COURT OF APPEAL CONSIDERS WHAT IS REQUIRED FOR A DEBTOR TO SUCCEED IN DISMISSAL OF BANKRUPTCY SUMMONS
Debtor appeals bankruptcy adjudication to the Court of Appeal
Claims amount due in Bankruptcy Summons is incorrect
Appeal dismissed on all grounds
Written judgment discusses what a debtor has to prove in order to succeed in dismissal of a Bankruptcy Summons
We recently acted in a rather protracted bankruptcy case on behalf of the Collector General of the Revenue Commissioners. The Debtor in this case appealed the Bankruptcy Order (adjudication) to the Court of Appeal and the Court dismissed the appeal on all grounds. In doing so, the Court considered the issue of what a Debtor has to show in order to have a Bankruptcy Summons dismissed due to an alleged overstatement of the amount claimed in the Bankruptcy Summons and the requirements of Order 76 of the Rules of the Superior Courts in this regard.
The Debtor (who was a former solicitor) was adjudicated a Bankrupt on foot of various judgments against him totalling €405,808. The Debtor appealed this Order to the Court of Appeal on various grounds, all of which were disputed by our client. The Court of Appeal heard the appeal on 29 November 2019 and delivered a written judgment on 3 March 2020 when the Court dismissed the debtor’s appeal on all grounds. This article will look at the ambiguity which exists if there is an error in the amount claimed in a Bankruptcy Summons and the Court of Appeal’s views on this particular point which were considered in the Judgment . The Court raised this issue because it believes that it “requires attention”, even though it had no impact on this particular case.
Act of Bankruptcy
In this case, the Order adjudicating the Debtor a Bankrupt was made on 13 November 2017. An Order of Adjudication is made by the Court on foot of a Creditor’s petition for Bankruptcy if the Court determines that the Debtor has committed an act of bankruptcy within the previous three months. The act of bankruptcy committed in this case was the Debtor’s failure to comply with a Bankruptcy Summons requesting payment of a specific sum due (which must be €20,000.00 or more, Order 76 RSC), within fourteen days from service of the summons.
One of the grounds of the Debtor’s appeal was that he was entitled to challenge the Bankruptcy Summons and /or resist his adjudication as a Bankrupt by showing that there was an issue, specifically that the amount demanded of him was incorrect. The Debtor claimed that the extent of the error was immaterial.
Judgment from the Court of Appeal
In a written judgment delivered on 3 March 2020, the three Judge Court of Appeal dismissed the appeal on all grounds and noted that “the attack on the Bankruptcy Summons on the basis that it overstates the amount due by the Debtor fails both as a matter of fact and as a matter of law.”
Giving judgment, Mr Justice Maurice Collins outlined the circumstances of the case and in concluding observations, stated that the question of what a Debtor must show when seeking to dismiss a Bankruptcy Summons requires attention, by reference to the statutory position outlined in Order 76 of the Rules of the Superior Courts and existing authority.
Existing authority indicates that a Bankruptcy Summons can be set aside if a Debtor can show there is an issue with the amount claimed in the Bankruptcy Summons, i.e., that the amount claimed in the Summons exceeds what the Debtor owes.
However, Order 76 itself appears to be premised on the basis that in order to dismiss a Bankruptcy Summons, the Debtor is obliged to establish more than the “existence of an issue” that goes to the heart of the debt. The Debtor has to show that he is not indebted at all, or owes less than €20,000.
The position regarding the implication of an error or overstatement of the amount claimed in a Bankruptcy Summons as outlined in Order 76 of the Rules of the Superior Court differs somewhat to the judicial position as set out in previous cases. The Court of Appeal highlighted in this this case that the position requires urgent review. We will have to wait to see if this issue is resolved either judicially or legislatively. However, given the ambiguity that exists at present, it is essential that all figures claimed in a Bankruptcy Summons are 100% accurate in order to avoid any potential for dispute in the High Court and/or Court of Appeal.