Re Tinkler (Personal Insolvency)
| Jurisdiction | Ireland |
| Judge | Mr. Justice Denis McDonald |
| Judgment Date | 03 December 2018 |
| Neutral Citation | [2018] IEHC 682 |
| Docket Number | Record Nos H:IS:HC:2016: 00046 and 000792 |
| Court | High Court |
| Date | 03 December 2018 |
IN THE MATTER OF THE PERSONAL INSOLVENCY ACTS 2012-2015
AND IN THE MATTER OF NOEL TINKLER OF 3 STONEY LANE, RATHCOOLE, CO. DUBLIN
AND IN THE MATTER OF BRITT TINKLER OF 3 STONEY LANE, RATHCOOLE CO. DUBLIN
AND IN THE MATTER OF APPLICATIONS IN BOTH OF THE ABOVE NAMED CASES PURSUANT TO SECTION 115A (9) OF THE PERSONAL INSOLVENCY ACTS 2012-2015
[2018] IEHC 682
McDonald J.
Record Nos H:IS:HC:2016: 00046 and 000792
THE HIGH COURT
Insolvency – Personal Insolvency Agreement – S. 115A Personal Insolvency Act, 2012 – Application of the debtors to have court confirm a proposed Personal Insolvency Agreement – Whether the proposed PIA was fair and equitable to each class of creditors who had not approved the proposals but whose interests or claims would be affected
Facts: The debtors, a husband and wife, brought the applications pursuant to s. 115A(9) of the Personal Insolvency Act, 2012, seeking orders confirming a proposed Personal Insolvency Agreement. At each of their creditors meetings, one class of creditors – namely the principal private residence creditor – voted in favour of the Personal Insolvency Agreement, while the remaining creditors voted against. A creditor, Cheldon Property Finance DAC had the benefit of a mortgage over commercial property owned by the debtors and argued that their interests were unfairly prejudiced by the proposals and that they were not treated fairly in comparison to other classes of creditors.
Held by McDonald J that a practitioner was not entitled to single out one creditor or class of creditors for particularly favourable treatment with a view to securing that creditors approval of the proposed Personal Insolvency Agreement. The obligation is always to formulate proposals which are fair and do not give rise to manifestly inequitable treatment between different classes of creditors.
S. 115A (9)(e)(e) provides that the court must be satisfied that the Personal Insolvency Agreement is fair and equitable in respect of each class of creditors that has not approved the proposal and whose interest or claims would be impaired by its coming into effect. Mc Donald J found that the in this case the proposals were not fair and equitable and that the objecting creditor was unfairly prejudiced. As such, McDonald J refused to confirm the proposed Personal Insolvency Agreement.
Application refused.
In both of the above cases, the debtors (who are husband and wife) have brought applications pursuant to s. 115A (9) of the Personal Insolvency Act 2012 (‘the 2012 Act’) (as inserted by s. 21 of the Personal Insolvency (amendment) Act 2015 (‘the 2015 Act’)) seeking orders confirming the coming into effect of a proposed Personal Insolvency Arrangement (‘PIA’) notwithstanding that the PIA, in both cases, has not been approved in accordance with Chapter 4 of Part 3 of the 2012 Act (as amended).
In each case, a creditors” meeting took place on 27th January, 2017 to consider the respective PIAs. In the case of Mr. Noel Tinkler, 22% of creditors voted in favour of the proposal with 78% voting against. When this is broken down as between secured creditors and unsecured creditors, 42.74% of secured creditors voted in favour of the proposal whereas 57.26% voted against. In the case of the unsecured creditors, 8% voted in favour while 92% voted against.
However, of the secured creditors, one class, namely the principal private residence class, voted in favour of the proposal and, on this basis, it has been possible to satisfy the requirement set out in s. 115A(9)(g) of the 2012 Act (as amended). That subsection makes it a precondition of any application under s. 115A that at least one class of creditors has approved the proposal.
In the case of Mrs. Britt Tinkler, the percentages were slightly different, but the overall outcome was similar. In her case, 19.1% of creditors voted in favour of the proposal while 80.9% voted against. Insofar as secured creditors are concerned, 42.73% voted in favour while 57.26% voted against. In the case of unsecured creditors 100% of those creditors voted against the proposal. Again, as in the case of her husband, the principal private residence creditor voted in favour of the proposal.
In each case the terms of the PIA are similar. It is unnecessary to set out all of the terms here. In the case of Mr. Noel Tinkler, the dividend payable under the PIA to unsecured non-preferential creditors will be 6.32 cents per euro. In the case of Mrs. Britt Tinkler, the dividend will be 6.15 cents.
In the case of the principal private residence creditor, Start Mortgages Limited (‘Start’), the debt to it is secured on the family home. Although the value of the family home was agreed at €380,000 there will be no write-down of the full mortgage debt outstanding at €502, 291.87. Instead, interest only repayments will be applied to this account for the term of the PIA (which is 72 months). On the successful completion of the PIA mortgage repayments will revert to full capital and interest repayments. An interest rate of 1.25% will be applied.
The debtors also own property at 14 Franford Close, Enniscrone, Co. Sligo. Under the respective PIAs, the debtors will sell this property and the residual mortgage balance due to Bank of Ireland Mortgage Bank (‘BOIMB’) will be treated as an unsecured debt after the proceeds of sale have been paid to BOIMB less the agreed costs of sale. BOIMB will be paid the same dividend as all of the other unsecured creditors and, on successful completion of the PIA, the balance of the unsecured debt will be written off.
The debtors also own commercial property known as ‘Tinkler's Yard’, Main Street Rathcoole, Co. Dublin. This yard has a current market value of €350,000. Cheldon Property Finance DAC (‘Cheldon’) have the benefit of a mortgage over this property which was originally granted by the debtors to Permanent TSB. Under the PIAs, the debtors will retain this commercial property for business purposes. The rental income of this property (from a number of business tenants) forms a significant part of the debtors” overall income. The amount outstanding to Cheldon is in excess of €1,750,000. Under the PIA, the secured debt would be reduced to €350,000 with a balance of €1,430,522.11 being treated as an unsecured debt and ranking for a dividend accordingly. The term of the loan would be extended from 85 months to 252 months. The applicable rate of interest would be reduced from 6.95% to 4.5%. For the 72-month duration of the PIAs the debtors would make interest-only repayments in respect of the restructured commercial loan in the combined sum of €1,312.50 reverting to capital and interest repayments of €2,667.48 thereafter.
As I understand the proposal, Cheldon would receive a total of €90,344.22 by way of dividend in respect of the unsecured portion of its debt under the Noel Tinkler PIA while it would receive a further dividend of €87,911.41 under the Britt Tinkler PIA. On completion of the respective PIAs, the remaining debt of €1,252,266.48 would be written off.
The debtors also own a quarry site at Calligstown, Rathcoole, Co. Dublin. There are three judgment mortgages registered against that property which, together, exceed the current market value of the property at €165,000. Under the PIA, the debtors will retain this site as it is their place of work. At retirement age, the debtors will sell this property, at which stage the judgment mortgage debts secured on it will be discharged in full.
Cheldon has filed a notice of objection in both cases. The grounds of objection in both cases are the same. While there were a large number of grounds set out in the notice of objection in each case, there were essentially three grounds relied upon by Cheldon at the hearing, namely:-
(a) concern was expressed about the treatment of Revenue debt in the PIAs which it was suggested would have unintended consequences for unsecured creditors given that part of the Revenue debt has preferential status;
(b) