Fay (A Debtor) v Personal Insolvency Acts 2012-2015

JurisdictionIreland
JudgeMr. Justice Denis McDonald
Judgment Date06 April 2020
Neutral Citation[2020] IEHC 163
Docket Number[2019 No. 87 C.A.]
CourtHigh Court
Date06 April 2020

MIDLAND CIRCUIT

COUNTY OF LAOIS

IN THE MATTER OF THE PERSONAL INSOLVENCY ACTS, 2012 TO 2015 AND IN THE MATTER OF MARK FAY (A DEBTOR)

[2020] IEHC 163

Denis McDonald J.

[2019 No. 87 C.A.]

THE HIGH COURT

CIRCUIT APPEAL

Personal insolvency arrangement – Personal Insolvency Act 2012 s. 115A – Costs – Objecting creditor appealing against an order confirming the coming into effect of a personal insolvency arrangement – Whether the requirements of s. 115A of the Personal Insolvency Act 2012 had been satisfied

Facts: An objecting creditor, Pepper Finance Corporation (Ireland) DAC (Pepper), appealed to the High Court against an order made in the Circuit Court on 28th February, 2019 under s. 115A of the Personal Insolvency Act, 2012 (as amended) confirming the coming into effect of a personal insolvency arrangement proposed on behalf of the debtor, Mr Fay, by his personal insolvency practitioner, Ms Mooney. Pepper contended that the requirements of s. 115A of the 2012 Act had not been satisfied in this case. Pepper also, in the course of the hearing of the appeal, drew attention to an issue relating to the manner in which exhibits were added to an affidavit sworn by Mr Fay subsequent to the date of its swearing. Applications were made both by Pepper and the objecting creditor in the Kelly Boumenjel case for costs orders against Ashtown Gate solicitors.

Held by McDonald J that it would be wrong to reject the entirety of the evidence of Mr Fay given on affidavit and that it would be equally wrong to dismiss the s. 115A application on that basis. In so far as the balance of the s. 115A requirements were concerned, McDonald J confirmed that he had considered each of them and was of the view that each of them had been satisfied. In the circumstances, he reached the conclusion that the appeal must be dismissed and the decision of the Circuit Court affirmed.

McDonald J held that counsel for Mr Holohan and Ashtown Gate was right to concede that this was an appropriate case in which to make wasted costs orders against his clients; that concession was made in recognition of the fact that there was a manifest failure on the part of Mr Holohan’s firm to apply appropriate professional standards in relation to the preparation of the evidence in 2018. In McDonald J’s view, it was necessary in this case to make such an order; the failings on the part of the firm were so significant that such an order was justified. Rather than sending the matter for adjudication by the Legal Costs Adjudicator, McDonald J believed that it would be preferable to exercise his powers under O. 99 r. 2 (a), and to measure a sum in gross. In his view, in Pepper’s case, the amount to be paid by Ashtown Gate to Sherwin O’Riordan solicitors on behalf of Pepper should be €6,000 plus VAT or, at Pepper’s option, a donation of €6,000 to a charity of Pepper’s choosing. In the case of Kelly Boumenjel, McDonald J proposed measuring a lower sum to be paid by Ashtown Gate. He did so because the issue did not occupy so much time of the court. He directed that the sum of €2,000 plus VAT be paid to Dillon Eustace Solicitors on behalf of the objecting creditor, or at the latter’s option a donation of €2,000 to a charity of its choosing.

Appeal by objecting creditor dismissed. Wasted costs order made against solicitors acting for personal insolvency practitioner.

JUDGMENT of Mr. Justice Denis McDonald delivered on 6 April, 2020
Introduction
1

This is an appeal brought by an objecting creditor against an order made in the Circuit Court on 28th February, 2019 under s. 115A of the Personal Insolvency Act, 2012 (as amended) ( the 2012 Act) confirming the coming into effect of a personal insolvency arrangement proposed on behalf of the above named debtor, Mr. Mark Fay, by his personal insolvency practitioner, Ms. Judy Mooney ( “the practitioner”).

2

The objecting creditor, Pepper Finance Corporation (Ireland) DAC ( “Pepper”) contends that the requirements of s. 115A of the 2012 Act have not been satisfied in this case. Pepper has also, in the course of the hearing of the appeal, drawn attention to a very troubling issue (which is of great concern to me) relating to the manner in which exhibits were added to an affidavit sworn by Mr. Fay subsequent to the date of its swearing. For completeness, it should be noted that Pepper is the successor in title to ACC Loan Management DAC ( “ACC”). Following the merger of ACC with a Dutch entity called Cooperatieve Rabobank U.A., the Circuit Court, by order dated 28th February, 2019 gave leave to substitute the Dutch entity for ACC. Subsequently, in the course of the hearing of the appeal before me, an application was made by Pepper for an order substituting itself as objecting creditor. That order was made in circumstances where the interests of the Dutch entity in the loans and security (described below) has since been assigned to Pepper.

