S37 Murphy -v- Bank of Ireland [2014] IESC 37 (07 March 2014)

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Cite as: [2014] IESC 37

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Judgment Title: Murphy -v- Bank of Ireland

Neutral Citation: [2014] IESC 37

Supreme Court Record Number: 191/11

High Court Record Number: 2010 621 P & Bankruptcy 2378

Date of Delivery: 07/03/2014

Court: Supreme Court

Composition of Court: McKechnie J., MacMenamin J., Dunne J.

Judgment by: Dunne J.

Status of Judgment: Approved

Judgments by
Link to Judgment
Result
Concurring
Dissenting
Dunne J.
Appeal dismissed - affirm High Court Order
MacMenamin J.
McKechnie J.
McKechnie J.


Outcome: Dismiss





THE SUPREME COURT
[Appeal No. 2011/191]

McKechnie J.

MacMenamin J.

Dunne J.


IN THE MATTER OF PATRICK MURPHY OF

18, FALCON HILL, LOVERS WALK, TIVOLI, CORK, A BANKRUPT


BETWEEN

PATRICK MURPHY
APPLICANT/APPELLANT
AND

THE GOVERNOR AND COMPANY OF BANK OF IRELAND

PETITIONING CREDITOR

/RESPONDENT

AND

THE OFFICIAL ASSIGNEE IN BANKRUPTCY

NOTICE PARTY

Judgment of Ms. Justice Dunne delivered on the 7th day of March, 2014

Introduction
The applicant/appellant (“the Appellant”) herein was adjudicated bankrupt on the 24th January, 2011 by the High Court (McGovern J.). An application for a stay on the order of adjudication was heard and refused on the 26th January, 2011.

On the 31st January, 2011, an application was made to extend time to show cause to the Court against the adjudication, time was extended and the application to show cause was heard on the 6th April, 2011 and in its judgment of the 12th April, 2011, the High Court (McGovern J.) rejected the application to show cause against the validity of the adjudication.

Background
On the 17th May, 2010, the High Court made an order by consent in favour of the petitioning creditors/respondent (“the Bank”) in the sum of €9,025,720.70 inclusive of interest together with six day costs.

Particulars of demand and notice requiring payment (“Particulars of Demand”) dated the 21st October, 2010 was served on the Appellant in which the Bank set out its demand for payment on foot of the Bank’s judgment against the Appellant in the sum of €9,025,880.70 being the amount of the judgment debt referred to above together with €160 for six day costs. The figure of €9,025,880.70 was stated to be the sum which “amounts to your total indebtedness” and that the “total amount remains outstanding”. The Appellant was called upon to pay that sum but did not do so.

A bankruptcy summons was issued on the 29th November, 2010. It called on the Appellant to pay the sum of €9,025,880.70 being the sum claimed by the Bank in the Particulars of Demand.

The issue
The essence of the case made on behalf of the Appellant is that the sum sought by the Bank in the Particulars of Demand is incorrect and that the sum in the bankruptcy summons is also incorrect in that the sum said to be due is in excess of the amount actually owed; on that basis it was contended that the bankruptcy summons was defective and that a failure to pay the amount claimed in the bankruptcy summons did not constitute a valid act of bankruptcy. The Bank has contended that the sum actually owed by the Appellant is far in excess of that claimed in the bankruptcy summons and that consequently any error, if any, in relation to credit for payments made does not invalidate the bankruptcy summons. Thus, this is a very unusual case in that the Appellant contends that the adjudication should be annulled on the grounds that the sum sought in the Bankruptcy Summons is excessive while the Bank maintains that the sum sought is far less than the sum actually due by the Appellant.

The figures
In order to understand the issue raised by the Appellant it is necessary to look at certain figures referred to in the affidavits sworn in the course of the proceedings.

The Appellant, in an affidavit of the 29th January, 2011, grounding the application to show cause against the adjudication made the point that between the 17th May, 2010, when judgment was entered and the 29th November 2010, the date of the bankruptcy summons, the latest date on which the Appellant had received bank statements, sums totalling €4,425 had been lodged to his current account by way of rent from a tenant of one of his properties and that sum had then been debited from his current account by the Bank on foot of its powers of set-off and applied in reduction of the amount due on foot of account No. 72939674. A further sum of €400 paid in on the 30th November, 2010 was treated in the same way by the Bank.

The point made on behalf of the Appellant was that the Bank did not give him credit for the payments made in the sum of €4,425 either in the Particulars of Demand, the bankruptcy summons or the affidavit of Janet Seacy sworn herein on the 2nd November, 2010 in which the Bank sought the issue of the bankruptcy summons. It is the Appellant’s case that the failure to give credit to him for the sum of €4,425 means that the sum set out in the Particulars of Demand and in the bankruptcy summons overstates the amount actually due by him and that consequently, he was not obliged to pay the sum set out in the bankruptcy summons and that the failure to pay that sum did not amount to a valid act of bankruptcy.

The Bank, in a subsequent affidavit of Janet Seacy, acknowledged that since the 17th May, 2010, the date of the judgment, a total of €4,425 had been credited to the loan account of the Appellant, the account which gave rise to the judgment. She noted that simple interest had accrued on the judgment debt inclusive of costs and she set out a calculation of same taking into account the sums credited to the loan account of the Appellant and noted that on the 2nd November, 2010, the date on which her previous affidavit was sworn, the total amount outstanding by the Appellant including interest was €9,359,097.38; on the 29th November, 2010, the date of issue of the bankruptcy summons, the sum outstanding was €9,411,490.49; on the 24th December, 2010, the date when the affidavit of debt was sworn grounding the petition of bankruptcy, the sum outstanding was €9,460,523.12 and on the 24th January, 2011, the date of adjudication, the sum outstanding was €9,521,819.57, some €495,938.87 in excess of that claimed by the Bank in the bankruptcy proceedings. Thus, it was pointed out that at no time has the amount outstanding by the Appellant to the Bank been less than the sum of €9,025,880.70.

Decision of the High Court
McGovern J. in the course of his judgment made a number of observations. He noted that the Bank accepted that the sum of €4,425 had been received on behalf of the Appellant since the date of the judgment. He further noted that it was not disputed that interest post-judgment pursuant to the Courts Acts and more specifically pursuant to s. 26 of the Debtors (Ireland) Act 1840 applied to the judgment. There was an issue before him as to whether the sum due for interest had been waived by the Bank but the argument of the Appellant in that regard was rejected as there was no evidence adduced to that effect. Further, there was no challenge to the computation of interest as set out in the affidavit of Janet Seacy. Therefore, there was no claim made as to a mistake in the figures. In the course of his judgment he referred to a number of relevant authorities and went on to say as follows:

        “21. The Bank argues that the reasoning behind the strict view taken by the court in In Re Sherlock and the other cases referred to therein is that because of the severity of the Bankruptcy regime and the consequences for a debtor, the law insists that he must actually owe the sum claimed of him, and that if the sum sought is in excess of the sum owed (however marginal), the demand must be bad because the debtor cannot be expected or compelled to pay a sum which is more than he owes.

        22. I accept the submission of the Bank on this point.

        23. In the case of In Re Sherlock, the sum sought was IR£1,000 in excess of the sum actually owed. In the case before me, the sum demanded of the applicant was considerably less than he actually owed at that time, when interest was taken into account, notwithstanding any credits given.

        24. In effect, the Notice of Demand and the Bankruptcy Summons understates the actual amount owed by the applicant. It does not do so because of any mistake in the calculations, but simply on the basis that the Bank has confined its claim in the application for the Bankruptcy Summons to the amount of the judgment of 17th May, 2010, and the costs awarded at that time.

        25. Whether the Bank would be entitled to prove a sum in excess of that figure in the Bankruptcy is a matter that can be argued by the parties in due course. But what is clear, beyond any doubt, is that the actual sum owed by the applicant to the Bank is considerably in excess of the sum demanded of him in the Notice of Demand and referred to in the Bankruptcy Summons which issued.

        26. In the course of the hearing, counsel were unable to cite any case which dealt specifically with this point, namely, whether an understatement of the amount actually due brought a debtor within the ambit of In Re Sherlock and the cases referred to therein.

        27. I am satisfied that the jurisprudence established by In Re Sherlock developed in order to protect debtors from the rigours of Bankruptcy following a demand for payment which was excessive, even if the excess was minimal, and arose due to an oversight or innocent mistake.

        28. That judgment is not authority for the proposition that a claim for a liquidated sum, which is less than the sum actually due, gives rise to a ‘cause shown’ against the validity of an adjudication of Bankruptcy under s. 16 of the Act, and where no mistake or carelessness has been shown in the computation of the figures set out in the Notice of Demand or the Bankruptcy Summons.”

It was in those circumstances that the adjudication was not set aside.

