Neutral Citation  IEHC 679
THE HIGH COURT
CHRISTOPHER LEHANE AS OFFICIAL ASSIGNEE IN BANKRUPTCY
IN THE ESTATE OF SEAN DUNNE
JUDGMENT of Ms. Justice Costello delivered on the 25th day of November, 2016
1. This is my judgment on the plaintiff’s application for discovery against the defendant, the wife of the bankrupt.
2. The plaintiff seeks discovery of 13 categories of documents and the defendant objects to making any discovery. She argues that the discovery sought is speculative and it is being sought for the purpose of making a case against the defendant. If she is incorrect in that assertion, she consents to make discovery in terms of categories 6, 9, 11, 12 and 13 of the notice of motion. She has proposed alternative categories in respect of categories 1, 2, 4, 5, 7 and 8, and she objects to discovery in respect of categories 3 and 10.
3. I have given a judgment previously in these proceedings where the facts are more fully set out. I do not propose to repeat them here.
Relevant legal principles
4. The discovery sought must relate to a matter in question in the proceedings. The issues in the proceedings are defined by the pleadings. The discovery sought must be necessary for disposing fairly of the cause or matter or for saving costs. The Court shall not make an order for discovery if insofar as the court shall be of the opinion that it is not necessary either for disposing fairly of the cause or matter or for saving costs. (Rules of the Superior Courts, O. 31, r. 12(1)(a) and (5))
5. It has long been established that the test in this jurisdiction is whether the documents sought may lead the parties seeking the discovery directly or indirectly to advance his own case or to damage the case of his adversary. This means that it is not confined to the issues arising from the plaintiff’s case but extends also to issues arising from the defence: Compagnie Financiere et Commerciale du Pacifique v. Peruvian Guano Company  11 Q.B.D. 55.
6. In Framus Ltd.v.CRH plc.  2 I.R. 20, Murray C.J. stated that there must be some proportionality between the extent or volume of the documents to be discovered and the degree to which the documents are likely to advance the case of his or her opponent in addition to ensuring that no party is taken by surprise by the production of documents at trial. In considering whether or not the discovery sought is proportionate in the sense identified by the Chief Justice the burden is upon the party asserting that the discovery ought not to be ordered and to establish that the requested discovery is so burdensome upon that party as to outweigh the benefit that might accrue to the requesting party if the discovery were to be made.
7. Finally, the courts do not permit discovery of what is usually described as “fishing”. A party may not seek discovery of a document in order to find out whether the document may be relevant. The party is not permitted to engage in a general trawl through the documents of the other party. See Hannon v. Commissioners of Public Works and Others  IEHC 59.
The defendant’s primary objection to discovery
8. The plaintiff sought voluntary discovery from the defendant by letter dated the 15th June, 2015. The defendant replied on the 29th June, 2015, stating that the plaintiff was not entitled to any discovery. This was on the basis that the discovery was speculative. The plaintiff was seeking discovery for the purposes of making a case against the defendant. He had not pleaded fraud against the defendant or that she had acted without the requisite good faith in relation to the transactions which he was seeking to have set aside in the proceedings. Secondly, she submitted that he had alternative means of proof as he had already obtained disclosure through other mechanisms. This was a reference to the disclosure of documents made by the bankrupt to his trustee in bankruptcy as part of the American bankruptcy proceedings. In order to assess these arguments it is necessary to consider the pleadings in some detail.
9. In these proceedings the primary reliefs sought are as follows:
10. At paras. 3 and 4 of the statement of claim it is pleaded:
“1. A declaration that the transfer of all shares in Mavior, in the legal or beneficial ownership of Sean Dunne, dated the 28th October 2008 from Sean Dunne to Gayle Dunne and/or companies controlled by Gayle Dunne is void and of no effect by virtue of Section 59 of the Bankruptcy Act of 1988 and/or by reason of the provisions of Section 10 of the Irish Statute of Fraudulent Conveyances, 1634 (10 CHAS. 1 SESS. 2, C.3);
2. A declaration that the purported transfer of Sean Dunne’s interest, whether represented by shares in Mavior or otherwise, in the Lagoon Beach Hotel, Cape Town, South Africa made pursuant to the Agreement of the 15th of February 2008 between Sean Dunne and Gayle Dunne is void and of no effect by reason of the provisions of Section 10 of the Irish Statute of Fraudulent Conveyances, 1634 (10 CHAS. 1 SESS. 2, C.3);
3. A declaration that the purported transfer by Sean Dunne of the full book value as calculated as of the 15th of February 2008 or otherwise of all loans made by him to Mavior and all of its related companies and subsidiaries made pursuant to the Agreement of the 15th February 2008 between Sean Dunne and Gayle Dunne is void and of no effect by reasons of the provisions of Section 10 of the Irish Statute of Fraudulent Conveyances, 1634 (10 CHS. 1 SESS. 2, C.3.”
