Bankruptcy notice set aside because execution of judgment debt was stayed under Debtors Relief Law.

[*293] 1981 December 15

(G. NICOLAOU, D.J.)

IN THE DISTRICT COURT OF NICOSIA

Re: Andreas Kaisi,

Debtor.

(B.N. Request No. 80/81).

Bankruptcy - Bankruptcy notice - Not signed by Registrar - Validity - Setting aside issue and service of Bankruptcy notice on ground that execution of the judgment debt to which it related was stayed, in an application under the Debtors Relief (Temporary Provisions) Law, 1979-1980 Section 3(l)(g) of the Bankruptcy Law, Cap. 5 - Rules 40 and 41 of the Bankruptcy Rules.

C. Myrianthis with L. Papaphilippou and S. Triftarides, for the Applicant-Debtor.

K. Michaelides, for the Respondents-Creditors.

DECISION

The following decision was delivered by:-

G. NICOLAOU, D.J,:- By the present application[*294] filed on 22nd September, 1981, the judgment debtor Andreas Kaisi, of Nicosia, seeks to set aside the issue and the service on him of a bankruptcy notice on the ground that execution on the judgment debt to which the bankruptcy notice related, was stayed on 8th August, 1981, such stay thereafter remaining in force. This notice was assumed to have been issued pursuant to a request, to the Registrar of this Court dated 25th July, 1981, at the instance of the judgment creditors British Overseas Engineering & Credit Co. Ltd. It was, in any event, served on the judgment debtor on 24th August, 1981.

This bankruptcy notice was founded on a judgment given in Action No. 3276/78 of the District Court Nicosia, a drawn up order of which had been produced to the Registrar together with the request for the issue of the bankruptcy notice. A. perusal of this drawn up order, reveals, however, that it is quite incomplete and. therefore irregular for it hints at the existence of terms not set out therein. The information contained in the request for the issue of the bankruptcy notice does not in the event supply the missing terms of the said judgment which relate to the stay of execution of the judgment. This point, however, has not been raised by either side and what I shall say later on in this decision will obviate the need to consider it further.

The request for the issue of the bankruptcy notice was apparently filed on 25th July, 1981. This request was accompanied by an attached bankruptcy notice which was given by the Registrar the same number as the request. In such circumstances the request and the bankruptcy notice[*295]may be considered as one set of documents filed by a single act of the Registrar. But, unfortunately, due to oversight, the bankruptcy notice was never signed by the Registrar. It should toe noted that in accordance with established practice, the signing by the Registrar of the bankruptcy notice constitutes also toy necessary implication the issuing of such notice. The mere fact, however, of the filing of the request together with the notice should not toe taken ipso facto to imply the issue of the notice. The issuing of the bankruptcy notice involves, and must consist of some separate act of the Registrar toy which his assent to the request might toe manifested. As. I have said, in the ordinary course this takes the form of the signing of the bankruptcy notice, without any particular minute toeing made. I should add that the mere service of a document purporting to toe a bankruptcy notice would not, in my view, necessarily raise an implication of its actual issue. This may seem a rather strict and rigid approach tout it must toe remembered that as was laid down toy Bowen L.J. in Ex parte Chiney. 12 Q.B.342 at 346, words defining acts of bankruptcy should toe construed strictly because the commission of an act of bankruptcy entails disabilities. The process begun by the issue of a bankruptcy notice forms, of course, the framework within which such definition takes place and is an indispensable part of it.

In the present case the said bankruptcy notice was passed on by the Registrar for service which was in fact effected on 24th August, 1981. The obvious discrepancy apparent on the face of the affidavit of service and the attached copy of the bankruptcy notice on which its receipt[*296]was acknowledged, regarding the date of service, has been resolved at the instance of the Court by the filing of a further affidavit by the process server concerned, on 7th December, 1981, in which this discrepancy is explained in terms rendering it a clerical error; and, thereby the actual date of service of the bankruptcy notice has been confirmed as the 24th August, 1981.

