Supreme Court: O’Donnells granted leave to appeal the award of costs against them outside their bankruptcy estates

About this case:

• Judgment:
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Chief Justice Denham, Justice Dunne, and Justice O’Malley stated that this particular question within the O’Donnells’ application for leave to appeal was of sufficient public importance that it should be the subject of an appeal to the Supreme Court.

Background

The proceedings concerned an application to the High Court by Brian and Mary Patricia O’Donnell pursuant to s.85C of the Bankruptcy Act 1988 as inserted by s.157 of the Personal Insolvency Act 2012, to annul an adjudication of bankruptcy in their cases.

The petitions to adjudicate the debtors bankrupt were grounded upon a judgment obtained by the Bank of Ireland in summary proceedings commenced in December 2010.

In March 2011, a settlement agreement was entered in to between the Bank of Ireland and the O’Donnells – a condition of which was that if the debtors defaulted in the scheduled payments, then they would consent to judgment. The O’Donnells defaulted on their payments, the Bank of Ireland therefore re-entered the proceedings and in December 2011, the High Court entered judgment of circa €71.5 million.

In September 2013, the O’Donnells were adjudicated bankrupt – however they subsequently made an application to annul the adjudication and certain ancillary matters. All applications were dismissed in the High Court, the appeal was dismissed by the Court of Appeal, and the O’Donnells therefore sought leave to appeal to the Supreme Court.

The Supreme Court

The O’Donnells identified four matters which satisfied the constitutional test that their case involved a point of law of general public importance which it is in the public interest should be the subject of a matter of an appeal to the Supreme Court.

(I) A clarification of the general test for annulment of a bankruptcy under s.85(c);

(II) Clarification of the Bankers Books Evidence Act 1879-1959;

(III) Clarification of the law relating to the handling of an application such as these where a number of applications were dealt with;

(IV) Clarification of the power to award costs personally against bankrupts.

The Supreme Court was satisfied that no issue of general and public importance arose in respect of the first three matters raised by the O’Donnells.

However, in relation to the order of costs made against the bankrupts personally, outside the bankruptcy estate in circumstances where there is no legislative or common law authority; the Supreme Court considered this issue did raise a point of some general importance and accordingly granted leave to appeal to this Court on the sole ground that: “The High Court and Court of Appeal erred in law and in fact in holding that they could award costs against the appellants outside their bankruptcy estates.”

In the Supreme Court, the O’Donnells have therefore been granted leave to contend that “such an order has no common law or legislative basis”, that “in granting such an order the High Court and Court of Appeal are usurping the legislature”, that this “is not in compliance with the provisions of the Constitution relating to the separation of powers, right to a fair hearing and protection of property rights nor Articles 6 and 8 ECHR and Article 1 of the Protocol thereto”.

In its concluding remarks, the Supreme Court emphasised that it was “desirable to point out that a determination of the Court on an application for leave while final and conclusive so far as the parties are concerned, is a decision in relation to that application only. The issue is whether the question is raised and the facts underpinning them meet the constitutional criteria for leave. It will not, save in the rarest of circumstances, be appropriate to rely on a refusal of leave as having any precedential value in the context of a different case”.