Bankruptcy summons appeal dismissed as moot; creditor no longer relies on 2021 act of bankruptcy grounds.

THE COURT OF APPEAL

CIVIL

[approved]

Neutral Citation No. [2025] IECA 56

Court of Appeal Record Number: 2024/240

High Court Record Number: 2021/6215 S

The President

Binchy J

McDonald J

IN THE MATTER OF A BANKRUPTCY SUMMONS ISSUED AGAINST PATRICK

DOHERTY BY BLESSVILLE UNLIMITED COMPANY, OF IDA BUSINESS

PARK, BALLYNATTIN, ARKLOW, CO. WICKLOW

BETWEEN/

PATRICK DOHERTY

APPLICANT/

APPELLANT

- AND –

BLESSVILLE UNLIMITED COMPANY

RESPONDENT/

RESPONDENT

JUDGMENT (ex tempore) of Ms. Justice Costello delivered on the 3rd day of March 2025

1. The sole issue in this appeal is whether the bankruptcy summons issued on 26 July 2021 by the creditor, Blessville unlimited company, should be dismissed pursuant to s. 8 (6)(a) or (b) of the Bankruptcy Act, 1988.

2. The serving of a bankruptcy summons may lead to the filing of a petition to bankrupt the debtor because if the debtor fails to pay the sum or secure or compound for it to the satisfaction of the creditor within 14 days, this amounts to an act of bankruptcy pursuant to s.7(1)(g) of the Act. In that event, the creditor may issue a bankruptcy petition within three months of the expiration of the 14 days (s.11). If that time elapses without the creditor issuing a petition, the creditor may no longer ground a petition based upon this alleged act of bankruptcy.

3. In this instance, the bankruptcy summons, though issued in July 2021 was not served until July 2022. The debtor filed an application to dismiss the summons on 28 July 2022 and on 18 July 2023 the High Court refused the application in a reserved judgment. The order was perfected on 19 September 2024 and the debtor appealed on 16 October 2024.

4. In the meantime, the creditor issued a fresh bankruptcy summons on 22 April 2024 which was duly served on the debtor. The 14 days elapsed without the debtor taking any steps in relation to the debt. Accordingly, this prima facia amounted to an act of bankruptcy and the creditor issued a petition to bankrupt the debtor within the three months window provided by the statute. The debtor has sought the dismissal of the second bankruptcy summons. That application and the petition are currently before the bankruptcy judge in the High Court and are awaiting the outcome of this appeal.

5. The creditor’s first point is that the appeal serves no purpose as the creditor has not reliedand no longer as a matter of law can relyon the failure to pay or otherwise secure or compound with the creditor to its satisfaction the sum demanded in the 2021 bankruptcy summons as an act of bankruptcy upon which it may present a petition in bankruptcy. It follows necessarily that the question of the validity or otherwise of the 2021 bankruptcy summons is neither here nor there as regards the risk that the debtor may be bankrupted. The battleground between the parties has moved to the 2024 bankruptcy summons and petition. According to the creditor, the appeal is moot, can serve no purpose and therefore its continuation amounts to an abuse of process.

6. The debtor says that the question of the validity of the 2021 bankruptcy summons is not moot, even if it is no longer open to the creditor to rely upon his failure to pay or secure or compound with the creditor for the debt claimed in the bankruptcy summons as an act of bankruptcy upon which it can rely in order to petition for his adjudication. When questioned further by the court his counsel explained that the failure to pay or compound with the creditor within the 14 days is deemed by s.7(1)(g) of the Act to be an act of bankruptcy. Therefore, it is said, even if it is not and cannot be relied upon to petition for his bankruptcy, he will have to disclose the fact that he has committed an act of bankruptcy when responding to questions which might arise in the future as to whether he has ever committed an act of bankruptcy.