Prior to the filing of the present application the judgment debtor had, on 26th August, 1981 , filed an affidavit by which objection was taken to the bankruptcy notice on two grounds. The first ground was that as on 8th August, 1981, in Application No. 79/81 of. the District Court Nicosia, filed under the Debtors Relief (Temporary Provisions) Laws of 1979 and 1980, a stay of execution was ordered of the judgment in Action No. 3276/78 of the District Court Nicosia to which the said bankruptcy notice relates, the process begun by this bankruptcy notice cannot continue and this notice must therefore be set aside. The second ground was that the validity of the bankruptcy notice cannot be sustained as it overstates the amount due.

The present application which raises again the first ground, relating to. the stay of. execution of the judgment debt, in a different procedural form, and has been opposed by the judgment creditors raises two short questions for consideration which are;-

(a) whether the present course followed by the applicants is procedurally correct and whether it is in any event necessary; and[*297]

(b)what the effect is of the interim order for a stay of execution made in Application No. 79/81 of the District Court Nicosia on the purported issue and the service of the said bankruptcy notice.

Dealing with the second point first, I would clear up the ground by saying that the execution of the judgment given in Action No. 3276/78 was validly and effectively stayed by the interim order made on 8th August, 1981, in Application No. 79/81 of the District Court Nicosia filed under the Debtors Relief (Temporary Provisions) Laws of 1979 and 1980. This order, as counsel for both parties have by a joint statement informed the Court, was still in force at the time of the hearing of the present application. It is common practice and in my opinion sound practice, that where an interim order for stay of execution is sought pending the determination of an application filed under the Debtors Relief (Temporary Provisions) Laws of 1979 and 1980 this should be done within such application rather than in an application in the action itself although this latter course is also possible. It should be observed that no question of staying expressly the effect of a bankruptcy notice can possibly arise in such circumstances, the question being only on how such stay of execution of the judgment debt affects the course of such notice.

Execution of the judgment in question having been stayed at the time when service of the bankruptcy notice was effected, it is quite obvious that the requirements of s.3(1)(g) of the Bankruptcy Law, Cap.5, have never thus[*298]come into play. The service, therefore, of the said bankruptcy notice on the debtor is not one attracting any consequences under the Bankruptcy Law. In the event, such service may be struck down as inappropriate and set aside so that the parties may know where they stand: see, inter alia, In re Ford, 18 Q.B.D. 369.

Regarding the question of the issue of the bankruptcy notice, assuming that such issue did take place on 25th July, 1981, when the request was made, what must be examined is whether, since there was no stay of execution of the judgment at the time of issue, the bankruptcy notice should remain on the paper as a validly issued notice that may be made use of at a subsequent stage or whether it has been rendered irrevocably ineffectual and invalid by reason of the intervening stay of execution. On this, stress was

laid by counsel for the judgment creditors that there was nothing on 25th July, 1981, to impede the valid issue of the bankruptcy notice,

and it was argued that nothing that occurred subsequently could retrospectively invalidate an otherwise valid issue of such notice. It is necessary. however, to bear in mind B.R.42 of the Bankruptcy Rules found in the Subsidiary Legislation of Cyprus Vol. II at p.23 which provides that:-

"Subject to the power of the Court to extend the time, a bankruptcy notice to be served in Cyprus shall be served within one month from the issue thereof".

No extension of time within which to serve the said bankruptcy notice has ever been sought by the judgment creditors in the light of the stay of execution of the judgment.[*299]

In my opinion the existence of the stay of execution of the judgment cannot operate as a stay also of the process begun by the issue of a bankruptcy notice. Time would, therefore, inexorably continue to run and the bankruptcy notice would thus be overtaken by the stay of execution of the judgment, until such bankruptcy notice expired by the effluxion of time, unless of course its life was extended by the Court, though in my view such extension might be made even after expiration of the notice. The explicit terms of Bankruptcy Rule 42 would not, in my opinion, allow of an interpretation to the effect that the life of the notice would be suspended while such stay of execution of the judgment lasts. As I see it, a bankruptcy notice ceases to be effective for service one month after issue come what may, unless the time is extended by the Court. Therefore, although I do not think that the intervening stay could invalidate the issue of the bankruptcy notice, yet, since such notice has not been validly and effectually served within one month from its issue as provided for in Bankruptcy Rule. 42 and no extension of time has been sought, it would, I believe, have been proper to give a decisive answer to the unfortunate dispute of the parties on this matter and set aside the issue of the bankruptcy notice on the ground that it has ceased to be effective due to the natural effluxion of time. This is the course I would have taken had the said bankruptcy notice served on the debtor been a validly issued notice. But, for the reasons which I have already explained,I do not think that it was and, so again, in order to sweep away the uncertainty that has so be devilled this case I would set aside the purported issue of the said notice.[*300]

