Bankruptcy Court refuses to look behind Judgment upon presentation of Bankruptcy Petition

February 28, 2017

In the recent decision of Master Kelly in The Governor and Company of the Bank of Ireland –v- Gerard Noel McFeely and Conal Derek McFeely, the Master refused applications issued by Gerard McFeely and Conal McFeely (“the Debtors”) asking the Court to look behind a Judgment and dismiss Bankruptcy Petitions issued by The Governor & Company of the Bank of Ireland (“the Bank”).

 

The Bank had obtained a Judgment of the High Court on 3rd January 2013 for £5,398,450.51.  The Judgment debt arose from Personal Guarantees given by the Debtors to the Bank on behalf of Inis Developments Limited, a Company in which the Debtors had an interest.  The Debtors sought to challenge the Judgment debt in a number of avenues ending with a decision of the Court of Appeal on 1st August 2016, which was not in the Debtor’s favour.

 

The Bank issued Bankruptcy Petitions against the Debtors on foot of the Judgment.  The Debtors brought an application by which they asked the Court to exercise discretion under Article 240(3) of the Insolvency (Northern Ireland) Order 1989 which grants the Court power, if it appears appropriate, to dismiss a Bankruptcy Petition or Stay proceedings on such a Petition.  The Court can exercise its discretion to go behind a Judgment, however Master Kelly noted that “it will only do so if satisfied that the Judgment Creditor manifestly had no claim against the Judgment Debtor on which the Judgment could have been founded.”  Master Kelly found that it was not appropriate to look behind the Judgment “because the enquiry which this Court has been asked to undertake has already been undertaken by the Court of Appeal as part of the Debtor’s application to extend time for the service of a Notion of Appeal of the Petitioner’s Judgment.”  Master Kelly refused the Debtor’s application to dismiss the Petition.