11. The transaction of 23rd March, 2005 is pleaded in full and is set out as follows:
“3. By transactions which are alleged to be dated the 23rd March 2005, the 15th February 2008 (the “Transactions”) and a Share Transfer dated the 28th October 2008 (the “Transfer”), the Bankrupt purported to transfer a proportion from the profits from the sale of certain assets and / or ownership of certain assets to the Defendant.
In order to give effect to such transfers the Bankrupt and the Defendant and their servants and agents, including a number of corporate entities and trusts, entered into a series of dealings designed to give effect to the transfer of, inter alia, the beneficial ownership of the Lagoon Beach Hotel, Lagoon Gate Drive, Milnerton, Cape Town, South Africa (hereinafter the “Hotel”) from the Bankrupt to Ms. Gayle Dunne.”
12. It is then pleaded at para. 6:
“Property Transfer Agreement between Sean Dunne and Gayle Dunne – 23rd March 2005
I, Sean Dunne, hereby undertake to give to my wife Gayle Dunne (nee Killilea), whom I married on the 11th July 2004, 70% of the profits accrued from the sale of my share of the following properties for the benefit of her and our son Bobby Luke and any future children born to us:
1. Woodtown Rathfarnham, Co Dublin
2. IGB Clonskeagh, Co Dublin
3. Lagoon Beach Hotel, Capetown, SA
4. Charlesland, Co Wicklow (residential portion only)
5. Malahide, Co Dublin (MRFC lands)
6. Rivertree (1 & 3 Shrewsbury Road, Dublin 4)
This transfer of money and/or assets is to ensure the financial independence of my wife and children for the future and to secure their independence from my own property investments. The 30% of the profits let over is estimated to cover all tax an associated ocsts in relation to these assets, and any shortfall will be covered by me, and surplus is for my account.
Lagoon Beach: In relation to Lagoon Beach which is owned by Mountbrook Homes Ltd, I have to date loaned Mountbrook Homes approximately €4m. I hereby transfer this debt owing to me from MHL to my wife Gayle.
Charlesland: In relation to Charlesland, which I hold in my own name, the transfer of profits relate to all residential lands only, and all commercial lands are for me and/or my companies.
I further confirm that I renounce on behalf of my estate all claims over or against these properties or the amount of money derived from their sale should I die before this transfer is fully completed.
I reserve the right to retain ownership of all these properties and transfer the value as cash or alternative properties at values to be agreed between us.
If no mutual agreement re values then this agreement must stand with no referral to arbitration or legal proceedings by either party, except for the enforcement of the agreement itself.
Sean Dunne: 23rd March 2005
Gayle Dunne: 23rd March 2005
13. The transaction of 15th February, 2008, is pleaded in full and the plaintiff makes a similar plea in relation to being a stranger to the circumstances surrounding this agreement and seeking discovery.
“…The O.A. is a stranger to the date of the 2005 Transaction and the circumstances surrounding same which are solely within the knowledge of the Bankrupt and the Defendant. The O.A. will seek discovery of all documents which purport to give effect to or refer to this agreement and, for the avoidance of doubt, the making of the alleged transaction and the date of same are not accepted as valid or accurate by the Plaintiff. Further the O.A. reserves the right to amend pleadings as necessary following such discovery to take account of any steps alleged to have been taken pursuant to the 2005 Transaction which relates to the Estate of the Bankrupt.”
