Part 3, Chapter 4 of the Personal Insolvency Acts 2012–2015

• Jurisdiction: Ireland
• Judge: Mr. Justice Mark Sanfey
• Judgment Date: 16 March 2021
• Neutral Citation: [2021] IEHC 186
• Date: 16 March 2021
• Docket Number: [Record No. 2020 223 CA]
• Court: High Court

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

And in the Matter of Aidan Quirke of 9 Killucan Manor Lawn, Rathwire, Co. Westmeath (A Debtor)

And in the Matter of Tracey Quirke of 9 Killucan Manor Lawn, Rathwire, Co. Westmeath (A Debtor)

And in the Matter of an Application Pursuant to Section 115A(9) of the Personal Insolvency Acts 2012–2015

[2021] IEHC 186

[Record No. 2020 223 CA]

THE HIGH COURT

CIRCUIT APPEAL

Personal insolvency arrangement – Debtors – Unfair prejudice – Debtors appealing from the judgment of the Circuit (Personal Insolvency) Court on the Midlands Circuit refusing the debtors’ application pursuant to s. 115A of the Personal Insolvency Acts 2012-2015 – Whether the personal insolvency arrangement was unfairly prejudicial to the creditor

Facts: The debtors, Mr and Ms Quirke, appealed to the High Court from the judgment of the Circuit (Personal Insolvency) Court on the Midlands Circuit of 10th December, 2020, in which that court refused the debtors’ application pursuant to s. 115A of the Personal Insolvency Acts 2012-2015 (the Act). The applications of the debtors were interlocking applications, and there was a single creditor of each of the debtors, namely the Governor and Company of Bank of Ireland (the bank). The matter came before Sanfey J on 1st March, 2021. Counsel for the debtors and the bank agreed an issue paper, setting out the substantive and discretionary issues which they considered to be arising from the case. They canvassed whether the arrangements were unfairly prejudicial to the creditor in a number of respects; whether the rejected arrangements return the debtors to solvency and whether they are sustainable; and whether the live balance on the debtors’ home loan with the creditor “was arrived at in accordance with law and whether the Rejected Arrangements provide for payments to the Creditor in accordance with the Debtors’ future means”. There were two discretionary issues in which the debtors’ repayment history in the two years prior to the issuance of the protective certificate was in issue; the creditor also referred to the fact that it had obtained an order for possession of the principal residence “which order the debtors unsuccessfully attempted to have set aside”.

Held by Sanfey J that, in all the circumstances, he did not consider that the Personal Insolvency Arrangement (PIA) was unfairly prejudicial to the interests of the bank. While the payment history of the debtors was not impressive, Sanfey J believed that they understood the importance of adhering to the repayment terms and the consequences if they did not. Sanfey J noted that both debtors were in full time employment, and would hopefully face their obligations in the future with renewed determination to make the arrangement work. Sanfey J considered that the costs set out in the PIA were appropriate, including the costs of the Personal Insolvency Practitioner (PIP). Sanfey J did not consider that the PIP acted inappropriately in deciding to make two applications rather than a joint application. Sanfey J was satisfied that the live balance of the loan was arrived at appropriately by the PIP. Sanfey J was satisfied that the payments in the PIA were affordable and sustainable. In so holding, Sanfey J took into account the assurance of the PIP. While the arrangement would require considerable discipline and vigilance on the part of the debtors, particularly while their children were at college, it seemed to Sanfey J that the arrangement was viable and that the debtors could, with prudent and careful budgeting, keep to the terms of the PIA and the restructured payments.

Sanfey J held that there would be an order confirming the coming into effect of the PIA. Sanfey J held that the matter would be listed for the first personal insolvency list after delivery of this judgment so that submissions may be made as to the terms of the court’s order.

Appeal allowed.

JUDGMENT of Mr. Justice Mark Sanfey delivered on the 16th day of March 2021.

Introduction

1 This matter concerns an appeal by Aidan Quirke and Tracey Quirke (‘the debtors’) from the judgment of the Circuit (Personal Insolvency) Court on the Midlands Circuit of 10th December, 2020, in which that court refused the debtors' application pursuant to s.115A of the Personal Insolvency Acts 2012–2015 (hereafter referred to collectively as ‘the Act’). The applications of the debtors are interlocking applications, and there is a single creditor of each of the debtors, namely the Governor and Company of Bank of Ireland (“Bank of Ireland”, or “the bank”).

