Irish Court of Appeal

THE HIGH COURT

[2024] IEHC 757

[Record No. 5212/P]

BANKRUPTCY

IN THE MATTER OF A PETITION FOR ADJUDICATION OF BANKRUPTCY BY LEADING EDGE PROJECT MANAGEMENT (IN VOLUNTARY LIQUIDATION) AGAINST LIAM CAMPION

JUDGMENT of Mr Justice O'Higgins delivered on the 19^th day of December 2024.

1.                  This is a creditor's application to adjudicate the respondent, Liam Campion, a bankrupt pursuant to a petition dated 29^th August 2022. The act of bankruptcy relied upon by the petitioner is the failure by the respondent to pay the sum of €30,500 on foot of a bankruptcy summons dated 18^th May 2022.

2.                  The respondent contends that he is not insolvent and has sufficient funds to discharge the debt. He has lodged the amount in question to the account of his solicitor. The respondent does not seriously dispute that there is a debt due by him to the petitioner. The Circuit Court (Judge Linnane) granted judgment in favour of the petitioner against the respondent for the sum in question on 1^st December 2008.

3.                  The respondent contests the application on two grounds: firstly, he says the Circuit Court judgment is more than twelve years old and therefore, under the Rules of the Circuit Court, is unenforceable. Secondly, he says the bankruptcy application contravenes s. 11(6)(a) of the Statute of Limitations Act 1957. He says the bankruptcy application constitutes an "action on a judgment" within the meaning of that section and is therefore statute-barred.

 

Issues for determination

4.                  It seems to me there are potentially four issues for determination:

(i) Where a judgment has become unenforceable under the Circuit Court Rules, does that preclude a creditor from proceeding with a bankruptcy application under s. 11 of the Bankruptcy Act 1988, on the ground of the debtor's failure to pay a bankruptcy summons?

(ii) Is a bankruptcy petition an "action upon a judgment" within the meaning of s. 11(6)(a) of the Statute of Limitations Act 1957, so as to preclude a bankruptcy application being made after the expiration of twelve years from the date on which the judgment becomes enforceable?

(iii) If a bankruptcy petition does constitute an "action upon a judgment", did the respondent "acknowledge" the debt for the purpose of ss. 56 and 58 of the Statute of Limitations Act 1957, such that time stopped running?

(iv) If the court rejects the respondent's arguments, is the court obliged to adjudicate the respondent a bankrupt or may the respondent, at that point, discharge the debt the subject matter of the application?

According to the parties, there is no decision in this jurisdiction determining the first two legal issues above.  

 

Procedural background

5.                  On 7^th March 2022, a bankruptcy summons was issued against the respondent to answer a debt to the petitioner in the sum of €30,500 on foot of a judgment obtained by the petitioner in the Circuit Court on 1^st December 2008. Since the sum demanded was not paid, the petitioner issued a petition and notice of motion seeking the adjudication of the respondent as a bankrupt.

6.                  By notice of motion dated 10^th February 2023, the respondent applied for the bankruptcy summons to be dismissed. On 20^th July 2023, Sanfey J. refused that application (see Re Campion [2023] IEHC 435). The respondent argued before Sanfey J. that there was an issue for trial within the meaning of s. 8(b) of the Bankruptcy Act 1988 as amended, and that this warranted the dismissal of the summons. The respondent submitted that the issue of the bankruptcy summons constituted an action upon a judgment which was statute-barred pursuant to s. 11(6)(a) of the Statute of Limitations Act 1957 as the summons was issued more than twelve years after the date the judgment was granted.

7.                  The application before Sanfey J. was made by the respondent to enlarge time for the purposes of bringing an application to have the bankruptcy summons dismissed. Sanfey J. held that time could not be enlarged and refused the respondent's application. In view of that finding, Sanfey J. found it unnecessary to decide the substantive legal issue concerning the judgment being statute-barred. The legal issue was therefore left over to the hearing of the bankruptcy petition.

8.                  As part of the application for the issuance of a bankruptcy summons, John Healy swore a verifying affidavit and an affidavit of debt on behalf of the petitioner on 29^th August 2022. In those affidavits, the petitioner, through the deponent Mr Healy, averred to certain facts, namely that:

(i) there was a total debt/ liquidated sum owed to the petitioner in the sum of €30,500 arising from a judgment which has not been discharged;

(ii) three months prior to the presentation of the petition, an act of bankruptcy was committed on account of the failure by the respondent to pay, secure or compound the sum claimed in the Bankruptcy Summons dated 7^th March 2021 within 14 days from 18^th May 2022, being the date of service thereof and;

(iii) the respondent has his centre of main interest in the State such that Regulation (EC) No. 2015/848 applies, and that the respondent conducts the administration of his interests in the State and is domiciled and has his permanent residence in the State.

9.                  None of these facts are seriously disputed by the respondent. I use that formula of words because there is a notional denial by the respondent that the debt is due in an affidavit he swore for the purpose of the application before Sanfey J. to enlarge time. In that affidavit sworn on 10^th February 2023, Mr Campion averred that he was "not indebted" to the petitioner in any sum amounting to more than €20,000. However, it seems to me that averment was more by way of a legal argument than a factual plea. The detailed affidavits sworn on behalf of the petitioner regarding the debt have not been contradicted or specifically addressed. Nowhere in any affidavit is there a claim that the debt has been discharged. Instead, the only grounds of defence advanced by the respondent are the first two legal issues identified above.