14. He pleads that in the circumstances set out in the statement of claim, the intended purpose and natural and probable effect of the 2005 agreement is to put assets beyond the reach of the bankrupt’s creditors should the “property investments” fail. The statement of claim sets out dealings which were in purported implementation of the transaction of 15th February, 2008, and the share transfer of the 28th October, 2008. He pleads that the necessary and probable effect of these transactions was to give the defendant the beneficial ownership and control of the hotel and ultimately, the net proceeds of sale of the hotel through the realisable value of loans or control of corporate entities. He therefore pleads at para. 27 that:
15. It is pleaded that the bankrupt was insolvent on 15th February, 2008, and 28th October, 2008, and therefore he was not entitled to enter into such transactions or to put his assets beyond the reach of his creditors. He pleads that the transfer of the Mavior shares on 28th October, 2008, from the bankrupt to the companies controlled by the defendant is void and of no effect as against the plaintiff by virtue of the provisions of s.59 of the Bankruptcy Act 1988, unless the defendant proves that the bankrupt was, at the time of the making of the transfer, able to pay all his debts without the aid of the shares. He pleads the transactions and transfer were entered into for no consideration or no bona fide consideration. They were entered into post the marriage of the bankrupt and the defendant and were not entered into in consideration of the marriage but were voluntary transfers made with the intent of putting assets out of the reach of the bona fide creditors of the bankrupt.
16. In her defence the defendant pleads that the plaintiff’s case invokes statutory provisions requiring an intention to defraud and a lack of bona fides and the plaintiff has failed expressly to plead the required fraud or lack of bona fides necessary to ground the causes of action.
17. She further pleads as follows:
18. In para. 27 it is stated that in the 2005 agreement properties were identified by the parties to give effect to the agreed transfer of wealth referred to in paras. 21-24 of the defence. In para. 31 it is said that each of the 2005 agreements and the subsequent transactions were inextricably linked to the agreement, understanding and intention referred to at para. 21-24 of the defence and the contract of their marriage.
“21. Prior to their marriage and as far back as 2003, following a proposal of marriage made by the Bankrupt to the Defendant, the Bankrupt and the Defendant discussed both getting married and having children. They discussed and they agreed and it was the intention prior to the marriage that if the Defendant married the Bankrupt and started a family with him he would immediately transfer a portion of his wealth to her so as to make her independently wealthy in her own right during or after an unsuccessful marriage or after his death. It was intended that the Defendant would forgo her career as a journalist and her intention to practice as a lawyer in favour of prioritising family life and the Bankrupt’s career and that she would give up her own sources of income from those careers. It was the intention that she would not need to, and would not in fact seek, any further assets from the Bankrupt if they separated or divorced following the marriage or by way [of] claim against his estate in the event of his death and would not compete for assets in family law proceedings on her own behalf or on behalf of her children against his ex-wife or the children of his first marriage…
22. The Defendant and the Bankrupt investigated both the possibility of a prenuptial agreement and a transfer of assets prior to the marriage… They reached an understanding and the Bankrupt undertook, prior to the marriage and having explored a pre nuptial agreement, that he was going to transfer a portion of his wealth to the Defendant immediately after the marriage in consideration of the Defendant’s forbearances aforesaid… The agreement to transfer wealth prior to the marriage of the Defendant to the Bankrupt gave rise to maintainable claims in law in the event of breach, particularly in family law, upon the Bankrupt’s marriage to the defendant in 2004.”
19. In para. 34 of the defence it is pleaded that there was part performance of the 2005 agreement and the bankrupt purchased a property at Shrewsbury Road, Ballsbridge, Dublin 4 on or about July, 2005 then valued at €58 million and the defendant accepted the property.
20. In reply the plaintiff denies that the purchase of the premises (Walford) constituted an act of part performance of the 2005 agreement and pleaded that he would seek discovery of all documentation in relation to the alleged act of part performance and that the defendant was put on full proof that the purchase and gifting of the property to the defendant was an act of part performance of the 2005 agreement or was related to that agreement.
Should there be any order for discovery?
21. The defendant argued on the basis of these pleadings that the plaintiff has not alleged fraud or a lack of good faith against her. She argues that this is required by s.10 of the Conveyancing Act (Ireland) 1634, (the Statute of Charles). As this has not been pleaded, there is no issue in respect of which discovery may properly be sought.
