Supreme Court dismisses appeals against bankruptcy adjudication and refusal to set aside annulment order.

THE SUPREME COURT

Nos. 18/00 & 447/04

Fennelly J.

Kearns J.

Macken J.

IN THE MATTER OF MICHAEL B O’Maoileoin, a Bankrupt

BETWEEN

MICHAEL B O'MAOILEOIN

Applicant

and

THE OFFICIAL ASSIGNEE

Respondent

JUDGMENT of MR JUSTICE FENNELLY delivered on the 6th day of March, 2006.

1. There are two separate appeals before the Court in the matter of the Appellant’s bankruptcy:

1. An appeal against a decision of Laffoy J of 21st December 1999 declining (a) to make an order pursuant to section 85(5)(b)

of the Bankruptcy Act 1988 on foot of a motion seeking annulment of the Appellant’s adjudication as a Bankrupt; (b) to make an

order pursuant to section 135 of the same Act setting aside an order dated 9th November 1995 permitting the Official Assignee

to seek an order in aid in bankruptcy in the High Court of Justice of England and Wales;

2. An appeal against a decision of Finlay-Geoghegan J dated 23rd July 2004 declining to re-enter the matter which had been

before Laffoy J in 1999, based on additional evidence.

2. The Appellant was a solicitor practising in Ireland from 1964 to 1986 and says he has practised as a barrister in England since 1986.

3. He was adjudicated a Bankrupt by Hamilton J (as he then was) on 12th January 1987. The petitioning creditor was one Patrick

McDonald. Mr McDonald had been a client of the Appellant, when he practised as a solicitor. Mr McDonald had recovered judgment

against the Appellant in a sum of some in an action for professional negligence. The finding of negligence was based on the

settlement of a personal injury action, which Mr McDonald claimed successfully had been effected without his authority. The judgment

was affirmed by this Court. That judgment was unsatisfied.

4. The Appellant did not show cause against his adjudication of 12th January 1987. He applied to the High Court by notice of motion

dated 27th October 1987 for an order annulling the adjudication on the ground that the debtor’s summons served by the petitioning

creditor had been defective, because the petitioning creditor had caused a receiver by way of equitable execution to be appointed in

respect of part of the sum due. On 21st September 1988, Hamilton P., as he then was, gave judgment dismissing that application. His

judgment is reported at [1989] I.R. 647. It contained the following statement:

“In this particular case, the position is that the debtor's summons claimed the entire of the amount due on foot of the

judgment of the High Court dated the 6th November, 1985. No amount has been paid in respect thereof to either the

petitioning creditor or to the receiver and the entire of the amount is due and owing and was due at the date of the issue of

the debtor's summons.”

5. Hamilton P. held that the debtor’s summons had been correct in matter of form and that the failure of the Appellant to comply with

it had constituted an act of bankruptcy. There was no appeal from that order.

6. In November 1988, it is alleged, according to evidence presented to the High Court in the present proceedings, that there was a

compromise of claims between the petitioning creditor and the Appellant. The former had accepted sums in discharge of his claims.

The petitioning creditor applied to the High Court ex parte for annulment of the bankruptcy. In the affidavit of the petitioning creditor

grounding that application, it was alleged, as it is in the present application, that the affidavit verifying the bankruptcy petition had

never been sworn by him. It has been sworn on behalf of the Official Assignee in the present proceedings, and not contradicted, that

the Appellant was represented by Senior Counsel at that hearing. The application for annulment of the bankruptcy was refused.

However, the High Court noted that the applicant was withdrawing all claims against the Appellant and relieved him of all further

obligations in the bankruptcy matter.

7. It is obvious that a very long period elapsed between the adjudication combined with the steps taken by the Appellant and the

petitioning creditor in 1988 and the step taken to seek annulment of his Bankruptcy in 1999. It is material to consider what happened

in that period.

8. Laffoy J recorded in her High Court judgment that, “because of lack of funds and the Bankrupt being out of the jurisdiction, the

bankruptcy was dormant from the end of 1988 to the beginning of March 1995 when the Official assignee became aware that the

Bankrupt was practising as a barrister in London.”

