Re Finnegan (a debtor)

• Jurisdiction: Ireland
• Judge: Mr. Justice Denis McDonald
• Judgment Date: 11 February 2019
• Neutral Citation: [2019] IEHC 66
• Court: High Court
• Docket Number: [2018 No. 410 C.A.]
• Date: 11 February 2019

[2019] IEHC 66

THE HIGH COURT

CIRCUIT APPEAL

McDonald J.

[2018 No. 410 C.A.]

IN THE MATTER OF THE PERSONAL INSOLVENCY ACTS 2012 – 2015

AND IN THE MATTER OF THOMAS FINNEGAN (A DEBTOR)

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

Personal insolvency – Personal insolvency arrangement – Personal Insolvency Act 2012 s. 115A – Debtor seeking personal insolvency arrangement – Whether s. 115A(2) of the Personal Insolvency Act 2012 requires that service be effected on the statutory notice parties within the fourteen day period prescribed

Facts: The debtor, Mr Finnegan, in 2016, initiated proceedings in the Circuit Court under the Personal Insolvency Acts 2012-2015 with a view to putting in place a Personal Insolvency Arrangement (PIA) with his creditors. Proposals for a PIA were prepared by Mr Mohan, the Personal Insolvency Practitioner retained for that purpose. Those proposals were considered at a meeting of creditors which was held on 6th December, 2016. The total amount of debt owed to creditors present and voting at that meeting amounted to €754,789.96. When broken down as between secured debt and unsecured debt, there was a majority of secured creditors who voted in favour of the proposal. However, when it came to the unsecured creditors, the total amount of debt held by those in favour of the proposals amounted to 49.9% of the unsecured debt owed by the debtor while a single creditor, Mars Capital Ireland No. 2 DAC, voted against the proposal, holding 50.1%. The result of the vote of the unsecured creditors meant that the requirements of s. 110(1)(c) of the 2012 Act could not be satisfied. In those circumstances, the only route by which the debtor could seek to proceed with the proposals was through the mechanism of an application by his practitioner under s. 115A(9) of the 2012 Act. The s. 115A application was listed for hearing before the Circuit Court on 25th October, 2018. Having considered the papers, the Circuit Court Judge concluded that the application had not been made within the fourteen day period prescribed by s. 115A(2) on the basis that the application could not be said to be “made” unless and until all of the parties had been served. The practitioner, acting on behalf of the debtor, appealed the decision of the Circuit Court and the practitioner and Mars agreed that the High Court should, in first instance, consider the steps that have to be taken before it can be concluded that an application under s. 115A has been “made” within the prescribed fourteen day period. The practitioner emphasised that each statutory provision dealing with the making of an application to a court must be construed in its own statutory context. Counsel placed significant emphasis upon the long title to the 2012 Act which expressly records the goals of the Act including the objective to ameliorate the difficulties experienced by debtors, the need to enable insolvent debtors to resolve their indebtedness in an orderly and rational manner without recourse to bankruptcy and, thereby, to facilitate the active participation of such persons in economic activity in the State. The practitioner argued that certainty would be enhanced by an interpretation which regarded the filing of an application as sufficient for the purposes of s. 115A(2). It was submitted that it would be much easier for a creditor to establish that the relevant fourteen day period had or had not been met if all the creditor had to do was to make contact with the relevant court office to inquire whether any application had been filed within that period.

Held by McDonald J that, when s. 115A(2) was read in context, he was of the view that the interpretation advocated by the practitioner was correct. He rejected the suggestion by Mars that this created uncertainty for creditors.

McDonald J held that an application under s. 115A(9) is made once the application has been lodged in the relevant court office. In McDonald J’s view, s. 115A(2) does not require that service be effected on the statutory notice parties within the fourteen day period prescribed.

Judgment approved.

JUDGMENT of Mr. Justice Denis McDonald delivered on 11th February, 2019

The Issue before the Court

1 The issue before the court relates to the interpretation of s. 115A(2) of the Personal Insolvency Act 2012 (‘ the 2012 Act’) as inserted by s. 21 of the Personal Insolvency (Amendment) Act 2015 (‘ the 2015 Act’). The issue relates to the meaning of the words:-

‘ An application under this section shall be made not later than fourteen days after the creditors” meeting…’ (Emphasis added)

2 Essentially, the question which requires to be addressed relates to the steps that have to be taken before it can be concluded that an application under s. 115A has been ‘ made’ within the prescribed fourteen day period. Is it sufficient, for this purpose, to simply file the application in the relevant court office? Alternatively, is it necessary that the application should both be filed and served on the mandatory notice parties within the prescribed fourteen day period?