22. The plaintiff submits that the application of s.10 of the Statute of Charles and s.59 of the Bankruptcy Act 1988, are issues for the trial of the action. The plaintiff says that case law in respect of s.10 establishes that there are two varieties of fraudulent intent envisaged by the section: express and actual intent or inferred intent. The plaintiff does not rely upon the first variety of express fraudulent intent. His case is based upon the second variety where a court is invited to draw an inference from circumstances found to have existed at the time and from the transactions themselves. This is the basis upon which the statement of claim is pleaded. The focus is on the transaction and the surrounding circumstances and it is not necessary for the plaintiff to either plead or prove an express fraudulent intent even on the part of the grantor much less the recipient. He relies upon the line of authority running from In Re Moroney  21 L.R.I. 27 to Doherty v. Quigley  I.E.C.A. 297. At p. 61 of the report in Moroney’s case, Palles C.B. stated:-
23. I am satisfied that the plaintiff is entitled to frame his case in this fashion. He has chosen not to make express allegations of fraud against the defendant in these proceedings. He is entitled to pursue a claim based upon what Palles C.B. described as the second variety of fraudulent conveyance coming within the scope of s.10 of the Statute of Charles.
“In other cases, no such intention actually exists in the mind of the grantor, but the necessary or probable result of his denuding himself of the property included in the conveyance, for the consideration, and under the circumstances actually existing, is to defeat or delay creditors, and in such a case… the intent is, as a matter of law, assumed from the necessary or probable consequences of the act done; and in this case, also, the conveyance, in point of law, and without any inference of fact being drawn, is fraudulent within the statute. In every case, however, no matter what its nature, before the conveyance can be avoided, fraud, whether expressly proved as a fact, or as an inference of law from other facts proved, must exist.”
24. The second argument advanced by the defendant against any order for discovery is her contention that the plaintiff may obtain the documentation he seeks through other sources and therefore the discovery sought is not necessary. In response the plaintiff says that the defendant is likely to have documentation which is not available to him. He submits that he should not be surprised at trial by such documentation and it should be available to him in advance of trial in order that there may be a fair trial and to save costs. He says he does not have alternative means of obtaining the information. In any event, this is not an answer to the type of discovery sought here: documentation relating to the transfer of wealth by the bankrupt to the defendant. Even if he has documents from the bankrupt’s estate, normally both parties to a transaction are required to make discovery of the documentation in their own possession.
25. I accept the submissions of the plaintiff. That being so, I reject the defendant’s submission that there ought to be no order for discovery at all in this case. I now turn to consider the individual categories of document.
26. Category 1: All documentation which relates to, refers to evidences or records of the purported agreement/transaction of 23rd March, 2006, where Sean Dunne (hereinafter “the Bankrupt”) purported to transfer money and/or assets to the defendant (hereinafter “the 2005 Transaction”) including, but not limited to, documentation referring to the making of and reasons for entering into the 2005 transaction, advices taken before and after the transaction, valuations of the assets purported transferred from the estate of the Bankrupt, drafts or memoranda recording the negotiations in relation to the 2005 transaction or earlier agreements, understandings or arrangements in relation to any proposed transfer of wealth from the Bankrupt to the defendant.
27. Category 2: All documentation evidencing, relating to, or recording the alleged part performance of the 2005 transaction or the performance of any allegation allegedly incurred prior to and subsequent to the 2005 transaction including but not limited to:
(i) All documentation relating to the transfer of Walford, Shrewsbury Road, Dublin 4, to entities controlled by the defendant and which show her interest in corporate entities which own the house; and
(ii) documents relating to the agreement of the 30th March, 2010, which was acknowledged by the Swiss Court on 23rd June, 2010; and
(iii) any other documentation which related to any alleged performance or part performance of the 2005 transaction or relates to any acts which are alleged to be consequent upon the bankrupt’s or the defendant’s obligations thereunder.
