[*61] 1985 July 9.

 

(KALLIS, D.J.)

IN THE DISTRICT COURT OF NICOSIA

Re: Costas Louca.

(Bankruptcy Notice No. 96/85).

Bankruptcy - Bankruptcy notice - Form - Non compliance with requirements of form - Setting aside the notice by reason of formal defect - May be sought by application - Time for issuing the application.

G. Korfiotis, for the Applicant-Debtor

Y. Kalli (Miss), for the Respondent-Creditor.

The following judgment was delivered by:-

KALLIS, D.J.:- On the 6th April, 1985, the respondent-creditor (“the creditor”) filed a request for the issue of a bankruptcy notice to the applicant-debtor (“the debtor”). The notice was issued on the same day and was served on the debtor on the 8th April, 1985. By an application by summons, filed on the 18th April, 1985, the debtor prayed for an order setting aside the bankruptcy notice and for an order or declaration that the bankruptcy notice is void and of no legal effect whatsoever. The application was based on Bankruptcy Rules of Court, rules 16, 17, 18, 38, 39, 40 and 41, the Exchange Control Rules 3, 5, 6 and 7, and on the inherent powers of the Court. In an affidavit [*62] in support of the application, which was sworn by the debtor, the following contentions were put forward:

That the documents which have been served on the debtor do not constitute a valid bankruptcy notice because they do not include the necessary material provided by rules 38, 39, 40 and 41 in that, inter alia, there is no address for service within the town of Nicosia, they do not show that they have been issued and/or have emanated from the Court, they were not accompanied by an office copy of the judgment, relied upon, the indorsement is contrary to the one provided by the Rules and/or is misleading and the contents thereof is not intelligible. It was, further, mainly contended that as a result of the above defects he was misled and failed to instruct counsel promptly, and when he did so they mentioned to him that due to the lapse of the prescribed time-limit he was deprived of the right to put forward important arguments and/or grounds for the setting aside of the above notice, something which amounts to irreparable and/or substantive injustice against him.

In the opposition of the creditor it was stated that the debtor could not apply by means of an application to set aside the bankruptcy notice and that in any event the application was out of time. It was, further, contended that the bankruptcy notice was accompanied by an office copy of the judgment and that there appeared therein the seal and signature [*63] of the Registrar. Regarding the remaining allegations of the debtor it was stated that they were utterly unfounded.

In his written address in support of the application, learned counsel for the debtor submitted that in the absence of an affidavit in support of the opposition the creditor cannot, by virtue of 0.48, r.4, of the Civil Procedure Rules, dispute facts which are not apparent on the face of the record. He, also, submitted that the Bankruptcy notice, which has been served on the debtor, is not in conformity with rules 39, 40 and 41 of the Bankruptcy Rules in that it has no address for service within the town of Nicosia, it does not show that it was issued by the Court and the indorsement is contrary to the one provided by the Rules.

In her written address in support of the opposition learned counsel for the creditor submitted that the facts relied upon in support of the opposition are apparent on the fact of the record and, therefore, the necessity of an affidavit does not arise. She, further, submitted that under 0.64 of the Civil Procedure Rules, which are applicable by virtue of rule 18 of the Bankruptcy Rules, the Court is vested with a discretion to consider the proceedings as being valid because no ground of substantive justice has been put forward by the other side justifying the setting aside thereof. He, also, submitted that [*64] the debtor had, by virtue of r.41 of the Bankruptcy Rules, to proceed by affidavit and that he ought to have proceeded within the time-limit set out in the notice, and his failure so to do renders his application out of time.

Before dealing with the substance of the complaints of the debtor, I shall deal with the contentions of the creditor going to the time-limit and to the validity of the application for setting aside.

It is true that under r.40(2) of the Bankruptcy rules a debtor who has “a counterclaim, set-off, or cross demand which equals or exceeds the amount of the judgment debt …. he must within the time specified in the notice file an affidavit to that effect with the Registrar”; and that under r.41 of the said Rules “the filing of such affidavit shall operate as an application to set aside the Bankruptcy notice …..“. However, as it appears from the application the bankruptcy notice is sought to be set aside in grounds other than those specified in the aforesaid rule 41; and the question arises whether the debtor, in such a case, can proceed by means of an application by summons.

