Michael Gladney v John Tobin

• Jurisdiction: Ireland
• Judge: Ms. Justice Dunne
• Judgment Date: 02 February 2022
• Neutral Citation: [2022] IESC 3
• Docket Number: S:AP:IE:2021:000034
• Year: 2022
• Court: Supreme Court

In the Matter of a Bankruptcy Petition by Michael Gladney Collector General of Sarsfield House, Francis Street, Limerick, Petitioning Creditor and John Tobin of Level 3, Cornmarket, Robert Street, Limerick, Debtor

Between/

Michael Gladney

Respondent / Petitioner

and

John Tobin

Appellant / Respondent

[2022] IESC 3

O'Donnell C.J.

MacMenamin J.

Dunne J.

Charleton J.

Hogan J.

S:AP:IE:2021:000034

AN CHÚIRT UACHTARACH

THE SUPREME COURT

Bankruptcy summons – Overstatement – Delay – Appellant seeking to dismiss bankruptcy summons – Whether the bankruptcy summons overstated the amount owed by the appellant

Facts: The appellant/debtor, Mr Tobin, was adjudicated bankrupt on the 13th November 2017 by the High Court (Costello J) on foot of a Petition dated the 28th June 2016. A challenge to the bankruptcy summons was brought outside the 14-day time limit prescribed under Order 76, Rule 13(2) of the Rules of the Superior Courts. On the 30th May 2017, the High Court refused an application for an extension of time to dismiss the bankruptcy summons. The High Court (Costello J) went on to consider the grounds on which it was sought to dismiss the bankruptcy summons, namely, that the summons overstated the amount owed by the debtor. The debtor contended that he had made a payment to the respondent/petitioner, Mr Gladney, in the sum of €71,030, and that the bankruptcy summons did not reflect this. The High Court dismissed the arguments made by the debtor. The High Court proceeded on the 13th November 2017 to adjudicate the appellant bankrupt. The judgments of the High Court were appealed and upheld in the Court of Appeal ([2020] IECA 49, Donnelly, Haughton and Collins JJ). The Supreme Court, by a Determination of the 14th June 2021, granted leave to appeal on a number of grounds. At the heart of the appeal was whether the adjudication of the appellant should be dismissed on the basis that the sum particularised in the bankruptcy summons was overstated and was therefore inaccurate and incorrect. The appellant relied on a long-standing common law precedent that a court should dismiss a summons where it contains an overstatement of the amount due by a debtor. The Court of Appeal expressed some misgivings about this approach even where the undisputed portion of the debt was many multiples of the statutory threshold. Accordingly, leave to appeal was granted in respect of that issue. Two other issues were also considered to arise: what is the credibility threshold that a party must meet when they seek to have a summons dismissed due to an overstatement of the debt, and whether a delay in challenging the figure presented in the summons is fatal to raising this issue, assuming that there is legal merit in relation to the defence notwithstanding the delay, and it passes any threshold of credibility test.

Held by Dunne J that there was no basis for allowing the appeal. Noting that the appellant had claimed that he was due a credit/refund in respect of monies paid by him on behalf of his client, Dunne J held that there was no basis upon which the payment of monies on behalf of his client could, in any shape or form, amount to an entitlement to the appellant to claim a refund from the Revenue or a credit in respect of that sum. Dunne J held that, in those circumstances, no issue could arise for trial which would have required the dismissal of the bankruptcy summons. Dunne J held that the application to dismiss the bankruptcy summons was out of time and there was no basis for extending the time within which to make such application. Dunne J noted that, regardless of the delay, both the High Court and the Court of Appeal considered the issues raised by the appellant in detail and were satisfied that the appellant simply did not meet the test for a bankruptcy summons to be dismissed. Dunne J agreed with their conclusions.

Dunne J dismissed the appeal.

Appeal dismissed.