28. The plaintiff seeks to set aside the 2008 transaction and the 2008 transfer. The defendant pleads that these are valid transactions and that they resulted from decisions and agreements reached between the bankrupt and the defendant long before there was any issue in relation to his solvency. She pleads that the process of transferring assets dates back to 2003 – 2005 and was carried forward. The plaintiff says that issues around the 2005 transaction and the issues arising from actions predating the transaction are essentially issues of defence. He does not accept that it has any legal effect but this is a matter to be determined at trial. He submits that there should be documentation prior to the alleged execution of the agreement in 2005 and this documentation will go to show when the agreement was made, what the intention of the parties was and may show why no transfer was ultimately effected and the Bankrupt ultimately retained ownership of the properties listed in the agreement. He submits that in the circumstances where the legality and effectiveness of the 2005 transaction is in issue, the ownership of the assets purportedly transferred is in issue and the ability of the bankrupt to enter into the transfer of the property not held in his own name is in issue, the documentation sought in Category 1 is relevant and necessary and fundamental to the disposal of the proceedings.
29. In relation to Category 2, he says that the defendant pleaded that there were acts of part performance of the 2005 transaction. Specifically, she pleaded that “the bankrupt purchased and that the defendant accepted [Walford] Shrewsbury Road, Ballsbridge, Dublin 4 on or about July, 2005.” In replies to particulars at 10(iv) she pleaded that the Swiss judgment “merely provided for the unfulfilled obligations of the bankrupt under the 2005 agreement”. She also relied upon it at reply to particulars 11(ix). Thus this category of documents is both relevant and necessary arising from that defence. The categories sought are not overly broad. They are dictated by the nature of the transactions which he seeks to have set aside, which he says are peculiar, fragmentary and unusual in nature. He says that the categories will not result in the defendant being unnecessarily obliged to discover a significant quantity of additional material: merely that it is complete and comprehensive.
30. The defendant objects to discovery of both of these categories on the basis that the plaintiff has raised no issue as to the validity of the 2005 agreement and has sought no relief in respect of the agreement. She submits therefore that these categories of discovery amount to impermissible “fishing”. She further objects that the two categories are too broad in that they are unlimited in time, as to persons, capacity or jurisdiction. She objects to the use of the formula “relating to” as broadening the scope of the discovery sought. She submits that the categories as drafted would impose an impermissible burden on the defendant with a disproportionate lack of benefit to the plaintiff. If discovery was to be sought she suggested a narrower category of discovery, limiting it to documents recording advice or evidencing the performance or implementation or acts of part performance of the 2005 agreement. She submits that this would include all documentation relating to the transfer of Walford as sought in Category 2 and she agreed to make discovery of the agreement between the bankrupt and the defendant dated 30th March, 2010, and the order of the Swiss court dated 23rd June, 2010.
31. I am satisfied that Categories 1 and 2 as drafted are relevant to the issues in the case. The documents are necessary to any objective assessment by the court of the transactions upon which the defendant relies in her defence. The fact that the plaintiff has not pleaded any relief in respect of the 2005 transaction does not alter the fact that the validity and effect of this agreement will be a central issue for the trial judge to resolve. He pleads the transaction is void while the defendant relies upon the validity of the transaction to resist his claims.
32. Given the nature of the transactions at issue in these proceedings, I do not believe that the categories as drafted by the plaintiff are too broad. The transactions relate to the actions of the bankrupt and the defendant. The plaintiff can have no knowledge of these discussions, agreements or advices obtained, if any. The defendant chose to put no evidence at all before the court as to the burden involved in complying with the discovery sought by the plaintiff in respect of these categories. Therefore she has not laid any basis for an argument that the discovery sought is disproportionate. Indeed, in submissions to the court, her counsel accepted that there was no such evidence and that he could not draw a distinction between the costs (and the burden) of making the discovery sought by the plaintiff as opposed to the discovery offered by the defendant.
33. In relation to Category 2(iii) the defendant was invited to confirm that the only acts of performance or part performance of the 2005 transaction upon which she relied were the transfer of Walford and the agreement of 30th March, 2010, acknowledged by the Swiss court on 23rd June, 2010. As she did not take up this invitation, I have concluded that the plaintiff is entitled to this sub-category of discovery also. I will order that discovery be made in terms of categories 1 and 2 in the notice of motion.
