Re Ahmed Ali (a debtor)

• Jurisdiction: Ireland
• Judge: Mr. Justice Denis McDonald
• Judgment Date: 04 March 2019
• Neutral Citation: [2019] IEHC 138
• Court: High Court
• Docket Number: [2018 No. 436 CA]
• Date: 04 March 2019

IN THE MATTER OF THE PERSONAL INSOLVENCY ACTS, 2012 TO 2015

AND IN THE MATTER OF AHMED ALI (A DEBTOR)

AND IN THE MATTER OF AN APPLICATION PURSUANT TO SECTION 115A(9) OF THE PERSONAL INSOLVENCY ACT, 2012 (AS AMENDED)

[2019] IEHC 138

McDonald J.

[2018 No. 436 CA]

THE HIGH COURT

CIRCUIT APPEAL

Insolvency – Finance and Banking – Personal Insolvency Act, 2012 (As Amended) – Personal insolvency practitioner seeking to confirm a Personal Insolvency Arrangement which was refused by the Circuit Court – Whether the requirements of the Act were satisfied such that proposals for a Personal Insolvency Arrangement should be put into effect

Facts: The matter came before the court by way of an appeal from the Circuit Court denying an application of the Personal Insolvency Practitioner to have the court put into effect a Personal Insolvency Arrangement (‘PIA’) pursuant to S. 115 A of the Personal Insolvency Act 2012 (as amended) (‘the Act’). Bank of Ireland Mortgage Bank (‘the bank’), a creditor, objected to the PIA and argued that multiple requirements of S. 115 had not been met. The bank contended that there was no ‘relevant debt’ as required by S. 115A(18) as the debtor did not live in the principal private residence on 1 January 2015. The bank further submitted, inter alia, that a declaration in writing had not been made pursuant to S. 90(1)(g) and as required by S. 115A(8)(a)(i); that the Revenue Commissioners should not be treated as a separate class of creditors and therefore S. 115A(9)(g) could not be satisfied; and that the proposed PIA was not sustainable as required by S. 115A(9)(b)(i).

Held by McDonald J that the requirements of s. 115 of the Act had been met by the Practitioner. While S. 115A(18) required that a debtor was in arrears with his payments on or before 1 January 2015 for a relevant debt to be present, there was no requirement that the debtor reside in the residence at that time, therefore the property was Mr Ali’s principle provide residence and there was a ‘relevant debt’ in this case.

Mc Donald J permitted new evidence to be admitted of the S. 91(1)(g) declaration. Despite the strict rules in relation to the admission of new evidence on appeal, this was not evidence relating to a factual dispute but rather simple proof that the declaration had been made, and as such, it was in the interests of justice to admit the evidence. The requirement under S. 115A(8)(a)(i) was therefore satisfied.

Mc Donald J further held that it was appropriate to treat the Revenue Commissioners as a separate class of creditors and that they could therefore accept the proposals to satisfy S. 115A(9)(g). The proposed PIA was found to be sustainable as there was a reasonable prospect that its confirmation would enable Mr Ali to resolve his indebtedness without recourse to bankruptcy. Mc Donald J found no unfair prejudice to the bank.

Mc Donald J was satisfied that all the requirements of S. 115A had been met and therefore made an order confirming the coming into effect of the proposals.

Relief granted.

JUDGMENT of Mr. Justice Denis McDonald delivered on 4 March, 2019

1 This is an appeal by a Personal Insolvency Practitioner, James Greene, (‘the practitioner’) on behalf of a debtor, Mr. Ahmed Ali, from a decision of the Circuit Court of 30th October, 2018, refusing the practitioner's application under s. 115A(9) to approve the coming into effect of proposals for a Personal Insolvency Arrangement (‘ PIA’). The hearing of the appeal took place on Monday, 11th February, 2019, during which I heard submissions from counsel for the practitioner and also counsel for an objecting creditor, namely Bank of Ireland Mortgage Bank (‘ the bank’) which holds security in the form of a mortgage over the home of Mr. Ali in Castlemartyr, Co. Cork.

2 In the course of the hearing on 11th February, 2019, the submissions of counsel, on both sides, focused primarily on the issues raised by the bank in its notice of objection dated 11th September, 2017. I address these issues, in turn, below.

Is there is a ‘relevant debt’ within the meaning of section 115A(18)?

