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Recent High Court Decision on Bankruptcy -Delay at your peril!  

By November 24, 2020June 26th, 2024No Comments


Recent High Court Decision on Bankruptcy -Delay at your peril !

In a recent case involving the application to make a James and Grainne Farrell Bankrupt, the High Court made it very clear that it was up to the parties who  are the subject matter of the application to move with reasonable speed to set out cogent reasons as to why they should not be made bankrupt and this did not happen in this case.


The Farrells were shareholders in a company BMSSL which was a security company. There was a falling out with a minority shareholder and in a dispute, which was determined by the High Court Mr  Justice Brian McGovern granted judgement to the minority shareholder of €315,000. This judgement was registered on their Family Home but behind an existing mortgage in favour of Ulster Bank who had security for a debt of €235,000.


The Judgement creditor issued a bankruptcy summons in February 2018 but the Farrells had obtained a protective certificate in November and had renewed it before the bankruptcy summons was issued and as such the bankruptcy summons could not proceed.


In November 2018 the judgment creditor again issued a bankruptcy summons, and the petition was filed for bankruptcy in March 2019. A second protective certificate was granted to the Farrells in July 2019 but their proposals were rejected by the creditors.


They then brought an application under Section 91(3) of the 2012 Act stating that there were exceptional circumstances which existed which should be taken into account by the Court in refusing the bankruptcy. This was refused by Ms. Justice Mary O’Malley Costello.


The creditor then brought an application for bankruptcy before the High Court and this was heard by Mr. Richard Humphreys.  The Farrells argued that they had appealed the refusal by Ms. Justice Mary O’Malley in relation to Section 91(3) application and that the application for Bankruptcy should not be heard until this appeal was dealt with but the High Court disagreed and considered the time which the Farrells had (3 years from the granting of the Judgement by Mr McGovern) and that this was sufficient time for them to come up with proposals to satisfy the Court that they should not be made bankrupt.


The Court was mindful of the fact that there was an unsatisfied judgement of Mr. McGovern which had been granted in June of 2017 and which remained unsatisfied and, on that basis, the High Court made the Farrells bankrupt.


The important issue which emanates from this decision is that the parties who are subject of an application to be made bankrupt should act as quickly as reasonably possible to work with the Judgement Creditor to come up with proposals that are an alternative to bankruptcy.


For any information in relation to bankruptcy or debt related matters please contact Brendan Dillon or Conor White on 01-2960666.