All of the litigation between Cork property developer Michael O’Flynn and the personal insolvency practitioner acting for his former business partner could have been avoided if both sides had taken a “reasonable” approach to various legal issues, a Supreme Court judge has said.
Ms Justice Elizabeth Dunne said it is “extremely unfortunate” that the parties found themselves “dug in to such an extent” on an issue such as Mr O’Flynn’s standing to object in court to the personal insolvency arrangement (PIA) of John O’Driscoll.
She said the litigation arising out of Mr O’Flynn’s bid to oppose the PIA has been conducted in a “combative”, “confrontational” and “unhelpful” way, which is “most unfortunate”.
Her remarks came in a judgment for the five-judge Supreme Court, which held that Mr O’Flynn’s objection to the PIA should be heard by the High Court.
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Mr O’Flynn claims Mr O’Driscoll, who is also his neighbour, owes him more than €750,000 and was not insolvent when the Circuit Court approved his PIA, which is designed to return to solvency a person who cannot afford to repay their personal debts. Mr O’Driscoll, from Ovens, Co Cork, denies he was solvent.
The High Court heard the alleged debt arose from a €2.2 million personal guarantee given to Mr O’Flynn concerning liabilities of pub operator Ezeon Entertainment Ltd, which was established by Mr O’Driscoll.
Rugby coach and former Irish player Ronan O’Gara was a co-guarantor on the loan agreement and filed an affidavit as part of the dispute alleging that Mr O’Driscoll had “fleeced” him.
The High Court, like the lower Circuit Court before it, rejected Mr O’Flynn’s attempt to object to the PIA when it came before it for approval, as it found he lacked standing due to having failed to “prove his debt” at an earlier stage of the process. The High Court approved the arrangement.
The Supreme Court ruled last November that Mr O’Flynn had obtained a right to contest in court the debt plan, despite earlier failing to “prove his debt”. The court then turned to the question of remitting the PIA for fresh consideration, accounting for his objection.
Mr O’Driscoll’s insolvency practitioner, Alan McGee, argued the matter should be returned to the High Court, while Mr O’Flynn submitted the lower Circuit Court was more appropriate.
In a judgment for the Supreme Court on Wednesday, Ms Justice Dunne said the High Court has sole jurisdiction of the matter, as the Circuit Court action has concluded.
She also held that each side should pay their own legal costs of the appeal.
Usually in court cases, the losing party pays the winning side’s legal fees, but, Ms Justice Dunne said, a personal insolvency practitioner will only be made to pay the other party’s costs in insolvency proceedings in “exceptional circumstances”. Nothing about this case brought it within the parameters of being “exceptional”, she added.
Ms Justice Dunne said it was hard to see an objective basis for why Mr O’Driscoll’s insolvency practitioner needed to take “such a vigorous role” in opposing Mr O’Flynn in pursuing his objection to Mr O’Driscoll’s debt deal.
However, she could not see “any basis” for Mr O’Flynn’s “serious allegation” that the practitioner acted in bad faith. Without any basis, this “should not have been said”, she said, adding that fighting a legal point “tooth and nail” is not evidence to support such an assertion.
It was “unfair” for Mr O’Flynn’s counsel to represent to the court “what can only be described as a throwaway remark” by the insolvency practitioner as a concession by him. The “off-the-cuff” response to a question does not amount to the sort of concession that could be ultimately binding on a party, she said.
“It is particularly desirable in cases where the parties have become entrenched and combative that their legal representatives maintain professional independence, detachment and fairness in their dealings with their opponents and the court,” she added.
Her ruling was unanimously supported by Chief Justice Donal O’Donnell, Ms Justice Iseult O’Malley, Mr Justice Gerard Hogan and Ms Justice Aileen Donnelly.