Submissions and discussion
A number of authorities were opened to the Court in the course of the submissions. The first of those was the decision of the Court of Appeal in In re HB [1904] 1 KB 94 in which Romer L.J. (at p. 103) stated:

        “Now I think it is clear that, when you have a judgment in the form that we have here, a bankruptcy notice under the Act must require payment of a sum alleged to be due according to the terms of the judgment - that is to say, it must state the amount that is claimed as remaining unpaid on the judgment debt. Clearly, in a bankruptcy notice the debtor is entitled to see from the notice exactly what is claimed to be due on the judgment debt. No doubt a sum might be claimed which is less than the real amount due, and that would not of course be fatal to the notice so long as the notice made it clear that nothing more was claimed to be due on the judgment beyond the amount specified in the notice.”
The judgment of Bacon C.J. in the case of In re Skelton, Ex parte Coates [1877] 5 Ch. D 979 was also opened where it was stated (at p. 980):
        “It is the very gist and essence of the Bankruptcy Act that creditors who claim the benefit of these severe and almost criminal provisions of the law cannot have that benefit unless they strictly comply with the terms of the Act.”
In re a Debtor [1908] 2KB 684 is a judgment which has been cited in a number of Irish decisions. Two passages from the judgment of Cozens-Hardy M.R. (at p. 687) are well known:
        “The amount claimed in the bankruptcy notice was not due. There was a mistake in the calculation of interest. For the present purpose I care not what the precise amount of the mistake was. It was, I believe, between one and two pounds. But putting aside the question of amount, this was a bankruptcy notice which said ‘If you do not pay a judgment debt which is due and also a further sum which is not due you are liable to be made bankrupt’.”
Cozens-Hardy M.R. added (at p. 687):
        “I cannot regard it as a mere formal defect that you claim payment from a man of that which never was due from him. It is not necessary to say that there was any attempt on the part of the petitioning creditors wilfully to exact payment of that which they knew was not due. My judgment does not depend upon that. It seems to me that a defect of this kind is substantial, that it is not formal, and does not fall within the language of s. 143. So much in point of principle.”
As mentioned previously, the judgment of Cozens-Hardy M.R. has been considered in a number of cases in this jurisdiction. In the case of In Re Sherlock, A Bankrupt [1995] 2 ILRM 493, the High Court (Murphy J.) applied the principles to be found in the judgment of Cozens-Hardy M.R. (at pages 686 to 687). It was noted that an earlier decision of the High Court in the case of O’Maoileoin v. Official Assignee [1989] I.R. 647 had also considered the judgment In re A Debtor. Murphy J. at p. 495 of his judgment In re Sherlock commented:
        “Although the decision in O’Maoileoin v. Official Asignee [1989] I.R. 647 was given prior to the enactment of the 1988 Bankruptcy Act and dealt with somewhat exceptional circumstances, it provides considerable assistance in dealing with this issue. What happened in that case was that the creditor obtained a judgment in the High Court against the bankrupt for a sum of £46,429. Subsequently the Bank of Ireland obtained a judgment against the petitioning creditor for a total sum of £5,725. Then, by an order of the Circuit Court made on 12 November 1985 a receiver by way of equitable execution was appointed to collect the said sum of £5,725 from the bankrupt, being portion of the judgment obtained by the petitioning creditor against him. The result was that when the debtor’s summons (as it then was) was presented in the full amount of the judgment obtained against the bankrupt, the creditor was entitled to receive only part thereof and the balance was payable to the receiver appointed on behalf of the Bank. The then President, Hamilton P. held that notwithstanding those facts, the debtor’s summons was in the correct form and that the failure to comply with its terms constituted an act of bankruptcy.”
Murphy J. then, as I have mentioned, cited a number of passages from the judgment of Cozens-Hardy M.R. which were relied on by Hamilton P. in the course of his judgment in O’Maoileoin and Murphy J. observed as follows at page 497 of his judgment:
        “Having quoted as aforesaid and other authorities to a similar effect, the learned Judge went on to express his conclusions (at page 654) in the following terms:
            ‘These cases clearly establish that the bankruptcy code, have regard to the consequences which flow from an adjudication of bankruptcy, is penal in nature and that the requirements of the statutes must be complied with strictly; that the debtor’s summons to be served within the provisions of s. 21 of the Bankruptcy Ireland (Amendment) Act 1872, must be served in the prescribed manner and the amount due in accordance with the judgment, when a judgment is relied upon, must be accurate and that a claim for an amount in excess of the amount due in accordance with such judgment would render the notice defective and a subsequent adjudication void’.
        It seems to me that applying those principles to the present case where I have accepted that the sum demanded of the debtor exceeded the amount due by more £1,000, it follows that the cause shown must be allowed and the adjudication set aside.”
In the case of Minister for Communications, Energy and Natural Resources v. MW and RW
[2009] IEHC 413, the High Court (McGovern J.) on an application to dismiss a bankruptcy summons considered a number of authorities including the decision in the case of In re Sherlock and the case of O’Maoileoin. Having referred to a number of passages referred to above, he concluded at page 4 of the judgment:
        “It seems to me that both before the 1988 Act, and since then, the courts have regarded it as necessary to strictly comply with the provisions of the rules and statutory provisions in order to trigger the bankruptcy process because it has such serious consequences for a debtor.”
In the later case of Allied Irish Banks plc v. Ivan Yates [2012] IEHC 36, a decision of the High Court, I considered the same line of authorities and commented at page 12 of the judgment in that case:
        “Thus, I think it is clear beyond any doubt that if the amount claimed on foot of the bankruptcy summons is in excess of that which is actually due, then in those circumstances there is no obligation to pay the amount claimed on foot of the bankruptcy summons and a failure to pay on foot of that summons will not constitute an act of bankruptcy.”
Apart from the Irish authorities referred to above, counsel on behalf of the Appellant referred to an Australian decision in the case of Kleinwort Benson Australia Limited v. Crowl [1988] HCA 34; 1988 165 CLR 71 in which the High Court of Australia on appeal from the Federal Court was considering the provisions of the Australian Bankruptcy Act 1966. Counsel referred in the first instance to paragraphs 9 and 10 of the judgment which state as follows:
        “9. Interest due on a judgment debt may, but need not, be included in a bankruptcy notice: In re Lehmann, Ex parte Hasluck (1890) 7 Morr 181; Re O'Keefe, Debtor; Ex parte Australian Factors Limited, Creditor (1963) 19 ABC 101; Re Mullavey; Ex parte Australia and New Zealand Banking Group Ltd [1977] FCA 17; (1977) 20 ALR 276, at p 283. It would seem that the reason for this is historical, rather than referable to the terms of s.41(2)(a)(i) of the Act which speaks of a requirement that the debtor pay the judgment debt ... in accordance with the judgment" (emphasis added). In Re Manion; Ex parte Deputy Commissioner of Taxation [1979] FCA 1; (1979) 23 ALR 270 Lockhart J. expressed the view (at p 273) that ‘(a)lthough interest is necessarily and inextricably attached to the judgment debt ... it does not itself answer the description of the sum due by the debtor to the petitioning creditor under the final judgment.’ Whether that be so or not, the regularity of including interest in the amount claimed by a bankruptcy notice has long been accepted.

        10. If interest is included in a bankruptcy notice it must be calculated: Re O'Keefe, at p 103. A notice claiming more by way of interest than that in fact due was held to be invalid in In re A Debtor (1908) 2 KB 684, where the mistake was held not to be merely a formal defect or irregularity. That position is now covered by s.41(5) and (6) of the Act, to which reference has already been made.”

It was further said in that case (at paragraph 16 and 17) as follows:
        “16. If the amount specified in a bankruptcy notice is in fact due and payment is claimed in accordance with the judgment, the essential requirements of s.41(2)(a)(i) - the only requirements presently relevant - are met. Understatement of the amount due, whether it be an understatement of the judgment debt or of interest payable thereon, will thus constitute a defect which is substantive rather than formal only if the understatement is objectively capable of misleading the debtor as to what is necessary for compliance with the notice.

        17. It may be that, in a given case, understatement is capable of misleading the judgment debtor particularly if the notice is capable of producing uncertainty as to whether the debtor is required to pay the amount in fact due or the amount specified in the notice. In such a case uncertainty arises, not merely from the understatement, but from the understatement in the context of the particular bankruptcy notice. No such uncertainty arises if it is clear that payment of the amount specified in the notice will constitute compliance with the notice.”

The latter two passages were relied on by counsel on behalf of the Bank as supporting its position.

In the course of the majority judgment in that case, reference was made to the decision in the case of In re HB [1904] 1 KB 94 where it was stated at paragraph 12:

        “In In re H.B. a creditor and debtor entered into an agreement in writing whereby the debt was fixed at a specified sum, and the debtor consented to judgment being entered against him for that sum which debt was to be paid by agreed instalments. After default in payment of the instalments a bankruptcy notice was issued requiring payment of the overdue instalments. The Court held the bankruptcy notice to be invalid. Vaughan Williams L.J. (at p.102) said that the notice required ‘the debtor to pay a debt in accordance with the terms, not of the judgment, but of an agreement’. Romer L.J. (at p.103) said that the bankruptcy notice
            ‘must state the amount that is claimed as remaining unpaid on the judgment debt. Clearly, in a bankruptcy notice the debtor is entitled to see from the notice exactly what is claimed to be due on the judgment debt. No doubt a sum might be claimed which is less than the real amount due, and that would not of course be fatal to the notice so long as the notice made it clear that nothing more was claimed to be due on the judgment beyond the amount specified in the notice. But a notice to pay part of a judgment debt, leaving any balance that may be due to be subsequently claimed, is, to my mind, clearly bad’.
        Stirling L.J. said (at pp. 104 - 105):
            ‘I do not think that the Act authorizes the issue of a notice in such a form. It appears to me that in reality the creditor is requiring payment of the debt, not simply in accordance with the terms of the judgment, but in accordance with the terms of the judgment as varied by the collateral agreement. I think this is a material departure from the terms of the statute. I do not think that the Legislature meant to make non-compliance with a judgment an act of bankruptcy so long as the terms of the judgment were controlled by an outside agreement which might be more or less difficult of construction. The result is that, in my opinion, the creditor will not be entitled to issue a bankruptcy notice until all the instalments provided for by the agreement have become payable’.”
In Kleinwort, the Court went on to conclude that there could be no uncertainty as to what would constitute compliance with the notice. The notice could not be regarded as being capable of misleading and, accordingly, the Court found that it could not be said to be a nullity. The understatement in that case was said to constitute a formal defect or irregularity which attracted the operation of s. 306(1) of the Australian Bankruptcy Act 1966 which provided that:
        “Unless the court . . . is of opinion that substantial injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by an order of that court.”
It was noted that there was no evidence before the Court or claim of actual injustice and therefore s. 306(1) operated automatically. In other words, although there was a formal defect or irregularity, it was not one that caused a substantial injustice and therefore the notice was not invalid.