9. An affidavit sworn on behalf of the Official Assignee recounts some of the events of these years. The Official Assignee did not

advertise for creditors, in the absence of apparent assets. Nonetheless, he received claims in the bankruptcy in the amount of

IR£424,468. He made many unsuccessful efforts to persuade the Appellant to furnish a statement of affairs. It is material to the issue

on the present appeal that on 22nd March 1995, the Appellant wrote to the Official Assignee stating the following:

“Mr Michael O’Maoileoin……draw[s] attention to an affidavit of Mr Patrick McDonald……The said affidavit confirms that Mr

O’Maoileoin is not indebted to Mr McDonald in any sum and also confirms that at no time did Mr McDonald ever swear an

affidavit for Messrs Vincent & Beatty Solicitors which would have enabled that firm to file an affidavit and petition of the type

required by …… the Rules of the Superior Courts.”

10. The Official Assignee learned that the Appellant was a member of Lloyds of London and that, in that capacity, he was the owner

of assets amounting to a total of some £45,654.39 sterling. The Official Assignee applied, with the authority of an order of the High

Court, (the order which is challenged in these proceedings) to the High Court of Justice (in Bankruptcy) of England and Wales for an

order in aid in bankruptcy. He secured significant payments from Lloyds to the credit of the bankruptcy. The Official Assignee incurred

costs in a total sum of I.R.£49,989.

11. The Appellant applied anew to the High Court, by Notice of Motion dated 18th October 1999, for an order pursuant to section

85(5)(b) of the Bankruptcy Act 1988 annulling his adjudication as a Bankrupt.

12. It was assumed, for the purposes of the application, and it continues to be assumed for the purposes of the appeal that the

allegation made by the petitioning creditor in his affidavit in 1988 was correct, i.e., that the affidavit grounding the bankruptcy was

not sworn. The parties agreed to have it decided as a preliminary issue whether, on the stated assumption, the adjudication should

be set aside.

13. The application was resisted on the ground that the Appellant was estopped from seeking annulment of his bankruptcy. It was too

late, after the lapse of so many years, for the Appellant to rely on what, though an essential step, was in truth, looked from the point

of view of the merits, a technical point.

14. Laffoy J, in her judgment relied on the judgment of Hamilton P in the case of In re Sean Hussey (Unreported, High Court 23rd

September 1987). It was there established that there had been several technical defects affecting the correctness and regularity of

the original adjudication. There had been a delay of some two years prior to the application for annulment. Hamilton P. said, at p. 7:-

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

bankruptcy annulled.

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

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

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

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

regard from the date of adjudication.

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

stage."

15. Laffoy J dismissed the Appellant’s application on 21st December 1999. The Appellant has appealed against that order. The Notice

of Appeal is dated 1st February 2000, but the Appellant took little or no action to prosecute his appeal. The appeal was heard in

December 2005.

16. The Appellant did, however, seek to re-enter his annulment motion, which application was dismissed by Finlay-Geoghegan J.

17. The notice of motion which was dismissed by Laffoy J and from whose order this appeal is taken, was grounded on a brief affidavit

sworn in 1999. It relies on the affidavit sworn by the petitioning creditor in 1988 to support the claim that, as he says:

“……the Order adjudicating me as a Bankrupt is fundamentally flawed in that it did not comply with the mandatory

requirements of the legislation prevailing at the time, to wit, section 116 of the bankrupt and Insolvent Act of 1851.”

18. It also relies on the discharge of the debt due to the petitioning creditor. However, the affidavit makes no attempt to explain the

Appellant’s delay in moving the Court for the relief sought in the present application, although the Appellant made an attempt to do so

in his later motion heard by Finlay-Geoghegan J.

19. Insofar as concerns the order of 9th November 1995, made by Murphy J permitting the Official Assignee to apply to the English

Court for an order in aid, the affidavit merely complains that the Appellant was not given notice.

