Mansour v Personal Insolvency Acts 2012–2015

• Jurisdiction: Ireland
• Judge: Mr Justice Mark Sanfey
• Judgment Date: 20 March 2023
• Neutral Citation: [2023] IEHC 185
• Docket Number: [Record No. 2021/183CA]
• Court: High Court

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

And in the Matter of Anas Mansour, 12 Riverwood Copse, Castleknock, Dublin 15 (A Debtor)

[2023] IEHC 185

[Record No. 2021/183CA]

THE HIGH COURT

CIRCUIT APPEAL

Personal insolvency – Debt settlement arrangement – Procedure – Appellants appealing from the judgment approving the coming into effect of a debt settlement arrangement – Whether the decision to exclude the appellants from the debt settlement arrangement was in accordance with the procedural requirements of the Personal Insolvency Acts 2012-2015

Facts: The appellants, Mr and Ms Costello (the creditors), were excluded by a Personal Insolvency Practitioner (PIP) from the debts included in a Debt Settlement Arrangement (DSA), as a result of which the creditors in question, who at the time of the DSA represented 71.6% of the indebtedness of the debtor, Mr Mansour, neither participated in a creditors’ meeting in respect of their indebtedness, nor participated in the resulting DSA, which was approved on a single creditor basis. The creditors appealed to the High Court from the judgment of the Circuit (Personal Insolvency) Court (Judge Lambe) of 16 November 2021, at which the court approved the coming into effect of the DSA, with no order as to costs. The creditors in that case had submitted a very detailed notice of objection in relation to what they alleged was a wholesale failure on the part of the PIP to comply with various procedural requirements specified in the Personal Insolvency Acts 2012-2015 (the Act). Those grounds of objection were repeated in the hearing before Sanfey J. Counsel for the creditors and the PIP agreed the issues to be decided by the High Court. They were expressed as follows: “1. Whether the Court is satisfied the debtor is insolvent, (and thereby eligible to avail of a Debt Settlement Arrangement under the Personal Insolvency Act 2012). 2. Whether the Debt Settlement Arrangement unfairly prejudices the interests of the Creditors to the extent that it is unjust. 3. Whether the decision by the PIP to exclude the Creditors’ debt on the grounds that they had not proved their debt, was in [accordance] with the procedural requirements of the Personal Insolvency Act 2012.”

Held by Sanfey J that the request for a proof of debt “may” be made by the PIP in accordance with s. 64(2)(a) of the Act; once the request is made, the debt “shall” be proved in the manner set out in that subsection. Sanfey J held that the notice requiring proof of debt must be properly served, and compliant with the section itself. Sanfey J held that if derogation is sought by the PIP from the method of service set out in s. 134(1)(a), so that service of the notice by email may be made, this must be “agreed in advance”; in this case, there was no such agreement in relation to the s. 64 notice. Sanfey J held that, in the absence of such agreement, the notice was not properly served. Sanfey J held that the notice was defective in relying on the wrong statutory provision in a different chapter of the Act, as grounding the PIP’s authority to make the request. The defects in service and the notice itself were in Sanfey J’s view fatal to its validity, and the PIP’s purported request to the creditors to prove their debt was accordingly invalid. In the circumstances, Sanfey J held that the appellants were not included in the creditors for the purposes of the creditors’ meeting normally convened to vote on the DSA, notwithstanding that the debt owed to them was the grounding debt for a bankruptcy petition against the debtor and had been previously “accepted” in the draft DSA. Sanfey J held that the absence of the appellant’s debt resulted in a “single creditor approval” procedure, instead of a creditors’ meeting in which the appellants probably would have voted against approval of the DSA. Sanfey J held that the procedure leading to the approval of the DSA was therefore fatally flawed, and could not be allowed to stand. Sanfey J held that this conclusion was sufficient to decide the application.

Sanfey J held that the appeal of the creditors must succeed and their objection to the DSA upheld.

Appeal allowed.

JUDGMENT of Mr Justice Mark Sanfey delivered on the 20 ^th day of April 2023 .

Introduction

1 . This judgment concerns a number of issues arising from the exclusion of judgment creditors by a Personal Insolvency Practitioner (‘PIP’) from the debts included in a Debt Settlement Arrangement (‘DSA’), as a result of which the creditors in question, who at the time of the DSA represented 71.6% of the indebtedness of the debtor, neither participated in a creditors' meeting in respect of their indebtedness, nor participated in the resulting DSA, which was approved on a single creditor basis.

