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Joint Committee on Legislation debate -
Wednesday, 27 Feb 1985

SECTION 11.

(Limerick East): I move amendment No. i1:

In page 10, subsection (1), line 38, to delete "£500" and substitute "£1,000".

This is to bring the amount into line with previous amendments I accepted. The "£500" is substituted by "£1,000". It is consequential on previous amendments.

Amendment agreed to.

I move amendment No. i1a:

In page 11, subsection (2), line 12, to delete "In the latter case" and substitute "Where a secured creditor gives an estimate of the value of his security".

This amendment involves a drafting change rather than a substantial change.

The next amendment involves a more substantial change. It seems a rather peculiar way of drafting legislation to say "in the latter case" when it is not absolutely clear what "the latter case" means. It probably means that portion of the preceding sentence which occurs after the word "or". I would like to make it clear that that is what I had in mind and I thought it might be a good idea to rephrase the first part of this sentence to repeat that part of the sentence which is after "or". In effect, that is the purpose of the amendment.

(Limerick East): It is a drafting amendment and it does help to clarify the situation. I will accept that.

Amendment agreed to.
Question proposed "That section 11, as amended, stand part of the Bill."

(Limerick East): The section lays down the requirements that must be fulfilled to entitle a creditor to present a bankruptcy petition. It sets out the conditions under which a secured creditor may petition and provides that a debtor may petition for his own adjudication. It modifies the existing requirements that must be fulfilled to entitle a creditor to present a petition: by increasing the minimum debt to ground a petition from £40 to £1,000, now that we have accepted the other amendments. The Bankruptcy Committee suggested £100; by reducing from six months to three months the period for which an act of bankruptcy will be available for the purpose of obtaining adjudication — the Committee considered it unfair that a matter of such potential danger for a debtor would be available for such a long period; and by adding a requirement that the debtor must be domiciled or have resided or have carried on business in the State within a year before the presentation of the petition. The existing requirement that the debt must be a liquidated sum is also retained. The section also repeats the existing provision regarding the position of a petitioning creditor who is a secured creditor as well as that which allows a debtor to petition for his own adjudication.

Is it necessary for the debtor to be domiciled in the State? What exactly is the position regarding citizenship and domicile or residence? Who exactly can be adjudicated? Are there qualifications there?

(Limerick East): It is a new provision that introduces an additional requirement which must be fulfilled before a petition can be presented by a creditor against a debtor. At present the basis of bankruptcy jurisdiction is uncertain. It seems that jurisdiction exists to adjudicate a debtor who commits an act of bankruptcy within the State, but jurisdiction to adjudicate a person who commits one abroad depends on his nationality, that is, the court has jurisdiction to adjudicate an Irishman who commits such an act abroad. The provision here clarifies the law in that it sets out the categories of debtors against whom a bankruptcy petition may be presented.

Surely the criterion should be whether the debtor has assets in this country or not. If you had a case of a debtor who had assets in this country but did not reside here or who was not domiciled here would such a person not be adjudicated bankrupt then?

(Limerick East): If someone is domiciled in the country or if they are carrying on their business in the country it would follow that they would have some assets here.

No, I do not mean that. Say you had a case where a person had substantial assets in this country but he was not domiciled here, nor did he reside here. Are we excluding the amenability of such a person to be adjudicated bankrupt?

(Limerick East): There could be proceedings in the country where he is domiciled or where he ordinarily resides. Later on in the Bill there is provision for reciprocal arrangements with the UK in that area.

I wonder is there any reason or need to limit the situation in that way? For example, if a person living abroad, for whatever reason, had very substantial assets here — it might be a bank account in a secret account or something like that — and that person owed an appreciable sum of money to an Irish resident it could be that the only convenient way of laying hands on that deposit or asset might be through adjudicating that person a bankrupt. It could be said that really the basis of the bankruptcy should be (1) that the sum of £1,000 or more is owing to an Irish citizen and (2) the person who owes it, whether they reside here or not or are domiciled here or not, has substantial assets in this country. Is there some technical reason why such a person should escape having their assets made amenable by bankruptcy by putting them in this country notwithstanding the fact that they would owe a substantial debt?

(Limerick East): A person to be subject to the jurisdiction of the Irish court must have some link with the jurisdiction other than just holding assets here.

I had not thought of it and I think we are indebted to Deputy Taylor for thinking of it but just to discuss it in committee. I suppose the adjudication of somebody as a bankrupt is not really something against his assets, it is personal to himself. You are not just seizing his assets, you are making the person a bankrupt. You are doing something to him as a person. It is not just to do with his assets or only to do with his assets. There appears to be adequate protection in respect of anybody who thinks that a person living abroad has assets in this country — there are various types of injunctions such as the one the Minister mentioned earlier that can be got against a person restraining him from taking money out of the country — but to actually declare a person bankrupt who is not amenable as a person to the jurisdiction of the Irish courts is extending the personal business of bankruptcy beyond what is normally meant. That is my instinctive reaction.