Relying on the authorities referred to above it is contended on behalf of the Appellant that the amount said to be due in the Particulars of Demand and the bankruptcy summons is wrong in that it does not give credit for the sum of €4,425 which was set off against the amount of the judgment debt. It is contended that there is an overstatement of the amount due, that the Particulars of Demand is defective as is the bankruptcy summons. Therefore, it is contended that the adjudication is void.

Counsel on behalf of the Bank contended simply that at all times the sums claimed by the Bank are due and owing and that, in fact, the sums actually due and owing are well in excess of that claimed. Reference was made specifically to the part of the Particulars of Demand which set out clearly what was required of the Appellant on foot of the Particulars of Demand, namely:

        “Take notice that the said the Governor and Company of the Bank of Ireland the said judgment creditor hereby requires payment of the said sum of nine million, twenty five thousand, eight hundred and eighty euro and seventy cent €9,025,880.70 (in figures €9,025,880.70) within four days of service of this notice upon you at the address given below.”
In other words, that was the amount to be paid and no more. It was submitted that the Appellant accepted the position set out in the affidavit of Janet Seacy sworn on the 29th January, 2011 that:
        “At no time during the entire of the period from the 17th May, 2010 until the date hereof had the amount outstanding by the bankrupt to the Bank been less than €9,025,888.70 after all credits have been made against the amount owing by the bankrupt to the Bank during that period.”
Accordingly, it is contended on behalf of the Bank that the bankruptcy summons is valid and that the adjudication based on the Act of Bankruptcy in not complying with the bankruptcy summons must stand. The final point made on behalf of the Bank was that it was not necessary to have a judgment against a debtor in order to apply for a bankruptcy summons. That was a fundamental difference between proceedings in this jurisdiction and in other jurisdictions. It was noted that the decisions in the case of HB referred to above and in Kleinwort were cases which required a judgment to have been obtained before a debtor’s summons or bankruptcy notice could be issued. Finally, it was submitted on behalf of the Bank that paragraphs 15 to 17 of the Kleinwort judgment, albeit that the bankruptcy framework in that jurisdiction is different to that here, does support the Bank’s case.

Conclusions
Section 8(1) of the Bankruptcy Act 1988 sets out the circumstances in which a bankruptcy summons may be granted, mainly, if the creditor proves that:

        (1) a debt of €1,900 or more is due to him;

        (2) the debt is a liquidated sum; and

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

Section 8(3) of the Act prescribed that the notice requiring payment of the debt “shall set out the particulars of the debt due . . .”.

Once served, the debtor is entitled to apply to have the bankruptcy summons dismissed and the Court shall dismiss the summons if satisfied that an issue would arise for trial.

In this case, there was an affidavit sworn by the Appellant seeking to have the bankruptcy summons dismissed but no motion was issued on behalf of the Appellant seeking such relief. Events overtook any such application. In the second affidavit sworn on the 23rd January, 2011, the Appellant sought an enlargement of the time prescribed for applying to have the bankruptcy summons dismissed but, as described earlier, he was adjudicated a bankrupt on the following day, the 24th January, 2011. No issue arises on the fact that the Appellant did not, in fact, have an application to dismiss the bankruptcy summons before the Court. It is conceded on behalf of the Bank that if the bankruptcy summons was not valid, then the adjudication cannot stand.

It is clear from the many authorities cited above such as the decision in In re Collier ex parte Dan Rylands Limited [1891] 64 L.T. 742 and reiterated regularly in cases such as O’Maoileoin, In re Sherlock and Minister for Communications v. MW and RW, that the consequences of bankruptcy are serious and penal and for that reason there must be strict compliance with the provisions contained in the statutory code and the Rules of the Superior Courts. The requirement for strict compliance has led to the dismissal of bankruptcy summons in cases such as In re Sherlock where Murphy J. concluded:

        “It seems to me that in applying those principles to the present case where I have accepted that the sum demanded of the debtor exceeded the amount due by more than £1,000, it follows that the cause shown must be allowed and the adjudication set aside.”
In the more recent decision of the High Court in the case of AIB v. Yates referred to above, and applying the same principles I commented at page 12 of the judgment:
        “Thus, I think it is clear beyond doubt that if the amount claimed on foot of the bankruptcy summons is in excess of that which is actually due, then in those circumstances there is no obligation to pay the amount claimed on foot of the bankruptcy summons and a failure to pay on foot of that summons will not constitute an act of bankruptcy.”
In the present case there is no doubt whatsoever that the amount actually due by the Appellant to the Bank is considerably in excess of that sought in the bankruptcy summons to be paid. The Bank chose not to claim the amount due for interest in the bankruptcy summons. That is, obviously, in ease of the Appellant.

In the course of submissions there was some discussion as to whether the Bank could prove in the bankruptcy for the sum due by way of interest up to the date of adjudication, but counsel on behalf of the Appellant did not seek to rely on an argument that the Bank had waived its right to interest. Instead, and relying on the Australian decision in Kleinwort, it was noted that interest on a judgment may or may not be included in a bankruptcy notice (the equivalent of a bankruptcy summons) and that if interest was included, it had to be calculated. It was contended that the trial judge herein erred in taking into account the fact that the amount actually due by the Appellant was greater than that set out in the bankruptcy summons in considering whether or not there was an overstatement of the amount due as a result of the payment of the sum of €4,425.

I find it difficult to place reliance on the decision in Kleinwort given the differences between the statutory framework in Australia as compared to Ireland. There are different statutory requirements in that jurisdiction as to what must appear in a bankruptcy notice which differ from the statutory requirements in this jurisdiction. There is also the statutory provision in that jurisdiction (s. 306.1 of the Bankruptcy Act, 1966) which had a bearing on the outcome in that case which has no equivalent in this jurisdiction.

The theme running through the authorities requiring strict compliance with the bankruptcy code is clear, namely, that the debtor on whom a bankruptcy summons is served should know the amount he/she is required to pay in order to avoid committing an act of bankruptcy and should not be confused or misled as to the requirements being made of him/her. An examination of the decision in O’Maoileoin is illustrative of this point. In that case the applicant had been adjudicated bankrupt on foot of an act of bankruptcy allegedly committed when he failed to pay the amount demanded in a debtor’s summons. (That decision concerned s. 21 of the Bankruptcy (Ireland) Amendment Act 1872 which was then in force). A receiver by way of equitable execution had been appointed over the portion of the amount of the judgment obtained by the petitioner against the debtor. There was no reference in the debtor’s summons to the fact that an appointment had been made over part of the judgment debt. It was argued that the debtor’s summons was defective, in that the amount claimed did not take into account that the petitioning creditor was not entitled to receive the entire amount of the judgment nor to execute for the full amount of the judgment, in view of the appointment of the receiver. Accordingly, it was submitted that this was a defect in the debtor’s summons and that the failure to respond to it did not amount to an act of bankruptcy. It was on that basis that it was sought to have the order adjudicating the applicant a bankrupt annulled. It was common case between the parties in that case that a bankruptcy notice in respect of a judgment debt should only be issued for the judgment debt or that part of the debt on which the creditor can issue execution. The motion in that case to annul the adjudication was unsuccessful.

In the present case, there is no doubt but that the Bank would be entitled to issue execution against the Appellant in the amount of the judgment together with interest thereon pursuant to the provisions of the Debtors (Ireland) Act 1840 and costs. In executing the judgment, credit would have to be given for the sum of €4,425 but clearly the Bank would be entitled to execute for a sum far in excess of that actually claimed in the bankruptcy summons herein. McGovern J. in his concluding remarks observed:

        “26. In the course of the hearing, counsel were unable to cite any case which dealt specifically with this point, namely, whether an understatement of the amount actually due brought a debtor within the ambit of In Re Sherlock and the cases referred to therein.

        27. I am satisfied that the jurisprudence established by In Re Sherlock developed in order to protect debtors from the rigours of Bankruptcy following a demand for payment which was excessive, even if the excess was minimal, and arose due to an oversight or innocent mistake.

        28. That judgment is not authority for the proposition that a claim for a liquidated sum, which is less than the sum actually due, gives rise to a ‘cause shown’ against the validity of an adjudication of Bankruptcy under s. 16 of the Act, and where no mistake or carelessness has been shown in the computation of the figures set out in the Notice of Demand or the Bankruptcy Summons.”

I consider the approach of McGovern J. to be correct. The sum demanded was not in excess of that actually due and there was nothing in the Bankruptcy Summons which could have confused or misled the Appellant as to what he was required to do in order to avoid committing an act of bankruptcy. Had the appellant paid the sum sought on the Bankruptcy Summons, he would not have committed an act of bankruptcy.

Thus, in circumstances where the sum actually due is significantly in excess of that sought on the Bankruptcy Summons, it is difficult to see how the appellant can contend that the amount claimed in the Bankruptcy Summons was excessive by failing to give credit for the sum of €4,425 as against the sum of €495,938.87 which had accrued due for interest as set out above.

