Frank and Teresa McNamara (a debtor)

• Jurisdiction: Ireland
• Judge: Mr. Justice Denis McDonald
• Judgment Date: 20 September 2019
• Neutral Citation: [2019] IEHC 622
• Date: 20 September 2019
• Court: High Court
• Docket Number: [C:IS:HC:2016:000039]

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

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

[2019] IEHC 622

Denis McDonald

[C:IS:HC:2016:000039]

[C:IS:HC:2016:000040]

THE HIGH COURT

Personal insolvency arrangements – Unfairly prejudiced – Adjournment – Personal insolvency practitioner seeking an order confirming the coming into effect of the interlocking personal insolvency arrangements proposed on behalf of the debtors – Whether Tanager DAC was unfairly prejudiced by the proposals

Facts: Mr Green, personal insolvency practitioner, brought applications before the High Court under s. 115A of the Personal Insolvency Act 2012. The practitioner sought an order pursuant to s. 115A (9) confirming the coming into effect of the interlocking personal insolvency arrangements proposed on behalf of Mr and Ms McNamara (the debtors). The application was opposed by Tanager DAC as successor in title to Bank of Scotland (Ireland) Ltd. Tanager held security over the family home of the debtors in County Meath. A detailed notice of objection was filed on behalf of Tanager.

Held by McDonald J that he would adjourn the matter for a brief period to give Mr McNamara an opportunity to explain the position in relation to the inheritance, its value, and the rent payable in respect of the inherited property. McDonald J held that he would not direct proofs for Mr McNamara and the practitioner but that it would be appropriate to support whatever was said in the affidavit by any relevant exhibits. McDonald J held that if the affidavit was incomplete or unsatisfactory, further argument may be required as to whether the applications should be refused in the circumstances.

McDonald J held that, in circumstances where a further affidavit was required, it was necessary to await the affidavit in question before proceeding further; in the absence of such an affidavit, he could not be satisfied that the means of Mr McNamara had been sufficiently brought to bear on the proposed arrangement as required by s 115A (9) (b) (ii). McDonald J held that if the means of Mr McNamara had not been sufficiently brought to bear, he would be unable to conclude that Tanager (which would be subject to such a significant write-down of secured debt under the proposed arrangements) had not been unfairly prejudiced by the proposals; nor could he be satisfied that a satisfactory prescribed financial statement had been made by Mr McNamara. That said, McDonald J held that these concerns may well be capable of being fully addressed by a further affidavit from Mr McNamara.

Matter adjourned.

Judgment of Mr. Justice Denis McDonald delivered on 20 August 2019 The applications before the court

1 In both of the above cases, Mr. James Green, personal insolvency practitioner ( “the practitioner“) has brought applications before the court under s. 115A of the Personal Insolvency Act, 2012 ( “the 2012 Act”) as amended by the Personal Insolvency (Amendment) Act, 2015 ( “the 2015 Act”). In both cases the practitioner seeks an order pursuant to s. 115A (9) confirming the coming into effect of the interlocking personal insolvency arrangements proposed on behalf of each of the above named debtors namely Mr. Frank McNamara and Ms. Teresa McNamara.

2 The application is opposed in each case by Tanager DAC (“ Tanager”) as successor in title to Bank of Scotland (Ireland) Ltd ( “BOSI”). Tanager holds security over the family home of the debtors in County Meath. A detailed notice of objection has been filed on behalf of Tanager in each of the applications. It will be necessary, in due course, to consider the nature of the objections in more detail.

Background

3 Mr. McNamara and Ms. McNamara are husband and wife. Mr. McNamara is a musician and composer. Ms. McNamara is a barrister. When the arrangements in this case were first proposed in 2016, the ages of their dependent children were eighteen and sixteen respectively.

4 According to the background information contained in the proposed arrangements, Mr. McNamara and Ms. McNamara first encountered financial difficulties in the early 2000s when Mr. McNamara began to experience problems in collecting music royalties due to him. During this time, Mr. McNamara and Ms. McNamara borrowed money to try and get through what they believed to be a short term financial problem. They remortgaged properties and also sold a number of properties in order to try and make ends meet. At the time, Mr. McNamara believed that his financial problems would resolve themselves over a relatively short period. Up to 2007 he had been working as a music conductor in the United States and had been earning a high income. However, in 2007, Mr. McNamara devoted significant time to an unsuccessful attempt to win a seat in local authority elections held in that year. As a consequence of the time taken to stand in the local elections, the household income was reduced significantly. Very soon afterwards, the recession hit Ireland and this compounded the financial problems of the McNamaras who, as noted above, had borrowed money to assist with what they had then believed were short term financial difficulties.