So far as concerns the question relating to the procedural aspect of the matter, I have no doubt that the procedural course followed by the debtor by means Of the present application was the appropriate one. The procedure laid down in B.R. 40(2), B.R. 40(3) and . 41 of the Bankruptcy Rules, under which an affidavit is filed by the debtor where he asserts "that he has a counterclaim, set off, or cross demand which equals or exceeds the amount of the judgment debt or sum ordered to be paid, and which he could not have set up in the action or proceedings in which the judgment or order was obtained, he must within the time specified in the notice file an affidavit to that effect with the Registrar", operating as an application to set aside the bankruptcy notice, is confined in its scope exclusively to those instances expressly specified in B.R. 40(2) i. e. to those instances where there is a counterclaim, set off or cross demand.

It is possible, however, to set aside a bankruptcy notice on other grounds as well, and in such cases the debtor should proceed by application, the statutory procedure above I described being quite inapplicable. To such an application there is no time limit. The decision in

the case of In re A Debtor (No. 30 of 1956) (1957)2 All E.R. 216 where a bankruptcy notice was set aside upon motion

on the ground of satisfaction, provides clear authority for this proposition. As Danckwerts J. pointed out in dealing with a bankruptcy rule similar to our own:-

"There are a number of cases in which bankruptcy notices have quite plainly been set aside on motion[*301] on other grounds than those mentioned in rule 137. Such cases are: In re Howes

(1892) 2 Q.B. 628: In re H.B.

(1904) 1 K.B. 94: and In re Miller (1912) 3 K.B. 1 ".

And as Upjohn J. pointed out:- .

"One of those grounds plainly must he satisfaction because if a judgment has been satisfied… there is no judgment left on which to found the bankruptcy "notice".

See also In re Smith (1903) 1 K.B. 33 where upon motion the bankruptcy notice was set aside on the ground that the debt had been secured.

The same principle is at work when the judgment has been stayed, for under the express words of s.3(1)(g) of the Bankruptcy Law, Cap.5, no bankruptcy notice would lie in such circumstances. The position on this matter is well illustrated by a number of cases in which the pendency of interpleader proceedings was held to operate in substance as a stay of execution of the judgment debt since the judgment creditor was not as a result in a position to issue execution upon the. judgment. This was on statutory provisions similar to our own; see In re Ford, 18 Q.B.D. 369; Ex parte Woodall, 13 Q.B.D. 497; In re Ide, 17 Q.B.D. 755 and In re Follows (1895) 2 Q.B.D.521.

As to the need or otherwise of the institution of the present proceedings for the setting aside of the bankruptcy notice, I think that the concern of the debtor regarding the effect and the use that might or might not subsequently be made of this notice, with the risk of the uncertainty hanging[*302]over him, seen in the light of the stand taken in the matter by the judgment credit ors, affords a reasonable explanation the course the debtor has taken and, perhaps, he was well advised to do so,

In the result, the said bankruptcy notice is set aside both in respect of its purported issue and in respect of its service on the debtor on 24th August, 1981. This result obviates, of course, the need to consider separately the other parallel application of the debtor which consists of the affidavit filed in purported pursuance of B.R. 40(2), B.R. 40(3) and B.R.42, in answer, to the bankruptcy notice which is now entirely swept away by the present decision.

As to the question of costs, after having regard to the whole course of the proceedings initiated by the creditors request for a bankruptcy notice, I have decided not to make any order.

Order accordingly.