7. This argument is without merit in my judgement. First, it was raised for the first time by counsel for the debtor on his feet in argument and if there had been any substance to it, I would have expected it to be raised by the debtor in his affidavits or, at the very least, in his arguments to the High Court or his Notice of Appeal or his written submissions on his appeal. If in the future the debtor is ever required to address such a query it will be open to him to state that while technically he committed such an act by failing to pay on foot of a bankruptcy summons, he challenged the validity of the summons and that his appeal in relation to the refusal of the High Court to dismiss the bankruptcy summons was dismissed on the grounds of mootness because the summons has not been and cannot as a matter of law be relied upon to petition for his bankruptcy.

8. The second basis upon which the debtor seeks to pursue the appeal relates to the question of the service of the Particulars of Demand in 2021. His argument is that the Particulars of Demand were not served upon him and this is a necessary proof to the grant of a bankruptcy summons prescribed by s.8(1) of the Act. That being so, he argues, he has raised a good ground upon which to dismiss the summons. In my judgement this argument, too, should be rejected.

9. First, no question of issue estoppel can arise in relation to the service of the Particulars of Demand in 2021 as the creditor is not relying upon the 2021 bankruptcy summons and the 2024 bankruptcy summons is not grounded upon service of the 2021 Particulars of Demand.

10. Second, the affidavit grounding the application for a bankruptcy summons sworn by Mr David Cahill on behalf of the creditor on 23 June 2021 avers that “[a]n account in writing of the particulars of demand and notice requiring payment was on or about 28th day of October 2020, sent by certified post addressed to the said [debtor] of Cornerstown House, Ballybride Road, Shankill, Co. Dublin aforesaid, and payment of the same has been on more than one occasion required of him.” In response, the debtor swore simply that he does not reside in the jurisdiction and that the Particulars of Demand were never served on him, nor did he receive them via a third party or otherwise. In response Mr Cahill swore an affidavit dated 18 November 2022 confirming that the Particulars of Demand were sent on or about 28 October 2020, to the address given by the debtor as his address in proceedings he issued against the creditor and in an affidavit of discovery he swore in those proceedings. This was eight months after the order of Pilkington J of 14 February 2020 entering judgment against the debtor. While the debtor swore two further affidavits in this application, he did not address Mr Cahill’s averment that the Particulars of Demand were served by certified post on or about 28 October 2020 at the address he himself had given as his address in the proceedings giving rise to the judgment debt.

11. It is important to recall that the Rules of the Superior Courts require that Notice of Particulars of Demand be served by ordinary prepaid post at an alleged debtor’s last known address or place of businessnot that there be proof of personal service of the Particulars of Demand. This is precisely what occurred in this case and there was evidence to that effect in two affidavits of Mr Cahill. In my judgement, if the alleged debtor then sought to contend that the Particulars of Demand in fact had not been served upon him as required under the RSC and that, as a result, a statutory requirement for the issue of a bankruptcy summons had not in fact been met, the onus was on the debtor to adduce evidence which could establish that the creditor had failed to comply with the provisions of s.8(1)- not on the creditor to further prove service of the Notice of Demand. There is no such or no such sufficient evidence from the debtor in this case in my judgement and so this argument is of no avail to him.

12. It is also worth observing that while this argument loomed large in the appeal, it was barely mentioned in the High Court and was not the focus of the trial judge’s thorough, considered judgment.

13. Accordingly, as the question of the validity or otherwise of the service of Particulars of Demand in 2021 is irrelevant to the live bankruptcy petition, the question of the service of the Particulars of Demand in 2020 is not a live controversy and therefore is moot.

14. In relation to his second argument that he is not indebted to the creditor, the debtor says, notwithstanding the fact that there is an unappealed and unsatisfied judgment of the High Court that he pay €151,000 to the creditor, that he is not a debtor. He says that he was prevented from complying with one of the terms of the consent order of 6 November 2019 (collecting his chattels from the creditor’s premises within 28 days) by the wrongful actions of the creditor which resulted in the High Court entering judgment against him on 14 February 2020 for the greater sum of €151,000. He says that judgment ought not to have been entered in those circumstances and an issue arises for trial as to whether he owes the creditor the sum decreed by the High Court.

