Supreme Court dismisses bankruptcy summons dismissal application due to mootness and lack of special circumstances.

THE SUPREME COURT

103/02

Murphy J

Hardiman J

Geoghegan J

Hugh A Carthy, John P Carthy, Pamela Madigan & Rocco Caira, Practising as Kent Carthy & Company

Applicants/Respondents

AND

Michael Colin Jeffrey McMullen

Appellant

IN THE MATTER OF AN APPLICATION BY MICHAEL MCMULLEN FOR AN ORDER DISMISSING A BANKRUPTCY SUMMONS ISSUED

AGAINST HIM BY THE ABOVE KENT CARTHY & COMPANY OF 48, PARNELL SQUARE, DUBLIN 1.

Judgment of Mr Justice Francis D Murphy delivered the 7th day of June, 2002

In proceedings bearing record number 1988 6218p between Michael Colin Jeffrey McMullen and Hugh A Carthy, John P Carthy, Pamela

Madigan and Rocca Caira, practising as Kent Carthy & Company, the High Court dismissed the claim of the plaintiff (Mr McMullen) and

granted to the defendants (Kent Carthy) the costs of those proceedings to be taxed in default of proceedings. The appeal by Mr

McMullen against the order and judgment of the High Court was dismissed on the 27th day of January, 1998, and Kent Carthy were

awarded their costs of the appeal against Mr McMullen. The High Court costs were subsequently taxed at a sum of £33,611.41 and

the costs of the appeal at £15,098.11. On the 9th October, 2000, Giles J Kennedy, solicitor, on behalf of Kent Carthy, served

particulars demanding payment of that sum which, together with interest thereon then amounted to £71,433.59. On the 20th

October, 2000, Mr Justice McCracken issued a bankruptcy summons in respect of the said sum of £71,433.59. On the 6th day of

December, 2000, an application was made by Mr McMullen to dismiss the bankruptcy summons which application came before Mr

Justice McKechnie who delivered his judgment thereon on the 20th of March, 2000. By that judgment and the order made pursuant

thereto Mr McMullen’s application for an order dismissing the bankruptcy summons issued against him was refused. No stay was put on

that order. Nor does it seem to me that such a provision would be appropriate but the Court in its order did note:-

“....... The undertaking given by counsel (for Kent Carty) to take no further steps in these proceedings for a period of six

weeks from the date hereof.”

By notice of appeal dated the 29th day of April, 2002, Mr McMullen has sought an order reversing the order made by the learned trial

judge and reversing the same in its entirety and seeking in lieu thereof an order in favour of Mr McMullen “in such a manner to dismiss

and stay indefinitely the said summons in bankruptcy pending the completion of the pre-existing complaints to the Court of Human

Rights in Strasbourg, the appeals of the two actions seeking the indemnity for the whole amounts the subject matter of the said

bankruptcy sums as well as an order for the expenses of resisting the said threats.”

However, the application at present before the Court is a notice of motion dated the 8th day of May, 2002, in which Mr McMullen

seeks the relief following:-

“A An order staying the dismissal of the application by this appellant for the dismissal or in the alternative staying

indefinitely pending the actions as outlined in the attached notice of appeal, which said dismissal is contained in the order

of Mr Justice McKechnie dated the 20th of March, 2002 perfected on April 10th 2002.

B The said staying order to have the effect of continuing the undertaking already given by counsel for Kent Carthy,

contained in the last sentence of the said order until such time as this appeal be disposed of or in the alternative such

time as a decision be returned from the Court of Human Rights in Strasbourg, to whose office copies of this notion are

being transmitted with a request for information regarding the dates of procedures before it.”

The Bankruptcy Act 1988, s.8 (replacing the Bankruptcy (Ireland) Amendment Act 1872, s.30) insofar as it is material, provides as

follows:-

“8(1) A summons (in this Act referred to as a “bankruptcy summons”) may be granted by the court to a person, (in this

section referred to as “the creditor”) who proves that:-

“(a) a debt of £1,500 or more is due to him by the person against whom the summons is sought,

(b) the debt is a liquidated sum, and

(c) a notice in the prescribed form, requiring payment of the debt has been served on the debtor.

(2) .......

(3) The notice requiring payment of the debt shall set out the particulars of the debt due and shall require payment

within four days after service thereof on the debtor.

(4) The bankruptcy summons shall be in the prescribed form.