 

Relevant provisions of the Bankruptcy Act 1988, as amended

10.              Section 7 (1) of the Bankruptcy Act 1988, as amended, identifies the means by which a debtor can be said to commit an act of bankruptcy:

"(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 he 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."

11.              Section 8(1) provides as follows:

"(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 more than €20,000 is due to the creditor concerned by the person against whom the summons is sought,

(b) the debt is a liquidated sum, and

(c) the creditor concerned has given not less than 14 days' notice in the prescribed form to the debtor of the creditor's intention to apply for a bankruptcy summons and the debt remains unpaid."

Section 8 provides a facility for the debtor to apply to dismiss the bankruptcy summons. The relevant subsection provides as follows:

"(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."

Bankruptcy petitions are dealt with in ss. 10 to 15 of the Act as follows:

"10. An application for adjudication shall be by petition verified by the affidavit of the petitioner.

11. (1) A creditor shall be entitled to present a petition for adjudication against a debtor if—

(a) the debt owing by the debtor to the petitioning creditor (or, if two or more creditors join in presenting the petition, the aggregate amount of debts owing to them) amounts to more than €20,000,

(b) the debt is a liquidated sum,

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

(d) (i) the debtor's centre of main interests is situated in the State,

(ii) the debtor's centre of main interests is situated in another member state and the debtor has an establishment within the State, or

(iii) the Insolvency Regulation does not apply to the proceedings, and the debtor (whether an Irish citizen or not)—

(I) is domiciled in the State, or

(II) within 3 years before the date of the presentation of the petition—

(A) has ordinarily resided or had a dwelling-house or place of business in the State,

(B) has carried on business in the State personally or by means of an agent or manager, or

(C) is, or within the said period has been, a member of a partnership which has carried on business in the State by means of a partner, agent or manager.

            ...

14. (1) Subject to subsection (2), where the petition is presented by a creditor, the Court shall, if satisfied that the requirements of section 11(1) have been complied with, by order adjudicate the debtor bankrupt.

(2) Before making an order under subsection (1), the Court shall consider the nature and value of the assets available to the debtor, the extent of his liabilities, and whether the debtor's inability to meet his engagements could, having regard to those matters and the contents of any statement of affairs of the debtor filed with the Court, be more appropriately dealt with by means of—

(a) a Debt Settlement Arrangement, or

(b) a Personal Insolvency Arrangement,

and where the Court forms such an opinion the Court may adjourn the hearing of the petition to allow the debtor an opportunity to enter into such of those arrangements as is specified by the Court in adjourning the hearing."

12.              Even after the debtor has been adjudicated bankrupt, the Act makes provision for the bankrupt applying to court to "show cause" to the court as to why the adjudication order should be set aside. The relevant section is s. 16 which provides as follows:

"16. (1) The bankrupt may, within three days or such extended time not exceeding fourteen days as the Court thinks fit from the service of the copy of the order of adjudication on him, show cause to the Court against the validity of the adjudication.

(2) On an application to show cause under subsection (1) the Court shall, if within such time the bankrupt shows to its satisfaction that any of the requirements of section 11 (1) have not been complied with, annul the adjudication and may, in any other case, dismiss the application or adjourn it on such conditions as the Court thinks fit, having regard to the interests of the bankrupt, his creditors and any persons who might advance further credit to him.

(3) Nothing in this section shall be construed to prevent the immediate seizure of the goods of the bankrupt on his adjudication."

13.              In addition to the statutory architecture, the rules governing bankruptcy procedures are set out at Order 76 of the Rules of the Superior Courts.

 

Summary of the petitioner's arguments

14.              The petitioner submits that the necessary proofs for a bankruptcy petition are in place and that the application complies with the requirements of s. 11(1) of the Bankruptcy Act 1988 as amended. He says it is not in dispute that the debt of €30,500 remains due and owing. The technical requirements of s. 11(1) have been met. That being so, the court is obliged to adjudicate the respondent a bankrupt unless there is a basis to adjourn the petition in accordance with s. 14(2) of the Act. In that regard, the petitioner relies on the use of the mandatory "shall" in s. 14 of the 1988 Act.

15.              The petitioner submits that it is clear from the statutory framework and case law that once an act of bankruptcy has been committed, it is no longer open to a debtor to argue that the debt claimed is not enforceable. The petitioner says this makes sense when one considers that an act of bankruptcy is an indication of insolvency and one cannot be insolvent without a debt first becoming owed and which then goes unpaid, despite a demand having been made.

16.              The petitioner submits that a debtor's opportunity to argue that he is not in debt to a creditor by reason of it being invalid, unenforceable or time-barred can only arise in the course of an application to dismiss a bankruptcy summons, provided that such an application is brought on time. This is because at that point, no act of bankruptcy has occurred and the "deeming effect" of s. 7(1)(g) of the 1988 Act has not been engaged. However, if no issue is raised in relation to such a debt and an act of bankruptcy is deemed to have occurred, no issue requires to be tried in relation to the validity, enforceability or maintainability of the relevant debt since, by then, an act of bankruptcy will have already been deemed to have occurred. It is that act of bankruptcy which is the foundation for any bankruptcy proceedings which then commence against the debtor.