Senator O'Leary raises a nice point there. I am not so sure that he is entirely right as to whether bankruptcy is a matter of the person or of the assets. I would have thought that it should really be more a matter of the assets than of the person — quite the other way round. That was why — unfortunately I was not here on time to move it — I wanted to probe the question of section 9 dealing with the question of arrest, this whole concept of a person in their personal capacity of having their person made amenable for debt, be it through the Enforcement of Court Orders Act or arrest. I know it has a long history in law but may be it is time for change in a modern context. The essential matter in bankruptcy refers to the assets because the object of the exercise is where a person has assets. Bankruptcy does not arise in the case of a person who has no assets. You may have such a person but if you are dealing only with a person and not with assets you are not in a bankruptcy situation. So you are dealing with a situation where a person has assets, possibly even substantial assets and he has even more substantial creditors. So the object of the exercise is that you call in those assets and distribute them according to rules equitably and proportionately between all the creditors. The question of punishing the person, putting him in prison, does not arise. It is really a mechanism of making his assets available on a just and equitable basis. It probably would not arise very often but you could have a situation where a person was owed a substantial sum of money by some fly-by-night or whatever and it would be known that he had substantial assets in this country and the only way perhaps that you might be able to lay hands on those assets would be by having him adjudicated a bankrupt.

I must say that that situation would not arise in reality because if you had a claim against somebody and they have assets in the country and do not live in the country and you go to the courts and say that you have reason to suppose that those assets are going to be moved out of the country, they will be injuncted from repatriating those assets. I have done it myself on numerous occasions on behalf of people. What Deputy Taylor has said is quite true, that you cannot have a bankruptcy unless you have a debtor who also has assets but you cannot have a bankruptcy either unless you have a debtor. The person is an essential part of it. It is an amalgamation of both things.

We could have usefully discussed the question of arresting. I was sorry that I was not alive to the Deputy's opposition to the section because I would have tried to keep the debate going. We will have an opportunity of discussing it on Report Stage.

We should recognise that there is an element of — not punishment of the person involved — restraint and discipline imposed on the person with regard to his future conduct. That is an essential portion of the Bill. The Bill makes certain changes in that regard and gets people discharged as bankrupts automatically after a period of time in respect of people who are already bankrupts and after a shorter period of time by application to the court. It is a personal matter as well as concerning assets and for that reason I would not see much merit in the point of view that a person who is not domiciled in the State or ordinarily resident in the State or connected with the State in some other way like that should be made amenable to the bankruptcy procedure.

(Limerick East): I will take account of what both of you have said and I will look at it again before Report Stage and see if there is a possibility of extending this in the manner suggested. It is a question of whether a court of any sort has any jurisdiction over people who are not domiciled or ordinarily resident in a country and whether any attempt to extend that jurisdiction would even be effective.

I have no objection in principle to it. If it is possible I am quite happy to have it done.

The section as it stands envisages that a person who formerly resided in the State but has now gone abroad can be adjudicated. As it stands, it goes that far. It says: "whether a citizen is domiciled in the State or not or within a year before the presentation of the position has ordinarily resided." So a person who formerly resided in the State but who has gone abroad within the year and is now gone completely can be adjudicated. So it is not the case that a person has to live within the jurisdiction to be adjudicated. The section even as it stands does not go that far. The only case not provided for is the case of a person who never resided here but has assets here. On Senator O'Leary's point that you can get an injunction to stop assets being taken out of the country by a creditor, that is a fairly recent innovation but the proofs of it are not easy and secondly, the object of the bankruptcy exercise is not so much to stop the assets being taken out — that is only stage one of the operation — as to lay hands on the assets. However, I am happy enough with the Minister's indication that he will have a look at this and see if it warrants extending it to that minor degree.

(Limerick East): It would certainly require some strong connection with the State as subsection (d) is drafted:

"Within a year before the date of the presentation of the petition, (the debtor) has ordinarily resided or had a dwelling-house or place of business in the State or has carried on business in the State personally or by means of an agent or manager, or within the said period has been a member of a partnership which has carried on business in the State by means of a partner, agent or manager.

So it covers anybody who is domiciled in the State and has an asset connected with domicile or anybody who is involved in some kind of business arrangement with managers or agents or partners. Except for somebody who has no connection with the State is banking here, I think it runs fairly wide and it covers a lot of people who are resident abroad and domiciled abroad. However, I will have a look at it between now and Report Stage.

Subsection (2), dealing with the question of a creditor who has a security for his debt, provides that a creditor is given the option, that either he can put the item he holds as security into the bankrupt's estate or alternatively he can put in an estimate and prove in the bankruptcy for the differential. It seems to be left to the creditor himself to put in the estimate.

It says that the Official Assignee can apply after the date of adjudication, in which case, as I understand it, the creditor will be paid out, based on the estimated value put on by the creditor himself. Could you have a situation where a creditor would put in an inflated estimate that would adversely affect the residue of the assets?

(Limerick East): The First Schedule has special provisions which deal with proof of debts and secured creditors. We will be able to deal with that point when we come to the First Schedule.

Question put and agreed to.
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