21. Laffoy J summarised the history of the bankruptcy, including a series of proceedings in the English Bankruptcy Court, in which the

Appellant resisted various orders and sought, invariably unsuccessfully, to set aside the orders made in that Court. She summarised

the issue before the High Court as follows:

“The gravamen of the Bankrupt’s challenge to the validity of the order of 12th January 1987 is that section 16 of the Irish

Bankrupt and Insolvent Act, 1857, which governed this adjudication, made it mandatory that the truth of the petition should

be verified by the affidavit of the petitioner and that the purported verifying affidavit which supported the petition of the

Petitioning Creditor, while signed by the petitioner, was neither signed nor sworn by him in the presence of the Commissioner

for oaths referred to in the jurat. The position of the Official Assignee is that he is a stranger to the facts deposed to by the

Petitioning Creditor as to the affidavit of verification.”

21. She also noted:

“It is clear from the affidavits sworn by the Petitioning Creditor filed on this application that the facts set out in the petition on

which the adjudication order was based were true, in that at the date of the petition the Bankrupt was indebted to the

Petitioning Creditor in the sum of £46,429.18 on foot of the judgment of the High Court. It is also clear that the petition was

brought on the instructions of the Petitioning Creditor.”

22. Having reviewed the authorities generally on the history of the jurisdiction to annul an order of adjudication in bankruptcy, a

jurisdiction which is not in issue on the appeal, Laffoy J stated:

“The real issue for determination is whether, as contended for……the Bankrupt is estopped by his conduct in the bankruptcy

and his unconscionable delay in bringing this application.”

23. The learned trial judge reviewed the law relating to delay in civil proceedings, including Primor plc v Stokes Kennedy Crowley

[1996] 2 I.R. 475, and concluded that there had been inordinate and inexcusable delay on the part of the Appellant in prosecuting his

application, particularly in view of his knowledge, as from 1995, of the facts alleged by him as the ground for the annulment

application. Laffoy J found that there had been delay on the part of the Appellant which was both inordinate and inexcusable.

24. The learned trial judge then considered the balance of justice in the context of the Primor decision. She concluded as follows:

“A bankruptcy adjudication order inures not only for the benefit of the petitioner, but also for the benefit of all the creditors of

the bankrupt. Section 136 of the Act of 1988 provides that on the making of an order of adjudication, a creditor to whom the

bankrupt is indebted for any debt provable in the bankruptcy shall not have any remedy against the property or person of the

bankrupt in respect of the debt apart from his rights under the Act and shall not commence any proceedings in respect of

such debt unless with the leave of the Court on such terms as the Court may impose. Since 12th January 1987 the creditors

of the Bankrupt have been precluded from pursuing the normal legal remedies available to a creditor. If the bankruptcy was

annulled at this juncture, over twelve years after the date of the adjudicating order, the creditors, other than the petitioning

creditor whose debt apparently has been satisfied, would in all probability be unable to pursue the normal legal remedies

because their claims would be statute barred in consequence of which they would be seriously prejudiced. On the evidence, it

has been the conduct of the Bankrupt which has hindered the prosecution of the bankruptcy process, including the proof of

debt element of that process to date. Moreover, the depletion of the assets of the Bankrupt by reason of the legal costs

necessarily incurred by the Official Assignee is attributable to the Bankrupt’s conduct.”

25. The learned trial judge concluded that the balance of justice would not be in favour of allowing the Bankrupt to prosecute his

application.

26. Laffoy J dismissed the application pursuant to section 135 of the 1988 Act to set aside the order giving leave to apply for an

order in aid from the English Bankruptcy court, both on the ground that the practice of not giving notice to the Bankrupt of such an

application and on the grounds of the Appellant’s delay.

27. The Appellant appeals to this Court against both aspects of the order of Laffoy J.

The Appellant thus asks the court to annul an adjudication order of the High Court made nineteen years ago. The Appellant rightly

states that the regular swearing of the affidavit grounding the petition is fundamental to such an important a procedure as the

adjudication of a citizen to be a bankrupt. However, the startling aspect of that proposition in the context of the present case is that

the Appellant seeks that relief after the passage of an enormous of time.