17.              The petitioner submits that the consequence of this is that a debtor is restricted at the hearing of the petition to establishing that there is either no debt owed or that such debt does not exceed €20,000. It is urged that support for this is to be found in the wording of s.11(1) (a) of the 1988 Act which refers to the debt in terms of it being one "owing by the debtor to the petitioning creditor" rather than being one that is enforceable or actionable.

18.              The petitioner submits that this use of language by the Oireachtas was not accidental. The provisions of the 1988 Act are framed in facilitative terms and refer to debts simplicitor without qualifying such debts as only being those that are valid, enforceable or not time-barred. Relying on Chapter 1 of Canny, Limitation of Actions, 3^rd ed. (Round Hall Press, 2022), the petitioner submits that it is well settled that the Statute of Limitations Act 1957 bars a claimant's remedy, not his legal rights (unless expressly provided otherwise), and therefore a creditor's right to repayment survives, notwithstanding that his remedy to recover payment might be time-barred by the 1957 Act.

19.              There is no dispute by the respondent that there was a debt due by him to the petitioner. This is unsurprising as the debt the subject of the petition was found to be due and owing by him by the Circuit Court. That being so, the question of whether such debt is now enforceable or time-barred is not one which the respondent is entitled to raise at the hearing of the petition, having failed to do so prior to committing an act of bankruptcy.

20.              The petitioner relies upon the decision of the Supreme Court in Re Wymes (a bankrupt) [2021] 1 IR 803. In that case, the Supreme Court considered at length the legal nature of a bankruptcy summons. In her analysis, Baker J. clarifies that a bankruptcy summons is not itself an action or a mode of enforcing a judgment. The issuing of a bankruptcy summons does not commence a court process; it is merely a form of notice. As a consequence of this, the issuing of a bankruptcy summons brought on foot of a judgment debt is not a form of action, or indeed an action upon a judgment within the meaning of s. 11(6)(a) of the 1957 Act. Therefore, the issue raised by the respondent does not establish any infirmity with the bankruptcy summons procedure or with the underlying debt and therefore does not provide a defence to the petition.

21.              As to the respondent's submission that the petition is time-barred, the petitioner submits that the proceedings initiated on foot of the summons do not constitute an action upon a judgment within the meaning of the Statute of Limitations Act 1957, and are therefore not time-barred. The petitioner says that it is necessary to look more closely at what exactly is an action upon the judgment. Historically, it was acceptable at common law to bring a new action upon a judgment as an alternative to executing that judgment. However, such action is a different concept to an execution of a judgment (Lowsley v. Forbes [1999] 1 AC 329).

22.              Relying on Mr Canny's text, the petitioner submits that the necessity to bring an action upon a judgment arose due to the common law presumption that existed, namely that a judgment was satisfied within a year and a day, and that if a judgment creditor failed to issue execution within that period, he could execute the order only by applying to the court to revive the judgment by issuing a writ of scire facias. An action upon a judgment could therefore be brought as a means of re-litigating the subject matter of the judgment.

23.              The petitioner says an action upon a judgment should not be confused with an "action" taken in relation to, or on foot of, an existing judgment. Instead, it is the taking of a legal action or suit within which the substance of the judgment is re-litigated and adjudicated afresh.

24.              Apart from this general distinction, the petitioner submits that bankruptcy proceedings brought by a creditor do not, as a specific form of action, constitute an action upon a judgment. He relies upon the decision of the English Court of Appeal in Ridgeway Motors (Isleworth) Ltd v. ALTS Ltd [2005] 2 All ER 304. In that case the court held that a winding-up petition and, obiter, a bankruptcy petition, was neither an action upon a judgment, nor execution of that judgment, and that no limitation period applied when a judgment debt was relied upon in such a petition.

25.              Although Ridgeway concerned a winding-up petition rather than bankruptcy proceedings, the petitioner submits the same principles should apply to bankruptcy proceedings.

26.              In the present case, there has been no attempt by the petitioner to have the subject matter of the judgment re-opened or re-litigated. Instead, the petitioner has sought to rely upon a judgment insofar as it constitutes evidence of a pre-existing liquidated debt which has already been adjudicated to be due and owing. The petition can therefore not be properly regarded as an action upon a judgment, nor can it be considered to be time barred by reference to s. 11(6)(a) of the 1957 Act.

27.              Separately, the petitioner relies upon an alternative argument that the respondent has orally and in written correspondence acknowledged the debt to be due and owing. The petitioner submits that, even if it could be said that the bankruptcy summons or petition constituted a re-litigation of the petitioner's judgment (as a debt action) and was therefore caught by s. 11(6)(a) of the 1957 Act, the provisions of s. 56 of the 1957 Act would nonetheless apply. Section 56 of the Act provides that:

"(1) Where—

(a) any right of action has accrued to recover any debt, and

(b) the person liable therefor acknowledges the debt,

the right of action shall be deemed to have accrued on and not before the date of the acknowledgment."

