Bankruptcy notice dismissed with costs against creditor for failing to verify stay of execution.

[*448] 1985 April 27

(P. KALLIS, D.J.

IN THE DISTRICT COURT OF NICOSIA

In the matter of P.S.586 Petros Tsiannaros,

Debtor,

Ex parte: Savvas Constantinou Kamilaris,

Creditor.

(Application No. 179/84).

Bankruptcy notice - Withdrawal - Costs - Discretion of the Court - Principles on which it is exercised.

C. HjiPieras, for the Creditor.

St. Erotokritou (Mrs.), for the Debtor.

RULING

The following ruling was delivered by:-

P. KALLIS, D.J.:- On July 26, 1974, the above-named creditor filed a request for the issue of a bankruptcy notice against the above-named debtor. In the bankruptcy notice it was stated that the debtor was indebted to the creditor in the sum of £17.610 by virtue of a final judgment of the District Court of Limassol given on 30.5.1 984 in Action No. 607/81; and in the request it was stated that the “execution of the above judgment has not been stayed”. In an affidavit, sworn by the debtor for the purpose of setting aside the bankruptcy notice, it was, inter alia, stated that an appeal was filed [*449] against the above judgment on 13.6.1984 and on 9.7.1984 an ex parte application for stay of execution of the judgment in the above action was filed; that the Court by means of an order dated 9.7.1984 stayed execution of the judgment until the final determination of an application by summons for stay of execution which should have been filed within 10 days from 9.7.1984; and that the application by summons was filed on 10.7.1984 and was fixed for hearing on 14.9.1984

On 24th October, 1984, counsel for the debtor applied for a date of hearing whereupon counsel for the creditor applied for leave to withdraw the bankruptcy notice without prejudice to his rights to file a fresh request for the issue of a new bankruptcy notice. Counsel for the debtor raised no objection to the withdrawal of the notice but claimed her costs, a course objected to by counsel for the creditor who also, claimed costs. Thereupon, the Court dismissed the Bankruptcy notice and fixed a day for the hearing of argument on the issue of costs.

Learned counsel for the creditor mainly submitted that though execution of the judgment had been stayed prior to the filing of the application for the issue of the Bankruptcy notice, the debtor and his counsel, though under a duty to do so, failed to give notice to the creditor of the fact that the execution of the judgment had been stayed. On the other hand, [*450] learned counsel for the debtor submitted, inter alia, that she was under no obligation to inform counsel for the creditor regarding the steps she would take for the protection of the debtor who personally did not owe any amount to the creditor, because it was his insurance company which would have paid the judgment debt; and that in para.3 of the application for the issue of the Bankruptcy notice it was stated that execution of the judgment has not been stayed though counsel for the creditor had to inquire into such a serious matter and find out whether there was a stay or not once he knew or ought to have known that under s.3(g) of the Bankruptcy Law, Cap. 5 amongst the prerequisites for the issue of a bankruptcy notice is the absence of stay of execution.

Now section 93 of the Bankruptcy Law, Cap. 5 provides that “the costs of and incidental to any proceedings in Court under this Law shall be in the discretion of the Court”. Rule 188 of the Bankruptcy Rules provides 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”. In the absence of any provision in the Bankruptcy Rules, regarding withdrawal or discontinuance of a bankruptcy notice, we resort to the Civil Procedure Rules, where the matter is governed by Order 15, rules 1 -3 . It is apparent [*451] from the wording of the above Rules that in cases of withdrawal or discontinuance, in circumstances such as the one in hand, the question of costs is within the discretion of the Court. The corresponding Order of the old English R.S.C. is 0.26 and in a note to this Order the following are stated:

“Discontinuance - Without leave. The plaintiff discontinuing an action without leave must pay the costs of the action up to date of notice to discontinue.... But where leave is given, terms as to costs are expressly within the discretion of the Court and must be provided for in the order.... In Ch. D. the order usually directs payment of costs. (Hess v. Labouchers (1898) 14 T.L.R. 350; In Q.B.D. it often does not”.

Having held that the question of costs is within the Court’s discretion, I proceed to consider the facts relevant to the exercise of my discretion and the principles on which such discretion is exercised. It has been held that no hard-and-fast rule can be laid down as to costs; and that wide though the discretion is, it is a judicial discretion, and must be exercised on fixed principles, that is, according to rules of reason and justice, not according to private opinion (See Sharpe v. Wakefield, (1891) A.C. 173). [*452]

Taking into consideration that by virtue of s.3 (g) of the Bankruptcy Law, Cap. 5, a debtor commits an act of bankruptcy “... if a creditor has obtained a final judgment or final order against him for any amount, and, execution thereon not having been stayed ...”; that, further, taking into consideration that the creditor mentioned in para.3 of his application - in line with Form 3 of the Bankruptcy Rules - that “execution on the said judgment has not been stayed”; and that, finally, taking into consideration that by virtue of Order 48, rule 8(1) (ee) an application for stay of execution pending appeal under Order 35, rule 18, as is the case in hand, may be made ex parte this Court is of opinion that the creditor had a duty to inquire into the question of stay or not of the judgment before resorting to bankruptcy proceedings, the more so because a bankruptcy adjudication creates many disabilities and cannot be applied for light - heartedly; and though his failure to inquire into the above matter brought about the subsequent withdrawal of the bankruptcy notice, in the opinion of this Court such failure can have no adverse repercussions on the debtor in the form of an order for costs against him or even an order for the payment of his own costs, because the debtor cannot be made to suffer for the neglect or inadvertence of the other side. Had the creditor or his counsel [*453] bothered to ascertain their facts properly before filing the request for the issue of the Bankruptcy notice it would have been very easy for them to find out, by inquiring from the District Court of Limassol, whether execution had been stayed or not. In the circumstances, and for all the above reasons, this Court has decided to exercise its discretion against the creditor.

In the result, the bankruptcy notice is withdrawn and dismissed - as already ordered - with costs against the creditor, subject to what will be said hereinafter. In view of the fact that counsel for the debtor filed her written address out-of-time - albeit with the Court’-s leave - no costs will be awarded to the debtor for the appearances of 28.2.1985 and 9.3.1985, which were occasioned because of the above default, and in respect of which there is made no order as to costs.

Bankruptcy notice dismissed with costs against creditor.