It has been noted time and again that the consequences of adjudication in bankruptcy are penal in nature and for that reason strict compliance with the Bankruptcy code is necessary before an individual can be adjudicated a Bankrupt. The requirement of strict compliance is to protect debtors from being adjudicated in respect of a sum that is not due but it is difficult to see how the requirement for strict compliance could be relied on to annul an adjudication in Bankruptcy because of an apparent failure to give credit for a payment made in reduction of the overall sum due when the sum actually due is greater than the sum demanded on the Bankruptcy Summons. As I have said, the purpose of the requirement of strict compliance is to ensure that an individual is not adjudicated bankrupt in respect of a sum which is not due. It is difficult to see how that requirement could be used for the benefit of a debtor and to the detriment of a creditor in circumstances where the debtor was not asked to pay more than was due but, in fact, was asked for less than was due.

In all the circumstances of this case, I am satisfied that the approach of the learned trial judge was correct and I would dismiss the appeal.

Judgment delivered the 7th day of March, 2014 by Mr. Justice William M. McKechnie.
The Issue:

The issue in this appeal is whether the adjudication of the appellant as a bankrupt should be annulled, on the basis that the sum specified in both the Particulars of Demand and Notice Requiring Payment and in the Bankruptcy Summons is, by overstatement, inaccurate and incorrect, and thus at the time, was not due and owing. Accordingly it is said that despite further monies also being due, the failure to comply with the payment demands cannot be regarded, as having been an act of bankruptcy upon which a valid adjudication could be based. No authority has been identified by either party which directly reflects the circumstances of this case and therefore the point must ultimately be dealt with, largely in accordance with principle.

Process of Bankruptcy:

The process of bankruptcy as material to this case involves, the taking of several steps which are set out in the Bankruptcy Act 1988, as amended, in the version applying at the relevant time (“the 1988 Act” or “the Act”). Subsequent amendments, such as those made by the Civil Law (Miscellaneous Provisions) Act 2011, the Personal Insolvency Act 2012 and the Courts and Civil Law (Miscellaneous Provisions) Act 2013, all post-dated the relevant period and thus do not have any baring on this case..

This process involves: the making of a demand, in a document titled “Particulars of Demand and Notice Requiring Payment” (the “Notice of Demand” or “Demand”), by the petitioning creditor for payment of the sum specified; followed by the service of a Bankruptcy Summons (or “the Summons”) in respect of which, if default in payment is made, an act of bankruptcy is committed, which thereby allows the creditor to petition on that ground, to have the debtor adjudged a bankrupt. Verifying Affidavits are required for the issue of the Summons and the Petition. A debtor has a statutory opportunity of responding in a number of ways, including moving to have the Summons dismissed within a prescribed time after service, and in addition, irrespective of whether that step has been taken, to “show cause” against the validity of the adjudication. Again Affidavits are required from or on behalf of the debtor in support of either or both applications. In this case the real contest arose when Mr. Murphy invoked the latter step, thereby giving rise to the High Court decision which is the subject matter of this appeal and this judgment.

Statutory Provisions and Rules of Court:

The statutory provisions upon which the above steps are based, show:

Order 76 of the Rules of the Superior Courts 1986, in the version applying at the relevant time (“R.S.C.”), facilitates this regime, inter alia, by specifying the appropriate forms by which many of the aforementioned steps are to be implemented. For example, the Notice of Demand shall be in Form No. 4, the Affidavit grounding the Bankruptcy Summons, which must verify the truth of the debt, shall be in Form No. 5, and the Petition shall be in Form No. 11; each of these Forms are set out in Appendix O to that Order.

As appears from its terms, O. 76 R.S.C. also provides that certain matters must be specified in the Bankruptcy Summons - an example of which is a requirement to state that, if the debt specified and therein demanded is not paid or otherwise secured or compounded for within 14 days from the date of service, the debtor shall have committed an act of bankruptcy (r. 10). Such an act is of course the foundation of and a pre-condition to any subsequent adjudication. Furthermore, mention should also be made of r. 12(4) which, having required that detailed particulars of demand should be endorsed upon or annexed to the Summons, goes on to provide that: “[n]o objection shall be allowed to the particulars unless the Court considers that the debtor has been misled by them.” Whilst there are several other requirements set out in the Order, none touch on the issues in this appeal.

The Factual Background - in General Terms:

The following is a brief summary of the most salient events which gave rise to this case and which of course give rise to this appeal:

        On the 17th May, 2010, Bank of Ireland, hereinafter also called “the Bank”, obtained a judgment, by consent, for the sum of €9,025,720.70 (inclusive of interest up to that date) against the appellant, Mr. Patrick Murphy, together with six days’ cost as taxed and ascertained.

        The Bank, on the 21st October, 2010, served on the appellant a Notice of Demand as a prelude to the issue of a Bankruptcy Summons. This Notice demanded payment of a figure of €9,025,880.70, which comprised the aforementioned amount, together with a token sum of €160 to represent the Cost Order as obtained. No objection has ever been taken to the addition of this small amount. The total sum of €9,025,880.70 thus resulting, can be treated as being, and is referred to in this decision as, “the judgment amount”, or “the judgment debt”.

        As no such payment was ever received, a Bankruptcy Summons was duly applied for and obtained on the 29th November, 2010. It was based on the affidavit of Ms. Janet Seacy who styled herself as a Senior Business Manager with the Bank. The Summons was in standard form and stated that unless the judgment amount was paid or was otherwise secured or compounded to the Bank’s satisfaction within a specified time, “… you [(Mr. Murphy)] will have committed an act of bankruptcy in respect of which you may be adjudged a bankrupt …”.

        On the 24th December, 2010, a Notice of Motion returnable for the 24th of January, 2011 issued, in which the Bankruptcy Court was requested to adjudicate the appellant a bankrupt; this was on foot of a Petition seeking that relief, which also issued on the same day.

        An Affidavit of Debt sworn by Ms. Helen Nolan on the 24th December, 2010, supporting the Petition Application was filed on the same day on behalf of the Bank.

        On both the 22nd and the 23rd January, 2011, Mr. Murphy swore Affidavits, apparently in furtherance of an application under s. 8(5) and (6) of the 1988 Act, seeking to have the Bankruptcy Summons dismissed. It is quite unclear what happened to this application: it seems never to have been formally moved or determined.

        In any event, following an unsuccessful application for an adjournment, the High Court heard and determined the Petition on the 24th January, 2011 and made an Order adjudging the appellant a bankrupt on that day. It refused a stay, but on the 31st January, 2011, time was extended for the bankrupt to show cause against the validity of the adjudication.

        Mr. Murphy did so, as provided for under s. 16 of the Act and set out the grounds being relied upon in a Notice in writing dated the 1st February, 2011. This Motion was heard on the 6th April, and on the 12th April, 2011, McGovern J., dismissed the application.

        It is against that decision and the resulting Order which the instant judgment deals with.

The Foundation of the Dispute:

Whilst the above general facts in this case are not in dispute, their appreciation at a more particular or refined level, as in most cases, is a matter of some importance so as to understand how the legal issue arises.

The Notice of Demand, in particularising the debt, sought payment from Mr. Murphy of the judgment amount, and stated that “… [such sum (€9,025,880.70)] amounts to your total indebtedness to [the Bank]”. It went on to describe how this sum was “made up”, referring to:

      “[the] High Court Commercial Order obtained against you on the 17th day of May, 2010 In The Matter Entitled …

      [w]hich judgment was obtained against you in the sum of … €9,025,720.70 … besides the sum of … €160.00 … for six days costs which sum remains outstanding together [sic] all of which together amount to a total of … €9,025,880.70 … which total amount remains outstanding.”

Payment of this sum was demanded within four days from the date of service, which was effected on the same day by ordinary pre-paid post. No such payment was made.

The Bankruptcy Summons also sought payment of the above sum which it described as “being the sum claimed of you by [the Bank] according to the particulars hereunto annexed or endorsed hereon …”. Those particulars specified how this sum was calculated. They did so in the same way as in the Notice of Demand; that is, by reference solely to its two component elements; namely the sum of €9,025,720.70 as specified in the High Court Order, to which was added €160 in respect of costs, in all amounting, in total, to the sum of the judgment debt.

The Affidavit of Ms. Janet Seacy, sworn on the 2nd November, 2010, which grounded the issue of the Summons, averred in one place that the sum of €9,025,880.70 represents “the total” due, and separately in another place that such sum is “the grand total of the amount outstanding on foot of a judgment obtained …”, pursuant to the Order of the 17th May, 2010. In the Affidavit of Debt grounding the Petition it is claimed that the bankrupt, as of the 24th December, 2010, was still “justly and truly indebted”, to the Bank, in the amount herein mentioned which again was stated to arise from the said High Court Order.

In the Affidavits sworn by Mr. Murphy on the 22nd and 23rd of January, 2011, respectively, it is asserted that the judgment amount was not due to the Bank either as of the 21st October, 2010 (Notice of Demand) or as of the 29th November, 2010 (Bankruptcy Summons), because the Bank had received a number of small sums in the intervening period, in respect of which he was entitled to credit on the loan account, upon which the judgment was based. It is not disputed but that he is correct in this regard.

The circumstances relating to this assertion were subsequently clarified by Ms. Seacy in a replying Affidavit of the 29th January, 2011, which disclosed that between the 17th May, 2010 and the 21st October, 2010, the Bank had received, through a series of payments, a total of €3,025, and that by the 29th November, 2011 it had received a further €1,000; in all the amount of €4,025. These sums, as appears from a copy of the bankrupt’s loan account, were credited to this account as and when received. A further sum was offset on the 30th November, 2011, but this can be discounted, as it was subsequent to the issue of the Summons.

