McManus a debtor

• Jurisdiction: Ireland
• Judge: Ms. Justice Baker
• Judgment Date: 27 May 2016
• Neutral Citation: [2016] IEHC 279
• Court: High Court
• Docket Number: H:IS:HC:2016:000003
• Date: 27 May 2016

[2016] IEHC 279

THE HIGH COURT

Baker J.

H:IS:HC:2016:000003

IN THE MATTER OF PART 3, CHAPTER 3 OF THE PERSONAL INSOLVENCY ACT 2012 (AS AMENDED)

AND IN THE MATTER OF FERGAL MCMANUS OF SANTA MARIA ALACKEN, CAVAN, A DEBTOR

Bankruptcy – S. 97 of the Personal Insolvency Act 2012 as amended – Issuance of protective certificate to debtor – Objection – Irreparable damage

Facts: Following the issuance of a protective certificate to the debtor by the High Court, the creditor/objector filed an application under s. 97 of the Personal Insolvency Act, 2012, for an order directing that the protective certificate should not apply to that creditor. The creditor contended that since there were two prior charges registered on the relevant property prior to the creditor's judgment being lodged for registration as judgment mortgage, the creditor would lose status as a secured creditor as during the pendency of the protective certificate, there could not be any declaratory relief to challenge the validity of said charges.

Ms. Justice Baker granted an order to the effect that the protective certificate should not apply to the objector/creditor. The Court held that in order to seek an order under said s. 97 of the Act of 1997, a creditor had to prove that it would suffer irreparable damage. The Court found that there had been material non-disclosure of facts by the debtor at the time of the issuance of the protective certificate in that the debtor had not revealed about the existence of two prior legal charges and a family loan agreement pertaining to the relevant property, which would have remained under wraps had the creditor not taken steps for registration for judgment mortgage in relation to that property.

JUDGMENT of Ms. Justice Baker delivered on the 27th day of May, 2016.

1 On the 11th February, 2016 the High Court issued a protective certificate to the debtor pursuant to s. 95(6) of the Personal Insolvency Acts 2012 – 2015 ('The Acts'), and on the 18th April, 2016 the period of protection was extended for an additional 40 days from the date of the expiry of the certificate on the 21st April, 2016.

2 This judgment is given on the notice of objection filed on the 25th February, 2016 by a creditor, Clones Credit Union Limited ('the Credit Union'), pursuant to s. 97 of the Act.

3 The application came on for hearing before me on notice of motion grounded on the notice of objection and an affidavit of the objecting creditor. A replying affidavit of the debtor was sworn on the 18th April, 2016.

4 The grounds of objection are stated as being:

(a) That the creditor suffers irreparable loss arising from the issuance of the

protective certificate which would not have otherwise occurred.

(b) That the procedural requirements of the Personal Insolvency Act 2012 as

amended, had not been complied with by the debtor.

(c) That the debtor has made material non-disclosure in his prescribed financial

statement placed before the High Court for the purposes of the

issuance of the protective certificate.

(d) That the proposed Personal Insolvency Arrangement unfairly prejudices the

interest of the objecting creditor and other creditors.

5 The notice of objection echoes the language of s. 97 of the Act, but it is also argued that the High Court has an inherent jurisdiction to set aside a protective certificate and remove the benefit of the protection thereby offered on the grounds that a debtor has failed to make full disclosure in the documents presented to the court on application for protection. That inherent jurisdiction of the court has already been considered by me in the matter of Nugent and Personal Insolvency Acts [2016] IEHC 127, and both the objector and the debtor rely on the principles therein stated.

Statutory scheme

6 The personal insolvency legislation offers, for the first time, a scheme by which a personal debtor may avoid some of the more unfavourable consequences of being adjuducated bankrupt, by seeking to make an arrangement with his creditors. The issue of a protective certificate affords comprehensive protection to a debtor from all action by a creditor, and during its currency a creditor may not commence or continue proceedings against the debtor, or enforce a judgment. The period of protection is a window within which a debtor seeks to put in place a proposal for a Personal Insolvency Arrangement for submission to his creditors at a formal meeting.

