Last month in Dublin’s High Court, AIB failed in its bid to have former Fine Gael minister, Newstalk presenter and owner of Celtic Bookmakers, Ivan Yates, made bankrupt. The judgment in the case is published today, and in it, we find Ivan more than capable of brushing off AIB’s clumsy attempt to make him bankrupt in Ireland where he would have faced up to 12 years of draconian measures. You will be surprised to learn that Ivan did not even need to resort to the defence that his Centre of Main Interest (COMI) was not in the Republic, but the UK where Ivan lost no time after his victory over AIB here, and succeeded in getting a bankruptcy order in Wales last Friday morning!
The overview of the AIB case is this: the bank was seeking the repayment of €3.7m arising from loans to Ivan’s business which had been personally guaranteed by Ivan. AIB seemingly served Ivan with a pre-bankruptcy demand in April 2012, AIB then attempted to serve a bankruptcy summons on 14th May. There is reference to difficulty in serving Ivan and he was subsequently served in June. In response, Ivan applied to the Irish High Court on 25th June 2012 to resist AIB’s application, and the case was heard in August with the judge ruling on 21st August that AIB’s application was not valid. Lickety-split Ivan then obtained a bankruptcy order from the Swansea County Court on 31st August 2012.
We have all known for some time that Ivan was in financial difficulty, he made no bones about it and indeed wrote in newspapers in 2011 how he might have to leave Ireland to seek bankruptcy in the UK. So how on earth did AIB fail in its bid to make Ivan bankrupt here?
Firstly Ivan and his legal team threw a lot of mud which didn’t stick. For example, Ivan claimed that the personal guarantees produced by AIB were “poor and indistinct” photocopies so he couldn’t confirm if he had signed them. He claimed the bankruptcy demand served on 6th April was invalid because of a formal demand issued in March 2012 which allowed for payment by mid-May 2012.
Irish bankruptcy case law has established that even a relatively minor overclaim by the creditor in a bankruptcy application – IRL £1,000 in the context of a IRL £167,000 claim – may render the application by the creditor invalid. Bankruptcy is held by the courts to be a penal matter, so the sums claimed by the creditor need to be correct. In this case, Ivan disputed nearly €300,000 of the sums claimed. Ivan claimed there was an agreement with AIB which placed a cap on the fees paid to the receivers appointed to his bookmaking business at the behest of AIB, and in this case the receiver, Neil Hughes of Hughes Blake Accountants received a “kicker payment” – seemingly a bonus or commission – for the sale of one of the Celtic Bookmakers premises on Lombard Street in Dublin. Ivan also claimed that he had an agreement to stop the clock on interest being charged on certain loans. The personal guarantee provided for a certificate to be issued by “an officer of the bank” should the guarantee be called in, and it seems the judge very narrowly construed this requirement and the judge ruled that “it was noted that, contrary to the express requirements of the guarantee, no officer of the bank is named in the certificate or avers on affidavit to having prepared the certificate. Instead the certificate purports to emanate from the bank as a corporation and is signed by two authorised signatories on behalf of the bank.” The judge held that “the issues raised are real and substantial and have some prospect of success”
So the lesson for creditors pursuing bankruptcy against debtors in Irish courts is that they must ensure the amount claimed is correct and not in dispute. It may be that a judgment order is required as a prerequisite to pursuing bankruptcy. And it seems Irish judges can be quite pedantic in closely following the letter of any agreement.
As we own 99.8% of AIB, we will be footing the cost of AIB’s cackhanded and failed attempt to have Ivan made bankrupt here, and we are entitled to demand answers and accountability for the expenditure of our money.
For AIB, read Dept. of Finance. There’s as much chance of getting answers or accountability from either organisation.
Pearse Doherty might lob a question in when the Dail resumes, but Michael Noonan will hardly oblige us.
“we will be footing the cost of AIB’s cackhanded and failed attempt to have Ivan made bankrupt here”
Maybe I am mistaken, but surely it is irrelevant from AIB’s perspective whether he is bankrupt in the UK or bankrupt in Ireland, i.e. they would get the same cent in the € in either case?
I think the bigger issue is why they forced him into bankruptcy in the first place (in any jurisdiction) rather than coming up with a sensible workout plan that might have secured something higher from him for the state coffers?