Accordingly, it is claimed by the appellant that had these amounts been deducted from the judgment debt as they should have been, the subsequent demands at both critical dates would consequently have been overstated, and therefore his failure to satisfy such demands ought not to be regarded as an act of bankruptcy.

The Bank of course could not dispute these figures, as it had supplied them. In fact, as stated, it confirmed that each such payment when received can be regarded as having been credited against the sum of €9,025,880.70 - the judgment debt. It went on however to resist Mr. Murphy’s assertion as to consequence, by claiming that as and from the date of the judgment, interest at the then rate of 8% accrued automatically on the judgment debt by virtue of s. 26 of the Debtors (Ireland) Act 1840, as later amended inter alia by ss. 19 and 20 of the Courts Act 1981 (“Courts Act interest” or “statutory interest”).

The calculations to reflect such interest show that even when each credit is accounted for, the bankrupt’s true indebtedness at all times far exceeded the amount of the judgment debt. For example, by the 2nd November, 2010, the excess sum was over €300,000; by the 29th November, 2010 it had increased to more than €385,000; and by the date of the adjudication, it had risen to almost €500,000. These figures, as figures, were not disputed and neither was the operation of the statutory provision. On this basis, the Bank’s simple answer to the appellant’s submission is that there was never a question of it seeking more than what was actually due. In fact the contrary was the position. Therefore, there is no basis either in fact or in law for the assertion that the demands as made could be regarded as excessive.

The respective positions of the parties are more fully reflected in their submissions to this Court which are set out later in this judgment.

The Notice to Show Cause:

The grounds upon which cause was shown were:

      “1. The sums claimed in the [D]emand and in the Bankruptcy Summons were inaccurate and accordingly the failure to pay all or part of the sums so demanded could not, and did not, amount to an act of bankruptcy.

      2. Accordingly there was no act of bankruptcy on which to ground a valid [O]rder of [A]djudication of bankruptcy.

      3. In particular no act of bankruptcy had occurred within three months before the presentation of the Petition.

      4. The debt was not a liquidated sum by reason of the failure to properly account for partial repayments of the same.

      5. The Bankruptcy Summons, if granted prior to the swearing of a valid verifying [A]ffidavit (and it appearing that the [A]ffidavit was sworn some two days after the issue of the Bankruptcy Summons) could not be a valid [B]ankruptcy [S]ummons”.

When the fifth ground so stated is disregarded, as it can be in that it was not pursued either at the original hearing or on this appeal, it can be seen that in essence there is but one issue raised, and that relates to whether, in the above circumstances, the appellant’s failure to meet the demands made of him could be held to constitute a valid act of bankruptcy.

The High Court Judgment:

Having set out what was asserted on behalf of the bankrupt, and what resulted when interest was calculated on the judgment amount, the trial judge concluded that the sum demanded for legal purposes, in both the Notice of Demand and in the Bankruptcy Summons actually understated, rather than overstated, what the full indebtedness of the appellant was. In this regard he said “that even allowing for the credits due to the applicant, his debt to the Bank considerably exceeds the sum demanded of him, both at the date of the Demand and the date of the Bankruptcy Summons”. Being of that view, authorities such as In the Matter of a debtor And in the Matter of the Bankruptcy Acts. Michael B. O'Maoileoin v. The Official Assignee [1989] I.R. 647 (“In re O’Maoileoin”) and In the matter of Gerard Sherlock, a Bankrupt [1995] 2 I.L.R.M. 493 (“In re Sherlock”) were not on point as these cases related to excessive demands. That was not the situation which the trial judge was facing; rather the contrary was the position in light of the accrued interest. Accordingly, neither case could be considered authority for the proposition that by claiming a sum which was less than that actually due, such could give rise to a valid “cause shown” on an application under s. 16 of the 1988 Act. In these circumstances and for this principal reason, the learned trial judge, who also rejected the claim that by the nature of its demands the Bank had waived its right to interest, dismissed the application and affirmed the Order of Adjudication.

The Appellant’s Submissions:

The submission advanced at appeal level is identical to that opened before the High Court, save with some added focus on how it is said that the judgment of McGovern J. was wrong in law.

As regards the appropriate legal principles by which the provisions of the Bankruptcy Code should be interpreted, much reliance is placed on the well known case of In re Sherlock, which in turn draws heavily on the decision of In re O’Maoileoin and/or on the cases therein referred to. More recent cases such as In the matter of an application pursuant to s. 8 of the Bankruptcy Act 1988 and in the matter of The Minister for Communications, Energy and Natural Resources and M. O'C. v. M. W. and R. W. [2010] 3 IR 1 (“M. W. and R. W.”); In the Matter of P. F. v. K. D. & Ors. [2010] IEHC 63 (“In re P. F.”); and Allied Irish Banks Plc. v. Yates [2012] IEHC 360 (“Yates”) were also mentioned, but apart from adopting the same interpretive approach, these do not add to the jurisprudence otherwise established by such cases.

In short, it is submitted that these cases establish that a demand for a sum not then wholly due and immediately payable, cannot ground an act of bankruptcy, no matter how marginal the excess might be. Furthermore, the statutory provisions must be interpreted strictly and all requirements fully satisfied.

So based, the first argument is that, by the date of the Notice of Demand and by the later date of the Bankruptcy Summons, the judgment debt should have been reduced by the credits above mentioned. The failure to do so resulted in both seeking excessive sums and accordingly, the bankrupt’s failure to discharge the demanded amount could not ground a lawful act of bankruptcy.

The appellant argues that the question of interest played no part in this process and was not even mentioned until Ms. Seacy’s Affidavit of the 29th January, 2011, which post-dates the Order of Adjudication. The argument goes further in that, given the repeated assertions by the Bank in, for example, the Notice of Demand, the Bankruptcy Summons and the Affidavit of Debt, to the effect that the judgment amount was the total amount outstanding, it must follow that the Bank waived its right to interest, or at least must be regarded as having expressly disavowed any reliance on it, for the purposes of adjudication. Furthermore, when the Bank did address this question in Ms. Seacy’s Affidavit, it clearly confirmed that the amounts in question were credited not as against interest, but as against principal. Accordingly in these circumstances, the Bank should not now be allowed to make the case, as it is attempting to do, that the credits can be offset against statutory interest; in so finding, the learned trial judge was in error both in fact and in law.

On a more general level it is pointed out that the effect of permitting the Bank to rely on statutory interest, led the trial judge to conclude that above all just credits, the amount claimed by the Bank in this process was in fact an understatement of the debtor’s liability and accordingly, the cases pertinent to excessive demands were not relevant. On the particular question of interest, Counsel on Mr. Murphy’s behalf referred to the Australian case of Kleinwort Benson Australia Ltd. v. Crowl (1988) 165 C.L.R. 71 (“Kleinwort Benson”). Under the provisions of the Bankruptcy Act 1966, an overstatement of the amount due, would not by reason of that fact alone, necessarily be fatal to a Bankruptcy Notice “unless the debtor … gives notice to the creditor that he disputes the validity of the [N]otice on the ground of mis-statement” (s. 41(5)). In relation to an understatement of the debt, the same can be cured under the general provision of s. 306(1) of the Act, if it constitutes only a formal defect or irregularity unless, by so doing, a substantial injustice is caused to the debtor, being one which cannot be remedied by court order.

Paragraphs 9 and 10 of the judgment were then quoted and read as follow:

          “9. Interest due on a judgment debt may, but need not, be included in a [B]ankruptcy [N]otice: … It would seem that the reason for this is historical, rather than referable to the terms of s. 41(2)(a)(i) of the Act which speaks of a requirement that the debtor pay ‘the judgment debt … in accordance with the judgment’ …. In Re Manion [1979] F.C.A. 1 … Lockhart J. expressed the view (at p. 273) that ‘(a)lthough interest is necessarily and inexplicably attached to the judgment debt … it does not itself answer the description of the sum due by the debtor to the petitioning creditor under the final judgment.’ Whether that be so or not, the regularity of including interest in the amount claimed by a [B]ankruptcy [N]otice has long been accepted.

          10. If interest is included in a [B]ankruptcy [N]otice it must be calculated: … A notice claiming more by way of interest than that in fact due was held to be invalid in In re A Debtor (1908) 2 KB 684, where the mistake was held not to be merely a formal defect or irregularity.”

For these reasons, it is contended by the bankrupt that the approach adopted by the learned High Court judge to bring into consideration the question of interest, where the Bank had limited its claim to the principal sum plus €160 for costs was in error, or in the alternative, at least raised an issue which should be determined at a separate trial (In the Matter of Bankruptcy Summons by St. Kevin's Company (Petitioning Creditor) Against Richard Flynn (Debtor) (Unreported, Supreme Court, 27th January, 1995)). Either way, the correct manner of resolving this issue should have led the High Court to annul the adjudication pursuant to the “cause shown”.

Finally, it is also submitted that the sum in question is not a “liquidated sum” as required by s. 11(1)(b) of the 1988 Act and on that basis itself, the adjudication is invalid. This point was not separately pursued but rather formed part of the overall argument.

The Respondent’s Submissions:

The Bank firstly complains of the appellant’s failure to put in issue, in early course, the question of credits; as even a cursory examination of either the Notice of Demand or the Bankruptcy Summons will show, there is no mention of such credits in either document. In the same vein, the appellant is also criticised for his failure to bring an application under s. 8(5) and (6) of the 1988 Act so as to have the Bankruptcy Summons dismissed.

