Power v Personal Insolvency Acts 2012 to 2015

• Jurisdiction: Ireland
• Judge: Mr. Justice Mark Sanfey
• Judgment Date: 12 October 2022
• Neutral Citation: [2022] IEHC 562
• Court: High Court
• Docket Number: [Record No. 2021/58CA]

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

and

In the Matter of Eugene Power of Ballyglavin Park, Youghal, Cork

and

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

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

and

In the Matter of Mary Power of Ballyglavin Park, Youghal, Cork

and

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

[2022] IEHC 562

[Record No. 2021/58CA]

[Record No. 2021/59CA]

THE HIGH COURT

CIRCUIT APPEAL

Personal insolvency arrangements – Sustainability – Personal Insolvency Acts 2012-2015 s. 115A(9) – Debtors appealing against the refusal of the Circuit Court of an application by their personal insolvency practitioner pursuant to s. 115A(9) of the Personal Insolvency Acts 2012-2015 – Whether the personal insolvency arrangement was sustainable

Facts: The debtors, Mr and Mrs Power, appealed to the High Court against the refusal of the Circuit Court (Judge Meghen) on 6th May 2021 in each of the debtors’ cases of an application by their personal insolvency practitioner, Mr O’Callaghan (the PIP), pursuant to s. 115A(9) of the Personal Insolvency Acts 2012-2015 (the Act). An issue paper was agreed by counsel, and the agreed issues were stated to be as follows: “(1) Whether the debtors’ financial position has been adequately vouched. (2) Whether the PIA is sustainable having regard to the fact that the arrangement would require the debtors to live beneath the ISI’s guidelines on reasonable living expenses. (3) Whether the PIA is unfairly prejudicial to the interests of the objecting creditor.” The objecting creditor argued that, given the debtors’ circumstances, the personal insolvency arrangements (the PIAs) as proposed were neither affordable nor sustainable.

Held by Sanfey J that the shortfall was significantly less than the objecting creditor contended, and at €268.27 per month for three years at its worst point, was in the range of the sort of shortfall which McDonald J considered permissible in Re Hurley and Phelan, Debtors [2019] IEHC 523. It seemed to Sanfey J that, as in that case, the debtors had established that notwithstanding that the arrangement may cause them to live below reasonable living expenses at certain points, they would be able to arrange their affairs so that they and their children could generate sufficient income to maintain a reasonable standard of living.

Sanfey J considered both applications by the debtors to be appropriate cases in which to grant the relief claimed under s. 115A(9) of the Act. Sanfey J therefore made orders setting aside the orders made by the Circuit Court judge on 6th May 2021 and confirmed the coming into effect of the proposals for the PIAs in each case in accordance with their terms.

Relief granted.

JUDGMENT of Mr. Justice Mark Sanfey delivered on the 12 ^th day of October 2022 .

Introduction

1 . This judgment concerns two appeals by Eugene Power and Mary Power (‘the debtors’) against the refusal of the Circuit Court (His Honour Judge Patrick Meghen) on 6 ^th May 2021 in each of the debtors' cases of an application by their personal insolvency practitioner John O'Callaghan (‘the PIP’) pursuant to s.115A(9) of the Personal Insolvency Acts 2012–2015 (collectively referred to herein as ‘the Act’). The debtors are a married couple, with shared domestic circumstances, and counsel for the PIP dealt with their applications at the hearing as if there were effectively a single appeal.

2 . No written submissions were proffered by the parties. However, an issue paper was agreed by counsel, and the agreed issues were stated to be as follows:-

• “(1) Whether the debtors' financial position has been adequately vouched.

• (2) Whether the PIA is sustainable having regard to the fact that the arrangement would require the debtors to live beneath the ISI's guidelines on reasonable living expenses.

• (3) Whether the PIA is unfairly prejudicial to the interests of the objecting creditor.”

3 . There were certain other objections in the notice of objection dated 6 ^th August 2019 filed by Promontoria Scariff Designated Activity Company (‘the objecting creditor’), notably the proposition that it was not accepted that a valid class of creditors had accepted the personal insolvency arrangements (‘PIAs’) by a majority of over fifty percent of the value of the debts owed to the class. However, this objection was not pursued at the hearing, and it was agreed that the only issues were those set out in the issue paper.

4 . Essentially, the objecting creditor argued that, given the debtors' circumstances, the PIAs as proposed were neither affordable nor sustainable. As the onus of proof in this regard is on the PIP, particular regard must be had to the circumstances of the debtors as set out in the affidavits of the debtors and the PIP, and particularly in the PIAs themselves.