7 The legislation requires an applicant to complete certain prescribed documents and statements and the prescription in the Rules regulating this documentation is of a very detailed kind. The scheme of the legislation requires the debtor to engage the services of a Personal Insolvency Practitioner (a 'PIP') and that the application be processed through the Insolvency Service of Ireland (the 'ISI'). The degree of prescribed detail required to be given by a debtor must be seen in the context of the requirement of s. 91 of the Act that a debtor who wishes to avail of the legislation shall make a statutory declaration confirming that the documentation lodged with ISI is a complete and accurate statement of his assets, liabilities, income and expenditure.

8 Application for a protective certificate comes on before the court on notice to the ISI, and only after the ISI certifies, by means of a prescribed form, that the documentation is complete and that the application is ready to proceed. Notice is not required to be given to any other person or body, but s. 97 of the Act permits application by a creditor who has been given notice of the issue of the protective certificate to seek an order directing that the protective certificate shall not apply to that creditor.

9 The relevant provisions of s. 97 of the Act are as follows:

'97.— (1) Where a creditor is aggrieved by the issue of a protective certificate that creditor may within 14 days of the giving of notice of the issue of the protective certificate to that creditor apply to the appropriate court for an order directing that the protective certificate shall not apply to that creditor.

(2) A creditor who brings an application under subsection (1) shall give notice to the Insolvency Service and the relevant personal insolvency practitioner and to such other persons as the court may direct of that fact, and the application shall be made in such form as is provided for in rules of court.

(3) In determining an application under this section the court shall not make an order directing that the protective certificate shall not apply to that creditor unless it is satisfied that:

(a) not making such an order would cause irreparable loss to the

creditor which would not otherwise occur, and

(b) no other creditor to whom notice of the protective certificate has

been given would be unfairly prejudiced.'

10 Section 97 allows the court, on application by an aggrieved creditor, to direct that the protective certificate shall not apply to that creditor. An order under the section does not inure for the benefit of all the creditors and it does not of itself mean that the personal insolvency process cannot continue. The section is stated in the negative such that the court shall not make such an order unless it is satisfied, not merely that irreparable harm will be done to the creditor were the order not made, but that that irreparable harm would not otherwise occur. This suggests that the burden is on the applicant creditor.

Main grounds of objection

11 The primary complaint of the applicant relates to certain transactions surrounding the interest of the debtor in his principal private residence which he owns jointly with his wife, Eithne Doyle. I have been informed that Ms. Doyle has commenced proceedings under the Acts which are at present adjourned before the Circuit Court.

12 The Credit Union obtained liberty to enter final judgment against the debtor in the sum of €203,983.22 together with measured costs, by order of the Master made on the 27th October, 2015. The debtor was represented at the hearing before the Master and sought an adjournment, principally on the basis that he intended to seek a protective certificate under the personal insolvency legislation. The Master refused an adjournment and gave liberty to enter judgment.

13 The debtor then made application to set aside the order of the Master which remains listed in the non-jury list pending the determination of the within application.

14 On the 3rd November, 2015 the debtor made application to Barr J. for a stay on the entry of judgment, and Barr J. refused a stay having heard argument from the Credit Union that it would be prejudiced by a stay, as it would prevent it from registering a judgment mortgage.

15 Following on the refusal of the stay, the solicitors for the Credit Union took steps to mark judgment in the Central Office of the High Court.

16 The solicitor for the defendant in the meantime had written to the Central Office of the High Court, directly and without notice to the Credit Union, by letter of the 30th October, 2015, asking that the marking of judgment be delayed until the application for a stay and/or an appeal was determined. By a further letter of the 5th November, 2015 and after Barr J. had refused a stay, the solicitor for the defendant wrote to the Central Office of the High Court, and again did so without notice to the Credit Union, making scandalous suggestions with regard to certain actions taken by the solicitor for the Credit Union, and also suggesting that certain irregularities were apparent in the paperwork of the plaintiff, and that the plaintiff had failed to file an affidavit of debt. The letter suggested that judicial review of the decision to enter judgment was being contemplated.

17 Mr. McManus says in his replying affidavit that this...