28.              In the motion to dismiss the bankruptcy summons brought by the respondent, Mr Healy on behalf of the petitioner gave evidence of a series of written communications between himself and the respondent. In those communications the judgment debt was referred to and written proposals to compromise the debt were made by the respondent. These communications were not the subject of any privilege asserted by the respondent and indeed, it was accepted by Mr Campion in para. 8 of his supplemental affidavit sworn on the 6^th March 2023 that it would have been appropriate for him to mark his communications "without prejudice" but he did not do so.

29.              The petitioner submits that having regard to the provisions of ss. 56 and 58 of the Statute of Limitations Act 1957 and the open acknowledgments made by the respondent in August 2020, if the bankruptcy proceedings constituted an action upon a judgment (which is denied), any such cause of action would have accrued in August 2020 and not before. Consequently, the issuing of a bankruptcy summons or petition would not be statute barred by the provisions of s. 11(6)(a) of the 1957 Act.

30.              In conclusion, the petitioner submits that the necessary proofs required by s. 11(1) of the Bankruptcy Act 1988 have been made out and that the court is obliged to adjudicate the respondent a bankrupt. Neither the bankruptcy summons nor the petition constitutes an action upon a judgment, and they are not time barred by reference to s. 11(6)(a) of the 1957 Act.

31.              According to the petitioner, the evidence establishes that there was no alternative to a bankruptcy in the form of a Debt Settlement Arrangement (DSA), Personal Insolvency Arrangement (PIA) or other means that would justify the adjournment of a petition. In these circumstances, the petitioner says it is appropriate to grant the adjudication order sought.

 

Summary of submissions of the respondent

32.              The respondent submits that in order for the court to have jurisdiction to adjudicate a person bankrupt, the onus is on the petitioner to demonstrate to the court that it has complied with s. 11(1)(a) of the 1988 Act - the court must be satisfied that there is a "debt owing" by Mr Campion in a sum more than €20,000.

33.              In this case the respondent says that there is no debt owing as:

(a) there is no enforceable debt due and owing by reason of Order 36 rule 9 of the Circuit Court Rules; and/or

(b) The underlying judgment is statute-barred.

34.              Order 36 rule 9 of the Circuit Court Rules provides as follows:

 "Every decree of the Court, and every judgment in default of appearance or defence, shall be in full force and effect for a period of twelve years from the date thereof, and an execution order based on any such decree or judgment may be issued in the Office within the said period, but not after the expiration of six years from the date of such decree or judgment without leave of the Court. An application for such leave shall be made by motion on notice to the party sought to be made liable."

35.              In Pepper Finance Corporation Ireland DAC v. Doyle [2023] IEHC 662, the plaintiff sought leave to issue execution on foot of a judgment that was more than twelve years old. The court refused the application and noted that O.36 of the Rules of the Circuit Court provided that every decree of the Circuit Court could only be enforced for a period of twelve years, and that any execution order would not be issued after that. The court noted that there was a difference between the Circuit Court Rules and the Rules of the Superior Courts (RSC), the relevant RSC rule being O.42. Pepper Finance sought to argue that the court, in interpreting O.36 of the Circuit Court Rules should do so in a manner that aligned with the equivalent rule in the RSC and more generally, the Statute of Limitations Act 1957. Simons J. rejected this argument. Pepper Finance also argued that the Statute of Limitations represented the proper context for interpreting O.36. This was also rejected.

36.              The first basis upon which Simons J. rejected the arguments made was that the language of the Circuit Court Rules was incapable of accommodating an interpretation which led to an execution order being issued or renewed after the expiration of twelve years. The principle that a decree or judgment is only effective for a period of twelve years is stated, directly or indirectly, at several points throughout O.36 and there was no alternative interpretation available, without doing violence to the legislative language. The second difficulty Simons J. had with the applicant's argument was the fact that there was no cogent basis for the assumption that the Circuit Court Rules Committee cannot have intended to impose a twelve-year time limit in the absence of there being an equivalent limitation period under the Statute of Limitations.

37.              The respondent submits that in light of the judgment of Simons J., there is no debt owing by the debtor within the meaning of s. 11(1) of the Bankruptcy Act 1988, and no debt was owing as of the date the bankruptcy summons issued and the date the present application for adjudication was presented. In all the circumstances, the respondent submits that this issue is a complete answer to the petitioner's application.

38.              By way of alternative argument, the respondent submits that the question of whether or not the issuing of a bankruptcy summons is an action on foot of a judgment is one that has yet to be adjudicated by the courts at an appellate level. In these circumstances, it is submitted that it would not be appropriate for such adjudication to occur in a petition to adjudicate an individual bankrupt over an asserted liability that a debt of €30,500 is due on foot of a judgment given some fifteen years ago.

39.              That judgment was granted in favour of the petitioner on the 1^st December 2008 by the Circuit Court. In circumstances where it is accepted that the judgment became enforceable more than twelve years ago, the respondent submits that the judgment is statute-barred under s. 11(6)(a) of the Statute of Limitations Act 1957 on the basis that the issuing of a summons is an action on a judgment.