34. Category 3: All tax returns made by the defendant or on her behalf jointly or otherwise in any jurisdiction for the years 2005 to the date of the issue of the proceedings.
35. The plaintiff says that the defendant claims that pursuant to the agreements of 2005 and 2008 she immediately became the owner in equity of the Mavior loans and other properties gifted to her by the bankrupt, including Walford. The issue in the case is whether, and if so, when she became the owner of the assets in dispute. He says that her tax returns will reflect whether she acknowledged receiving the assets or whether it is simply a promise to pay her in the future. If she received the assets at a particular date then she would be obliged to make a tax return in relation to it. Thus the tax return(s) will establish a date upon which she says she became owner of the assets in question. He makes the point that she may redact those parts of her tax returns that do not relate to her ownership of or interest in any of the assets at issue in the proceedings.
36. The defendant objects to this category on the basis that it is not relevant. She says that there is no pleaded issue in relation to her tax returns and therefore no issue in relation to the tax treatment of the transfers by or to her. She submits that it is impermissible to seek discovery in aid of investigation. She also submits that the burden of disclosing 9 years of tax returns not limited as to jurisdiction which would be of no benefit to the plaintiff is unreasonable in the circumstances.
37. I accept that the question of the tax treatment of the defendant’s assets is not in issue in these proceedings. However the plaintiff is not seeking discovery in aid of an investigation. He is seeking documentation which would assist the plaintiff and the court in determining a date or at least a year in which the defendant became entitled to a particular benefit in a particular asset. The date of the transfer of wealth from the bankrupt to the defendant is critical in these proceedings. The tax returns of the defendant are relevant in assisting in the establishment of this disputed date or dates. On this basis I am satisfied that the discovery sought falls within the Peruvian Guano train of enquiry test.
38. The defendant has not set out any information concerning the burden that would be involved in making discovery in respect of this category of documents. Her tax returns for the 9 years sought should not be unduly difficult to produce even if it involves a number of jurisdictions. She has simply made the bald assertion that it would be an undue burden but has given the court no indication of the actual work involved to substantiate this claim. I am satisfied that the request is not disproportionate and that discovery should be made of the category as sought with the proviso that the defendant is entitled to redact the details of her tax returns which do not relate to the assets at issue in these proceedings. I order that the defendant make discovery in terms of this category.
39. Category 4: All documentation which evidences the plea at para. 25 of the defence that the defendant and/or the bankrupt had decided to develop and maximise the value of the property which it was alleged was transferred under the 2005 transaction.
40. The plaintiff says that this category is designed to capture documents to show that the bankrupt was still in control of the assets after a transfer was alleged to have been effected. He says that this is relevant as one of the indicia of a fraudulent conveyance is that the transferor remains in control after the date of the transfer of the asset. On this basis he says that this category of documentation is both relevant and necessary and he seeks discovery in these terms.
41. The defendant offered to discover all documents recording any agreement between the bankrupt and the defendant that the value of the properties listed in the 2005 agreement would be maximised prior to sale or disposal. The defendant seeks to restrict the category to agreements to maximise the value of the property rather than mere decisions. In response, the plaintiff submits that the proposal of the defendant would show nothing as it is to be assumed that they would always wish to maximise the value of the property.
42. Subject to the court deciding that any discovery is necessary in this case, the defendant does not really dispute the relevance of this category. As I have held that discovery is required for the reasons set out earlier in this judgment, the issue of relevance and necessity does not arise in respect of this category. The issue is whether it is properly drafted to capture what the plaintiff requires and is entitled to. I am not satisfied that the category as formulated is really directed towards obtaining discovery of the documents which will show, or will not show, that the bankrupt was still in control of the assets after the transfer was alleged to have been effected. I have therefore redrafted the category and direct the defendant to make discovery of,
Categories 5 and 8
“All documents evidencing the involvement, directly or indirectly, of the bankrupt in the management and/or control of property which it was alleged by the defendant was transferred to her pursuant to the 2005 transaction from 2005 to date.”