3 Provided certain conditions are met, s. 115A provides a mechanism whereby a practitioner can seek to persuade the court to approve the coming into effect of proposals for a PIA notwithstanding that the proposals have been rejected by a majority of the creditors of a debtor. One of the conditions which must be satisfied in order to trigger the jurisdiction of the court under s. 115A, is that the debts covered by the proposed PIA must include a ‘relevant debt’. For this purpose, s. 115A(18) defines a relevant debt as follows:-

‘(18) In this section—

“relevant debt” means a debt—

(a) the payment for which is secured by security in or over the debtor's principal private residence, and

(b) in respect of which—

(i) the debtor, on 1 January 2015, was in arrears with his or her payments, or

(ii) the debtor, having been, before 1 January 2015, in arrears with his or her payments, has entered into an alternative repayment arrangement with the secured creditor concerned.’

4 The bank takes a preliminary objection in this case on the basis that (so it submits) there cannot be a ‘relevant debt’ in circumstances where Mr. Ali was not residing in the principal private residence on 1st January, 2015. In this context, it is clear from the affidavit evidence before the court that Mr. Ali had previously lived in the property from 2004 to 2011 with his then wife. However, his marriage broke down and, at some stage in 2011, he moved out of the home. He subsequently lived in rented accommodation from 2011 until June 2015.

5 It appears from the materials before the court that Mr. Ali sought to remove his name from the mortgage at the time of the breakdown of his marriage but the bank refused to do this. At that time, Mr. Ali says that he was in a low paid job and was not in a position to contribute anything towards the repayment of the mortgage debt. In 2014, his estranged wife (who was also in financial difficulty) decided to move out of the home. She was later adjudicated a bankrupt (on her own application). The property, therefore, appears to have been empty for a time between 2014 and June 2015. According to the PIA, Mr. Ali decided to move back into the property at that time in circumstances where he realised he had a personal liability on foot of the mortgage loan and he has since paid a sum of €700 per month to the bank.

6 On the basis of this evidence, the bank submits that the requirements of s. 115A(18) are not satisfied; it submits that it follows that Mr. Ali does not have a ‘relevant debt’ and, accordingly, the application under s. 115A (according to the bank) must fail in limine.

7 While I understand why the bank should make this submission, it is noteworthy that there is nothing in the language of the definition of ‘relevant debt’ which expressly requires that the debtor should reside in the principal private residence as of 1 January, 2015. What is required is that the mortgage loan should be in arrears as of that date. However, there is no express requirement that the debtor should reside in the principal private residence as of that date.

8 There are two aspects to the definition of ‘relevant debt’ in s. 115A, namely:-

(a) the requirement that there should be a debt secured over the principal private residence; and

(b) that the debt was in arrears as of 1 January, 2015, or had been in arrears prior to that date and the debtor had entered into an alternative repayment arrangement with the secured creditor concerned.

9 It is obviously a critical component of the definition of ‘relevant debt’ that there should be arrears as of 1 January, 2015, or arrears before that date. Notably, s. 115A(18) does not go so far as to require that the debtor must reside in the property as of that date. For the subsection to operate, there must be a mortgage over the principal private residence of the debtor prior to 1 January, 2015. There must also be a ‘ principal private residence’. That term is defined in s. 2 of the 2012 Act as meaning (insofar as relevant): ‘a dwelling in which the debtor ordinarily resides.’ Importantly, there is nothing in the definition of ‘ principal private residence’ in s. 2 to require that the debtor must reside in the dwelling as of any particular date.

10 It is clear that Mr. Ali did not ordinarily reside in the property in issue here as of 1 January, 2015. However, there is no doubt (on the basis of the evidence before the court) that as of the date of commencement of the proceedings under the 2012-2015 Acts in 2017, he was ordinarily resident in the property.

11 Thus, for the purposes of these proceedings, the property is Mr. Ali's principal private residence within the meaning of s. 2. Furthermore, there is a debt secured over that property in favour of the bank. That debt was in arrears as of 1 January, 2015. In these circumstances, each of the express requirements set out in the definition of ‘relevant debt’ are satisfied. There is accordingly a ‘relevant debt’ within the meaning of s. 115A(18).

12 Had it been the intention of the Oireachtas to require that the debtor should actually reside in the principal private residence as of 1 January, 2015, it would have been a very simple matter for that requirement to be spelt out in section 115A(18). No such provision was made. I can see no basis on which such a requirement can be read into s. 115A(18). In fact, no argument was addressed to me at the hearing that would provide any proper basis for the court to conclude that it is implicit in the definition of ‘relevant debt’, that the debtor should be resident in the relevant property as of 1 January, 2015.

13 In the circumstances described above, I have come to the conclusion that the requirements of s. 115(18) have been satisfied and that there is, accordingly, in this case, a ...