15. Secondly, he says that he was wrongfully prevented by the creditor from removing valuable chattels from the premises of the creditor, that the value of the goods exceeds the judgment debt, and so he should be credited with the value of the goods by way of a set-off against the judgment debt. He says that by both retaining the goods (or the proceeds of the sale of the goodsit is not quite clear which) and seeking to recover the judgment sum that the creditor is/will be unjustly enriched in that it will have secured more than is due to it, even on its case.

16. The creditor disputes the contention that the debtor was prevented from collecting the chattels in December 2019 and says baldly that it is simply untrue. It points to the fact that this contention is inconsistent with the actions of the debtor in 2020. The debtor was a party to the compromise agreement which provided for a default judgment in the sum of €151,000 if two conditions were not met by him, one of which was the removal of the chattels in dispute. He was in court when the case was adjourned to 7 February 2020 to allow for the implementation of the settlement, so he was aware of the return date. This had to be put back one week as the court was not in session but this was advertised in the legal diary and the debtor did not attempt to attend court on 7 February or make any enquiries as to the new return date. The evidence is that his solicitors could not contact himnot that he was attempting to contact them to inform them of what occurred in Decemberand on 14 February they applied to come off record. The court permitted this and entered judgment against the debtor. He was notified of this by his solicitor that evening. Despite this, he never wrote protesting that he was prevented from removing the chattels, he never protested that the order of 14 February 2020 ought not to have been made, he did not seek to either re-enter the matter or appeal the order and he did nothing until, more than two years later, when he applied to dismiss the 2021 bankruptcy summons in July 2022. On this basis, the creditor argues that there is no credible basis for contending that the creditor was prevented from collecting the chattels as he alleges, and therefore no basis for impugning the final order of the High Court. It follows, according to the creditor, that no issue for trial arises on the debtor’s own case.

17. The High Court held, based on the evidence before it, that the defence raised by the debtor was not “real and substantial”, that the point was “unreal and depends on factual assertions which lack credibility”. When asked during oral submissions where the High Court erred in reaching this conclusion, counsel for the debtor failed to identify any such error. I am satisfied that the trial judge’s assessment of the evidence in this regard was unimpeachable and I share it. I too believe that it falls very far short of the evidence necessary to justify a court going behind an unappealed final money judgment of the High Court entered three years ago in the context of an application to dismiss a bankruptcy summons.

18. Instead, counsel emphasised the failure to address what he asserted was the fact that the creditor had sold the debtor’s goods which were worth far in excess of the judgment debt and had not credited him with the net proceeds of sale. He says this gives rise to a question of unjust enrichment and thus of an issue for trial within the meaning of s.8(6)(b) of the Act of 1988. In fact, there is no evidence that the creditor sold the chattels and held onto the proceeds of sale without affording the debtor any credit. It is clear from his own pleadings that at the very least he was not the owner of all of the chattels in issue, many belonged to companies associated with him. Second, there was no evidence what chattels were in the premises in November 2019 nor of their value. Invoices for the purchase of items several years earlier proves nothing. Third, in circumstances where there is no evidence that the creditor sold the chattels, it cannot be said that the creditor was enriched by any proceeds of sale. Nor has it failed to account for a credit due to the debtor’s account so any argument launched at the eleventh hour to the effect that a sum greater than that due was claimed in the summons is not established by any evidence. The evidence is that the creditor “eventually disposed” of the chattels, that is they were dumped. So this argument too simply falls away.

19. For all of these reasons I am of the view that this appeal is and was at all times moot and the arguments to the contrary are without merit. For this reason I would refuse the appeal. The Court notes that the creditor has confirmed that any act of bankruptcy that may have occurred on foot of the 2021 bankruptcy summons is not being relied upon in any bankruptcy proceedings brought by it against the debtor.

Binchy J: I have listened carefully to the judgment just delivered by Costello P and I am in full agreement with it and have nothing to add to it.

McDonald J: I also agree with the judgment just delivered by Costello P.