43. Category 5: All documentation relating to the purported assignment/novation (if any) of a loan allegedly made by the bankrupt to Mountbrook Homes Limited (subsequently Mavior) in the amount of approximately 4 million euro and all documentation evidencing or recording all funds received by the defendant in purported payment (partial or otherwise) thereof.
44. Category 8: All documentation relating to the loans allegedly transferred/novated (if any) by the bankrupt to the defendant under the 2009 transaction, which loans were claimed to be due to him from Mountbrook Homes Limited (Mavior) and all of its associated companies and subsidiaries, including documentation relating to the claim that the open market value of same was €1.95 million and all documentation evidencing or recording all funds received by the defendant in purported payment (partial or otherwise thereof).
45. The defendant did not really dispute the relevance or necessity of these categories. She took issue with the formulation of the categories. She submitted that there should be one combined category of:
46. In substance her objection to the categories as formulated by the plaintiff was to discovery of documents “relating to” the assignment or novation of the loan and relating to the valuation of the loan in 2008. Other than the fact that the category or categories was necessarily broadened by the inclusion of documents relating to the assignment or valuation, counsel did not advance any particular reason why the category should be confined in the manner proposed by the defendant.
“All documents recording and/or evidencing the assignment of the benefit of the bankrupt’s loan to Mountbrook Homes Limited (subsequently Mavior) to the defendant and all documents recording and/or evidencing any valuation of the bankrupt’s Mavior loan as at the date of the 2008 agreement.”
47. As a general proposition, multiplication of categories of discovery should be avoided where possible. However, I am not satisfied that the defendant’s alternative unitary category either captures all that was sought by the plaintiff in the two separate categories or enhances the clarity of that which is to be discovered. Category 5 is directed towards the actual alleged assignment of the loan and any receipts in purported repayment of the loan. Category 8 is directed towards the alleged transfer of the loan in 2008 as part of the 2008 transaction and the open market value of the loan fixed at €1.95 million in 2008 when it was valued at approximately €4 million in 2005. Therefore I do not see that the proposed alternative is an improvement on what was sought.
48. I do not believe that it is appropriate to limit the two categories which seek discovery of documents “relating to” the matters the subject of the categories. It was not suggested that there could be any saving of time or expense by limiting the categories in this way, as the same search exercise would have to be conducted whichever formulation was ordered. I am not persuaded by the argument that including the test “relating to” will lead to more disputes about the discovery when produced. Frequently, courts make orders in these terms and practitioners comply with them for the most part without difficulty or unnecessary disputes. I order that the defendant make discovery in terms of categories 5 and 8 of the notice of motion.
49. Category 7: All documents which relate to, refer to, evidence or record the making of the purported agreement/transaction dated 15th February, 2008, (hereinafter “the 2008 transaction”) and/or the reasons for the bankrupt and the defendant entering into same.
50. The only objection advanced in relation to this category by the defendant was the formulation “relate or refer to”. The defendant submits that this is an “impossibly wide” category. She does not explain either on affidavit or in submissions why it would be difficult for her to make discovery in terms of this category or why it would be unduly expensive.
51. On the other hand, the plaintiff urges that this category of documentation is fundamental to the proceedings. It relates to the transaction that he seeks to set aside. In particular, he wants to e-mail track the correspondence in relation to the 2008 transaction. For this reason, it is essential that the category captures documents relating or referring to the transaction and is not confined to documents which evidence or record the making of the agreement/transaction.
52. I accept the submissions of the plaintiff in relation to this category. It is clearly relevant and necessary for a fair disposal of the proceedings. It is not impermissibly wide in its ambit. It is essential that the discovery of this category in particular encompasses documents relating or referring to the 2008 transaction in light of the case advanced by the plaintiff. Ultimately the court will be asked to infer from the surrounding circumstances whether or not the transaction falls foul of the relevant statutory provisions. The court will require to view the evidence in context and therefore this discovery as sought is required. I direct the defendant to make discovery of this category of documents also.
53. Category 10: All documentation relating to the transfer of any interest in the share capital of Lagoon Beach Hotel (Proprietary) Limited (LBH) and/or any novation of any loan obligation by Mavior to Castorena Limited and by Castorena Limited to Volcren Management Limited and the reasons for such transfers and the consideration in relation to same and all documentation relating to or evidencing the defendant’s ownership of shares in Enia Investments Limited.
