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

JudgeMr. Justice Mark Sanfey
Judgment Date13 May 2021
Neutral Citation[2021] IEHC 327
Docket Number[Record No. 2020 150 CA]
CourtHigh Court
Date13 May 2021
In the Matter of Part 3, Chapter 4 of the Personal Insolvency Acts 2012–2015
And in Matter of Esther Kirwan of the Bungalow, Moycarkey, Thurles, Co. Tipperary (‘A Debtor’)
And in the Matter of an Application Pursuant to Section 115 of the Personal Insolvency Acts 2012–2015

[2021] IEHC 327

[Record No. 2020 150 CA]



Personal insolvency arrangement – Approval – Personal Insolvency Acts 2012 to 2015 s. 115 – Personal insolvency practitioner applying to appeal a refusal by the Circuit Court to approve the coming into effect of a personal insolvency arrangement – Whether the court was obliged to approve the coming into effect of the arrangement

Facts: The Personal Insolvency Practitioner (PIP), Mr O’Brien, on 19th October, 2020, applied to the High Court to appeal a refusal by the Circuit Court to approve the coming into effect of a Personal Insolvency Arrangement (PIA) in accordance with s. 115 of the Personal Insolvency Acts 2012 to 2015. As the arrangement had the unanimous support of both secured and unsecured creditors present and voting, the application to the Circuit Court for approval of the coming into force of the arrangement was in accordance with s. 115. On the face of the wording of that section, it was submitted that it would appear that the wording of s. 115(2)(a) suggested that, if the court is satisfied that there has been compliance with the requirements set out at (i) to (iv) of that subsection, the court is obliged to approve the coming into effect of the arrangement; the use of the term “shall approve” being a mandatory direction to the court by the legislation, so that the court does not have the option, even where it has reservations in relation to the arrangement, not to approve its coming into effect.

Held by Sanfey J that, in the absence of any suggestion of error or incompetence on the part of the professionals involved on behalf of the debtor, Ms Kirwan, and given the overwhelming support of her creditors, it did not seem to him to be an appropriate case for the court to override the wishes of all concerned, and most particularly the debtor, given her adherence to the criteria in s. 115(2)(a) and her informed decision, having taken appropriate professional advice, to accept whatever risk there may be in embarking upon the arrangement.

Sanfey J held that he would accede to the PIP’s application, and that there would be an order confirming the coming into effect of the PIA.

Application granted.

JUDGMENT of Mr. Justice Mark Sanfey delivered on the 13th day of May, 2021


This is an application to this Court to appeal a refusal by the Circuit Court to approve the coming into effect of a Personal Insolvency Arrangement (‘PIA’) in accordance with s.115 of the Personal Insolvency Acts 2012 to 2015 (referred to collectively herein as ‘the Act’).


The circumstances in which this refusal was made are unusual, and raise an important point of principle as to the power of the court to refuse to approve a PIA notwithstanding that there has been compliance with the terms of s.115.


The application on behalf of the Personal Insolvency Practitioner (‘PIP’), Mr. Mitchell O'Brien, was made on 19th October, 2020. As it is an application under s.115, rather than s.115A, the application was unopposed. Having heard counsel, I reserved judgment in the matter. However, at that time it became apparent that there were a number of applications before the court, under both s.115 and s.115A, in relation to arrangements which involved proposed extensions of the mortgage term to a point at which the debtor would either be certain or unlikely to be still alive, and whether such an arrangement is at all permissible under the Act.


Accordingly, I decided that it would be appropriate to select one such case, and effectively to treat it as a test case, which might provide guidance as to how this issue might be addressed in other cases. The selected case was due to be heard in November 2020, but due to circumstances beyond the control of the parties, was ultimately heard in March 2021. Judgment was delivered on 29th April, 2021: see in re Ann Fennell, A Debtor [2021] IEHC 297.


While the judgment in Fennell was pending, I listed the present matter for hearing on 26th April, 2021 pursuant to s.115(3)(b) of the Act, so that some matters which I had encountered during my deliberations in relation to the Fennell judgment could be explored with counsel in the context of the present matter which, it must be emphasised, unlike Fennell concerned a s.115 application rather than a s.115A application. Having heard counsel, I adjourned the matter to 10th May, 2021, so that counsel could consider my judgment in Fennell and its implications, if any, for the present case. The court received considerable assistance from the submissions of counsel on both occasions.