28. I had occasion to consider a number of cases where there had been delay in moving for annulment of an adjudication in

bankruptcy in my judgment in In re John Gill, a Bankrupt: Gill v Philip O’Reilly & Company Limited [2003] 1 I.R. 434. In that case, there

had been a delay of more than five years from adjudication to the initiation of the application for annulment. The application was

refused essentially on the ground of delay, and particularly because the applicant must have known of the point he wished to make

for a long time.

29. In the present case, the delay is extreme. It would take something truly extraordinary to justify annulment of the adjudication

after so many years.

30. At the hearing of the appeal, Dr Forde, Senior Counsel for the Appellant, did not deny that there had been extreme delay. He

made two points to counter its effect. Firstly, he said that the absence, presumed for the purpose of the proceedings, of a verifying

affidavit was fundamental to the adjudication and that this distinguishes the present case from others in which annulment has been

refused on the ground of delay. Secondly, he sought to attribute responsibility for the delay to the Official Assignee from the March

1995, when the Appellant wrote to inform him of the absence of a sworn affidavit. He submitted that the Official Assignee was

estopped from reliance on the delay of the Appellant. Mr Charles Meenan, Senior Counsel for the Official Assignee argued that his

client is a creature of statute, who has no function in the matter of annulment of bankruptcy. In addition he pointed to the failure of

the Appellant ever to comply with his obligation to provide a statement of affairs.

31. In my view, the facts of the present case make it clear beyond argument that the adjudication simply cannot be set aside. The

allegation that the grounding affidavit had not been properly sworn was first made in an affidavit of the petitioning creditor in 1988.

The Appellant was represented by Senior Counsel at the hearing at which that affidavit was produced. No attempt has been made to

explain how he was unaware of the matter at that time. He has, nonetheless, sworn in an affidavit in 2003 in the later proceedings

before Finlay-Geoghegan J, that he was unaware of the relevant facts until 1995. In a letter of 22nd March 1995, the Appellant

disclosed his full knowledge of those facts. Even assuming he could be fixed with knowledge of the allegation of irregularity only as of

that date, it would require a great deal of explaining to show that he should not have moved promptly at that time. At the hearing,

counsel relied on the fact that he wrote to the Official Assignee. But it is no function of that officer, as pointed out by his counsel, to

move to annul a bankruptcy. A lot of time had already passed. In reality, it was almost certainly already too late by then. The total

delay amounts to some twelve years, compounded now by the Appellant’s delay in prosecuting his appeal.

32. In addition to the simple delay, all the points made by Laffoy J must be borne in mind. In my opinion, she was amply justified in her

conclusion that the balance of justice was against the granting of the order for annulment. I also agree with the conclusion of Laffoy

J that the order of this Court of 9th November 1995 granting leave to the Official Assignee to apply for an order in aid from the

Bankruptcy Court of England and Wales should not be set aside. The Appellant participated in the Bankruptcy proceedings of the

English Court for several years without applying to the Irish Court to set aside its order. He was obviously aware of the fact that the

order had been made in 1995. It is clear that he cannot now be heard to say that he should have been on notice of that application,

even if he was entitled to such notice. It is not necessary to decide whether he was entitled to notice. For my own part, I would

think the practice of applying ex parte for leave to seek the assistance of another jurisdiction is reasonable. The bankrupt will be

entitled to be heard before the courts of that jurisdiction.

33. Finally, it is necessary to consider the order of Finlay-Geoghegan J dated 23rd July 2004. The learned judge dismissed the

application on the basis that Laffoy J had decided the matter in 1999 on an assumption that the facts were as deposed to by the

Appellant. Insofar as the Appellant was making the case that evidence before it was not dealt with by the High Court then, she held,

that was a matter for the Supreme Court.