The creditor acknowledges that the relevant case law requires strict adherence to the Bankruptcy Code but points out that the instant case differs from the circumstances of many others, including In re Sherlock, because at no time was Mr. Murphy asked to pay an amount in excess of that which he legally owes the Bank. It is quite common for a petitioner not to claim the full amount due and there is no requirement in law to the contrary. It is claimed that an inadvertent omission of credits should not result in the Summons being held invalid where, in an overall context the amount actually sought is owed by the debtor, even when due allowance is made for such credits.

The Bank strongly asserts that at no time did it waive its claim for interest and that such a conclusion cannot be deduced from the manner in which it calculated the amount sought in the Summons.

In relation to the argument put forward by the appellant that, where an issue arises in relation to the amount sought it must be addressed at a hearing external to the bankruptcy proceedings, the Bank submits that the authorities upon which this proposition is based (paras. 21 and 27 supra) relate to circumstances very different indeed to the instant case. Firstly, all of these cases involved applications made under s. 8 of the 1988 Act and not, as here, an application to show cause under s. 16 of that Act. Secondly, in M. W. and R. W., the High Court held that there was a serious issue to be tried, namely whether the amount claimed in the Summons was overstated, and likewise in In re P. F where the issue was whether there was a debt owed at all. Yates also related to circumstances where the amount claimed exceeded the amount actually owed. Accordingly, it is said that none of these cases have any relevance to the instant circumstances.

In concluding the Bank expresses serious doubts about the motivation of Mr. Murphy in bringing this application, given the purported transfer of substantial property to his wife. It is said that such property, should rightly be available in part discharge of the debt owed to the petitioning creditor. In all of the above circumstances the application should thus be dismissed.

Decision:

The adjudication of a person as a bankrupt is, in light of the consequences of such an Order to that effect, a very serious matter for that person, his immediate dependants and wider family, and for the future direction of his life. Immediately on becoming operative, all of his assets automatically vest in the Official Assignee, all subsequently acquired property, under pain of criminal sanction, must be notified to the Official Assignee who can then claim it and any salary or income earned or received thereafter, is liable to be attached for the benefit of the creditors. Whilst there are some exceptions to these consequences, they have little effect on the grave impact of such an Order. Further, a bankrupt is disqualified from acting as a Director or from being involved in the management of a company without leave of the Court and he/she cannot continue to serve or otherwise hold, elected representative office. In addition, this virtually complete loss of control over one’s affairs can last for a very considerable time, at least as the law stood in 2010 (s. 85 of the 1988 Act). And finally, bankruptcy is regarded, historically at least, as reflecting badly on one’s character and reputation: it carries a stigma and an odium which continues even well beyond one’s discharge from that status. It is as if, once a bankrupt, a bankrupt forever.

The law for those and other reasons has therefore always regarded the statutory code by which such an outcome could be achieved, as being one which requires strict compliance. Bacon C.J., in Ex Parte Coates, In re Skelton (1877) 5 Ch. D. 979 (“In re Skelton”) gave as a reason that (p. 980):

      “[i]t is the very gist and essence of the Bankruptcy Act that creditors who claim the benefit of these severe and almost criminal provisions of the law cannot have that benefit unless they strictly comply with the terms of the Act.”
Some years later Cave J. in In re Collier, Ex p. Dan Rylands Ltd. (1891) 64 L.T. 742 at p. 743 put the matter thus:
      “Very soon after the [Bankruptcy] Act of 1883 came into operation several cases were brought … [where] the members of the Court of Appeal expressed the opinion that, since the commission of an act of bankruptcy was a serious matter, and involved consequences of what has been called a penal nature, it was important to see that the necessary preliminaries were complied with.”
In In re O.C.S. (A Debtor) [1904] 2 K.B. 161 the Court of Appeal also explained the extreme importance of great strictness in dealing with Bankruptcy Notices. Much the same view was expressed in several other cases including in In re A Debtor, (Cozens-Hardy M.R. at p. 686 to 689) - a decision further referred to later in this judgment. This approach in the neighbouring jurisdiction and the consequences of non-compliance with the statutory provisions (save in respect of mere formal defects per s. 143 of the 1883 Act), have largely held firm to this day.

The references in this judgment to the Bankruptcy Act 1883 (“the 1883 Act”), result simply from the fact that the English case law which the Court is referred to, is based on that Act. No later statutory provisions are relied upon by the parties as being relevant nor is any further case law mentioned, other than that as cited herein.

In this jurisdiction a modern authority of some note is the case of In re O’Maoileoin where the general approach above outlined was very much followed. At p. 654 of the report ([1989] I.R. 647), Hamilton P., having reviewed a number of other cases - including some of those previously mentioned - stated:

      “These cases clearly establish that the bankruptcy code, having regard to the consequences which flow from an adjudication of bankruptcy, is penal in nature and that the requirements of the statutes must be complied with strictly; that the debtor’s summons to be served within the provisions of s. 21 of the Bankruptcy Ireland (Amendment) Act, 1872, must be served in the prescribed manner and the amount due in accordance with a judgment, when a judgment is relied upon, must be accurate and that a claim for an amount in excess of the amount due in accordance with such judgment would render the notice defective and a subsequent adjudication void.”
See also the judgment of Murphy J., in In re Sherlock, which expressly endorsed these principles and by their application, directed that the adjudication in that case, be set aside (paras. 47 and 48 infra).

The reference in the passage quoted from In re O’Maoileoin as to what the situation is where a creditor is relying upon a judgment debt, is derived from English authority, which in turn is based on a particular provision of the 1883 Act. Under that Act, a person could commit an act of bankruptcy in a number of ways, including that set out in s. 4(1)(g), which provided that if a debtor, against whom a final judgment had been obtained, failed to “pay the judgment debt in accordance with the terms of the judgment”, he would, by reason thereof, have committed such an act. However, the requirement made of the debtor in the summons had to be strictly in accordance with “the terms of the judgment”, as otherwise such summons would be regarded as being statutorily defective and as a result could not provide a basis for adjudication.

A good illustration of this point is to be found in In re H.B. [1904] 1 K.B. 94 (“In re H.B.”). In that case following negotiations, the debtor and creditor agreed that the debt should stand at a certain sum. As security for the due performance of the agreement, the debtor consented to judgment being signed against him in the full amount. Default was soon made in respect of three instalments. A Bankruptcy Notice (in fact the second) then issued seeking payment, not of the whole judgment debt but of the overdue amount less some credits; the sum demanded however was described as the “amount due on the final judgment”. The Court of Appeal struck down the Notice as it failed to come within the provisions of s. 4(1)(g) of the 1883 Act. This because the Notice demanded payment of a sum which was not due “in accordance with the terms of the judgment”, but rather was due under the collateral agreement made between the parties. Therefore it did not comply with the wording of the particular provision and thus was invalid.

Notwithstanding the specific facts of that decision, it can hardly be doubted but that the following statement of Romer L.J. applies across the board: at p. 103 he stated:

      “Clearly, in a [B]ankruptcy [N]otice the debtor is entitled to see from the [N]otice exactly what is claimed to be due on the judgment debt”.
The making of that observation, I am satisfied, was well justified for the reasons which I give later in this judgment. In addition, the learned judge acknowledged what is rather obvious; which is that a sum might be claimed in a Summons which is less than the judgment debt, resulting for example from some payment on account. He appears however to have added the proviso that for the Notice to remain valid in such circumstances, it must be made clear that the excess is being waived by the judgment creditor. If this is to be read as saying that the creditor could not rely on the balance of the debt for the purposes of adjudication, then I would agree. If however it was intended to convey that such balance could not be proved post-adjudication, it should in my view be considered as applying only to that particular act of bankruptcy as specified in the sub-section. Even then its correctness may possibly be doubted, as the High Court in Kleinwort Benson did in relation to an identical provision of the Bankruptcy Act 1966 (s. 41(2)(a)(i)). In any event the act in question in this case is not the failure to pay in accordance with a judgment, but rather a failure to comply with a Bankruptcy Summons. Accordingly, I cannot see, at the level of principle, any justification why part of a debt admittedly due, but not claimed in the adjudication, could not be proved thereafter. Whilst some argument may of course be possible at the particular level, for example if circumstances existed giving rise to a waiver, an estoppel or such like, in general and excluding such, I would regard all just debts as being capable of proof before the Official Assignee.

Even leaving aside the debate about the proviso, it has been suggested otherwise that this decision should perhaps be considered as being quite narrow and as being restricted to its own facts, as the Court seems to have focussed very specifically on the statutory provision in question. Even if technically that is the case, which I am not at all convinced of, the same cannot be said of In re A Debtor [1908] 2 K.B. 684 (“In re A Debtor”) even though the same subsection of the 1883 Act was relied upon, as constituting the act of bankruptcy in that case. This, because the language of the Court was evidently of a general nature and clearly was intended to have a wide signification and a broad dimension to it.

The facts of In re A Debtor disclose that the amount claimed in the Bankruptcy Notice was overstated as a result of an inadvertent error in the interest calculation. Although the excess was only between one and two pounds, the mistake was considered substantial, as distinct from merely formal, and therefore did not fall to be amended under s. 143(1) of the 1883 Act. As such, the Court held that the debtor’s failure to comply with the Notice could not be regarded as having constituted a valid act of bankruptcy.

