The High Court has rejected Patrick Murphy’s application to set aside his bankruptcy adjudication, finding that the bank’s demand and bankruptcy summons sought less than the debt actually owed.
Mr Justice Brian J. McGovern delivered the judgment on 12 April 2011. The application was brought under section 16 of the Bankruptcy Act 1988, which allows a debtor to show cause against an adjudication. Murphy’s application was out of time, but the judge extended the deadline, saying it was appropriate given the serious consequences of bankruptcy and Murphy’s apparent intention to bring the application soon after his adjudication.
Bank of Ireland had obtained judgment against Murphy for €9,025,720.70 on 7 May 2010. It later issued a notice of demand for €9,025,880.70, comprising the judgment sum and €160 in costs. A bankruptcy summons issued on 29 November 2010, and Murphy was adjudicated bankrupt on 24 January 2011.
Murphy argued that payments made after judgment had not been properly credited and that the sums in the demand and summons were inaccurate. He said the credits should have reduced the principal rather than interest, and that the bank had waived interest by limiting its demand to the judgment sum and costs. He relied on an earlier decision, In Re Sherlock, in which a bankruptcy adjudication was set aside after a creditor failed to allow a credit against the amount claimed.
The bank accepted that it had received €4,025 between the judgment and the bankruptcy summons, as well as a further payment on 30 November 2010. The judgment records that Courts Act interest continued to accrue on the debt and that the credits were less than the accumulating interest. Murphy did not challenge the bank’s interest calculation, and the judge found no evidence that the bank had waived interest.
The judge distinguished In Re Sherlock. That decision concerned a demand for more than was owed; here, the amount demanded was below the debt due, even after allowing for the credits. The judge said the precedent did not establish that an understated liquidated claim, without a calculation error or carelessness, was grounds to invalidate an adjudication. Whether the bank could prove a larger amount in the bankruptcy remained a matter for the parties to argue later.
Murphy did not pursue a separate argument about when the verifying affidavit had been sworn, after evidence established it had been sworn on 2 November 2010. The court refused his application. The bankruptcy adjudication remained in force.