40.              The respondent submits that the words "action...upon a judgment" in s. 11(6)(a) do not refer to the positive act of a creditor taking steps to enforce the judgment, but rather a separate chose in action predicated on the existence of a judgment.

41.              The respondent relies on the decision of Pilkington J. in Greene King Brewing and Retailing Limited v. Baker [2020] IEHC 221 concerning an application to dismiss a bankruptcy summons. The court relied on the decision of Costello J. in ACC Loan Management Limited v. M(C) [2015] IEHC 96 and other caselaw which set out the test to be applied in such applications, namely that "there is a real and substantial issue and one which is, at least, arguable and which has some prospect of success". Pilkington J. considered the question of whether the issuing of a bankruptcy summons constituted an action on a judgment within the meaning of s. 11(6)(a) of the Statute of Limitations Act 1957. The court considered several authorities from Ireland and the UK, and also Mr Canny's text referenced above. Pilkington J. concluded that the court was precluded from adjudicating on the substantive issue as a matter of law, since the issue raised met the threshold for dismissing the summons.

42.              The respondent also addresses the petitioner's fallback argument that the debt in question was acknowledged by the respondent in the August 2020 communications between the parties, and the suggestion that this re-starts the clock for the purposes of the Statute of Limitations. Counsel submits that there is a conflict in the affidavit evidence on this issue, specifically whether the 12^th August 2020 telephone call, and the subsequent communications recording the discussion were without prejudice communications. Such conflict cannot be resolved without oral evidence. The respondent submits therefore these conflicts are not suitable for resolution in the context of an application for a bankruptcy adjudication.

43.              The respondent submits that in all the circumstances it would not be appropriate for the court to resolve these important issues which may have wider and systemic importance, in the context of a bankruptcy petition.

44.              Finally, the respondent submits that even if his arguments in defence of the petition are unsuccessful, he should nonetheless be permitted a further opportunity to pay the debt. He says he is not insolvent and has sufficient funds to pay the debt. Moreover, he has lodged the amount in question to the account of his solicitor, and his solicitor has given the necessary undertaking to pay out the monies. In these circumstances, he contends it would neither be necessary or appropriate for the court to adjudicate the respondent a bankrupt. 

Issue 1: Whether enforceability of the Circuit Court judgment is a necessary proof

45.              The parties are agreed that of the four legal issues that may arise for determination, issues one and two are potentially of systemic importance. These are firstly, whether the debt must be enforceable or not time-barred and secondly, whether a bankruptcy petition constitutes an "action upon a judgment" for the purposes of s. 11(6)(a) of the Statute of Limitations Act 1957. In both their written and oral submissions, the parties focussed primarily on the first issue. This meant that the level of attention paid to the second issue was quite limited.

46.              Moreover, while counsel referenced some caselaw that was of assistance to the court, counsel were unable to identify caselaw on the second issue that was directly on point. The court was referred to Greene King Brewing and Retailing Limited v Baker [2020] IEHC 221 which arose in the context of an application to set aside a bankruptcy summons. Mindful of the low threshold that applies in such cases, Pilkington J. held that the debtor had done enough to raise an issue for trial pursuant to s. 8(6)(b) of the Bankruptcy Act 1988. Therefore, Pilkington J. expressly declined to determine the point. In addition, she felt that discussion of the issues would have benefitted from further caselaw.

47.              As matters stand, I am of the same view in the present case. It would not be appropriate to determine the second issue at this stage. Instead, it would be preferable if the parties were given a further opportunity to research the second issue so that the court could be provided with further submissions and relevant caselaw on the respondent's argument concerning "an action upon a judgment" within the meaning of s. 11(6)(a) of the Statute of Limitations Act 1957.

48.              I propose in this judgment to focus on the first legal issue, namely the respondent's submission that a petitioner must demonstrate that a debt is not time-barred in order to proceed with a bankruptcy petition on the ground of the debtor's failure to pay a bankruptcy summons. Under Order 36 rule 9 of the Circuit Court Rules, a decree of the court shall only be "in full force and effect" for a period of twelve years from the date of the decree. Therefore, it ceased to have "force and effect" in December 2020, and at the time the bankruptcy summons issued on the 7^th March 2022, the Circuit Court decree was no longer in force. As I understand the submissions of the parties, none of this is in dispute. What is disputed, however, is the legal consequence of this state of affairs, and specifically, whether it disentitles the petitioner from proceeding with the bankruptcy petition under s. 11 of the Bankruptcy Act 1988.

49.              This issue, in turn, depends on the correct interpretation of s. 11(1) of the 1988 Act. That section provides:

"11 (1) A creditor shall be entitled to present a petition for adjudication against a debtor if -

(a)   the debt owing by the debtor to the petitioning creditor... amounts to more than €20,000."

50.              The respondent submits that since the debt is not enforceable, it cannot be said to be "owing" by the debtor. Therefore, he contends, the jurisdictional requirements of s. 11(1)(a) are not met and the application should fail. The petitioner says otherwise and submits that, properly construed, the issue of the enforceability of the debt does not arise.