(5) A debtor served with a bankruptcy summons may apply to the court in the prescribed manner and within the

prescribed time to dismiss the summons.

(6) The Court -

(a) may dismiss the summons with or without costs, and,

(b) shall dismiss the summons if satisfied that an issue would arise for trial.”

The Bankruptcy Act 1988 s.7 identifies a variety of acts which constitute “an act of bankruptcy”. In particular that section provides

as follows:-

“7(1) An individual (in this Act called a “debtor”) commits an act of bankruptcy in each of the following cases:-

...............

(g) if the creditor presenting a petition has served upon the debtor in the prescribed manner a bankruptcy

summons, and does not within fourteen days after service of the summons pay the sum referred to in the

summons or secure or compound for it to the satisfaction of the creditor.”

Presumably the bankruptcy summons was served on Mr McMullen and it is clear that he declined to pay, secure or compound the

amount specified therein. Instead he applied to the High Court, as he was entitled to do, under s.8 subsection 6 aforesaid of the Act

of 1988 to have the bankruptcy summons dismissed and that application was refused.

His present application to this Court is to have the bankruptcy summons “stayed”. However the bankruptcy summons is not itself an

operative order of the High Court the effect of which could be postponed in an appropriate case. The summons is either valid or

invalid. Its validity has been upheld by the High Court and that position will remain unless and until that order is set aside by this

Court.

It seems more probable that what Mr McMullen intended to seek was an order in the nature of an injunction restraining Kent Carthy

from taking any action on foot of the bankruptcy summons - and in particular restraining them from relying upon that bankruptcy

summons and the failure to pay, secure or compound the amount thereby demanded - as an act of bankruptcy to ground a petition

under s.11 of the Bankruptcy Act 1988 for the adjudication of Mr McMullen as a bankrupt. This clear distinction was adverted to in

the order of Mr Justice McKechnie where it was noticeable that he granted no stay in relation to the bankruptcy summons but instead

noted the undertaking of Kent Carthy to take no further steps in the proceedings for a period of six weeks from the date thereof.

It would be unusual for an appellate court to grant an injunction of the nature required by Mr McMullen in the present case. Certainly

it would require the existence of special circumstances which do not exist here. There is nothing in the judgment of the learned trial

judge nor in the argument presented in this Court which, so far as I can see, casts a doubt upon the validity of the summons.

However, there is a point of even greater concern. There is a time limit on the operative effect of a bankruptcy summons. The

Bankruptcy Act 1988 s.11 (1) provides as follows:-

“A creditor shall be entitled to present a petition for adjudication against a debtor if:-

...........

(c) the act of bankruptcy on which the petition is founded has occurred within three months before the

presentation of the petition....”

As the act of bankruptcy consists of the failure to pay within two weeks from the service thereof of a bankruptcy summons dated the

20th November, 2000, it would seem that that summons could not ground a petition for adjudication in bankruptcy at this stage.

I can go no further than to say that would seem to be the position. Mr Barron, counsel on behalf of Kent Carthy, very properly

accepted that on the wording of the legislation he could not rely on the existing petition as an act of bankruptcy by Mr McMullen. He

did assert that on the reading of the Act as a whole a more purposeful interpretation of the provision might be found. Unfortunately

Mr McMullen was not legally represented so the Court did not have the benefit of legal argument on this issue. In the circumstances it

would be difficult to go any further than saying at the present stage that it would appear extremely unlikely that Kent Carthy could

take any further steps based on the existing bankruptcy summons and of course to that extent the application is moot and

unnecessary. On the other hand there is nothing to prevent Kent Carthy seeking and, if obtained, serving a new bankruptcy summons

on which presumably they could then proceed to seek the adjudication of Mr McMullen as a bankrupt. If on the other hand Kent

Carthy are satisfied that they are entitled to rely on the existing bankruptcy summons no doubt Mr McMullen and any legal advisors

appearing on his behalf would be free to argue that the act of bankruptcy constituted by that summons is not available to ground a

petition under s.11 of the 1988 Act.

In summary it seems to me that the relief actually sought by Mr McMullen could not, and the relief which he effectively requires,

should not be granted. In any event the likelihood of Kent Carthy presenting a petition based on the existing bankruptcy summons is

probably remote. Certainly there would appear to be good grounds for disputing a petition based on that summons.

I would dismiss the application.