Nugent [the Debtor]

• Jurisdiction: Ireland
• Court: High Court
• Judge: Ms. Justice Baker
• Judgment Date: 10 March 2016
• Neutral Citation: [2016] IEHC 127
• Docket Number: [H: IS: HC: 2015: 000027]
• Date: 10 March 2016

IN THE MATTER OF PART 3, CHAPTER 4 OF THE PERSONAL INSOLVENCY ACTS 2012 – 2015

AND

IN THE MATTER OF JAMES NUGENT OF MAPLE 6, HAZELDENE ANGLESEA ROAD, DUBLIN 4

(‘THE DEBTOR’)

AND

IN THE MATTER OF A PROTECTIVE CERTIFICATE (PERSONAL INSOLVENCY ARRANGMENT) ISSUED BY THE COURT ON THE 3RD DECEMBER 2015 (‘THE PROTECTIVE CERTIFICATE’)

AND

IN THE MATTER OF AN EXTENSION TO THE PERIOD OF THE PROTECTIVE CERTIFICATE ISSUED BY THE COURT ON 10TH FEBRUARY 2016

AND

IN THE MATTER OF AN APPLICATION PURSUANT TO S.97 OF THE PERSONAL INSOLVENCY ACTS 2012 – 2015 AND THE INHERENT JURISDICTION OF THIS HONOURABLE COURT

[2016] IEHC 127

Baker J.

[H: IS: HC: 2015: 000027]

THE HIGH COURT

Bankruptcy – The Personal Insolvency Acts 2012-2015 – Practice & Procedures – O. 76A, r. 19 of the Rules of the Superior Courts – Issuance of protection certificate – Non-disclosure of material facts – Vacation of order – Role of Personal Insolvency Practitioner – Fair procedures

Facts: Following the grant of liberty by the Master of the High Court to the Bank to enter final judgment against the debtor for the alleged debt and grant of a protective certificate to the debtor by the High Court ex parte, followed by a further order for granting extension of that certificate, the Bank now sought an order for setting aside the extension of said certificate on the ground that the initial application for grant of protective certificate was made with lack of candour.

Ms. Justice Baker granted an order for setting aside the order made ex parte by the Court for the grant of protective certificate on an application made by the Personal Insolvency Practitioner (PIP). The Court held that s. 95 of the Personal Insolvency Act 2012 was enacted for the benefit of a debtor to make necessary financial arrangements with creditors without fear or stress of bearing any action or proceedings by the creditors. The Court, following the approach of Hogan J. in Re Belohn Limited and Merrow Limited [2013] IEHC 157, held that the Court had inherent jurisdiction to set aside an ex parte order as the grant of extension of certificate involved the constitutional right of fair procedures and affects the contractual rights of secured creditors, who if left without any remedy, would suffer from irreparable damage. The Court observed that a person applying for an ex parte relief had a duty to approach the Court with clean hands and he should make a complete disclosure of the facts before the Court. The Court opined that although the PIP was not an officer of the Court, yet he was obliged to adopt a professional and objective approach. The Court found that in the present case, there was material non-disclosure of facts pertaining to the financial arrangements made by the debtor, which were made knowingly with a mala fide intent to obtain the protective certificate. The Court held that since the revelation of those facts could have informed its opinion at the time of grant of certificate, the said error having now become culpable, it would be appropriate to set aside the initial ex parte order for the grant of certificate.

JUDGMENT of Ms. Justice Baker delivered on the 10th day of March, 2016.

1 This judgment is given in the motion by Danske Bank (‘ Danske’) for an order setting aside an extension of a protective certificate granted ex parte me on the 10th February, 2016 on application by the personal insolvency practitioner (‘the PIP’) on the grounds that the ex parte application was made with a lack of candour. The application is made pursuant to the inherent jurisdiction of the High Court and/or pursuant to the provisions of s. 97 of the Personal Insolvency Acts 2012 – 2015 (‘the Act of 2012’) and/or O.76A, r.19 of the Rules of the Superior Courts.

Background

2 Mr. Nugent is a businessman, and on 8th January, 2012 the Master of the High Court granted liberty to Danske to enter final judgment against him in the sum of €8,469,490.43. The judgment was registered in the Central Office of the High Court on 19th March, 2013. Danske claims that the debtor remains indebted to it in the sum of approximately €9.5 million excluding costs, and that interest on the judgment sum continues to accrue.

