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The High Court, Bankruptcy

We acted for the petitioner in recent bankruptcy proceedings where the debtor applied for dismissal of the bankruptcy petition on the basis that the petitioner had over calculated interest on the amount due.

 

Background

The petitioner claimed a sum of €425,689.21 plus continuing interest. The amount arose in respect of two judgments; the first included €1750.00 for measured costs and the second included €383.63 for fixed costs.

These sums were demanded in a statutory demand dated 22nd October 2013.  Interest included was calculated to 15th October 2013.  The debtor did not pay the sum demanded and a bankruptcy summons issued.   No payment was received pursuant to the bankruptcy summons. Subsequently, a bankruptcy petition issued which relied on the failure to pay the sum demanded as the act of bankruptcy.

The sums demanded were not disputed in subsequent documents filed in court.   However, at the hearing of the bankruptcy petition, counsel for the debtor argued the amount sought in the petition was in excess of the sum actually due, thus, the petition ought to be dismissed.

 

Challenge

The debtor claimed the sum incorrectly included interest on the costs of two judgments and ought to be dismissed.   The debtor relied on section 30 of the Courts and Courts Officers Act (CCOA) 2002, amended by section 41 of the Civil and Liability Courts Act 2004 claiming this provided the only basis upon which interest on costs could be charged, which did not apply to the costs in this case.

The debtor also cited Re a Debtor (1908) 2K.B. 684 and O’Maoileoin v Official Assignee (1989) I.R. 647 where demand for a sum which was greater than the amount due was made, the petition was either dismissed or the adjudication was cancelled.

We rejected the arguments advanced. The judgment amount, the interest charged on the judgment amounts and the costs were not disputed.  The issue was the interest on the two judgment costs totalling €159.60. We submitted that even if the position for interest on costs was correct, a further sum of €777.90 was due in respect of interest on the judgment sums meaning the statutory demand did not claim a sum greater than that due.

We also submitted that section 30 CCOA 2002 does not apply to the circumstances of this case and does not prescribe the only situations where interest can be levied on costs.

 

Costello J Judgment

In her reserved judgment, Costello J stated O’Maoileoin v Official Assignee (1989) was “very different from a case such as this where the amount demanded was always less than the amount lawfully due and owing”. She further stated that there is clear authority for the proposition that if the sum claimed in bankruptcy proceedings is less than the amount actually due, an error in the calculation of the sum claimed does not invalidate the bankruptcy petition (Murphy v Bank of Ireland).

Costello J accepted our submission regarding section 30 of the CCOA 2002 stating it must be given a purposeful interpretation.

Costello J concluded that our submissions were correct and had never demanded payment of sums in excess of the amount lawfully due. She also found that we were entitled to rely on the two judgments, each of which clearly charged interest on costs.

Accordingly, the debtor’s application for dismissal was refused.

For further information on this or any other debt collection related issue, please contact Jacci Fox, Debt Collection Unit.

 

Summary

There is clear authority for the proposition that if a sum claimed in bankruptcy proceedings is less than what is lawfully due, an error in the calculation of that sum does not invalidate the statutory demand, bankruptcy summons or subsequent petition (Murphy v Bank of Ireland

[2014] IESC 37).

Interest may be charged on measured costs from the date of pronouncement of the judgment.

Interest may be charged on fixed costs from the date of judgment.

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Legal Executive of the Year 2015, HOMS Debt Collection Manager, Jacci Fox

 

2018-11-13T10:48:09+01:00July 1st, 2015|Publications|

About the Author:

Jacci Fox manages the Debt and Asset Recovery Unit and joined the firm in 1988. She has extensive experience and expertise in all aspects of debt recovery, ranging from district […]

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