Background

3 In 2016, Thomas Finnegan (‘ the debtor’) initiated proceedings in the Circuit Court under the 2012-2015 Acts with a view to putting in place a Personal Insolvency Arrangement (‘ PIA’) with his creditors. Proposals for a PIA were prepared by Cormac Mohan, the Personal Insolvency Practitioner (‘ the practitioner’) retained for this purpose. Those proposals were considered at a meeting of creditors which was held on 6th December, 2016. The total amount of debt owed to creditors present and voting at that meeting amounted to €754,789.96. On an overall basis, creditors holding 60.7% of that debt voted in favour of the proposal while a single creditor, Mars Capital Ireland No. 2 DAC (‘ Mars’) holding 39.3% of the debt voted against the proposal. When broken down as between secured debt and unsecured debt, there was a majority of secured creditors who voted in favour of the proposal. However, when it came to the unsecured creditors, the total amount of debt held by those in favour of the proposals amounted to 49.9% of the unsecured debt owed by the debtor while a single creditor (Mars) voted against the proposal, holding 50.1%. The result of the vote of the unsecured creditors meant that the requirements of s. 110(1)(c) of the 2012 Act could not be satisfied. In those circumstances, the only route by which the debtor could seek to proceed with the proposals was through the mechanism of an application by his practitioner under section 115A(9). Under s. 115A, the court is given power to approve the coming into effect of proposals for a PIA notwithstanding that the requirements of s. 110 have not been satisfied. The power of the court is carefully circumscribed by the detailed provisions of section 115A. However, the only requirement of s. 115A which is relevant for present purposes is the requirement that the application should be ‘ made’ not later than fourteen days after the creditors” meeting.

4 In the present case, the s. 115A application was issued in the Circuit Court Office in Trim Co. Meath on 19th December, 2016. It was, therefore, issued within the prescribed fourteen day period after the creditors” meeting. Section 115A(2) requires that the application should be on notice to the Insolvency Service of Ireland (‘ ISI’), each creditor concerned and the debtor. Service on the creditors was effected by posting the notice of motion on 21st December, 2016. In the course of the Circuit Court hearing, it was agreed by the parties that such service fell outside the fourteen day period prescribed by section 115A(2).

5 Following service of the notice of motion seeking relief under s. 115A, a detailed notice of objection was filed on behalf of Mars. At that point Mars was aware of the date of service of the notice upon it. It did not specifically contend, in its notice of objection, that the application was thereby out of time. Instead, in para. 1 of that notice, Mars required proof that the application had been served on all of the parties who were required to be served under the Act. Paragraph 2 was then in the following terms:-

‘Subject to the foregoing, the Objector reserves the right to object on the basis that the within application has not been brought and/or has not been properly brought within the time permitted by s. 115A(2) of the Personal Insolvency Act 2012, as amended.’

6 When paras. 1 and 2 of the notice of objection are read together, one might think that the focus of these grounds of objection was centred on requiring proof that the s. 115A application had been served on all relevant parties as required by section 115A(2). However, the ground of objection that was ultimately argued in the Circuit Court on behalf of Mars was that the application was out of time because it had not been made within the fourteen day period prescribed by section 115A(2). That is also the argument that was made in this Court at the hearing on 21 January, 2019. No objection was taken by the practitioner that this was outside the scope of the notice of objection.

7 The s. 115A application was duly listed for hearing before Her Honour Judge O'Malley Costello in the Circuit Court on 25th October, 2018. Having considered the papers, the learned Circuit Court Judge came to the conclusion that the application had not been made within the fourteen day period prescribed by section 115A(2). She came to that conclusion on the basis that the application could not be said to be ‘made’ unless and until all of the parties had been served. In circumstances where service on the creditors here had not taken place within the fourteen day period, the learned Circuit Court Judge held that the requirements of s. 115A(2) had not been satisfied and she, therefore, dismissed the application.

8 The practitioner, acting on behalf of...