Court dismisses debtor's objection to bankruptcy notice irregularity after debtor took fresh steps with knowledge.

[*116] 1984.Sept.15

(N.NICOLAOU, D.J.)

IN THE DISTRICT COURT OP NICOSIA

,

Debtor.

(Bankruptcy Notice No. 118/83).

Bankruptcy Notice - Irregularity in

the indorsement of - The Bankruptcy Law, Cap. 5 - Sections 102(1) and 93(3) - Before raising the objection relating to the irregularity, the

debtor with knowledge of such irregularity took or allowed a number of further or fresh steps to be taken in the proceedings - In the light of this fact and of the authorities on the subject, the Bankruptcy Notice is not a nullity, but merely irregular, such irregularity in no way prejudicing or embarrassing the debtor in his defence or objection.

K. Koushios, for Applicant-Debtor.

E. Odysseos, for Respondent-Creditor.

RULING

The following ruling was delivered by:-

N. NICOLAOU, D.J.: Before the commencement of the hearing of this Bankruptcy Notice issued and served on the above judgment-debtor the following issues were raised by the parties to these proceedings for their determination by the Court.

(i) Whether the Court possesses jurisdiction to entertain the above creditors Bankruptcy Notice given that same does not comply either with the provisions of the Bankruptcy Law, Cap. 5 nor with the [*117] Rules enacted on the strength of this law rendering same void and/or of no effect in Law.

(ii) Assuming that the Court at the end of the day finds that the creditors Notice is void and/or procedurally irregular, whether or not such irregularity has been waived by the conduct of the debtor as hereinbelow described.

Perusing the file of the proceedings one could see that on 24.9.81 judgment was given against the debtor who was the defendant in Action No. 236/77 for the sum of £5,000. - with legal interest thereon, at the rate of 4% per annum as from 24.9.81 to date of payment, plus £7.

250 mils costs.

The said judgment provided further that, if the debtor pay:-

(i) £750.- on or before the 30.10.81, and

(ii) £3,000.- on or before the 31.3.82 making in all £3,750.-, then the whole judgment would be deemed as having been fully satisfied. The usual default clause was also inserted as a proviso in the said judgment of 24.9.81.

The debtor having at intervals paid to the creditor various sums of money and having delivered to him on or about the 26.5.82 on account, goods, the balance due and payable as alleged by the creditor is £2,000.- including interest up to the 31.7.83, whereas the debtor’s allegation is that his debt at all material times was £130.- which sum in any event he has already been tendered and/or offered to be paid by cheque included in a letter of the debtor’s advocates [*118] dated 8.9.83 which in any event was returned as unacceptable to the satisfaction of the creditor’s claim.

It is also evident from the file of the proceedings that the judgment-creditor has on

12.8.83 filed in the Registry at the District Court of Nicosia a request for the issue against the debtor a Bankruptcy Notice.

The Registrar acceding to such request issued on the 12.8.83 the present Bankruptcy Notice which was served on the judgment-debtor on 22.8.83.

After service on him the debtor has on 29.8.83 filed an affidavit traversing creditors allegations and praying an order of the Court setting aside the creditor’s Notice served on him.

At the same time however, he admitted owing to creditor the balance of £130.- and for this reason, as he alleged, he gave instructions to his advocates, to forward immediately this sum to creditor in full satisfaction of their claim.

Subsequent to the above, the case was fixed on several occasions for mention and hearing i.e. 16.9.83, 10.12.83, 22.12.83, 18.2.84 and with a view to settlement as requested by counsel appearing for the parties.

In the meantime on 25.2.84 the judgment-debtor, filed a second affidavit which he characterises as “supplementary” to the affidavit of 29.8.83 by means of which for the first time he raises the issue of the said irregularity.

