O'Flynn v O'Driscoll and Others

• Jurisdiction: Ireland
• Court: Supreme Court
• Judge: Ms. Justice Elizabeth Dunne
• Judgment Date: 30 November 2023
• Neutral Citation: [2023] IESC 32
• Docket Number: S:AP:IE:2022:000098

In the Matter of Part 3, Chapter 4 of the Personal Insolvency Acts, 2012 to 2015

And in the Matter of John O'Driscoll of Kilcea, Ovens, County Cork (“The Debtor”)

And in the Matter of An Application Pursuant to Sections 96 and 112 of the Personal Insolvency Act 2012 to 2021

Between/

Michael O'Flynn

Appellant

and

John O'Driscoll and Alan McGee

Respondents

and

The Insolvency Service of Ireland

Notice Party

[2023] IESC 32

O'Donnell C.J.

Dunne J.

O'Malley J.

Hogan J.

Donnelly J.

S:AP:IE:2022:000098

AN CHÚIRT UACHTARACH

THE SUPREME COURT

Personal insolvency arrangement – Locus standi – Personal Insolvency Act 2012 s. 98(2)(b) – Appellant seeking an order refusing the coming into effect of a personal insolvency arrangement – Whether a creditor who has failed to prove their debt pursuant to the provisions of the Personal Insolvency Act 2012 has locus standi to object to the coming into effect of a personal insolvency arrangement

Facts: The appellant, Mr O’Flynn, on 20th December, 2021, issued a notice of motion and sought two principal reliefs: leave to execute against the first respondent, Mr O’Driscoll (the debtor), pursuant to s. 96(3) of the Personal Insolvency Act 2012 and an order refusing the coming into effect of a Personal Insolvency Arrangement (PIA) pursuant to s. 115(2)(b) of the 2012 Act. The second respondent, Mr McGee, the Personal Insolvency Practitioner (PIP), wrote to the creditors, including the appellant, informing them that the PIA had been approved at the creditors’ meeting held on 5th January, 2022. The appellant lodged a notice of objection in accordance with s. 112(3) of the 2012 Act, which came on for hearing alongside the appellant’s motion. The motion came on for hearing on 16th March, 2022. The Circuit Court (Judge Meghan) dismissed the motion and the objection. The matter was appealed to the High Court and came before Owens J on 25th July, 2022. Owens J dismissed the appeal. The appellant was granted leave to appeal to the Supreme Court on 7th February, 2023. The appellant’s overarching submission was that the High Court gave an overly broad interpretation to s. 98(2)(b) of the 2012 Act by refusing the creditor locus standi. It was submitted that s. 98(2)(b) limits the rights of a creditor who fails to prove its debt in two distinct ways, and the decision of the High Court had the effect of limiting the creditor in a third way that is not envisioned by the 2012 Act. The appellant argued that the wording of s. 98(2)(b) is clear and unambiguous and should be given its natural and ordinary meaning in the context in which it appears. It was submitted that the intention of the Oireachtas is decipherable from the legislation and that the courts cannot read into the Act a further exclusion of a creditor where the legislator has decided not to do so.

Held by Dunne J that on a consideration of the interpretation of the provisions of the 2012 Act, there is nothing therein which precludes a creditor who has not proved his debt as requested to do so by the PIP from doing so at a later stage. In any event, Dunne J was also satisfied that there is nothing in the express terms of the provisions of the Act which precludes a creditor who has not filed proof of debt to lodge a notice of objection. Dunne J noted that the 2012 Act expressly states what should happen to a creditor who does not prove his debt; that is specifically provided for in s. 98(2)(b). Dunne J held that those provisions do not expressly exclude a creditor from lodging a notice of objection. The approach taken in this case that a creditor who does prove his debt drops out of the process does not, in Dunne J’s view, stand up to scrutiny; on the contrary, whether a creditor proves his debt or not, the creditor is fully bound by the process and the effects thereof once a PIA has been approved. In those circumstances, it seemed to Dunne J that the appellant had locus standi to lodge a notice of objection, and on an application to allow him to prove his debt, consideration should have been given to that application.

Dunne J allowed the appeal of the appellant. Dunne J held that it would be appropriate for the matter to be remitted for a further consideration of the issues as to the entitlement of the appellant to prove his debt, and, secondly, to lodge a notice of objection to the PIA.

Appeal allowed.

Judgment of Ms. Justice Elizabeth Dunne delivered on the 30th day of November 2023

Introduction

1 . This case considers whether a creditor who has failed to prove their debt pursuant to the provisions of the Personal Insolvency Act 2012 (“the 2012 Act”) has locus standi to object to the coming into effect of a Personal Insolvency Arrangement (“PIA”).

