High Court: Man has bankruptcy extended by five years for failing to cooperate with Official Assignee

About this case:

• Judgment:
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Ms Justice Caroline Costello ruled that the man, who would have been automatically discharged from bankruptcy in December 2016, “deliberately hindered” the bankruptcy process by withdrawing nearly €50,000 from his bank account after he was adjudicated bankrupt, and therefore a five-year extension was an appropriate sanction.

Background

In the High Court, the Official Assignee in bankruptcy brought an application seeking an order extending the bankruptcy period of Mr John Gaynor pursuant to s. 85A(1) of the Bankruptcy Act 1988.

The application was brought on the basis that Mr Gaynor had failed to co-operate with the Official Assignee in the realisation of his assets, or had hidden from or failed to disclose income or assets which could be realised for the benefit of the creditors of the bankrupt.

The Official Assignee also sought an order pursuant to s. 85(3) of the Act that the bankruptcy period shall not stand discharged until the investigation and pending the making of a determination under the application.

Bankruptcy

On 7th December 2015, Mr Gaynor was adjudicated a bankrupt on foot of a petition presented by his former solicitors.

Initially he refused to co-operate with the bankruptcy inspector by giving him the necessary contact details. However, as Mr Gaynor wished to bring a show cause application, he arranged for the order of adjudication to be served upon him by consent on 1st February 2016.

Justice Costello stated that this was “the full extent of his co-operation in the bankruptcy”.In addition to his complete failure to co-operate with the bankruptcy process, Mr Gaynor “failed to disclose any assets at all to the Official Assignee”.

In the circumstances, Justice Costello was satisfied that the evidence adduced by the Official Assignee established a prima facie case of very grave non co-operation and a failure to disclose assets in bankruptcy.

Justice Costello also stated that in the High Court proceedings, “far from seeking, to co-operate with his bankruptcy, Mr Gaynor persists in his obstruction and defiance of the process”.

The Court heard that Mr Gaynor did not swear an affidavit challenging the affidavit of the Official Assignee; and that he did not offer any explanation or excuse for his failure to complete a statement of affairs or a statement of personal information other than to insist that he was not properly adjudicated a bankrupt.

Recusal application

In the High Court, Mr Gaynor invited Justice Costello to recuse herself from hearing any matters relating to him, citing that she had a personal interest in the continuation of his bankruptcy. Mr Gaynor argued that clients of Ms Costello’s husband’s firm of solicitors own “much if not all of the equity” of a company granted a licence upon his lands without his knowledge.

Justice Costello stated that she did not have any knowledge of this, and thus ruled that this was not a proper basis upon which she should recuse herself.

Extending the bankruptcy

Firstly, Justice Costello was satisfied that the application was brought prior to the automatic discharge of the bankruptcy. She was also satisfied “from the uncontroverted evidence of the Official Assignee” that there had been a total failure of Mr Gaynor to cooperate in the bankruptcy process, and that he had hidden from or failed to disclose to the Official Assignee any income or assets which could be realised for the benefit of the creditors of the bankrupt.

Of particular concern was the withdrawal of nearly €50,000 from his bank account just days after his adjudication and the failure to account for any of the monies to the Official Assignee.

In all the circumstances, Justice Costello made an order that Mr Gaynor’s bankruptcy should not stand discharged by virtue of section 85 of the Bankruptcy Act 1988, as amended by the substitution of s. 157 of the Personal Solvency Act 2012

In assessing the length of the extension, Justice Costello considered Killally (A Bankrupt) v. Official Assignee 4 I.R. 365; McFeely (A Bankrupt) IEHC 299; and Lehane v Farrell IEHC 637.

While there was limited evidence establishing that the creditors had been prejudiced by the wrongdoings of the bankrupt, there had been a failure to disclose assets such as land, livestock, motor vehicles, and farm machinery to the Official Assignee – resulting in further prejudice to the creditors of the bankrupt.

Justice Costello found that the conduct of Mr Gaynor in relation to his bankruptcy challenged the integrity of the bankruptcy process, and that sanctions were therefore required for breaching the process.

Taking into consideration the degree of non-cooperation and concealment of assets which led to loss, Justice Costello extended the period of bankruptcy by five years.