In a well-known passage from that judgment, Cozens-Hardy M.R. said (p. 687):

      “The amount claimed in the [B]ankruptcy [N]otice was not due. There was a mistake in the calculation of interest. For the present purpose I care not what the precise amount of the mistake was. It was, I believe, between one and two pounds. But putting aside the question of amount, this was a [B]ankruptcy [N]otice which said ‘If you do not pay a judgment debt which is due and also a further sum which is not due you are liable to made bankrupt.’ It is said [that] that is a formal defect which can be set right under s. 143, sub-s. 1, of the Bankruptcy Act, 1883 … On principle I am not prepared to accede to that argument. I cannot regard it as a mere formal defect that you claim payment from a man of that which never was due from him.”
The Master of the Rolls ended his judgment by concluding that (p. 689):
      “[b]oth on principle and on authority it seems to me that when you find a [N]otice including in the claim for payment a sum which is not due from the debtor at all, that is not a mere formal defect within …. The appeal must therefore be allowed.”
Farwell L.J., in a concurring opinion, made two observations which have a relevance to the instant appeal. At pp. 689 to 690, the learned judge said:
      “I cannot think [that] it is a mere formal defect to include in a [B]ankruptcy [N]otice not only the amount payable under the judgment, but also a sum which is not due and owing at all, and which the debtor has no means of seeing on the face of the [N]otice is not due and owing” (emphasis added).
This last reference related to a case In re Johnson (1883) 25 Ch. D. 112 where the Court treated a clerical error as a formal defect, when its nature was readily discoverable from the document as a whole and when to do so would not result in any injustice to the bankrupt. However, that was not the case which the Court was dealing with in In re A Debtor, and accordingly the learned Lord Justice would also treat the Notice as invalid.

Based on the application of the same principles, it is also noteworthy to recall the general tenor of what James L.J. said In re Skelton ((1877) 5 Ch. D. 979):

      “The Act says [that] you must tell the debtor what the act of bankruptcy is which you allege against him, so that he may have an opportunity of contesting it in the first instance” (p. 982).
It is quite evident that the Court in In re O’Maoileoin considered the above approach to be part of Irish law and was prepared to apply the rationale underpinning it. The issue which Hamilton P. had to consider was whether the appointment of a Receiver, by way of equitable execution over a portion of the demanded debt which the creditor himself owed to a third party, had the effect of reducing by such amount the sum due by the debtor. If it had, a demand for an excessive sum had been made. Following In re Bond, Ex p. Capital and Counties Bank Ltd. [1911] 2 K.B. 988, the learned President held that such an appointment by itself did not so operate and accordingly did not alter - by reduction or otherwise - the specified amount: in such circumstances the appointment had no effect on the act of bankruptcy.

The issue of an excess demand once again arose, in the following way in In re Sherlock. The act of bankruptcy upon which Mr. Sherlock was adjudged, was his failure to pay or to secure or compound the sum of £182,669.73, as demanded in the debtor’s Summons. By reason of certain events, the details of which are not relevant, Mr. Sherlock was entitled to an off-set of about £1,000 against that sum. The failure on the creditor’s part to give such credit was purely due to an oversight. Furthermore, as is quite evident from the figures, the amount due even with such a credit, far exceeded the minimum sum specified in legislation for its application.

On behalf of the bankrupt it was argued that if the sums demanded and specified in the Bankruptcy Summons “… were inaccurate then the failure to pay the sums so demanded could not and did not amount to an act of bankruptcy and accordingly that there was no such act on which to ground a valid [O]rder of [A]djudication” (p. 494). Murphy J. readily accepted, as a matter of principle, the correctness of this submission. Given the undisputed facts of the case, this inevitably lead to the conclusion that as the sum demanded of the debtor exceeded the amount due, cause shown was allowed and the adjudication was set aside.

To get an overview of the situation, it is important to note that the acts of bankruptcy in the cases above cited, differed. For example: it was a departure by a trader from his dwelling house with intent to defeat or delay his creditors in In re Skelton; it was a failure to pay a judgment debt in accordance with the terms of a final judgment in In re H.B. and also in In re A Debtor; and it was a failure to comply with a Debtor’s/Bankruptcy Summons, in In re O’Maoileoin and In re Sherlock respectively. Thus, it can be taken that the principles deducible from these cases, have general application to the Code in question and are not dependent, at that level, on the particular act of bankruptcy relied upon.

Staying at the level of generality and as a direct consequence of applying a strict interpretation to the 1988 Act, it appears to me that a debtor must be informed, in specific and accurate terms, by way of the particulars served on him and certainly from those endorsed on or annexed to the Bankruptcy Summons, of the precise demand being made, so that he can know what act of bankruptcy he is facing and what steps he has to take to avoid committing that act; which of course, is the crucial default step in the procedure. It is an essential requirement of the statutory scheme that the Summons speak to the debtor in such a way that he can readily, immediately and clearly see what is required of him so as to terminate the process, and thereby avoid the drastic effects of adjudication. This view is I feel entirely supported from what the Summons, by express requirement, must contain. As pointed out at para. 6 supra, the Summons, having outlined the demand, must tell the debtor how he can avoid adjudication, so as to comply with s. 8(4) of the 1988 Act and O. 76 r. 10 R.S.C.: he is informed that this is achievable if he pays or secures or compounds the sum demanded. Quite obviously that sum can only be the sum specified, calculated in accordance with the details as given. Section 7(1)(g) of the 1988 Act commands the debtor to pay the sum “referred to in the Summons”: the sum thus available for adjudication is that particular sum and it cannot extend or relate to any other debt, even one otherwise due and owing by the debtor at the time. If a creditor wants to include, as part of the specific amount, a sum which is also due e.g. by separate debt or upon a different judgment, or resulting from a different calculation or arrived at in another way, he, as the driver of the process can do so: it is he who is in command and who makes that decision, but once arrived at, he is bound by it.

The opposite equally applies: the creditor in this case could have picked any part of the judgment debt, above the statutory minimum, and could have operated the process on that basis. That was the Bank’s choice. It had entire control over what it did. But as I have said, once a particular course is decided upon, it must be implemented and must be followed through with. Otherwise the debtor will not know precisely what he must do to avoid adjudication: if adjudication could follow otherwise than indicated, then the requirement of strict compliance with the statute would be entirely stood down and utterly disregarded.

Accordingly, I am satisfied that the above principles correctly represent the law in this jurisdiction and dictate what approach should be adopted by the Court when considering an issue such as that presently arising.

Before summarising therefore what I believe to be the correct principles, could I mention the Kleinwort Benson case on which the appellant relies - in particular by reference to paras. 9 and 10 of that judgment (see paras. 25 and 26 supra). Whilst undoubtedly of interest, I am satisfied that even a generous consideration of it, would not add further to the jurisprudence which emerges from the more pertinent case law identified elsewhere in this judgment. However my remarks, at para. 38 of Lofinmakin (a minor) & Ors. v. Minister for Justice, Equality and Law Reform & Ors. [2013] IESC 49, when referring to a Canadian decision are also apposite in the present context. I stated:

      “There can be no doubting the relevance of the Borowski decision to this aspect of law, but like all decisions from other jurisdictions, it is important to retain a measure of reserve in its application, as a full understanding of the principles and policies upon which such judgments are based may not always be readily apparent from the text of the decision itself. This is particularly so in the area of discretion, as the margin afforded to the decision maker may be heavily influenced by matters such as rules of court, domestic precedent, prevailing practices, and/or developing trends. Murray C.J., as he then was, highlighted in O’Brien (at p. 333) the importance of exercising restraint in this regard when making reference to the practice in the United States of vacating a decision later found to be moot and of dismissing the complaint (City of Mesquite v. Aladdin’s Castle, Inc. 455 U.S. 283 (1982)). Therefore, whilst such decisions are instructive, the learned Chief Justice warned that ‘one must be cautious in applying too literally the principles as expressed or applied in other countries.’ I respectfully agree with these observations.”
Apart therefore from noting Kleinwort Benson, I do not propose to base any part of my judgment on it.

In summary therefore insofar as this appeal is concerned, the legal position, in my view, is as follows:

            The Bankruptcy Code must be strictly construed and its essential provisions rigidly applied: particular vigilance is to be displayed regarding acts, steps and requirements which are central to the statutory regime and which give rise to the penal consequences above described.

            Whether there exists any legal basis upon which an irregularity may possibly be excused has not been explored in this case: the de minimus principle has not been raised and neither has the possibility of correcting errors, even those which are patently obvious and evidently observable from, for example, the Bankruptcy Summons, or those which truly could be described as trivial, peripheral or insubstantial. Therefore, further debate on this must await another occasion.

            Where an act of bankruptcy is founded on a Bankruptcy Summons, the requirements of s. 8 of the 1988 Act must be strictly satisfied, as must s. 11 regarding the follow on Petition: in both instances, this includes compliance with the relevant rules of court.

            This means in the context of a Summons, that the creditor must decide on and then specify what sum he demands payment of: having done so, it is by reference to that sum only by which any possible default is to be judged. No further indebtedness, even if acknowledged as due, can form any part of this assessment. Once a creditor makes this decision he is bound by it for this purpose.

            The sum in question must be due and owing and immediately payable: evidently, it must allow for any and all just credits and allowances which are properly to be offset against that particular sum at that time: it is only the net amount which can be said to be legally due and which can be enforced by the process.

            It follows that any demand for a sum greater than that last described or arrived at, is an excessive demand unjustified in law; subject to any possible argument along the lines mentioned in sub-para. (ii) supra, the margin of excess is not relevant.

            The fact that the excessive demand is solely due to inadvertence, oversight or other entirely understandable reason, is likewise not relevant.

            The amount which may appear in the Bankruptcy Summons need not necessarily and frequently will not be, the same as that nominated in the Notice of Demand. Updating the figures for interest is an obvious example as to how this may arise. Provided that there is no inconsistency in approach, this will not affect the validity of either Form.