Background

2 . In 2007, Mr. O'Driscoll (“the debtor”) alongside Mr. O'Flynn (“the appellant”) and a third party, set up Ezeon Entertainment Limited (“Ezeon”), each owning one-third shares in the company. Ezeon was set up for the purpose of purchasing and operating a public house in County Cork. The company purchased and renovated The Silly Goose pub in Cork City, financed by borrowings from Anglo Irish Bank Corporation.

3 . In 2009 when Anglo Irish Bank was nationalised, the borrowings were transferred to Carbon Finance Limited. The appellant agreed to personally refinance the loan on 30 ^th October, 2014. The debtor and third party personally guaranteed the appellant's loan and signed an agreement to this effect. The public house traded successfully until March 2020, when the Covid-19 pandemic and the restrictions imposed resulted in the pub's closure. This was the primary cause of the debtor's financial problems, and as a result, the debtor retained the services of Alan McGee, a Personal Insolvency Practitioner (“PIP”).

4 . A Prescribed Financial Statement (“PFS”) was completed by the debtor on 8 ^th November, 2021. The PFS was served on the appellant on 12 ^th November, 2021. In the same correspondence, the PIP informed the appellant that a protective certificate had been issued in respect of the debtor and called on him to “file a proof of debt within 14 days in the same manner as a debt of a bankrupt is proved under the Bankruptcy Act 1988” and informed him that “subject to subsection (3), paragraphs 1 to 22 of the First Schedule of [the 1988] Act shall apply with all necessary modifications and proofs of such debt.” The PIP informed the appellant that if he should fail to prove his debt, he would not be entitled to vote at the creditors' meeting or to any share or distribution made under the 2012 Act.

5 . Thereafter, the appellant, through his solicitor, engaged in correspondence with the PIP. In a letter dated 23 ^rd November, 2021, the appellant made eleven complaints about the debtor including, inter alia, that the debtor was not insolvent, that the debtor had sufficient assets to meet the debts owed, that the debtor had failed to disclose some of his assets in his PFS, and that a debt owed by Ezeon to the debtor had not been addressed in the PFS. An extension of time to lodge a proof of debt was requested by the appellant. On 24 ^th November, 2021, the PIP responded indicating that he would write to Ezeon and include the debt in the PFS. The request for an extension was denied by the PIP, and he again called on the appellant to prove his debt in the following terms:

“Please furnish a Proof of Debt within the prescribed timeline. Please note that a Personal Guarantee which has not been called at the date of the granting of the Protective Certificate will be treated as a contingent liability of €1.”

6 . On 26 ^th November, 2021, the appellant responded to the PIP restating his belief that the debtor was abusing the insolvency process and that the information in the PFS was not a “complete and accurate statement of the debtor's assets, liabilities, income and expenditure”. On 29 ^th November, 2021, the PIP responded and once again denied that this was an abuse of process and refused an extension of time for the filing of a proof of debt.

7 . On 14 ^th December, 2021, a second PFS was completed by the debtor. On the same day, the PIP wrote to the appellant with Notice of the Creditors' Meeting due to take place on 5 ^th January, 2022, and enclosed the proposed PIA along with other documents required by s. 107 of the 2012 Act. On 15 ^th December, 2021, the appellant once again set out his views in relation to the process and requested that the creditors' meeting be cancelled in light of his ongoing concerns. On 16 ^th December, 2021, the PIP responded denying these allegations and informed the appellant that the creditors' meeting was scheduled for 5 ^th January 2022. On 17 ^th December, 2021, the final piece of correspondence prior to the creditors' meeting was sent by the appellant to the PIP, where he stated that he would “not be dignifying this process with either an attendance at said meeting or a vote in respect of same.” At this stage, the appellant had still failed to prove his debt.

8 . On 20 ^th December, 2021, the appellant issued a notice of motion and sought two principal reliefs: leave to execute against the debtor pursuant to s. 96(3) of the 2012 Act and an order refusing the coming into effect of the PIA pursuant to s. 115(2)(b) of the 2012 Act.

9 . The creditors' meeting was held on 5 ^th January, 2022 and the PIA was approved by creditors who had previously proved their debt. Following the creditors' meeting, the PIP wrote to the creditors, including the appellant, informing them that the PIA had been approved at the creditors' meeting and that if an objection was forthcoming, a notice of objection in accordance with s. 112(3) of the 2012 Act could be lodged within 14 days. The appellant lodged a notice of objection within the prescribed time limit, which came on for hearing alongside the appellant's motion of 20 ^th December, 2021.

Statutory Framework

10 . Chapter 4 of the 2012 Act...