3

It is not in dispute that, at the time the arrangement was proposed in this case, Mr. Fay was indebted to ACC in the sum of €482,149.00 which is secured over his property (situated in a midland town) pursuant to a charge duly registered in the land registry on 7th January, 2005.

4

Before outlining, in more detail, the nature of the objections raised by Pepper (including the very serious issue in relation to the affidavit evidence), it may be helpful, in the first instance, to describe the relevant facts and to summarise some key features of the proposed arrangement.

Relevant facts
5

Mr. Fay was born in February, 1966. He is divorced. He has three adult children. His only remaining property is that described in para. 3 above (and dealt with in more detail below). The value of that property has been agreed at €200,000. His only other asset is a 2013 Vauxhall motor car. His total net income is €2,630 per month. This is derived from a number of different sources. He works, on a self-employed basis, as an upholsterer. He also acts as a self-employed agent for an insurance company. He is in receipt of a small pension and family assistance. The remainder of his income is made up of rent from a commercial unit at the front of the property where he now resides.

6

Previously, Mr Fay himself operated a shop in the commercial unit. However, he says, on affidavit, that, as a consequence of competition from larger retailers in the area, the business began to struggle in 2003. There were also a number of thefts such that, by the time the recession hit in 2008 and subsequent years, the business was already in financial difficulty. Mr. Fay says that, due to his inability to pay in advance for supplies, he was unable to continue trading.

7

The shop in question is situated to the front of the four bedroomed house in which Mr. Fay now resides together with some of his adult children. The shop is now the source of his rental income. At the time he acquired this property (incorporating the attached shop) he lived in a different property. However, Mr. Fay says that in 2007 he sold his then family home together with another property. He says this was done at the suggestion of ACC. This averment on the part of Mr. Fay is not denied in the affidavits filed on behalf of ACC in the course of the proceedings before the Circuit Court.

8

Mr. Fay has the following debts: -

(a) He owes €482,149 to ACC (now Pepper) on foot of the loan secured over his property;

(b) He owes BWG Foods €23,220 in respect of credit given to him when he formerly operated a shop;

(c) He owes €16,525 to Allied Irish Banks Plc in respect of a business loan;

(d) He also owes Cabot Financial Ireland Ltd €9,290 on foot of a loan;

(e) A further debt is owed by him to Bluestone Asset Finance Ireland Ltd in respect of a hire purchase agreement in the sum of €7,980; and

(f) He is also indebted to the Revenue Commissioners in the sum of €8,096.

9

The arrangement proposed by the practitioner in this case has the following features: -

(a) Insofar as the secured debt of €482,149,00 owed to ACC (now Pepper) is concerned, it is proposed to write it down by €272,149.00 to €210,000 (which is €10,000 more than the agreed value of the property). It is also proposed to extend the mortgage term to 240 months. The amount written down (namely €272,149.00) is to be treated as an unsecured debt and receive the same dividend of 2 cent in the euro proposed for each of the unsecured creditors (as set out below). Based on the bankruptcy comparison set out in appendix 5 to the arrangement, the total return to Pepper will be 44 cents in the euro as opposed to 37 cents in the event of a bankruptcy;

(b) As a preferential creditor, the debt to the Revenue Commissioners is to be paid in full;

(c) It is also proposed to pay the hire purchase creditor (namely Bluestone Asset Finance Ireland Ltd) in full;

(d) Insofar as the unsecured creditors are concerned, they will each (with the exception of BWG Foods who did not submit a proof of debt) receive a dividend of 2 cent in the euro. According to appendix 5 to the proposed arrangement, they would receive nothing in the event of a bankruptcy.

10

A meeting of creditors took place on 7th June, 2017 to consider the proposed arrangement. According to the certificate provided by the practitioner, two creditors voted in favour of the proposed arrangement namely Allied Irish Banks plc representing 3.16% in value of Mr. Fay's debts and the Revenue Commissioners representing 2.95% of Mr. Fay's debts. ACC (representing 92.12% of Mr. Fay's debts) and Cabot Financial Ireland Ltd (representing 1.77% of Mr. Fay's debts) voted against the arrangement. The practitioner has submitted (correctly in my view) that, for the purposes of s. 115A (9) (g) and (17) of the 2012 Act, two classes of creditor voted in favour of the arrangement namely (a) the Revenue Commissioners representing the “excludable class” of creditors and (b) the unsecured creditors holding no security over any asset of...

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