            A creditor is not obliged to bring into the process the full amount of the indebtedness due, whether that be based on a judgment debt or otherwise. Frequently for reasons of expedience and convenience, he will not in fact do so. Once the sum claimed is above €1,900, the statutory requirement in monetary terms is met. There is no obligation to go further.

            As stated above, the sum claimed is the relevant sum for adjudication purposes. There is no obligation, so as to ensure the integrity of the Summons, to expressly waive any balance which is left standing - subject to the qualification that evidently, argument to that effect at the particular level, may of course be open to the debtor.

            The point last mentioned applies with equal force to the question of interest on a judgment debt, and for that matter also to the question of costs. The fact that interest applies automatically, that is by operation of law, as distinct from contract, is irrelevant: the point at issue is not the accretion of interest, but rather the creditor’s reliance on it for the purposes of the Summons and thus for default purposes. He makes that decision. He can either claim it or not: if he does, it is part of the demanded sum, whereas if he does not, it must be disregarded.

            In saying that a sum not relied upon must be disregarded, I am specifically referring to the process of adjudication as distinct from what may happen at proof of debt stage (see para. 40 supra).

            If interest is included in the Bankruptcy Summons, the same must be accurately calculated and the accumulative sum must be specified.

            Finally, in addition to the specific matters above mentioned, the particulars given in the context of the Summons must be such as to demonstrate in specific and accurate terms, the precise requirement demanded of the debtor, which if satisfied will thereby avoid him committing an act of bankruptcy.

Before outlining my conclusion on this appeal, it is convenient at this juncture to dispose of a number of individual points which the parties have raised, but which for the reasons given, have no real baring on the crucial issue. These are as follow:
            It has been suggested that the Bank, by its decision not to include statutory interest as part of the adjudication process, must be regarded as having waived its entitlement to such interest for all purposes. It seems to me that resolution of this matter is best left to be determined at the proof of debt stage - if these proceedings should continue that far. It is sufficient, for the purposes of this appeal, to proceed as I do, on the assumption that such waiver does not apply, without however so holding or otherwise deciding.

            The Bank has pointed out in its submissions that provision is made in s. 8(5) and (6) of the 1988 Act whereby a debtor can challenge, within a certain period, the validity of the Summons served on him. It complains that Mr. Murphy did not avail of this procedure, an assertion which in any event may factually be incorrect (para. 7, indent six supra). Even however if that is so, it is not suggested that such a move is mandatory or that by his failure to adopt it, he is now either precluded or restricted from moving this application under s. 16 of the 1988 Act. Accordingly, it does not appear that this point can have any impact on the outcome of this appeal.

            Reference has been made to O. 76 r. 12(4) which is quoted at para. 6 of this judgment. It will be recalled that the rule states that “[n]o objection shall be allowed to the [P]articulars [as given in or annexed to the Summons] unless the Court considers that the debtor has been misled by them.” Apart from this rule, no other basis has been suggested which might render the question of prejudice relevant: as the rule has not been relied upon I will express no view on its scope or application.

            The appellant has asserted in a general way that in light of the dispute about interest, the creditor has failed to prove that the amount claimed is a “liquidated sum” for the purposes of both s. 8(1)(b) and s. 11(1)(b) of the 1988 Act. Given the view which I have taken in this case, this point does not arise.

            The Court has not been referred to any statutory provision akin to s. 143 of the 1883 Act, whereby errors, termed formal defects, can be overlooked or corrected where to do so would not cause any substantial injustice to the debtor. Therefore, apart from the observation made at para. 54(ii) supra, no further consideration has been given to any possible power which the Court might have in this regard.

            The Bank has questioned the motivation of the bankrupt in seeking to set aside the adjudication, by pointing out that on the 17th February, 2009, he transferred a total of 16 properties to his wife, for natural love and affection. The petitioning creditor values these properties in excess of €5 million and seriously disputes the validity of this transfer. Neither the motivation behind the transfer nor its ultimate validity are germane to the issue which the Court must decide in the instant appeal. These matters, if needs be, can be dealt with under the provisions of s. 59 of the 1988 Act at the appropriate time.

The essential facts in this case, as outlined above, are not in dispute and can be and have been stated with some definite clarity. These include the fact that the monetary threshold for invoking the bankruptcy process has at all stages been met and that the sum demanded can be regarded, as a liquidated sum for the purposes of both ss. 8 and 11 of the 1988 Act. Furthermore, it is not disputed but that statutory interest automatically accrues on the judgment debt from the date of the perfected Order (14th April, 2011). In this case that debt comprises the principal sum and the token amount of €160 nominated by the Bank to represent the Cost Order. Further, at both of the relevant dates, namely the 21st October, 2010 when the Notice of Demand was served, and the 29th November, 2010 when the Bankruptcy Summons was issued, the appellant was indebted to the Bank in a sum far in excess of what was demanded of him in both of those documents. This resulted from the continuing accrual of Courts Act interest and is quite unaffected by any or all credits which the bankrupt is entitled to from the Bank. These credits came about, not in any underhand or devious way, but rather, when a tenant of Mr. Murphy paid her rent to his current account which the Bank, as it was entitled to do, then credited to his loan account. In fact, the evidence shows that Mr. Murphy was not aware of the making of such payments until quite a late stage in this process. It is also undisputed that by the 21st October, 2010 these credits amounted to €3,025 and that by the 29th of November, 2010 they had reached a total sum of €4,025.

It is also important to understand how the Bank treated these credits. This appears from the Affidavit of Ms. Seacy, sworn on the 29th January, 2011. Therein she exhibits a copy of the account upon which the judgment debt was obtained. That account shows that when received, each credit was offset against the principal on the account and not otherwise. In fact, apart from an interest posting on the 24th May, 2010, no further interest debits appear on the account. It is therefore apparent, and confirmed by the Bank, that the sums so received were to be credited against the principal sum; at no point or stage did the Bank seek to or in fact credit such sums against interest. It must therefore be taken that when such sums were posted to the account, the principal was thereby reduced by such amounts.

Because the Bank posted a sum of €154,384.90 for interest on the 24th May, 2010, the account is not immediately reconcilable with the judgment debt given some seven days earlier. Evidently that interest sum covers a certain period prior to the date of its entry, which period is not identifiable from the account. However, this is but a complication which all parties agree can be ignored. In effect, the principal sum can be considered as the judgment debt (para. 7, indent 2 supra) for the purposes of the offsets which I have mentioned.

There is no doubt but that the Bank made a decision, as confirmed in its affidavit evidence, to move the bankruptcy process without relying on its entitlement to include within it, any statutory interest. This was a deliberate decision and was not in any way due to mistake, inadvertence or otherwise. This is self-evident from the sum specified in both the Notice of Demand and in the particulars endorsed in the Bankruptcy Summons. That choice was its own to make. Equally so with the question of costs. It could have awaited completion of the taxation process and then including the certified sum in the demands made. It decided not to. Having acted as it did it appears to follow that when the credits were posted, they had to, as a matter of fact, reduce the principal debt by an equivalent amount. I cannot see any other analysis or evaluation of what occurred which could lead to a different conclusion. In the absence of further debits, the sum standing in the account had to be correspondingly less than what it was, before the credits. That being so, the demands were overstated by the amounts in question.

This conclusion is, I feel, not disputed by either the Bank or indeed by the learned trial judge. No attempt has been made by the Bank to say, that the sums should then have been or even now be, credited against the interest. That is not the case factually and is not the basis of the High Court’s decision. It appears from paras. 25 and 30 of his judgment that McGovern J. dismissed the application on the basis that at all times the actual indebtedness between banker and customer exceeded the demanded sums. That in his view was sufficient to avoid the relevance of and having to apply the jurisprudence set out in In re O’Maoileoin, In re Sherlock, and in the other cases above mentioned. In adopting the approach which he did, the learned trial judge conflated debt with demand, instead of differentiating between both.

As is clear therefore, the essence of the judgment is based on an indebtedness which was, by deliberate choice, left standing outside the bankruptcy. The appellant was never in danger of becoming bankrupt by reason of interest. It appears nowhere in the documentation and in particular it is not mentioned in the critical demand made in the Bankruptcy Summons. In fact the judgment debt was expressly stated in the Notice of Demand and in the Affidavit of Ms. Seacy (paras. 9 and 11 supra, respectively) to be and to represent Mr. Murphy’s total indebtedness to the Bank. Disregarding any question of waiver or the like, the Bank was in effect saying to the appellant “pay us the sum of €9,025,880.70 and you will not commit an act of bankruptcy”. The process was invoked and continued to adjudication on that basis, effectively in a manner as if statutory interest was never payable. On the logic of the Bank’s position, there would have been nothing in principle preventing it, from also relying on the Cost Order if such costs had been taxed by the hearing date of the Show of Cause Application. And one may ask why stop there? If for example a further judgment had of been obtained in the intervening period, what in logic would have prevented the Bank from also relying on that? Evidently, such an approach would render the entire proceedings meaningless and would deny to the bankrupt well-established protections.

I therefore cannot agree with the creditor’s position or that the law permits of such an approach. In accordance with the principles above outlined, it appears to me that bankruptcy is a form of execution of choice and that nothing automatically happens until it is caused to happen. This method of execution must be both set in train and founded upon a basis justified in law. That basis must comply with the provisions above outlined. Given the Bank’s decision not to include interest as part of the process, its entitlement to rely upon it must stand outside the adjudication procedure. It follows that when the question of interest is disregarded, and when the credits are accounted for, the demand made in both the Particulars of Demand and Notice Requiring Payment and more essentially in the Bankruptcy Summons was excessive.

Consequently, in accordance with well established principles I would allow this appeal.


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