34. In his affidavit grounding the application to re-enter the matter raised in his 1999 motion, the Appellant claimed that, from the

time when he learned in 1995 of the alleged failure of the petitioning creditor to have sworn his grounding affidavit, he had "used all

reasonable endeavours to have the adjudication annulled, including bringing the matter to the attention of the Official Assignee and

his officials.” He then recounts unsuccessful efforts, from 1995 onwards, to secure the services of a solicitor or solicitors to pursue

the matter on his behalf.

35. I will assume in favour of the Appellant that he wishes to rely, on the present appeal, on the evidence contained in his affidavit

grounding the application heard by Finlay-Geoghegan J. In that affidavit, he seeks to explain what was not explained before Laffoy J,

in 1999, namely the reason for his delay in applying for annulment of his Bankruptcy on a ground of which he had been aware since

1995. In this connection, the first and insuperable obstacle to the admission of this new evidence is that the Appellant was patently

and fully aware of that evidence at all relevant times. He did not include it in his affidavit in 1999. He presented his application before

Laffoy J, without any explanation for his delay. Even after the delivery of her judgment, The Appellant must have been aware of the

crucial role his own delay had played in her decision. Even then, assuming, against all normal rules, that he was entitled to have a

matter already decided re-entered and decided again, he took no steps to do so. He deposed to it for the first time in an affidavit of

3rd December 2003.

36. In my view, the application for re-entry is without merit. I would dismiss the appeal and affirm the order of Finlay-Geoghegan.

37. It is not necessary, for the purpose of the present judgment, to delve into the background to the indebtedness of the Appellant

to the petitioning creditor. Indeed it is extraordinary that the Appellant should ask the Court to do so at this remove of time.

Moreover, these matters are not the subject of any identifiable ground set out in the notice of appeal against the decision of Laffoy

J. The Appellant claims, however, that the Court should now look at the entire matter of his indebtedness to the petitioning creditor.

To do this would run counter to the need for certainty in legal proceedings. Orders apparently duly and regularly made will not be set

aside in the absence of cogent evidence, especially so after the passage of many years.

38. In the interests of finality, I would, nonetheless, make the following observations.

39. The Appellant relies very largely on the affidavit sworn by the petitioning creditor on 12th December 1988, grounding the attempt

of the latter to have the bankruptcy set aside. The tenor of that affidavit is that Mr McDonald attended at his solicitors’ offices, at

the behest of the latter, in order to swear the affidavits necessary to have the Appellant made a bankrupt. The affidavit describes

the solicitors as making strenuous efforts to dissuade him from that course, whereas he, for example, asked the solicitors “for the

papers in order to sign them.” The petitioning creditor portrays himself as rejecting his solicitors’ pleadings that he should not subject

the Appellant to bankruptcy, and describes his conclusion: “I rejected this and said we might as well get on and sign whatever

document it was they wanted me to sign.” All of this is utterly inconsistent with the proposition that the Appellant was not indebted

to the petitioning creditor and that the latter was not pursuing him for payment. It is true that the affidavit ended mysteriously with

the statement: “I further acknowledge to this Court that the said Brendan O’Maoileoin is not indebted to me in any sum of money on

foot of any judgment against him at any time. And that he was not indebted to me in any sum at the time when [the solicitors] filed

the alleged Petition……” The last statement is, however, completely inconsistent with the earlier parts of the affidavit. The

Respondent also draws attention to the fact that the petitioning creditor, as late as 8th January 1987, swore an affidavit before the

Queens Bench Division of the High Court of Justice in England to the effect that the Appellant was still indebted to him in the amount

of IR£46,428.18.

40. I am satisfied that Laffoy J rightly rejected the Appellant’s application for annulment of his bankruptcy as well as for the setting

aside of the order of the High Court dated 9th November 1995. I fully agree with the reasons for her decision. I am equally satisfied

that Finlay-Geoghegan J rightly decided on 23rd July 2004 that the previous matter should not be re-entered. Insofar as the latter

judge reserved to this Court the question whether the mater should be re-entered on the basis of the evidence proffered I would

reject it.

41. I would dismiss the appeal in both cases and affirm the orders of the High Court.