Our rule 40 of the Bankruptcy Rules is almost similarly worded to the corresponding English Bankruptcy Rule 139 and so we can seek recourse to the English Bankruptcy Practice for guidance. [*65]

In Williams and Muir Hunter “The Law and Practice in Bankruptcy”, 19th ed., under the heading “Setting aside bankruptcy notice on grounds other than set-off”, we read the following at p.38:

“The debtor may apply by motion (i.e. not by the summary affidavit procedure of B.R. 139 to set aside the notice on other grounds, e.g. irregularity, bad service, payment (or quare legal tender) of the debt, etc.”.

Relevant is, also, the case of In Re a Debtor (No. 30 of 1956) ex parte The Debtor v. Harman, (1957) 2 ALL E.R. 216 in which it was held that:

“In a proper case the court will set aside a bankruptcy notice for reasons other than those mentioned in the Bankruptcy Act, 1914, s.1(1)(g), and the Bankruptcy Rules 1952, r.137, and in such a case the time limit specified in r.138 (within which the application to set aside the notice must be made) does not apply.

Where, therefore, the debtor gives notice of motion to set aside a bankruptcy notice on the ground that the judgment debt on which the bankruptcy notice was founded had been satisfied, the application is not out of time by reason only of its not being made within the time specified in r.138 (i.e. within three days of the service of the bankruptcy notice)”. [*66]

Guided by the above authorities, I hold that the debtor properly applied by application to set aside the bankruptcy notice and that the application, which was filed ten days after service is not out of time.

Substance of the Application

Section 3(3) of the Bankruptcy Law, Cap. 5, provides that “a bankruptcy notice ….. shall be in the prescribed form”. At p. 39 of Williams (supra) the following are stated:

“The section of the Act specifying acts of bankruptcy must be strictly interpreted and all requirements of form with respect to a bankruptcy notice must be complied with”.

And finally in para.522 of Halsbury‘s Laws of England, 3rd ed., p.280, the following are stated:

“As a general rule an amendment of a bankruptcy notice will not be allowed, except in the case of a merely formal defect”.

In the case of Re a Debtor (No.75 of 1982) ex parte The Debtor v. National Westminster Bank PIc. (1984) 1 W.L.R. 353, Mergary V.C. stated the following at p.367:

“Bankruptcy notices are of such importance to their recipients, who almost by definition are [*67] likely to be in a state of anxiety and financial stress, that it seems to me to be essential that the statutory forms of notice should not fall below the standards which the Courts have for long been requiring in filling up the blanks in the forms. It may be that other Judges will regard the statutory forms as being clear and free from what I regard as being blemishes. Yet, even if this is so, what matters is what the forms will convey to a debtor, not to a Judge”.

Under 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. Rule 188 of our 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”. Questions of irregularity in civil proceedings are governed by 0.64, rules 1-4, of the Civil Procedure Rules and in Bankruptcy proceedings by ss. 93 (3) and 102, of Cap. 5.

Section 93(3) provides: [*68]

“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”.

And section 102(1) provides:

“No proceedings 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 that the injustice cannot be remedied by any order of that Court”.

Having summarised the legal position, I turn to the alleged defects in the Bankruptcy notice.

The “Indorsement on Notice” provided by Form No.4 of the Bankruptcy Notice provides:

“You are specially to note:

1. That the consequences of not complying with the requisitions of this notice are that you will have committed an act of bankruptcy, in which bankruptcy proceedings may be taken against you”.

The indorsement on the Notice served on the debtor did not include the word “Not”; and it is obvious that in the absence of this word the indorsement conveys absolutely the contrary meaning than the one the statutory indorsement conveys. It is, therefore, confusing and misleading and has caused [*69] substantive injustice to the debtor that cannot be remedied by an order of the Court.

I, therefore, rule that the Bankruptcy Notice must be set aside with costs to be assessed by the Registrar.

In view of the above conclusion I need not pronounce on the remaining issues.

Bankruptcy Notice set aside with costs.