Bourke v Personal Insolvency Act 2012-2021
| Jurisdiction | Ireland |
| Judge | Mr. Justice Mark Sanfey |
| Judgment Date | 17 June 2022 |
| Neutral Citation | [2022] IEHC 371 |
| Court | High Court |
| Docket Number | [Record No. 2021/182 CA] |
[2022] IEHC 371
[Record No. 2021/182 CA]
THE HIGH COURT
Personal insolvency arrangement – Preferential debt – Conduct – Personal insolvency practitioner applying pursuant to s. 115A (9) of the Personal Insolvency Acts 2012-2021 on behalf of the debtor – Whether the attribution of blame to the Revenue Commissioners was supported by the evidence
Facts: Mr O’Callaghan of KPMG, the personal insolvency practitioner (PIP), initiated an application by notice of motion on 25th November, 2021 pursuant to s. 115A (9) of the Personal Insolvency Acts 2012-2021 on behalf of Mr Bourke (the debtor). The application was withdrawn before the High Court on 4th April, 2022. A bankruptcy petition by the Revenue Commissioners (Revenue) against the debtor subsequently proceeded before the court, and the debtor was adjudicated bankrupt on 25th April, 2022. Pepper Finance Corporation (Ireland) DAC (Pepper) filed a notice of objection to the application on 8th December, 2021. Prior to the application being withdrawn, counsel for Pepper indicated to the court its disquiet that the personal insolvency arrangement (PIA) which had been voted upon by the creditors had proceeded on the basis that Revenue was owed a preferential debt of €558,601.66, when in fact only €351,627.22 of that debt was preferential, and that the s. 115A (9) application before the court had proceeded on the same basis. Notwithstanding that the application had been withdrawn, counsel indicated that Pepper considered that this state of affairs should be drawn to the attention of the court. When this was brought to the court’s notice, counsel for the PIP immediately made it clear that the treatment of Revenue’s debt in the PIA was “an error”, and should not have happened. Counsel conveyed the PIP’s apologies to the court for the misdescription of Revenue’s debt. Sanfey J indicated that, notwithstanding that the issue was academic in the context of the withdrawn PIA, he was concerned about what had occurred, and required an explanation from the PIP. The matter came before Sanfey J on 16th May, 2022, on which occasion he heard from counsel for the PIP, Revenue and the objecting creditor. Given that there was a formal hearing with affidavit evidence as to what occurred, with all of the various parties represented by counsel, Sanfey J took the view that he should not deal with the matter informally, but should express his findings and views in a written judgment.
Held by Sanfey J that it was evident from the correspondence that Mr O’Callaghan worked diligently to reach an agreement with Revenue with a view to persuading it to “opt-in” to the PIA. Sanfey J held that as the arrangement clearly envisaged that Revenue and Bank of Ireland, as secured creditors, would be paid in full, the discharge of Revenue’s debt was not dependent on the designation of the full Revenue debt as a preferential creditor. Nonetheless, Sanfey J held that the mischaracterisation of the Revenue debt gave the impression to creditors that Revenue was entitled to be paid ahead of the unsecured creditors in respect of its entire debt; had Pepper not insisted on seeing the Revenue proof of debt, this impression would have remained uncorrected. Sanfey J was not impressed by Mr O’Callaghan’s explanation of what had occurred; his attempted rationalisation at para. 9 of his affidavit was garbled and contradictory, and the description of the mischaracterisation of Revenue debt as “an error” and “incorrect use of language” did not address what occurred in any meaningful way. Sanfey J held that the apparent attribution of blame at least in part to Revenue was unsupported by the evidence and rejected by Revenue.
Sanfey J held that Pepper’s position was that it considered that these matters should be brought to the attention of the court, but that it was entirely a matter for the court as to what, if any, action was to be taken in respect of them. Although Pepper had incurred extra cost in bringing these matters to the attention of the court, it was made clear that it did not seek its costs. Sanfey J held that there was therefore no application as such before him, and he was not required to make any order, nor did he consider that he should take any further action in the matter.
No order made.
