Court allows bankrupt director application after creditors served via Official Receiver notice, overruling preliminary objection.

[*222] 1972 May 19

(LORIS, AG. P.B.C., HADJITSANGARIS, D.J.)

IN THE DISTRICT COURT OF LIMASSOL

In the matter of Athos Philalithis (Holdings) Ltd. and Philalithis & Co. Ltd.,

And

In the matter of the Companies Law, Cap. 113.

Application by Athos Philalithis.

(Application No. 9/72).

Company - Undischarged bankrupt - Application for leave to act as director and take part in the management of a Company - Section

179 of the Companies Law, Cap. 113 - To be made by summons and notice thereof be given to Official Receiver and Registrar - Creditors – Entitled to be served with notice of application by Official Receiver and Registrar and entitled to appear.

M. Houry, for the Applicant.

Sir P. Cacoyannis with C. Tsirides for G. W. Joynson & Co. Ltd. of London, a creditor who has proved in bankruptcy.

RULING

The following ruling was delivered by:-

LORIS. AG. P.D.C.: The applicant in the [*223] present application, an undischarged bankrupt, applied under the provisions of s. 179 of our Companies Law, Cap. 113, for leave of this Court enabling him to act as director of and to take part in the management of the two companies referred to in the application.

The applicant has taken out the present summons and served same only on the Official Receiver and Registrar; the latter filed his report in Court and also forwarded a copy of the present application to the creditors of the bankrupt-applicant.

One of the aforesaid creditors, namely G. W. Joynson &. Co. Ltd. of London, who has proved in bankruptcy, through his counsel filed an opposition to the above application, and when the application came on for hearing on the 6/5/72, Mr. P. Cacoyannis with Mr. C. Tsirides appeared on behalf of the aforesaid creditor opposing the application.

Before the commencement of the hearing learned counsel appearing for the applicant raised a preliminary objection to the effect that neither the aforesaid creditor nor any other creditor could appear either in person or through counsel and oppose the application as they have never been served with a summons.

Owing to the nature of the point raised, the issue was set down for hearing first and we heard argument from both sides on same without going into the substance of the present application.

The argument advanced by the learned counsel appearing for the applicant in support of his submission [*224] may be conveniently summarized as follows:

This application is made pursuant to the provisions of s. 179 of our Companies Law, Cap. 113. In view of the provisions of Rule 3 of our Companies Rules, and in view of the absence of any specific rules regulating the procedure in applications of this nature, - counsel for the applicant submitted - the practice and procedure observed by the Courts in England should apply. The relevant English rule is Rule 238 of the English Bankruptcy Rules 1952 which requires service on the official receiver only. This was done, the Official Receiver was served, he filed his report in Court and he did choose not to appear in Court and oppose the application. The Official Receiver was the only interested person - counsel for the applicant maintained – and no other person including the creditors was entitled to appear and oppose the application; this is a fortiori so, in view of the fact that none of the creditors was served with a summons.

The leading counsel appearing for the aforesaid creditor, submitted that Rule 238 of the English Bankruptcy Rules 1952 was inapplicable in the case in hand as there is specific rule in our Companies Rules, Rule 6(q) which provides that: “Applications for leave to be a director of or to manage a company under s. 178 and 179(1) of the Law - (now s. 179 and 180) shall be made by summons”. The creditors of the bankrupt were persons having an interest in the result of the present application and therefore they should be served with a summons; nevertheless, despite the fact that they were not so served they were perfectly entitled [*225] to appear and oppose the application once they took notice of same, having been furnished with a copy by the Official Receiver.

According to s. 179 (1) of our Companies Law, Cap. 113, leave of the Court is required for an undischarged bankrupt to act as director of, or directly or indirectly take part in or (be) concerned in the management of any company.

Sub-section (2) of the same section provides as follows: “The leave of this Court for the purposes of this section shall not be given unless notice of intention to apply therefore has been served on the Official Receiver and Registrar and it shall be his duty, if he is of opinion that it is contrary to the public interest, that any such application should, be granted to attend on the hearing of and oppose the granting of the application”.

Rule 3 of our Companies Rules, provides as follows: “The Rules of Court for the time being in force, relating to civil actions, and the general practice and procedure of the Courts in Cyprus (or, in default of local provisions the practice and procedure observed by the Courts in England) shall apply as regards all proceedings in relation to applications to which these rules relate so far as may be practicable, except if and so far as the Law or these rules otherwise provide”.

Rule 6(q) of our Companies Rules, provides as follows:

“6. The following applications shall be made by summons: [*226]

………………………………………………………………………………………..

(q) Applications for leave to be a director of or to manage a company under s. 178 and 179 (1) 11 of the Law - - (now s. 179 and 180)”.

From the above it is quite clear that an undischarged bankrupt applying under s. 179 of our Companies Law, Cap. 113, has to apply by summons - and not be motion as provided by Rule 238 of the English Bankruptcy Rules 1952 -- and must give notice of his intention of so applying to the Official Receiver and Registrar pursuant to s. 179(2) of our Companies Law, Cap. 113.

The next question which falls for determination is whether the creditors should be served with such a summons and whether they are entitled to appear and oppose the application.

In Williams on Bankruptcy, 18th edition, at p. 152 the following are stated; “… A practice analogous to discharge is followed on an application for leave to act as director or manager of a company under s. 187 of the Companies Act 1948.”

In connection with the discharge of a bankrupt our Bankruptcy Rules provide inter alia the following;

“Rule 98(1) …………………………………………………………………………………..

(2) The Registrar shall, not less than 28 days before the day fixed for the hearing, give notice of the application to the Official Receiver and Trustee, and the Official Receiver shall forthwith gazette and advertise the same and also send notice to each creditor who has proved not less than 14 days before the day of the hearing. [*227]

………………………………………………………………………………

Rule 99(1) ……………………………………………………………………………………

(2) Any creditor who intends to oppose the discharge on grounds other than those in the Official Receiver’s report, shall give notice of the intended opposition, stating the grounds thereof to the Official Receiver and to the bankrupt not less than k days before the day of the hearing.

S. 26(7) of our Bankruptcy Law, Cap. 5 provides as follows:-

Notice of the appointment by the Court of the da5r for hearing the application for discharge shall be published in the prescribed manner and sent days at least before the day so appointed to each creditor who has proved, and the Court may hear the official receiver and the trustee, and may also hear any creditor....”

Applying the above mutatismutandis, to the present application, we hold the view that although the creditors cannot be held, strictly speaking, persons who should have been served with a summons, yet, they should have been served with a notice of the application by the official receiver. Once they were so served, they are entitled to appear and we feel that it is in the interests of justice if they are allowed to be heard.

Accordingly, the objection of the learned counsel appearing for the applicant is hereby overruled.

Order in terms.