3 Danske presented a petition that the debtor be adjudged bankrupt on 5th February, 2015 and the petition has been adjourned on eight occasions on application by the debtor, for the express purpose of enabling the PIP to apply for a protective certificate under the Act of 2012 and to seek to put in place a personal insolvency arrangement under the legislation. The adjournments were contested, and affidavits have been sworn by Danske and by Mr. Nugent for that purpose. The bankruptcy petition stands adjourned to Monday 14th March 2016.

4 Application was made to me for a protective certificate pursuant to s.95 (2) of the Act of 2012 on 3rd December, 2015 and that order was made for the statutory period of 70 days from the date of issue. That 70-day period was due to expire on 11th February, 2016. Danske did not appeal the grant of the protective certificate and the grounding affidavit sworn in respect of the present motion states that it determined not to do so as a matter of expediency.

The statutory regime

5 Section 95 of the Act of 2012 makes provision for the grant of a protective certificate to a debtor who establishes the statutory proofs. The effect of the grant of a certificate is that during its currency the debtor is protected from any action or enforcement proceedings by his creditors, and by virtue of s. 96 of the Act a creditor to whom notice of the issue of a protective certificate has been given shall not initiate or continue legal proceedings, nor take any steps to secure or recover payments or judgment, or on foot of any security. Whilst a protective certificate remains in force a bankruptcy petition may not be presented, or, in a case where a petition for bankruptcy has already been presented, may not be processed. The issuing of a protective certificate is a matter of considerable benefit to a debtor in that it gives breathing space in which to seek to come to an arrangement with creditors, and avoid the less benevolent consequences of bankruptcy.

6 The long title of the Act of 2012 recites a need perceived by the Oireachtas that debtors be assisted in resolving their indebtedness…

‘without recourse to bankruptcy and to thereby facilitate the active participation of such persons in the economic activity of the State.’

7 I have already considered the import of the legislation in Re P. Bankruptcy [2016] IEHC 117. The intention of the Oireachtas was to facilitate a debtor to avoid bankruptcy, and this was seen as being a matter in furtherance of the common good. I will return later to the proposition that the court might take a certain approach to an application where a person seeks the protection, or the continued protection, of a protective certificate, and whether the purpose of the Act of 2012 suggests that I should approach a creditor's opposition to such application with some degree of caution.

8 Application for a protective certificate is brought pursuant to the provisions of s.93 of the Act by a personal insolvency practitioner, and on notice to the Insolvency Service of Ireland. The Insolvency Service of Ireland, provided it is satisfied that the application is in order, provides for an application to be made to the appropriate court for the issuing of a certificate pursuant to s. 95(2). The court, once it is satisfied that the criteria and eligibility requirements are met, is mandated to issue a certificate:

‘(2) Where the appropriate court receives the application for a protective certificate and accompanying documentation pursuant to subsection (1)(a), it shall consider the application and documentation and, subject to subsection

(3)—

(a) if satisfied that the eligibility criteria specified in section 91 have been satisfied and the other relevant requirements relating to an application for the issue of a protective certificate have been met, shall issue a protective certificate, and

(b) if not so satisfied, shall refuse to issue a protective certificate.’

9 The eligibility criteria are set out in s. 91, and no issue arises as to whether the debtor does satisfy these. Application is made to the specialist judges of the Circuit Court save where the level of debt exceeds €2.5m, when application is to the High Court.

Application to set aside

10 Danske makes an application that I set aside the order made by me on the 10th February, 2016 by which I extended the original period of the protective certificate for a further period of 40 days. The application is made in reliance on the inherent jurisdiction of the court and/or pursuant to s.97 of the Act of 2012 as amended. It is convenient that I consider the extent of the jurisdiction of the High Court in this application before I turn to consider the application.

11 Section 95 of the Act and O.76A r.15 of the Amended Rules of the Superior Courts provide for the making of an ex parte application to extend the period of a protective certificate. The application is on notice to the Insolvency Service of Ireland under r.17, but not on notice to any of the creditors. The court may in its discretion direct under r.15 (2) that notice of the application for extension be given to any person as it may direct.

12 The application for the original protective certificate was heard by me on the 3rd December, 2015 on notice to the Insolvency Service of Ireland, although the Service did not participate in the hearing. There was nothing unusual about this and as the application met the statutory criteria, the order was made.

13 The application for the extension of the time was made ex parte to me on the 10th February, 2016, and the Insolvency Service of Ireland, having been served with notice of the intention to make...