High Court: No jurisdiction to extend 14-day period for debtors to challenge bankruptcy summons

About this case:

• Citation:
  [2023] IECA 435
• Judgment:
  External link
• Court:
  High Court
• Judge:
  Mr Justice Mark Sanfey

Delivering judgment in the case, Mr Justice Mark Sanfey was satisfied that the 14-day time limit was mandated by the Act and that Order 122 could not be used to “side-step” the requirement. The court held that an act of bankruptcy occurred by operation of law and therefore a creditor was entitled to petition for bankruptcy.

Background

In December 2008, Leading Edge Project Management Limited obtained judgment against the debtor in the sum of €30,500. The company was placed in voluntary liquidation. In March 2022, the company was granted leave to issue a bankruptcy summons against the debtor.

The debtor did not pay the sum within 14 days and a petition in bankruptcy was presented in August 2022. A hearing was listed for October 2022. In February 2023, the debtor served a notice of application to dismiss the bankruptcy summons in accordance with Order 76 Rule 15 RSC.

The core claim of the debtor was that the debt was more than 12 years old and, accordingly, the creditor was statute-barred in seeking his bankruptcy. Section 8(5) of the Act provided that a debtor could apply to the High Court “in the prescribed manner and within the prescribed time to dismiss the summons.”

Order 76 Rule 13(2) provided that a debtor was required to file an affidavit within 14 days if they were seeking to dismiss the summons. In the present case, the application to dismiss issued eight months after the summons was served and, accordingly, the creditor claimed that the debtor was not entitled to seek to dismiss the summons in advance of trial.

The debtor argued that Order 122 RSC provided that a court could enlarge or abridge the time “for doing any act or taking any proceeding” under the Rules. It was said that this was a very wide power and allowed a court to hear the application.

High Court

The court began by outlining that, where a debtor did not pay the sum referred to in a summons or secure or compound for it to the satisfaction of the creditor within 14 days, an act of bankruptcy had been committed (see in re Wymes, a bankrupt [2021] 1 IR 803). The court also noted that section 8(5) referred to an application to dismiss being brought “within the prescribed time” which (under section 3) meant “prescribed by the rules of court.”

The court held that it was significant that the periods after which the act of bankruptcy will be deemed to have occurred and within which the debtor may apply to dismiss a summons were co-extensive. In other words, it was important that both periods were 14 days, where an alleged debtor could attempt to prevent the act of bankruptcy occurring by applying to dismiss.

Once the 14-day period elapsed, a creditor had a basis for proceeding with the petition for bankruptcy and was entitled to invoke the jurisdiction of the court, Mr Justice Sanfey said. While a debtor was still entitled to raise any infirmity in the summons at the hearing of the petition, the creditor’s position changed fundamentally after the act of bankruptcy occurred.

While Order 122 provided an extensive power to enlarge time set down by the rules, there was “no power to invoke Order 122 as a means of extending a mandatory statutory time-limit” the court said (see Proctor and Gamble v. Controller of Patents [2003] 2 IR 580).

The court held that it could be persuasively argued that the 14-day limit was a statutory time limit and section 8(5) simply left it to the Superior Court Rules Committee to determine how long the limit should be. The court also opined that the use of the word “may” in section 8(5) was “one of those occasions when “may” means “shall”; the debtor can of course decide whether or not to apply to dismiss the summons, but if he opts to make the application, he must do it within the prescribed time.”

Conclusion

The court held that there was no jurisdiction to extend the 14-day period for a debtor to challenge a bankruptcy petition in advance of trial. Even if the court was wrong on this point, it was held that such extension would only be granted in compelling circumstances where the delay was measured in days. In the present case, the delay was over eight months and so, the court would not be inclined to use a discretion to allow an extension.

Accordingly, the court dismissed the debtor’s application and the matter could proceed to hearing.

In Re Campion, a debtor [2023] IEHC 435