High Court: Period of bankruptcy extended for retiree who failed to disclose loans to children

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• Judgment:
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Stating that there was “grounds for disquiet” due to the extent of the woman’s discretionary expenditure in the months prior to her bankruptcy, Ms Justice Costello said it was a matter for concern that the woman may have manufactured her own insolvency.

Grounds for disquiet

The application to extend the period of bankruptcy for Breda Webster pursuant to the Bankruptcy Act 1988, was brought by the Official Assignee on the grounds that she hid or failed to disclose to the Official Assignee assets which could be realised for the benefit of her creditors.

Given Ms Webster’s discretionary expenditure around the time of being advised as to how to appropriately deal with her debt, Justice Costello stated that an analysis of Ms Webster’s case raised “grounds for disquiet”.

The evidence established that in the seven months prior to the presentation of her petition, her discretionary expenditure came to €28,203 – comprising of €15,500 purchasing two cars; €12,703 paying for a trip to New Zealand for her son’s wedding; and a loan of €5,000 which she had given her son.

Particularly, the expenditure of €12,703 “was incurred at or about the time that her personal insolvency practitioner… was to advise whether or not her debts could have been more appropriately dealt with by means of either a debt settlement arrangement or a personal insolvency arrangement”.

Justice Costello said that it was “a matter of concern that, whether innocently or otherwise, the Bankrupt in effect manufactured her own insolvency sufficient to meet the threshold for bankruptcy by entering into these relatively modest transactions”

The true deficit at the date of her petition was only €26,593.63, and her only creditor was her mortgagee.

Notwithstanding these reservations, Justice Costello stated that “they were not matters which could properly be taken into account in determining the application brought” pursuant to s. 85A of the Bankruptcy Act 1988.

Jurisprudence

My decision has been based upon the provisions of the Bankruptcy Act 1988, in particular s. 85A, and the jurisprudence based upon that section.

When considering the jurisdiction conferred on the court pursuant to s. 85A of the Bankruptcy Act 1988, Justice Costello referred to Killally (a bankrupt) v. the Official Assignee IESC 76, McFeely (a bankrupt) IEHC 299, and Gaynor, a bankrupt IEHC 27.

In Ms Webster’s case, Justice Costello stated that it was “important to distinguish between a failure to disclose assets and a failure to disclose payments”.

The two assets not disclosed to the Official Assignee were a loan of €5,000 and a gift of a car purchased for €3,000. The other payments which were not disclosed were not assets capable of being recovered for the benefit of her creditors.

Considering the s.85A jurisprudence, Justice Costello stated that it was “appropriate to consider the conduct and attitude of the bankrupt and whether the established failure was wilful or deliberate”. Justice Costello was satisfied that this was not the case

Furthermore, Ms Webster had no opportunity in which to respond to the Official Assignee’s queries prior to him bringing the present application, and could therefore not “be criticised for not clarifying any questions that remained to be clarified prior to the bringing of the motion”.

Justice Costello was satisfied that “only two assets with a maximum value of €8,000 which might have been realised for the benefit of her creditors were not disclosed”.

Distinguishing McFeely (a bankrupt) IEHC 299, Justice Costello was satisfied that her conduct was not persistent and ongoing.

Justice Costello was satisfied that Ms Webster answered the Official Assignee’s questions promptly and truthfully.

Considering “the degree of non co-operation and concealment of assets which has led to loss” as per Gaynor; Justice Costello stated that Ms Webster’s breach of obligations should be placed on the “lighter end” of the spectrum.

Considering Killally and the importance of maintaining the integrity of the bankruptcy process, pursuant to the provisions of s. 85A (4) of the Bankruptcy Act 1988 Justice Costello extended the period of Ms Webster’s bankruptcy for nine months from the date of her automatic discharge on 17th April 2017.

As this period had already been exceeded, Justice Costello was satisfied that Ms Webster was entitled to an automatic discharge from her bankruptcy as of the date of the judgment.