The Supreme Court has dismissed an appeal by Michael Wymes, holding that a debtor may commit an act of bankruptcy by failing to satisfy a bankruptcy summons even while challenging the summons under section 8(5) of the Bankruptcy Act 1988.
The appeal concerned the interaction between the 14-day period in section 7(1)(g), during which a debtor may pay, secure or compound the debt demanded, and the right to apply to dismiss the summons. Wymes argued that the period should be suspended while such an application was pending, so that no act of bankruptcy could occur before the challenge was decided.
The judgment, delivered by Ms Justice Baker on 1 July 2021, says the Act contains no provision suspending that period. The Court concluded that the failure to meet the summons within 14 days can constitute an act of bankruptcy notwithstanding a challenge. It rejected the argument that the reasoning in McConnon v Zurich Bank required a different result, explaining that the earlier case concerned whether time to present a petition could be extended.
The Court distinguished the statutory act of bankruptcy from adjudication. It said a petition may be presented within the statutory period, but fairness requires that adjudication not take place while a challenge to the summons remains undetermined. If the challenge succeeds and the summons is dismissed, there can be no adjudication founded on it. The judgment also noted that a debtor may seek to show cause against an adjudication after it has been made.
Wymes had been adjudicated bankrupt in March 2018 on a petition relying on his failure to pay after service of a bankruptcy summons. His earlier challenge to that summons had been rejected, with the appeal process finally determined by the Supreme Court in 2017. The present appeal arose from the later rejection of his application under section 16 to set aside the adjudication. The High Court rejected that application and the Court of Appeal dismissed his appeal.
The underlying debt arose from a 2003 certificate of taxation relating to a costs order made in 1997. The judgment records the debt as €3,297,493.33 at the certificate date and €4,881,012.86 including interest at the relevant later date. It states that the debt had been finally determined and was not affected by the challenge to the bankruptcy process.
The Supreme Court’s ruling addressed only whether a challenge to a summons prevents an act of bankruptcy from occurring. It dismissed the appeal; the judgment did not reopen the underlying debt determination.