The creditor, thereafter, on 12.3.84 filed his opposition accompanied by an affidavit traversing the debtor’s allegations as found in his said affidavits dated 29.8.83 and 25.2.84. [*119]

The gist of the debtor’s complaint is that the Bankruptcy Notice served on him ought to be set aside as being irregular and as consequence voil and/or of no effect in law as same contravenes the provisions of Law, Cap.5, particularly s.3(3) having been filed not in the prescribed form i.e. the Indorsement of the said Notice is lacking in as much as no creditors’ address within the Court’s jurisdiction is mentioned in the body of the Notice.

It is obvious to me that the second leg of the debtor’s complaint is totally unfounded as the addresses of both the creditor and his advocate clearly appears in the body of the present bankruptcy Notice.

It is, however, admitted by the creditor’s counsel that the above mentioned Indorsement is lacking but he argued that this “irregularity” does not render the proceedings void and/or at all irregular in law arguing that:-

(i) the debtor’s second affidavit dated 25.2.84 by which he raises for the first time the issue of irregularity cannot under any circumstances be considered as an application to set aside such proceedings or as conducted irregularly, which motion in any event ought to have been filed within a reasonable time, which has not been done by the debtor.

(ii) the debtor cannot successfully argue the setting aside of the proceedings on the issue of irregularity given that it is too late for him to do so, the reason being that he must have waived such right by taking several steps with the knowledge of the [*120] complained irregularity which in any event has not caused to him any or any substantial injustice.

Bearing in mind the factual issues and the respective parties’ counsel arguments as hereinabove described I shall now proceed and examine the legal background of the case.

By s.87 of the Bankruptcy Law, Cap.5 the bankruptcy jurisdiction is exercised by the District Courts which in the exercise of their jurisdiction have all the powers conferred on the ordinary District Courts as in a trial of a civil action.

The identical powers described hereinabove were given to the Bankruptcy Courts by Rule 188 of the Cyprus Bankruptcy Rules which provide that;-

“Where no provision is made in these rules in regard to any matter arising out of bankruptcy proceedings, the Rules of Court governing civil proceedings shall in so far as they are not repugnant to these rules, apply to such matter”.

The subject of irregularity in civil proceedings is governed by Order 64 Rules 1-4 and in Bankruptcy proceedings the matter is regulated by ss. 93(3) and 102 of Cap.5 which provide run as follows:-

S.102(1) of Cap. 5 provides:-

“No proceeding in bankruptcy shall be invalidated by any formal defect or by any irregularity, unless the Court before which an objection is made to the proceedings is of opinion that substantial injustice has been caused by the defect or irregularity and [*121] “that the injustice cannot be remedied by any order of that Court”.

S.93(3) of the same Law provides:

“The Court may at any time amend any written process or proceeding under this law upon such terms if any, as it may, think fit to impose”.

The above statutory proviso is a replica of section 109(3) of the English Bankruptcy Act 1914.

In the case of Kyriakos (alias Koulis)

Protopapa v. Eleni (alias Lella) Spyrou Vasiliou (1959-1960) 24 C.L.R. at p.132 the Supreme Court has occasion to deal with an

action for libel which was commenced by a specially indorsed writ contrary to order 2 rule 6.

The defendant-appellant took no steps to set aside the writ after service thereof but raised objection at the inception of the trial contending that as the writ was badly indorsed the proceedings amounted to a nullity and that he was therefore, entitled to an order dismissing the action.

The trial Court treating the defect as a mere irregularity and considering further that fresh steps had been taken, that is an application for summary judgment by the appellant-defendant with

knowledge of the irregularities, overruled the objection under 0.64, rule 2. The decision of the Court appears in the following extract

from the headnote:-

“The Court below was right in treating the defect in question as a mere irregularity. By no means the defendant-appellant was prejudiced or embarrassed in his defence after the application [*122] for summary judgment was dismissed by the Court”.

The essence of the decision is given by Zekia J. at P. 134:-

“Indeed if the default in question amounted to nullity the proceedings followed in the action are automatically nullified. Notes in the Annual Practice on Order 14 rule 3 of the Rules of the Supreme Court which correspond to Order 18,rule 3 of the Civil Procedure rules, show clearly that a bad endorsement of a writ does not by itself amount to nullity”.