2 . The present application is an appeal from the judgment of the Circuit (Personal Insolvency) Court (Her Honour Judge Verona Lambe) of 16 November 2021, at which the court approved the coming into effect of the DSA, with no order as to costs. The creditors in that case had submitted a very detailed notice of objection in relation to what they alleged was a wholesale failure on the part of the PIP to comply with various procedural requirements specified in the Act. These grounds of objection were repeated in the hearing before me, and I shall refer to them in detail below.

3 . Numerous affidavits were filed in the Circuit Court in relation to the matter, and these, together with extensive written submissions, were relied upon before this Court. While the appeal is primarily concerned with interpretation of sections of the Personal Insolvency Acts (2012–2015) (referred to collectively as ‘the Act’), it is necessary to explain the background to the matter as set out in the affidavits in some detail.

Background

4 . Mr Anas Mansour (‘the debtor’) is a medical practitioner. The appellants, Seamus Costello and Dympna Costello (‘the creditors’ or ‘the appellants’) are creditors of the debtor due to a judgment of 11 July 2018 for €91,300 together with subsequent taxed legal costs of €43,351.58, giving a total of €134,651.58. The judgment arose from the debtor's default in relation to a commercial agreement with the appellants.

5 . The creditors subsequently issued bankruptcy proceedings against the debtor. A bankruptcy petition was listed before the court on 03 February 2020. At that point, a firm of solicitors came on record for the debtor and applied for a number of adjournments to enable the debtor to engage with a PIP in accordance with s.14 of the Bankruptcy Act 1988 as amended.

6 . By an email of 10 July 2020, the debtor's solicitors Staunton Caulfield & Co. wrote to the creditors' solicitors by an email which enclosed inter alia a “Draft Debt Settlement Arrangement” and a summary of the statement of affairs. The draft DSA showed that the judgment in favour of the creditors was included in the proposal, and the creditors understood that the calculations at p.14 of the draft DSA meant that all creditors of the debtor, including the creditors themselves, would receive payments over five years resulting in payment of 100% of their debt. The section of the draft DSA dealing with the debt owing to the appellants specifically acknowledged that debt as “accepted”.

7 . The appellants found this proposal unsatisfactory. Their solicitors replied to the email of 10 July 2020 on 13 July 2020 stating that it was extraordinary that the debtor had not sought a facility to discharge the creditor's debt given his income, his disposable income and his general practitioner's practice. By an email of 07 September 2020, the debtor's solicitors enclosed copies of the debtor's Prescribed Financial Statement [ ‘PFS’], application for a protective certificate and statutory declaration. The PFS acknowledged the debt owing to the creditors of €134,651.58.

8 . By letter of 24 September 2020, the creditors' solicitors reminded the debtor's solicitors that the court had directed the debtor to deliver any documents relied on in the bankruptcy proceedings by 28 October 2020. The letter repeated the arguments regarding the creditors' view that the debtor had the ability to pay the debt, and referred to an inconsistency between the debtor's statement of affairs in the bankruptcy proceedings which referred to his having take home pay net of taxation per month of €11,781, and his PFS which indicated that that figure was income before tax. In a reply of October 2020, the debtor's solicitors stated:

“The documents we sent you with our email of 07 September 2020 are complete copies of the Statutory documents submitted by our Client's PIP, Mr Niall Moran to the Insolvency Service of Ireland. He is awaiting the issue of a Protective Certificate”.

9 . By email of 05 November 2020, the debtor's solicitors enclosed a copy of the Protective Certificate which had issued, and sought an adjournment of the bankruptcy proceedings to enable the PIP to prepare a debt settlement arrangement and make an application to court under the Act. The creditors' solicitors consented to an adjournment for this purpose.

The contentious correspondence

10 . At that time there was correspondence between the parties to which particular attention must be paid, as it is central to the issues currently between the parties. By an email of 04 November 2020 to Staunton Caulfield & Co, the firm of solicitors acting on behalf of the debtor, and Shanley Solicitors LLP for the creditors, Ms Corinna Nolan on behalf of the PIP stated that a protective certificate had issued in the case of Dr Mansour and asked “can you confirm you are willing to accept these documents by way of email”. A reminder in this regard was sent by Ms Nolan to Shanley Solicitors LLP on 06 November 2020. The creditors' solicitors replied on that date, stating “…we can accept by email given the circumstances”. Later that afternoon, Ms...