Judgment of Ms. Justice Dunne delivered on the 2nd day of February 2022

Introduction

1 . Mr. Tobin (“the Appellant” or “the Debtor” herein) was adjudicated bankrupt on the 13th November 2017 by the High Court (Costello J.) on foot of a Petition dated the 28th June 2016. A challenge to the bankruptcy summons was brought significantly outside the 14-day time limit prescribed under Order 76, Rule 13(2) of the Rules of the Superior Courts (“RSC”). On the 30th May 2017, the High Court refused an application for an extension of time to dismiss the bankruptcy summons as it was concluded that there was no basis put forward to demonstrate that an extension of time should be granted. Nevertheless, notwithstanding the decision to refuse the extension of time within which to make the application to dismiss the bankruptcy summons, the High Court (Costello J.) went on to consider the grounds on which it was sought to dismiss the bankruptcy summons, namely, that the summons overstated the amount owed by the Debtor. Essentially, the Debtor contended that he had made a payment to the Respondent/Petitioner (“the Respondent”) in the sum of €71,030, and that the bankruptcy summons did not reflect this. The High Court dismissed the arguments made by the Debtor. Having rejected the application to extend time and dismissed the application to dismiss the bankruptcy summons on its merits on the 30th May 2017, the High Court proceeded on the 13th November 2017 to adjudicate the Appellant bankrupt. The judgments of the High Court were appealed and upheld in the Court of Appeal ( [2020] IECA 49, Donnelly, Haughton and Collins JJ.).

2 . This Court by a Determination of the 14th June 2021 granted leave to appeal on a number of grounds. At the heart of this appeal is whether the adjudication of the Appellant should be dismissed on the basis that the sum particularised in the bankruptcy summons is overstated and is therefore inaccurate and incorrect. The Appellant relies on a long-standing common law precedent that a court should dismiss a summons where it contains an overstatement of the amount due by a debtor. The Court of Appeal expressed some misgivings about this approach even where the undisputed portion of the debt was many multiples of the statutory threshold. Accordingly, leave to appeal was granted in respect of that issue. Two other issues were also considered to arise: what is the credibility threshold that a party must meet when they seek to have a summons dismissed due to an overstatement of the debt, and whether a delay in challenging the figure presented in the summons is fatal to raising this issue, assuming that there is legal merit in relation to the defence notwithstanding the delay, and it passes any threshold of credibility test.

Background

3 . The Debtor was a solicitor who was retained by a client for the purchase of two plots of lands (“the H Lands” and “the O'C Lands”). In relation to the H Lands, the Debtor gave an undertaking on behalf of his client to the relevant financial institution that he would lodge with it the title deeds for the lands in question, which could not be done without payment in full of Stamp Duty and the receipt of a Stamp Duty Certificate. Without the payment of Stamp Duty, the client could not be registered as the owner of the lands, and the Debtor could not have complied with his undertaking. A similar undertaking was given to another financial institution regarding the O'C Lands which had an even greater liability in respect of Stamp Duty attached to it. The Debtor was not put in funds to pay Stamp Duty on either transaction and as result there was a significant liability in respect of Stamp Duty outstanding on behalf of the client which prevented the Debtor from fulfilling these undertakings.

4 . The Debtor alleges that in order to comply with these undertakings, he paid a total of €96,850 from his own resources in partial discharge of a Stamp Duty liability on these lands. The Debtor made these payments on foot of information he received from the client that he (the client) was due substantial sums by way of forest grants and premiums from the Department of Agriculture, Food and the Marine for various lands, including the H Lands and the O'C Lands. In order to receive those grants, the Debtor had to certify title to them. The Debtor says that an agreement was reached between the Department, the Revenue and the Debtor that so much of the grants due to the client would be paid to Revenue for the purpose of discharging the remaining Stamp Duty liability on the lands. This would have, in turn, enabled the Debtor to comply with his undertakings to the relevant financial institutions by registering the transactions and delivering title. The Debtor alleges that as a result of the agreement together with the payments made personally by him in partial discharge of the Stamp Duty liability, an overpayment was made to the value of €71,030. It is this figure which the Debtor believes gives rise to an overstatement of the debt in the bankruptcy summons, and for which he claims he is entitled to a refund. It should be noted that the Debtor never suggested that the Revenue agreed (or could have lawfully agreed) to attach more than was due in tax by his client in order to repay to the Debtor the sum paid by him in 2009.

5 . The Revenue says that while it initially indicated it would be possible to attach monies for the purpose of discharging the Stamp Duty liability of the Debtor's client, it was subsequently explained to the Debtor that this would not be possible as the monies were being attached pursuant to s. 1002 of the Tax Consolidation Act 1997, which only allows for the attachment of monies for the discharge of Capital Gains Tax (“CGT”) and Income Tax, but not Stamp Duty. Thus, the monies received by the Revenue on foot of the Notice of Attachment were applied to discharge other liabilities of the client relating to CGT and Income Tax but were not available to discharge any other tax...