See also the judgment of Pikis J.in Costas Evagorou v. Kokos Christodoulou and Another (1982) 1 C.L.R. p.771.

I quote from p. 260 of the Annual Practice 1959 under the heading “Show cause” :-

“.... that the plaintiff’s claim is in substance of such a nature that it cannot be made the subject of a special indorsement under 0.2, r.6 e.g. that it involves a claim for damages for libel. In such a case the objection is fatal to the application under 0.14, and the Master will exercise his discretion in the circumstances whether to dismiss it under r.9(b), infra, or give unconditional leave to defend. No affidavit is required in support of a preliminary objection on either of the above grounds. [*123]

“It appears that a judge has a discretion in the matter and in a matter of nullity no such discretion is reserved to the Court, In this particular case unconditional leave to defend was given and there was nothing wrong with it”.

Order 64 of the Civil Procedure Rules states:-

“Effect of non-compliance:

“1. Non compliance with any of these rules, or with any rule of practice for the time is force, shall net render any proceedings void unless the Court or judge, so direct, but such proceedings may be set aside either wholly or in part as irregular, or amended, or otherwise dealt with in such manner and upon such terms as the Court or judge shall think fit.

“2 No application to set aside any proceedings for irregularity shall be allowed unless made within reasonable time, nor if the party applying has taken any fresh step after knowledge of the irregularity”.

Order 70 of the English Rules of the Supreme Court, the Annual Practice 1959 at p. 1986, -under the title “effect of non-compliance” reads:-

“Non-compliance with rules not to render proceedings “void (0.70, r.1).

“1. Non-compliance with any of these Rules, or with any Rule of practice for the time being in force, shall not render any proceedings void [*124] unless the Court or a Judge shall so direct, but such proceedings may be set aside either wholly or in part as irregular, or amended, or otherwise dealt with in such manner and upon such terms as the Court or judge shall think fit

“Effect of the Rule:

“ A distinction is to be drawn between proceedings which are null and void, and proceedings which are merely irregular in the sense that they involve non-compliance with any of the R.S.C.or with any rule of practice. In both cases an application should generally be made to the Court to set the proceedings aside. But rules 1 and 2 of this order do not apply to the first class of case, but only to the second. In the first class of case the party is entitled ex debito justitiae to have the proceedings set aside without conditions, for they are a nullity, though the Court retains its discretion as to the costs of the application and may refuse them, or, if it awards them, may do so on terms. In the second class of case rules 1 and 2 apply: the proceedings are valid though irregular and the Court has an unlimited discretion as what order it will make in the circumstances, both as to costs and otherwise; and furthermore it will not set aside the proceedings if not made within reasonable time or the party applying has taken any fresh step after knowledge of the irregularity (rule 2)”.[*125]

For all the above and particularly bearing in mind that the debtor with knowledge of the complained of irregularity took and/or allowed a number of further and or fresh steps to be taken particularly conserning the proceedings to be fixed on several occasions both for Mention and for Hearing without raising such objection as the one he

is presently complaining of and relying on the authority of Kyriakos (alias Koullis) Protopapas v. Eleni (alias Lella)

Spyrou Vasiliou (supra) and having in mind the comments in the Annual Practice just quoted I hold that the present Bankruptcy Notice is not a nullity but merely irregular, such irregularity in no way prejudicing or embarrassing the debtor in his defence or objection.

In the result I dismiss the judgment-debtor’s above stated contentions and considering the irregularity I decided to make an order as to no costs of the present proceedings.

With regard, however, to the rest of the issues raised by the judgment-creditor’s counsel, I am of the firm opinion that same ought to be raised when the merits of the whole case will be argued, my task at present being limited to the issues and/or contentions agreed to be resolved on 14.4.84 and 6.6.84.

Order accordingly.