@tdo, There are a few issues but the main difference between Ireland and the UK is the period for which the bankruptcy lasts. In Ireland it is still up to 12 years, though more likely to be five, in the UK it is generally 12 months. During the bankruptcy period your creditors have a right to snaffle excess income, so if you are someone with Ivan’s past earning potential, that might be the best part of an extra €1-2m that the bank could expect in Ireland over a 12-year period. It doesn’t look like he will be generating very much in income over the next 12 months in the UK. And it’s not just income earned during the bankruptcy period that is handed over to the bank, there might also be potential inheritances which is mooted to be something relevant in Ivan’s case. The talk of a book might be bravura on Ivan’s part, though on the other hand if he does publish something in a year or so then his creditors are unlikely to be able to lay claim to royalties and advances!
So the 12 year period in Ireland is not just for punishment, it serves to enlarge the pool of money available to your creditors. Of course it also deters you from earning income which will just go to your creditors and if you are an entrepreneur that makes you a concern for society generally because you won’t be motivated to generate wealth, income and jobs. Sean Quinn will be 78 years of age when he emerges from bankruptcy, and if anyone thinks he would scratch his arse so as to enrich his creditors, particularly IBRC, they are I think much mistaken. So what the 12 years has done in Sean Quinn’s case is kill off the possibility of the man ever employing another person.
Speaking of wasted millions of (implicitly) taxpayer funds, what about the law lacuna preventing banks from repossessing virtually any residential property? Politicians seem keen not to fix the legislative error since the benefits are public (no repossessions until the lacuna is fixed) and the costs are hidden (long-term problems at state-owned banks due to massive arrears). This has probably generated several extra billion of won’t-pay mortgage arrears at the state-run banks — depends what percentage of mortgage arrears is classified as aware of and playing on this legal flaw versus true can’t-pay cases. I would be interested if you did a blog on it — beyond my limited legal knowledge of property law.
There’s an appeal pending in the Start Mortgages case, which was the one that lit that particular touch paper. There was some talk of an amending bill earlier in the year, and what looked one appeared in a goverment legislation schedule for the year back in March, iirc, but don’t be surprised if the government sit and wait for the Supreme Court to take a mop and bucket to that particular mess. In any event, there’s nothing to stop the banks pursuing possession order on foot of plenary summonses seeking specific performance of their contractual right to possession (which even the most cack-handededly drafted mortgage includes), further to http://www.courts.ie/Judgments.nsf/bce24a8184816f1580256ef30048ca50/247eb2cb858b0f6a802579170052d158?OpenDocument.
Wow, what a complete mare’s nest they made of this. In the absence of judgment, it was ludicrous to make a pre-bankruptcy demand for payment that included sums over which there was even the merest shadow of doubt about. Yates pretty clearly signposted what he was up to many months ago, if they were determined to bankrupt him, they should have sought judgment in the Commercial Court first, that’s what it’s there for.
They could still apply to the court in the UK to challenge Yates’ entitlement to seek bankruptcy there on the basis of COMI, but whether they have the belly for it after this fiasco remains to be seen.
@Will C. — thanks for that — keep in mind I have limited understanding of property law — is the alternative receivership route that you suggest instead of foreclosure so expensive as to be impractical? Just a question — I assumed that the reason for the approx 0% foreclosures in Ireland despite massive mortgage non-payment rates was this legal lacuna, is that wrong?
No bother Gregory. What I was getting at is that there is an alternative method of getting a Court order for possession; the Start Mortgages decision only creates problems with the summary method that banks have been accustomed to availing of. By going the plenary route for specific performance of a contractual right to possession, they are faced with a longer and more expensive path, which gives a defendant the opportunity to throw a lot more chaff in the air, but it can be done.
You correctly identify the other route that can be taken, the appointment of a receiver over the asset. Unfortunately, that doesn’t do much good in the case of owner-occupied properties; the owner-occupier is no more likely to hand their home or business premises over to a receiver than to the mortgagee-bank.
While Start has fed into the low rate of mortgagee possessions, it isn’t noticeably any lower than prior to that decision. Mainly, it appears to me to be down to (1) how slow and tortuous it already was to get an order for possession and to then execute the order (anything up to 2 years was the norm), and (2) the complete unwillingness of most in the banks to take possession of a property unless there is absolutely no alternative. Taking possession means finally facing up to the huge bath the bank in question has taken on that loan. Never mind that the loss, in real terms, is many years old already; it will now (horror of horrors) “crystalise”. You’d be surprised by the number of bankers still praying for a turn around in property prices, I know I still am.
he punitive 12 year Irish Bankruptcy Period apparently has its downside for the creation of new jobs by entrepreneurs. Its hard for people caught up in the wrack of an economic collapse. But it certainly shuts down the rogues.
Shutting down the rogues is the responsibility of the Gardai – not the bankruptcy legislation, which is supposed to give relief to those with crippling debt.
Does any body know who the solicitors who acted for AIB in this matter were? Should they not have had all papers in order?