Courts to assist in Drumm bankruptcy

The High Court has ruled it is in the interests of the creditors of former Anglo Irish Bank chief executive David Drumm for the Irish courts to assist a US official in her administration of his bankruptcy proceedings.

There was no reason of public policy to refuse to make such an "order in aid", Ms Justice Elizabeth Dunne found.

Ms Justice Dunne today granted the application for the "order in aid" sought by Kathleen P Dwyer, the trustee administering the bankruptcy of Mr Drumm since he filed for voluntary bankruptcy in the US last October.

That surprise move cast into uncertainty what was to happen to court proceedings brought against Mr Drumm in Ireland, fixed for hearing just days after Mr Drumm filed for bankrpuptcy, in which Anglo sought repayment of loans of some €8 million.

Anglo had also sued Mr Drumm and his wife Lorraine in the Commercial Court over the transfer by Mr Drumm of his interest in the couple's former family home at Abington, Malahide, into the sole name of Mrs Drumm. Anglo claimed that transaction was a fraud on creditors while the couple insisted it was for taxation reasons.

Mrs Drumm recently gave an irrevocable undertaking to voluntarily set aside the transfer into her name which would mean the Abington property, said to have a value of some €1.2 million, would again become part of Mr Drumm's estate and could be sold for the benefit of his creditors.

In her application to the High Court here for an order in aid, Ms Dwyer said the effect of Mr Drumm's filing the bankruptcy petition was immediately to render him a bankrupt under the law of the US. Ms Dwyer also said the US Bankruptcy Court for the District of Massachusetts has exclusive jurisdiction over his bankruptcy with all his assets vested in her as trustee.

Ms Dwyer referred to the situation regarding the Abington property and said she was seeking for the Irish courts to assist in realising that property and any other assets of Mr Drumm situated in the Republic of Ireland for the benefit of his creditors.

In her judgment today, Ms Justice Dunne noted the trustee, in seeking an order in aid, could not rely on the provisions of the Bankruptcy Act 1988 as the Irish Government has not made any order applying the relevant order in aid provisions of that Act to the US or other countries with which Ireland has many links.

The judge accepted arguments by Bernard Dunleavy, for the trustee, there is an equivalence between the bankruptcy code in the US and in Ireland.

Having analysed several decisions relating to the universality of bankruptcy and insolvency, the judge noted universality of bankruptcy has long been an aspiration, if not always fully achieved, of UK law. With increasing world trade and globalisation, many other countries have come round to the same view, she observed.

Referring to an English decision which stated the common law on cross-border insolvency has been in a state of "arrested development", the judge said those comments could be said to have some application here also.

The judge said we live in a world of increasing world trade and globalisation with many businesses and individuals "infinitely more mobile" than they were centuries ago. She could see no reason of public policy for refusing to assist the US trustee in this case by granting the order sought, the judge said.

On the contrary, it appeared to be to the benefit of creditors to assist the trustee, she said. On a practical basis, it appeared to be more appropriate to make the order so the property here could be dealt with by the trustee for the benefit of all the creditors of Mr Drumm. She was satisfied the court had inherent jurisdiction to make the order in aid and she would do so.

Given that decision, issues relating to what is to happen to the Commercial Court proceedings against the Drumms in the Irish courts will be dealt with tomorrow by Mr Justice Peter Kelly.

Mr Drumm, who resigned in December 2008 as Anglo chief executive, is being pursued by the bank for €8 million over unpaid loans but he denies liability and has counter-claimed for some €2.6 million in salary, pension and deferred bonus payments. He also wants damages, including for "mental distress".