JUDGMENT of Mr. Justice Mark Sanfey delivered on the 17 th day of June 2022
. This judgment concerns an issue in relation to the conduct of an application by a personal insolvency practitioner pursuant to 115A (9) of the Personal Insolvency Acts 2012–2021 (referred to collectively herein as ‘the Act’) on behalf of Jonathan Bourke (‘the debtor’). The application was initiated by notice of motion on 25 th November, 2021 by John O'Callaghan of KPMG (‘the PIP’), and was withdrawn before this Court on 4 th April, 2022. I am informed that a bankruptcy petition by the Revenue Commissioners (‘Revenue’) against the debtor subsequently proceeded before this Court, and that the debtor was adjudicated bankrupt on 25 th April, 2022.
. Pepper Finance Corporation (Ireland) DAC – ‘Pepper’ or ‘the objecting creditor’ – filed a notice of objection to the application on 8 th December, 2021. Prior to the application being withdrawn, counsel for Pepper indicated to the court its disquiet that the personal insolvency arrangement (‘PIA’) which had been voted upon by the creditors had proceeded on the basis that Revenue was owed a preferential debt of €558,601.66, when in fact only €351,627.22 of that debt was preferential, and that the s.115A (9) application before this Court had proceeded on the same basis. Notwithstanding that the application had been withdrawn, counsel indicated that Pepper considered that this state of affairs should be drawn to the attention of the court.
. When this was brought to the court's notice, counsel for the PIP immediately made it clear that the treatment of Revenue's debt in the PIA was “an error”, and should not have happened. Counsel conveyed the PIP's apologies to the court for the misdescription of Revenue's debt. I indicated however that, notwithstanding that the issue was now academic in the context of the withdrawn PIA, I was concerned about what had occurred, and required an explanation from the PIP. Mr. O'Callaghan swore an affidavit of 5 th May, 2022, and Revenue at my invitation also caused an affidavit of 12 th May, 2022 to be sworn by Annette Gayson, an officer of the Personal Insolvency Unit of the Revenue, on its behalf. The matter came before me on 16 th May, 2022, on which occasion I heard from counsel for the PIP, Revenue and the objecting creditor.
. Given that there was a formal hearing with affidavit evidence as to what occurred, with all of the various parties represented by counsel, I took the view that I should not deal with the matter informally, but should express my findings and views in a written judgment. I do so because, firstly, it is important to acknowledge the hard work done by the PIP on the debtor's behalf in attempting to find a solution to his intractable insolvency, and to set out the context in which he fell into error. Secondly, as will be apparent from what follows, I consider that the concerns of Pepper were justified, and that it acted correctly in bringing the matter to the court's attention. Thirdly, I think that it is important for the court to set out its views in relation to the necessity for observance by PIPs of appropriate ethical standards when proposing an arrangement to creditors, and particularly when asking the court to review the arrangement for the purpose of s.115A(9) of the Act.
. The PIA, which is expressed to have been generated on 4 th October, 2021, indicates that the specified debt creditors of the debtor amounted to €13,751,949.40. Of these, Pepper was by far the largest creditor at €12,296,391.91. Apart from judgment mortgages, the debtor had substantial equity in his principal private residence (“PPR”), which was co-owned with his wife, and had a significant monthly income. The PIA also referred to a “lump sum” of €616,017.88. This was a reference to a sum which it was hoped would accrue to the debtor arising from his shareholding in an underwriting business called “XS Direct”; it was hoped that a “flotation event” … which would “…provide good liquidity to investors…”, would yield a payout to the debtor, which could be used mainly to clear the Revenue debt.
. At my request, I was provided with the emails between Revenue and the PIP which indicated the manner in which those parties liaised. The PIP stated as early as 7 th October, 2020 to Revenue that he was formulating a PIA for the debtor and expected to apply for a protective certificate within “ten days at the most”. Revenue appear to have issued a bankruptcy petition against the debtor, and to have adjourned this a number of times during 2021 while there were ongoing discussions with the PIP as to whether Revenue would “opt in” to the arrangement.
. In this regard, I should say that the preferential debt owed by the debtor to Revenue is an “excludable debt” within the meaning of the Act as it comprises a liability “…arising out of any tax, duty, levy or other charge of a similar nature owed or payable to the State…” [s.2]. Pursuant to s.92(1) of the Act, an excludable debt can only be included in a PIA “where the creditor concerned has consented, or is deemed to have consented…to the inclusion of that debt in such a proposal”.
. Thus, a PIP will normally try to persuade an excludable debtor to “opt in” to the proposal, and will try to formulate the proposal in a way that will make it attractive for the excludable...
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