The creditors

5 According to Appendix 3 to each of the proposed arrangements, Mr. and Ms. McNamara have the following creditors: -

(a) They are jointly and severally liable to Tanager in the sum of €2,267,479 on foot of three accounts (which, where necessary, I will refer to as the 05,06 and 09 accounts). This debt is secured on the family home (i.e. their principal private residence within the meaning of s. 115A) which has a current market value of €550,000. It should be noted that, prior to the issue of the protective certificates in these cases, Tanager had obtained an order for possession against Mr. McNamara and Ms. McNamara in respect of the family home. However, the order for possession had not been executed prior to the issue of the certificates. The order for possession had been obtained on 8th April, 2014. Not long prior to the issue of the protective certificates, Tanager, on 24th October, 2016, had renewed the relevant execution order in respect of the order for possession.

(b) Mr. McNamara is individually liable to First Citizen Finance DAC (previously known as Consumer Auto Receivables Finance Ltd) in the sum of €58,705 which is secured by a judgment mortgage registered against Mr. McNamara's interest in the family home which is comprised in Folio 53047F of the register, County Meath and also against Mr. McNamara's interest in a parcel of lands comprising 5.21 acres namely the lands comprised in Folio 10051, County Meath (those lands being in the joint names of Mr. McNamara and Ms. McNamara).

(c) Ms. McNamara is indebted to the Revenue Commissioners in respect of Value Added Tax (“ VAT”) in the sum of €9,354. Although not shown in Appendix 3 (containing the schedule of Ms. McNamara's creditors), it is included in the estimated statement of affairs contained in Appendix 1 to the proposed arrangement in her case and it forms part of the overall preferential debt of €12,836 shown in Appendix 4 (which sets out the estimated dividends to creditors under the proposed arrangement). At this point, it should be noted that there is an obvious error in Appendix 4 insofar as it suggests that the preferential debt to Revenue amounting to €12,836 represents a joint obligation of both Mr. McNamara and Ms. McNamara. On the basis of the papers available to the court, the only debtor in respect of VAT is Ms. McNamara. This is reinforced by a consideration of p. 16 of the arrangement in Ms. McNamara's case which makes clear that Ms. McNamara has a permitted debt of €9,354.34 which is owed to the Revenue Commissioners in respect of VAT and that the debt has a preferential status. In this context, it should be noted that the meaning of “permitted debt” is explained in s. 92 (8) of the 2012 Act. Essentially, a “permitted debt” is an excludable debt which has been included in a proposal for an arrangement with the consent (either actual or deemed) of the creditor concerned. In turn, s. 2 (1) of the 2012 Act explains that an “excludable debt” includes any liability of a debtor arising out of any tax duty levy or other charge of a similar nature owed or payable to the State. VAT plainly falls within that category;

(d) As noted above, Appendix 4 to the arrangement in both Mr. McNamara's case and also in Ms. McNamara's case refers to a preferential debt of €12,836 owed by both of them to the Revenue Commissioners. As explained in sub. para. (c) above, this is not consistent with the substantive text of the arrangement in Ms. McNamara's case which (as noted above) makes very clear that Ms. McNamara's obligation to the Revenue Commissioners is confined to the preferential debt of €9,354.34 owed to the Revenue Commissioners in respect of VAT. Paragraph 4.4 of her arrangement expressly states that she does not have any excludable debts which are not permitted debts within the meaning of the 2012 Act. Thus, it cannot be said that Ms. McNamara has a joint obligation to the Revenue Commissioners in respect of a sum of €12,836 as suggested in Appendix 4 to the proposed arrangement in her case. Similarly, the suggestion made in Appendix 4 of the proposed arrangement in Mr. McNamara's case that €12,836 represents a preferential debt owed by him to the Revenue Commissioners is also mistaken. Again, it is clear from the substantive text of the proposed arrangement in his case that the sum of €3,482 (representing the balance of €12,836 shown on Appendix 4 to each of the arrangements after deduction of Ms. McNamara's debt in respect of VAT in the sum of €9,354) is, in fact, owed solely by him in respect of local property tax. On p. 17 of the proposed arrangement in Mr. McNamara's case, it is stated that Mr....