D –v– D, HIGH COURT: BANKRUPTCY COURT
Judgment was given by Ms Justice Elizabeth Dunne on December 12th, 2008.
JUDGMENT
An estranged wife who petitioned for bankruptcy against her former husband in pursuit of his payment of €2.125 million ordered by the High Court in family law proceedings in February 2006, is entitled to an adjudication of bankruptcy.
BACKGROUND
The case arose from protracted judicial separation proceedings, including an appeal to the Supreme Court, which sent the case back to the High Court, which ordered the husband, who owned and ran a group of companies, to pay €2.5 million to the wife, of which €2 million was to be paid by February 28th 2006, and €125,000 by June 30th, 2006. The order was perfected on February 21st. None of the money was paid.
The husband swore a number of affidavits, in which he outlined the background to the family law proceedings and the valuation of the group of companies. He described his circumstances and those of his group of companies as “straitened”.
Ms Justice Dunne said that the High Court, in making the orders, had the benefit of hearing evidence from the parties and their experts as to the circumstances of the parties and the valuation of the group of companies and other assets. Neither party was entitled to look behind the order made in the family law proceedings, which had not been appealed.
The High Court would have had all the up-to-date information at the time of the making of the order and its terms were to be largely complied with a week after it had been perfected. It was hard to see how the debtor could make reference to “straitened circumstances” with reference to an order that had just been made.
A key argument of the husband was that the wife was bringing the bankruptcy proceedings, not in order to collect the debt, but out of spite. An affidavit had been sworn by one of the couple’s adult sons, who had met his mother to discuss his concerns as to the effect an adjudication of bankruptcy would have on the group of companies, the family and the workforce.
He reported she said she would be happy to see the husband being made a bankrupt and if the company closed as a result it would not be her problem.
Another of the children also swore an affidavit outlining the financial circumstances of the companies and the negative impact an adjudication of bankruptcy would have on the companies and the family as a whole.
The wife swore an affidavit outlining the hardship caused to her by the failure of the husband to comply with the order and outlining the various attempts made to resolve the issue by family discussions and through the services of the legal representatives of the parties, but to no avail.
The husband stated in a final affidavit that the wife acknowledged that her financial circumstances would not be improved by a bankruptcy adjudication, therefore that the petition had been brought out of ill-will and malice. He had been advised by counsel and believed that the petition had been brought in bad faith and was an abuse of the process of the court.
DECISION
Ms Justice Dunne said the petitioner had met the criteria laid down in the 1988 Bankruptcy Act and was entitled to a bankruptcy adjudication.
Notwithstanding that the debtor said he was not seeking to look behind the order of the High Court by complaining of his “diminished capacity” to comply, he appeared to be doing so. Given that the order should have been complied with by February 28th, 2006, it was difficult to see how he could now complain of a “diminished capacity” to comply with it.
“It is noteworthy that no satisfactory explanation has been provided by the debtor for the non-compliance with the order,” Ms Justice Dunne said. “The trading difficulties of the group post the making of the order are not, in my view, a reason for not making an adjudication of bankruptcy.”
Turning to the issue of whether the petition was an abuse of process, she said: “It is clear from the examination of the authorities referred to that if someone commences bankruptcy proceedings, not for the purpose of recovering the debt due, but to inflict damage on the debtor . . . then the proceedings are an abuse of process and liable to be dismissed.”
However, the facts in this case were somewhat different to those in the cases cited, she said. An order was made by the High Court for money to be paid within a short time-frame. The order was not appealed, the money was not paid and no satisfactory explanation had been put forward as to why the order had not been complied with.
From reading the affidavits, she had the overwhelming impression that the petitioner had tried through negotiation to have the order of the court complied with. Although the debtor now pleaded financial problems, there was nothing to suggest he had these problems at the time of the making of the order.
It was an “inference too far” to suggest that the wife was aware that an adjudication would not assist in the recovery of the debt. On the contrary, it would assist her in the recovery of the debt.
While it would also obviously have an effect on the position of the husband as the director of the companies, there was nothing in the evidence to suggest that this was her reason for bringing the proceedings.
She was not satisfied on the facts that the petitioner was motivated by spite or ill-will towards the debtor in bringing the proceedings. It seemed, bearing in mind her circumstances, that she was driven to take these steps in order to secure the payment of the money provided for by the order of the court.
Referring to the wife’s remarks to her son, Ms Justice Dunne said: “I am satisfied that her remarks can be attributed to understandable frustration on her part in response to the failure of the debtor to comply with the terms of the order of the High Court.”
She rejected the arguments made on behalf of the debtor and was not satisfied that the petitioner was engaged in an abuse of process. She was entitled to an adjudication of bankruptcy and Ms Justice Dunne sought submissions on the next steps.
The case was later settled.
The full judgment is on www.courts.ie
David Hegarty SC and Olwyn Bennett BL, instructed by AF Smyth, Solr, Dublin, for the petitioner; Bernard Dunleavy BL, instructed by MT O’Donoghue Co, Wexford, for the debtor.