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Supreme Court confirms that dual bankruptcies can exist under Irish law

AUTHOR(S): Tony O’Grady, Brendan Colgan, Julie Murphy-O’Connor, Niamh Counihan
PRACTICE AREA GROUP: Corporate Restructuring and Insolvency
DATE: 28.05.2015

The recent decision of the Supreme Court in the case of In the matter of Sean Dunne (a bankrupt) has confirmed that it is possible for a debtor to be adjudicated a bankrupt under the laws of Ireland notwithstanding the fact that the debtor has already been adjudicated a bankrupt in another jurisdiction which is not subject to the European Insolvency Regulation.

Summary 

By order of the High Court dated 29 July 2013, Sean Dunne was adjudicated bankrupt under the Bankruptcy Act 1988 (as amended) (the “1988 Act”). Mr Dunne subsequently applied to the High Court for an order overturning the original bankruptcy order but was unsuccessful in his application in this regard.

Mr Dunne appealed the decision of the High Court refusing to overturn the original bankruptcy order on a number of grounds, the principal ground of appeal being that it was not possible for the High Court to make an adjudication order under the 1988 Act where Mr Dunne had already been adjudicated a bankrupt in another jurisdiction, in this case the United States of America.  Mr Dunne argued that dual bankruptcy was impermissible in circumstances where (i) it was contrary to the prevailing jurisprudence in the field of international insolvency and in particular the principle known as “modified universalism” and (ii) the 1988 Act did not permit it. Ulster Bank, as the petitioner, argued the contrary.

Analysis

It is clear from Ms Justice Laffoy’s written judgment delivered on 15 May 2015 that she was firmly of the opinion that it was not the function of the Supreme Court to make any determination or express any view on how the bankruptcy of Mr Dunne should be conducted (although acknowledging in her written judgment that concurrent bankruptcies could give rise to problems in the administration of the bankrupt’s estate). Rather, the Supreme Court was required to determine whether or not the High Court had the requisite jurisdiction to adjudge Mr Dunne bankrupt in circumstances where he had previously been adjudicated bankrupt in a foreign country (ie the United States of America). 

Ms Justice Laffoy noted that no judgment of an Irish court, either before or after 1922, in relation to concurrent bankruptcies was opened to the Supreme Court at the hearing of the appeal. Having regard to the English authorities relied upon by Ulster Bank, in particular the decision of the Privy Council in Singularis Holdings v PWC [2014] UK PC 36, Ms Justice Laffoy was satisfied that the High Court could only act within the limits of its own statutory and common law powers and that there was nothing in the 1988 Act which precluded the High Court from making an order adjudicating Mr Dunne bankrupt, notwithstanding the pre-existence of the Chapter 7 proceedings in the US Bankruptcy court.  

Ms Justice Laffoy also indicated that there was no basis in law on which the High Court could abstain from exercising its jurisdiction under the 1988 Act on the ground that the Chapter 7 Trustee appointed in the context of the US bankruptcy proceedings had the ability to apply for an order in aid as an alternative to dual bankruptcy.  

Significance of the Decision

The unanimous decision of the Supreme Court has confirmed that the adjudication of a debtor in a foreign country (which is not subject to the European Insolvency Regulation) is not an impediment to the High Court making an order adjudicating that same debtor bankrupt under the 1988 Act.

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