The PIAs

5 . A meeting of creditors was held on 12 ^th July 2019 to consider the terms of the PIAs. The arrangements were rejected by the creditors: in Mr. Power's case, 13.69% of creditors present and voting voted in favour of the PIA while 86.31% of creditors present and voting voted against it. Those creditors were the objecting creditor and Cabot Financial (Ireland) Limited, which is owed an unsecured debt of €175,158.75. Mrs. Power's PIA was defeated by a similar margin.

6 . The debtors proffered separate PIAs, although their assets are jointly held. Their debts are for the most part also jointly held, with some minor differences: Mr. Power's specified debt creditors amount to €382,613, while Mrs. Power's specified debt creditors amount to €377,378.80. In the interests of concision and in order to avoid repetition, I propose in this judgment to concentrate on Mr. Power's PIA; where Mrs. Power's circumstances differ and require to be emphasised, this is set out below.

7 . Mr. Power was born on 25 ^th June 1975; Mrs. Power was born on 20 ^th August 1980. At the time of writing this judgment, they are 47 and 42 years of age respectively. They are married and live in the permanent private residence (‘PPR’) in Youghal, County Cork with their five children who, at the time of the presentation of the PIA in July 2019, were, in terms of age, 4, 7, 9, 10 and 13. Mr. Power is a car body repairer and driver with Barry Metal Recycling Limited; Mrs. Power is a homemaker and fulltime carer for their eldest child, who has epilepsy.

8 . The current market value of the PPR is agreed in the PIA at €290,000. The mortgage balance, owed to the objecting creditor, is €155,062.16. There is therefore €134,937.84 equity in the house as of July 2019. There are however other liabilities. A sum of €173,845.28 is owed to Cabot Financial (Ireland) Limited, which is described as a “residual debt from KBC”. Bank of Ireland has registered a judgment mortgage against both debtors in respect of a personal loan in the sum of €36,094.50. Mr. Power has a liability of €16,297.59 to Youghal Credit Union Limited, although that entity voted in favour of the PIA. Mr. Power's total liabilities are €382,613.

9 . As regards income, the debtors have joint income of €3,786.59, of which 66% — €2,499.15 — is attributed to Mr. Power. His set costs are €1,648.92 — 66% of the household's set costs of €2,541.90 — and after deduction of a monthly mortgage repayment of €358.23 (total €542.78), a monthly payment in respect of the Bank of Ireland judgment, and special circumstances cost of €251.76, it is estimated that Mr. Power will have an available contribution for creditors of €174.06. Mrs. Power's PIA suggests that her available contribution will be €89.67.

10 . At part III of the PIA, some background to the circumstances of the debtors is given. It appears that the debtors fell into money problems, “due to the timing of the sale of their old PPR in Castlemartyr”, with that house “selling for less than they had hoped leaving a large residual with KBC”. Unfortunately, the financial pressure contributed to Mr. Power suffering a suspected heart attack and as a result he was unable to work for a period of time. He avers at para. 40 of his replying affidavit of 12 ^th February 2021 that financial stress has also “had a significant effect on my wife's mental health”. He goes on in that paragraph to say that the Castlemartyr property “was eventually sold at a significant loss leaving a large unsecured debt”.

11 . Mr. Power works as a car and truck repairer for Barry Metal Recycling Limited in Youghal, County Cork. That company has confirmed that Mr. Power has recently passed a specific driver's test for trucks which will allow him to work one more day a week, which will accordingly increase his earnings.

12 . The PIA states that Mrs. Power is a homemaker whose only income is her carer's allowance of €293.28 per week. The debtors, as of July 2019, had recently cancelled their health cover as they realised that they could no longer afford it if the PIA were to be sustainable.

13 . The proposed arrangement is a twelve-month PIA. While this does not allow much time for the PIA to be “road-tested”, the PIP comments that “the family's total set costs increase in Year 2 and again in Year 4 of the PIA and the monthly surplus is not enough to cover PIP fees or pay an increased dividend to the unsecured creditors…”. The debtors propose to procure a €5,000 lump sum from a family friend to pay the PIP's fees and this lump sum has been split in line with the RLE split, i.e. €3,000 to Mr. Power's PIA and €2,000 to Mrs. Power's PIA. The full outstanding balance of the PPR mortgage is restructured under the PIA and is to be repaid in full over the 324-month term. The debtors will make monthly payments of approximately €100 per month over a period of fifteen years to discharge the Bank of Ireland judgment in full. The PIP...