The debtor in this case, Ms. Esther Kirwan, is a single lady who lives on her own in a three-bedroom house in Moycarkey, Co. Tipperary. She was 54 years of age at the date of formulation of the PIA, and works in the local Spar shop as a shop assistant. She has worked there since a retail business which she operated closed approximately five years ago.


The debtor's financial situation deteriorated in 2017, when her elderly mother, who had been living with her and who contributed to the costs of running the household from her Old Age Pension, passed away. At this time, the financial burden for Ms. Kirwan of the expense of a mortgage and running a car became insupportable.

The arrangement

As set out in the PIA, the debtor had, at the date of issue of the protective certificate, total debts of €108,265.29. Of this amount, €83,485.46 is secured on the principal private residence (‘PPR’) in favour of Start Mortgages DAC (‘Start’), the only secured creditor. The section 105 agreed valuation for the PPR is €145,000. The majority of the remaining unsecured indebtedness is owed to Allied Irish Banks plc for business loans and a business overdraft, and to the Revenue Commissioners.


As regards assets and liabilities, the debtor's only significant asset is the PPR. The debtor's car is a 2005 Toyota Corolla with a notional value of €1,000, which together with the debtor's household effects are needed for her personal use. The debtor's total net income per month is €1,586.61, with set costs of €1,050.48 and special circumstance costs of €208.48. The debtor therefore is in a position to contribute €327.65 per month to her liabilities.


The PIP has constructed the PIA as a twelve-month term arrangement which seeks to protect the debtor's reasonable living expenses (‘RLE’) and to secure continued occupation of the home. The mortgage is to be restructured by way of a capitalisation of arrears, a term extension and a conversion of the annuity basis of the loan to interest only for the term of the loan.


In relation to the secured creditor, the figures indicate that the debtor currently has equity in the PPR of €61,514.54 (agreed valuation €145,000 less mortgage balance €83,485.46). Under the PIA, the secured debt is to be restructured to 420 months (35 years) from the coming into effect of the PIA. This would mean that the term would not expire until Ms. Kirwan was 90. If she should pass away before the end of that period, the full loan balance (and continuing interest) will be paid from the proceeds of sale of the PPR by the representatives of her estate. As interest will have been discharged during the term, there is no reason to believe that the property will not yield more than sufficient proceeds to discharge the loan balance in full.


The interest rate relating to the mortgage loan will be charged at the standard variable rate of 3%, although this may of course be subject to fluctuations. The mortgage loan repayments will be of interest only, estimated at €214.98 per month. The loan balance itself is not being reduced, and will be payable on the expiry of the term or the death of the debtor, whichever occurs first.


The bankruptcy comparison proffered by the PIP shows that, in bankruptcy, the PPR would be sold and the secured and unsecured creditors would both be paid in full, although the bankruptcy fees are substantially higher than the modest fee charged by the PIP. Under the PIA, the PPR will be retained, so no assets are available to generate a dividend for the unsecured creditors.

The creditors' meeting and the section 115 application

However, at the creditors' meeting held under s.106 of the Act on 20th March, 2020, the unsecured creditors present and voting — €21,536.37 out of a possible €24,779.83 – voted in favour of the arrangement. No unsecured creditor voted against it. The only secured creditor, Start, voted in favour of it. There was therefore unqualified support from the creditors for the arrangement, notwithstanding the fact that the unsecured creditors would have been paid in full if the debtor had been adjudicated.


Likewise, when the matter came before the Circuit Court in June 2020, no creditor opposed the application by the PIP for an order for approval of the coming into effect of the arrangement. The Circuit Court appears to have expressed a concern that, at the end of the 420-month term when the debtor would be aged 90, she would not be solvent or have secured continued occupation in the property, given that the outstanding balance of the mortgage would then be payable. The court adjourned the s.115 hearing to allow the PIP to respond in relation to these issues.


The PIP duly responded by way of a detailed written submission of 4th July, 2020. In relation to the “return to solvency” issue, the PIP expressed the view that the debtor was “cash flow solvent”, in that following successful completion of the PIA within the twelve-month term, the debtor would have €112.67 monthly available to her after discharge of the...

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