About this case:

• Citation:
  [2024] IECA 237
• Judgment:
  External link
• Court:
  Court of Appeal
• Judge:
  Ms Justice Nuala Butler

Delivering judgment for the Court of Appeal, Ms Justice Nuala Butler remarked: “It might have been more straightforward if, on being notified of the fact that the appellant’s motions were live in the Court of Appeal directions list, the official assignee had taken a positive decision to withdraw the motions and/or the proceedings rather than adopting a “wait and see” approach.”

Background

In 2005, Philisview Properties Ltd offered as security a premises in Cork city as security for a loan to Bank of Scotland (Ireland) Ltd (BOSI). The appellant was a director of that company.

Following a default in the repayment of the loan, BOSI appointed the second respondent as a receiver. In 2013, BOSI and the first respondent (BOS) merged and the assets of BOSI were transferred to BOS. The loan was subsequently transferred to Ennis Property Finance Ltd in 2013 and the receivership was novated in 2015.

The receiver had difficulty securing possession over the premises and issued equity proceedings in the Circuit Court on 14 March 2014. The interlocutory reliefs sought by the receiver were granted and the appellant appealed to the High Court. The appellant did not turn up for the callover list and in March 2015, the appeal was struck out.

Notwithstanding the substantive proceedings then live in the Circuit Court, the appellant issued High Court proceedings against the bank and receiver in July 2014, seeking inter alia the return of his personal property remaining in the premises. In 2015, the Circuit Court granted judgment in default of defence to the receiver.

The receiver then issued a motion in the High Court proceedings seeking to strike out the plaintiff’s claim on grounds that the cause of action was res judicata, which was successful.

The appellant appealed to the Court of Appeal which upheld the High Court’s judgment on slightly different grounds, finding that a discrete issue remaining was the appellant’s claim for the return of his personal property. The Court of Appeal permitted him to pursue this claim but expressly disallowed him from pursuing damages against the receiver.

The appellant subsequently made an application for leave to amend his pleadings to introduce a claim for damages against the receiver, which was refused by the High Court in 2018. The appellant issued two motions directly in the Court of Appeal seeking clarification of the judgment of the Court of Appeal and seeking leave to amend his pleadings.

In March 2019, the appellant was adjudicated bankrupt, and was automatically discharged therefrom in March 2020. The then-official assignee (OA) having adopted a neutral stance, the appellant’s motions were adjourned in the directions list by virtue of inter alia Covid-19. In 2023, the OA’s successor was granted liberty to file an affidavit.

The “new” OA raised a preliminary issue, claiming that the proceedings vested in him in 2019 and that the appellant no longer had locus standi to pursue them, and further indicated that he did not intend to pursue the proceedings.

The appellant contended that the OA’s predecessor had disclaimed the proceedings, allowing him to pursue them, and that the unrealised assets in his estate as a bankrupt reverted to him three years after the date of his adjudication.

The Court of Appeal

Ms Justice Butler considered the ss.44(1) and 3(1) of the Bankruptcy Act 1988 which state that where a person is adjudicated bankrupt, their property vests in the OA, including money, goods, things in action, land and every description of property.

The court agreed with the OA’s view that as of March 2019, all of the appellant’s property including his High Court litigation vested in the OA.

The court then examined s.44(5) of the 1988 Act, which states that property which is acquired by or devolves on a bankrupt before the discharge or annulment of the adjudication order (after-acquired property) vests in the OA if and when he claims it.

The appellant asserted that because the OA did not claim the litigation during his bankruptcy, the OA could not now assert that the litigation vested in him after the bankruptcy concluded.

Ms Justice Butler opined that the appellant had misread both s.44(5) and correspondence from the OA dated 5 March 2020 which stated that assets claimed by the OA as part of the bankruptcy estate stayed in the ownership of the OA after discharge.

Recognising that the High Court litigation was instituted in 2014, Ms Justice Butler determined that same constituted property belonging to the appellant on the date he was adjudicated bankrupt in 2019 and that the OA was not required to claim it.

The court then turned to the appellant’s argument that the right to pursue the litigation reverted to him because it was disclaimed by the OA’s predecessor or by operation of law at the end of the bankruptcy period. 

In this regard, the appellant claimed that when his motions appeared in the directions list in 2019 and 2020, the OA did not interject in the proceedings or notify the parties of his intentions. 

The court determined that disclaimer is and was not a casual act which could come about through the OA’s inadvertence, omission or failure to act promptly, noting that “disclaimer cannot arise simply because proceedings are extant in a list and the official assignee, who may not necessarily be aware of the litigation at the date of the adjudication or appraised of the issues involved in it, does not make an immediate decision as to what attitude he will take towards that litigation”.

The judge continued that “the non-continuance of existing proceedings neither requires nor amounts to a disclaimer of those proceedings and therefore they do not revert to the bankrupt merely because the official assignee has not actively pursued them”.

Ms Justice Bolger found that this was so notwithstanding the OA’s express power under s.61(3)(d) to continue any proceedings relating to the property.

The court then considered the appellant’s argument that the right to pursue the extant litigation had reverted to him by virtue of s.85(3A) of the 1988 Act.

Ms Justice Butler opined that s.85(3A) relates only to property comprising the bankrupt’s family home, shared home or principle private residence, noting: “The appellant seeks to read section 85(3A)(a) as if it were a definition of the unrealised property of the bankrupt and as merely confirmatory that that property to which the subsection applies can include a family home.”

The judge confirmed that “this is simply a misreading of section 85(3A). That subsection does not apply to the entire of the estate of the bankrupt. Instead, it only applies to that portion of the unrealised property of the bankrupt which comprises a family home, shared home or principle private residence…”

Though declining to consider same in detail, Ms Justice Butler found it surprising that there is no express statutory provision revesting the estate of a bankrupt in the new holder of the office of OA when there is a change in identity of that person. Noting that the issue had been addressed in Larkin v. Gaynor [2022] IECA 224, the judge highlighted that that decision was based largely upon In Re Fitzpatrick [1939] IR 252, which predated the enactment of the 1988 Act.

Conclusion

Ms Justice Butler concluded that the appellant’s interest in the extant High Court proceedings vested in the OA, as did the personal property the subject of those proceedings, and that neither re-vested in the applicant upon his discharge from bankruptcy.

Accordingly, the Court of Appeal refused the appellant’s motions and struck out the proceedings.

Carney v Bank of Scotland Plc & Anor [2024] IECA 237