51.              In my view, this question is essentially an issue of statutory interpretation. The question for determination is whether the section, correctly construed, requires the petitioner to show not only that the debt is unpaid, but that it is enforceable. The respondent's thesis is that the usage of the word "owing" in s. 11(1) means that unenforceable debts would not be included because they cannot be said to be "owing". It seems to me that on a literal reading of the section, the respondent's argument appears to be ambitious. In its express terms, the section requires the petitioner to establish no more than two things: 1) that the debt is owing and 2) that the debt amounts to more than €20,000. The section is silent on whether the debt must be actionable or capable of being enforced.

52.              If we leave aside the €20,000 qualification threshold, the only express requirement is to show that the debt is "owing" by the debtor. The Oxford English Dictionary, 2^nd Ed., (Oxford University Press, 2007) defines "owing" as an adjective meaning "yet to be paid or supplied". The synonyms provided include "unpaid", "to be paid", "payable", "due", "overdue", "undischarged", "owed", "outstanding" and "in arrears". All of these meanings speak to the monetary question of whether the debt has been paid, not whether it is enforceable. Applying these dictionary definitions, it seems to me that a literal reading of the section does not support the respondent's interpretation, but rather indicates that for a debt to be "owing" it must be shown that it has not been paid or discharged.

53.              Traditional approaches to statutory interpretation emphasise the pre-eminence of the text chosen by the legislature, and the general rule that where words and phrases are given their ordinary and natural meaning, and this results in a provision being entirely plain and unambiguous, the interpreter's job is at an end and effect should be given to that plain meaning (Howard v. Commissioners of Public Works [1994] 1 IR 101).

54.              An important recent authority on statutory interpretation is the decision of the Supreme Court in Heather Hill Management Company CLG v. An Board Pleanála [2022] 2 ILRM 313. At para. 214, Murray J. states the following:

"The words of the section are the first port of call in its interpretation, and while the court must construe those words having regard to the context of the section, of the Act in which the section appears, the pre-existing relevant legal framework and the object of the legislation insofar as discernible, the onus is on those contending that a statutory provision does not have the effect suggested by the plain meaning of the words chosen by the legislature to establish this".

55.               It seems to me therefore that the onus is on the respondent to establish why a second requirement should be "read in" to the section.

56.              In A, B and C (A Minor) v. Minister for Foreign Affairs and Trade [2023] 1 ILRM 335 Murray J., commenting on case law and his own judgment in Heather Hill, stated the following at para. 73:

"In answering these questions, it is to be remembered that the cases - considered most recently in the decision of this court in Heather Hill Management Company CLG and anor. v. An Bord Pleanála [2022] IESC 43, [2022] 2 ILRM 313 - have put beyond doubt that language, context and purpose are potentially in play in every exercise in statutory interpretation, none ever operating to the complete exclusion of the other. The starting point in the construction of a statute is the language used in the provision under consideration, but the words used in that section must still be construed having regard to the relationship of the provision in question to the statute as a whole, the location of the statute in the legal context in which it was enacted, and the connection between those words, the whole Act, that context, and the discernible objective of the statute. The court must thus ascertain the meaning of the section by reference to its language, place, function and context, the plain and ordinary meaning of the language being the predominant factor in identifying the effect of the provision but the others always being potentially relevant to elucidating, expanding, contracting or contextualising the apparent meaning of those words."

57.              Adopting that approach, the court's task is to consider the meaning of the words chosen by the Oireachtas, having regard to the relationship of the provision in question to the statute as a whole, the location of the statute in the legal context in which it was enacted, the connection between the words in the section and the whole Act, and the discernible objectives of the statute.

58.              The court's task in this regard is greatly assisted, and indeed shortened, by the extensive analysis already carried out by Baker J. of the scheme and purpose of the Bankruptcy Act 1988 in Re Wymes (a bankrupt) [2021] 1 IR 803. Baker J. notes at paras. 22 to 25 of the judgment that the first step in the adjudicative procedure is to ascertain if the debtor has committed one of the acts of bankruptcy identified in the 1988 Act. The act of bankruptcy that featured in Re Wymes (and in the present case) is the failure of the debtor to pay or secure to the creditor the debt demanded in a bankruptcy summons. The second step is the issuing and presentation of a petition for bankruptcy by the creditor in which the act of bankruptcy relied on is clearly identified. The third step is the hearing of the petition at which an adjudication may be made, following which the bankrupt takes on the status of a bankrupt person and his/her property vests in the Official Assignee.

59.              The judgment notes that a number of safeguards are built into the system from the debtor's point of view:

"The debtor may by statute challenge the validity of the bankruptcy summons. In addition, the debtor may seek by application to "show cause" why the adjudication should be set aside. This is an unusual element of the code, as it permits the setting aside of an order of adjudication other than by appeal."

60.              Baker J. notes that the sequence of available remedies for the debtor illustrates the fact that there exists a considerable degree of protection to a debtor faced with a bankruptcy, but also the sometimes cumbersome and lengthy processes which can delay the collection of debt and the return of the debtor to meaningful economic activity when he/she exits from bankruptcy.

61.              Importantly, the scheme of the Act focuses on the requirement to prove "an act of bankruptcy" rather than the requirement to prove a specific debt. Section 7 of the Act identifies some 11 ways in which a debtor can be said to commit an act of bankruptcy. The last of these is s. 7(1)(g) which provides that an individual commits an act of bankruptcy "if the creditor presenting a petition has served upon the debtor in the prescribed manner a bankruptcy summons, and he 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."

