, the domicile issue, constitute this application an “other case” where the Appellant might possibly establish that he “ought not to have been adjudicated bankrupt” within what is now s. 85C(1)(b) of the Act of 1988. I am satisfied that they do. While there seems to be some disparity between the broad approach adopted by the trial judge to the overall determination of the issues, that is to say, not merely determining them by reference to s. 16, and the narrow approach he adopted to the determination of the service issue, in concluding that that could only be determined if there was fresh evidence on the application before him which had not been before the Court on the hearing of the petition, having regard to the manner in which the issues are before this Court, I am satisfied that the proper course is to consider whether the Appellant has made out a case that the adjudication of the Appellant should be annulled on the ground that the petition was not properly served, and that it is open to the Court to do so for the following reasons. First, I am not satisfied that the discretion conferred on the Court to annul a bankruptcy order by s. 85C(1)(b) is fettered in the manner suggested by the trial judge. Secondly, in any event, there was no affidavit evidence as to the Appellant’s version of the events in relation to the service of the petition on him before the High Court on the hearing of the petition on 29th July, 2013. All of the affidavit evidence adduced on behalf of the Appellant was filed on the application to show cause. 83. I have already referred to and, to the extent necessary, quoted from the relevant Rules in relation to the service of the petition: rule 25 of Order 76 and rule 9 of Order 122. As the kernel of the Appellant’s complaint is non-compliance with the Rules, I consider that the Court is entitled to have regard to rule 15 of Order 9 and rule 1 of Order 124, which have also been referred to and quoted. The order for substituted service made on 10th June, 2013 did not truncate the requirement of Order 76, rule 25 that the Appellant be served with the petition not less than seven days before the hearing of the petition on 29th July, 2013. Even though the package containing the petition was delivered to Zeisler & Zeisler on 18th July, 2013 in accordance with the order for substituted service, because of the manner in which it was addressed, it was not opened until 25th July, 2013. Further, because of the confusion in relation to the date of the hearing of the petition, the Appellant was not served by delivery at the office of Zeisler & Zeisler with notification of the date of the hearing of the petition and, in reality, with the petition, until 4.30pm Eastern Time (as distinct from Greenwich Mean Time) on 22nd July, 2013, when the date of the hearing of the petition as being 29th July, 2013 was notified to the Appellant via Zeisler & Zeisler. 84. Having regard to the combined effect of -
“Time. Where time is expressed by reference to a specified hour or to a time before or after a specified hour, that time shall be determined by reference to the Standard Time (Amendment) Act 1971”, (b) section 1(1) of the Standard Time (Amendment) Act 1971 which provides: “Notwithstanding s. 1(1) of the Standard Time Act 1968, the time for general purposes in the State shall during a period of winter time be Greenwich mean time, and during such a period any reference in any enactment or any legal document (whether passed or made before or after the passing of this Act) to a specified point of time shall be construed accordingly unless it is otherwise expressly provided”, and (c) Order 122, rule 9,
86. Apart from that, however, in the unusual circumstances of this case, the Appellant has suffered no prejudice whatsoever by reason of having had less than seven days notice of the date of the hearing of the petition. The purpose of the application to show cause was to enable the Appellant to argue that his adjudication should be annulled on the ground of failure to comply with the requirements of s. 11(1) of the Act of 1988. On that application the Appellant also argued two further points as grounds for annulling the adjudication order: the point that the Court did not have jurisdiction to make the adjudication order; and the point that the service was defective. His arguments were heard in the High Court by McGovern J. over three days in November 2013. He has had an opportunity to appeal against the decision of the High Court to this Court on all the grounds on which he relies and his appeal was heard in this Court ran into a third day in March 2015. In those circumstances, he has not suffered any prejudice. 87. Accordingly, I consider that the Appellant is not entitled to have the adjudication order annulled on the ground that the service of the petition on him was defective.
Procedural matters 89. It would also have been procedurally preferable if the Petitioner had made a separate application to the Court on 29th July, 2013 for an order deeming service on the Appellant to be good. As is pointed out in Delany and McGrath (op. cit.) in footnote 21 in relation to para. 3 - 13, although the Rules are silent on the point, it appears that such an application can be brought ex parte. It would have brought clarity to the matter if such an application had been brought and if an order had been made on that day deeming service good. Summary of conclusions and order
(b) The fact that the findings of the trial judge on the hearing of the Appellant’s application to show cause of compliance by the Petitioner with certain requirements of s. 11(1)(d) of the Act of 1988 have not been appealed against to this Court means that the issue as to whether the Appellant was or was not domiciled in the State when the Petitioner’s petition was presented to the High Court on 12th February, 2013 is, in effect, moot, because having regard to the unappealed findings made in relation to the application of the other requirements of para. (d), overall the requirements of s. 11(1) have been complied with. If it was necessary for this Court to determine the domicile issue, for the reasons outlined earlier, it would not be possible to conclude that the Appellant has discharged the onus of proving that he was not domiciled in the State on 12th February, 2013, the date of the presentation of the petition to the High Court, by reason of having acquired a domicile of choice in the United States of America. (c) On the hearing of the Petitioner’s petition on 29th July, 2013, the High Court was entitled to deem service of the petition on the Appellant sufficient and to proceed with the hearing of the petition. In any event, having regard to the circumstances as outlined above, the Appellant has not suffered any prejudice, having been afforded the opportunity on the application to show cause to pursue all of his arguments against the validity of the adjudication and to appeal the decision of the High Court to this Court. 92. Accordingly, there will be an order dismissing the Appellant’s appeal. | ||||||||||||||||||||||||||||||||||||||