2 The protective certificate issued on 23rd May, 2019. The Personal Insolvency Arrangement (‘PIA’) was formulated in July 2019 after a process of consultation with Bank of Ireland. The PIP decided that there should be two separate applications, notwithstanding that the only debt was that owing to Bank of Ireland in respect of its secured debt over the principal private residence (‘PPR’). This decision proved somewhat controversial, as we shall see. The s.111A notice was sent to Bank of Ireland on 10th July, 2019 seeking its approval of the PIA, and Bank of Ireland responded on 26th July, 2019, rejecting both PIAs.

3 What is proposed in each of the PIAs is a two-year period, rather than the more usual six-year period. The debtors have two dependent children, both of whom had turned sixteen at the time the PIA was submitted. The bank was owed €306,877.61. The parties have agreed a current market value of €176,000 in respect of this home, which is a four-bed semi-detached home in Rathwire, Co. Westmeath, jointly owned by the debtors. The current market value assigned to the property means that the unsecured balance owing to the bank is €130,877.61. The debtors have a monthly payment due in respect of their mortgage of €1,400, and pay interest at a rate of 4.49%. The term of the mortgage is expressed to be 216 months.

4 The restructure of the mortgage proposed in the PIA is as follows:-

• • there will be an extended term of 300 months;

• • there will be a repayment of €1,013.94, both during and post-PIA;

• • the Personal Insolvency Practitioner (‘PIP’) expresses the view that there “is no surplus income capacity to fund a standard PIA…”;

• • the net household income between the debtors, both of whom are currently in full-time employment, is €4,312.55;

• • the PIP proposes to charge fees of €3,081 and €5,270 including outlay – a total of €8,351 – which corresponds to the amount of the available contribution from the debtors after deduction of set costs for the two-year period of the PIA;

• • no lump sum is being introduced.

5 The PIA, as is required by the Act, contains a bankruptcy comparison. As regards the bank's secured indebtedness, the bankruptcy comparison erroneously sets out that the bank will retrieve the full current market value (“CMV”), whereas in fact the terms of the PIA will deliver a slightly higher figure of €182,604.52. After deduction of standard costs in bankruptcy, the CMV of the PPR would in a bankruptcy situation be reduced to €158,400. The position of the debtors therefore is that there is an appreciably better outcome for the bank as a secured creditor as a result of the PIA, and it will in addition have the benefit of interest being paid on the mortgage repayments over the restructured term. The bankruptcy comparison in Mr. Quirke's case suggests that there will be no funds to discharge the unsecured element of the bank's debt, whether under the PIA or in a bankruptcy situation (although in fact the comparison exhibited to the PIA of Mrs. Quirke suggests that there would be a dividend of €937.06). However, the net effect of the bankruptcy comparisons in the two PIAs is that, on the figures given, there would be a better outcome from successful completion of the PIAs than there would be if the debtors were to be adjudicated bankrupt.

6 A notice of objection on behalf of the bank was filed on 16th August, 2019. A substantial affidavit from the objecting creditor was filed on 24th October, 2019, with the PIP responding by affidavit on 9th March, 2020. There was thereafter a full exchange of affidavits which addressed the issues exhaustively.

7 The matter came before me on 1st March, 2021. There were no written submissions in the matter. However, counsel for the debtors and the bank agreed an issue paper, setting out the substantive and discretionary issues which they considered to be arising from the case. While I do not propose to reproduce the issue paper here, it is fair to summarise them by saying that they canvassed whether the arrangements were unfairly prejudicial to the creditor in a number of respects; whether the rejected arrangements return the debtors to solvency and whether they are sustainable; and whether the live balance on the debtors' home loan with the creditor “ was arrived at in accordance with law and whether the Rejected Arrangements provide for payments to the Creditor in accordance with the Debtors' future means”. There were two discretionary issues in which the debtors' repayment history in the two years prior to the issuance of the protective certificate was in issue; the creditor also referred to the fact that it had obtained an order for possession of the principal residence “which order the debtors unsuccessfully attempted to have set aside”.

Submissions

8 I have considered carefully all of the submissions made to me by counsel and in the affidavits, which canvassed the matters of controversy between the parties at length. I have also had the benefit of listening to the digital audio recording of the hearing to clarify any aspects of the argument in respect of which I had an imperfect note or memory. What follows is a non-exhaustive summary of the respective submissions of counsel for the appellant debtors and the bank, in which I do not seek to set out every submission...