62.              Baker J. notes at para. 32 that some of the acts of bankruptcy listed in the section relate to the person of the debtor, some to his own conduct in relation to his property, and some to the state of his circumstances. Not all the acts require culpable action on the part of the debtor.

63.              Under the Act, service of a bankruptcy summons serves the key purpose of creating an act of bankruptcy (see Re Wymes para. 41 and the decision of Sanfey J. in Re Campion para. 12). This occurs where, within fourteen days after service of the summons, the debtor does not pay the sum referred to in the summons. At the end of the fourteen days, such a debtor is deemed to have committed an act of bankruptcy. Importantly, Baker J. refers to s. 7(1)(g) as a "deeming provision" of the Act. After the passing of fourteen days from service of the summons and absent payment or the provision of security, an act of bankruptcy can be said to have occurred.

64.              Having considered Baker J.'s analysis of the statutory code, I agree with the petitioner's submission that the nature of s. 7(1)(g) as being a deeming provision is significant in the context of the statutory interpretation exercise the court has to perform here. Where non-payment of a bankruptcy summons under s. 7(1)(g) is the act of bankruptcy being relied upon once time for challenging the summons has passed, an important line is crossed, and the debtor is now deemed to have committed an act of bankruptcy. This means that the process has moved beyond issues such as the enforceability or validity of the debt, and now focuses on the issues set out within s. 11(1) of the Act. Support for this view is provided by the wording of s. 14 which in material part provides that where the petition is presented by a creditor, the court shall, if satisfied that the requirements of s. 11(1) have been complied with, by order adjudicate the debtor bankrupt.

65.              In her analysis, Baker J. notes at para. 88 that it is material that the act of bankruptcy is committed under s. 7(1)(g) by reason of a failure to pay on foot of the summons, and that that is stated without condition and without a statutory stay on the deeming provision.

66.              The question of statutory interpretation under discussion in Re Wymes was whether one should "read in" to the statutory code an entitlement on the part of a debtor to challenge the issuing of a summons, even where the fourteen day period within the section has expired. In Re Wymes, the debtor argued that unless the fourteen day period set out in s. 7(1)(g) is suspended, an unjust situation would arise as a debtor would have to make immediate payment on foot of the summons to avoid bankruptcy, even when a challenge to the summons has not been determined. The petitioners argued against this construction and submitted that the 1988 Act does not provide that the fourteen-day period in s. 7(1)(g) is stayed or suspended if the bankruptcy summons is challenged. They argued that if the legislature had intended that no act of bankruptcy could occur during the fourteen day period when an application to dismiss under s. 8(5) has been brought, the legislature would have so expressly provided. Baker J. agreed and held as follows at para. 112:

"The act of bankruptcy is, under the statutory scheme, the failure to pay on foot of a summons. The respondent seeks that this court would add to its interpretation of the section language that provides that the act of bankruptcy is the failure to pay on foot of the summons provided that summons has not been challenged, or when that challenge has been concluded. There being no ambiguity in the section or how it operates in conjunction with s. 11, a lacuna is apparent only if one ignores the clear language of ss. 7 (1)(g), 8 (5) and 11."

67.              By analogy with Baker J.'s analysis, it seems to me that had the legislature intended that proof of the enforceability of the underlying judgment or debt was required at the petition stage, the legislation would have expressly so provided. The omission of any wording suggestive of such a requirement cannot have been an accident. While Re Wymes concerned a different issue and a different statutory provision, Baker J.'s analysis is of assistance to the court at a number of levels. Firstly, the judgment supports the view that additional words should not lightly be "read in" to the section. Secondly, the respondent has not identified a likely source or indicator for adding such additional words. Thirdly, and crucially, the scheme and purpose of the Act as explored in Re Wymes does not appear to support the respondent's interpretation either.

68.              It is necessary therefore to carry out the contextual analysis mandated by the Supreme Court in Heather Hill and in A, B and C (A Minor). Approaching the statutory interpretation exercise in this way, s. 11(1)(a) should be interpreted in the context of the 1988 Act as a whole, bearing in mind the connection between the wording of s. 11(1)(a) and the whole Act, the overall statutory context and the discernible objects of the statute, as carefully traced by Baker J. in her judgment. The court should also keep to the forefront of its mind the plain and ordinary meaning of the language used in the section, since that is the predominant factor in identifying the true meaning and effect of the subsection.

69.              Applying that approach and drawing on Baker J.'s analysis in Re Wymes, it seems to me the following features of the Bankruptcy Act 1988 are relevant:

(i)                 Section 7 sets out the various ways in which the debtor may commit an "act of bankruptcy".

(ii)              One of these is s. 7(1)(g), which says that a debtor commits an act of bankruptcy if the creditor has served upon the debtor in the prescribed manner a bankruptcy summons, and the debtor does not within fourteen days after service of the summons pay the sum referred to in the summons.

(iii)            This act of bankruptcy under s. 7(1)(g) includes a temporal requirement.

(iv)             The creditor's right to present the petition for bankruptcy arises by reason of the committal by a debtor of an act of bankruptcy.