54. The defendant accepts that she is the ultimate owner of the shares “in the entity which owns the Lagoon Beach Hotel”. She says therefore that this category is not relevant to any issue in the proceedings.
55. The plaintiff says that it is. He says that the central contention is that the entire transaction has the effect of putting assets beyond the reach of the creditors and delaying, hindering or defrauding creditors as a result. He says that one of the indicia of an agreement that will be set aside under such circumstances is where a party purportedly transfers assets but retains control of them. He therefore says that any commentary in relation to transfers may show why it was deemed necessary to transfer the share capital of the hotel holding company and the loan through a myriad of companies in the Isle of Mann, Mauritius and Cyprus. He seeks this category of discovery on the basis that it is relevant to show who ultimately was dealing with the assets through these corporate entities at the date of the relevant transfers.
56. He says that this is not tangential and it is not unduly burdensome. It relates solely to the transfer of any interest in the share capital of the Lagoon Beach Hotel (Proprietary) Limited and/or any novation of any loan obligation by Mavior to the parties referred to in the statement of claim. He points out that the defendant has accepted that she is the ultimate owner of the shares in the various companies as pleaded in paras. 42, 43 and 44 of her defence and that the category is a discreet category in respect of a small number of documents. He says that this therefore falls within the exception recognised by the Supreme Court in Thema International Fund Plc v HSBC Institutional Trust Services [Ireland] Ltd & Anor  1 IR 274 at para. 54 where Clarke J. accepted there could be an order for discovery;
57. A further reason for seeking this category of discovery is based upon the fact that the bankrupt claims that 30% of the shares in Mavior were held by him in trust for his children. The plaintiff does not accept this and will contend that no such trust exists or that if it exists it is a sham trust. He pleads at para.19(vii) that the assets allegedly held for the benefit of the beneficiaries were not so held insofar as the assets were clearly held to the order of the bankrupt and transferred to the defendant in pursuance of agreements he made with the defendant. On that basis he says it is necessary to see the instructions given in respect of the transfers to see whether the assets were in fact held to his order.
“…in the sort of situation where there is a single or small number of readily identifiable documents in respect of which there is good reason to believe that production can be procured…”
58. The defendant does not argue that the category of documentation sought falls outside of the Thema exception or that she could not procure documentation from the various corporate entities in order that she would be in a position to comply with discovery obligations if this category of discovery is ordered. Her primary objection is the fact that she acknowledges that she is the ultimate controlling party of the company holding the Lagoon Beach Hotel and the loans and therefore the discovery sought is neither relevant nor necessary.
59. In other proceedings the submissions of the defendant might well carry weight. However, the essential point in these proceedings is the contention that the entire transaction is a sham designed to put assets beyond the reach of creditors and delay, hinder or defraud creditors as a result. It is well established that a relevant factor to be considered in such a case is whether the party purportedly transferring the assets retains control of them. On this basis it cannot be said that this category of documentation is not relevant. It is clearly necessary as the Official Assignee has no access to the documentation other than by means of an order of discovery. I am satisfied that the order sought falls within the limited exception acknowledged in the Thema case by the Supreme Court. I therefore order discovery in terms of Category 10 as sought by the plaintiff.
60. Category 13: All documentation which evidences the denial at paras. 47 and 54 of the defence that the bankrupt transferor was insolvent as at 15th February, 2008 and 28th October, 2008.
61. During the course of the hearing the defendant effectively withdrew her objection to this category of discovery when acknowledging that the plaintiff had agreed to make comparable discovery on his part. She was more concerned with whether the category implied an obligation on her part to establish that the bankrupt was solvent at the relevant dates rather than the obligation resting on the plaintiff to establish that he was insolvent at the dates in question. This is not a matter which is relevant to an assessment as to whether or not the category of discovery of documentation is relevant and necessary to the proceedings. It was not necessary to debate the point at the hearing of the motion. I order discovery as sought in respect of this category.
62. The defendant is to make discovery in terms of categories 1, 2, 3, 5, 6, 7, 8, 9, 10, 11, 12 and 13 of the notice of motion and category 4 as I have redrafted it.