(v)               Section 7 (1) provides in unequivocal terms that an individual commits an act of bankruptcy on the happening of one of the listed events.

(vi)             The provision is in effect a deeming provision, such that after the passing of fourteen days from service of the summons, and absent payment of the sum or the provision of security, the act of bankruptcy will be said to have occurred.

(vii)          Under this act of bankruptcy, the statute makes no mention of a judgment or a decree - whether enforceable or otherwise - being a required proof.

(viii)        The act of bankruptcy is committed under s. 7(1)(g) by reason of the failure to pay on foot of the bankruptcy summons, not on foot of any judgment or decree.

(ix)             As noted by Baker J. at para. 88 of Re Wymes, it is material that the act of bankruptcy is committed under the subsection by reason of the failure to pay on foot of the summons, and that that is stated without condition and without a statutory stay on the deeming provision.

(x)               The scheme of the Act and the combination of ss. 7 and 11 mean that the happening of an act of bankruptcy must be identified with certainty, as it is that which enables the creditor to present a petition for adjudication.

(xi)             The service of the bankruptcy summons puts the debtor on notice and on risk that the process leading to adjudication will be commenced, as the expiration of the time provided in the summons entitles the creditor to avail of the provisions of s. 11.

(xii)          Section 11 is stated in the positive form in that a creditor "shall be entitled to present a petition for adjudication against a debtor" if the conditions set out in s. 11(1) are met.

(xiii)        Section 14 provides in material part that where the petition is presented by a creditor, the court shall, if satisfied that the requirements of s. 11(1) have been complied with, by order adjudicate the debtor bankrupt.

(xiv)         Baker J. notes at para. 94 that these are matters which the Oireachtas has carefully framed to provide certainty as to the date and means by which an act of bankruptcy can occur, and certainty as to when and how a creditor may present a petition for adjudication.

(xv)           The usage by the legislature of the words "the act of bankruptcy on which the petition is founded" in s. 11(1)(c) also supports the conclusion that it is the committal of an act of bankruptcy that is the foundation for any proceedings brought by petition for the adjudication of a debtor as a bankrupt, rather than a judgment or decree relating to the underlying debt.

(xvi)         The statutory code builds in several layers of protections and safeguards to protect the debtor, including the facility of applying to dismiss the bankruptcy summons, stringent technical requirements regarding the summons, and its service, the entitlement to contest the bankruptcy petition and the right of the debtor to "show cause" why the adjudication order should be set aside.

(xvii)      The procedure requires the creditor in the body of the summons to remind the debtor that he retains the entitlement to simply pay the sum referred to in the summons.

70.              In my view, these features of the statutory code support the contention that s. 11(1) of the Act should be given its literal and ordinary meaning and does not require the creditor at the petition stage to demonstrate that the underlying debt or judgment remains enforceable or is not time-barred. I find that there is no ambiguity in s. 11(1)(c), or in how sections 7, 11 and 14 operate in tandem.

71.              For all these reasons, I reject the interpretation urged by the respondent. I hold that even where a judgment has become unenforceable under the Circuit Court Rules, a creditor is not precluded from proceeding with a bankruptcy application under s. 11 of the 1988 Act, on the ground of the debtor's failure to pay a bankruptcy summons.

 

Other issues to be held over

72.              Since I have decided to hold over for further legal argument the separate issue concerning whether a bankruptcy petition constitutes an "action upon a judgment" for the purposes of s. 11(6)(a) of the Statute of Limitations Act 1957, it seems to me that I should also hold over the remaining two issues concerning whether the clock should be regarded as having stopped for the purposes of the Statute of Limitations, and the final question whether it is open to the respondent at this stage, even if his arguments against the petition fail, to discharge the debt so as to avoid being adjudicated a bankrupt.

73.              During the hearing the respondent made the submission that it would not be appropriate for the court to determine the weightier issues arising in circumstances where the issues arise in the context of a petition to adjudicate a person a bankrupt over an asserted liability of so small a debt as €30,500, involving a judgment given over 15 years ago. Without intending to be prescriptive, the parties may wish to make further submissions on this issue at the resumed hearing.

74.              As to the fourth and final issue concerning whether the respondent can simply reserve his position and discharge the debt at any stage to avoid the adjudication order, that too warrants further exploration by the parties. That issue may require further consideration of the language used by the Oireachtas in ss. 11, 14 and 16 of the Act and also Baker J.'s careful analysis of the statutory code in Re Wymes.

75.              Accordingly, I will list the matter for mention for the purpose of setting a date to enable the parties make further submissions on the three remaining issues. In the meantime, the parties will have the benefit of the court's decision on the first issue in favour of the petitioner.

 

SIGNED: Micheál P. O'Higgins

 

Appearances:

For the petitioner: Paul Brady BL instructed by Ivor Fitzpatrick & Co. Solicitors.

For the respondent: Gary McCarthy SC instructed by Tom Casey Solicitors.

 

 

Postscript:

It was ultimately unnecessary for the court to determine the remaining issues. The parties settled their differences and on Thursday, 27^th March 2025 the court made an order on consent, striking out the proceedings with costs to the petitioner.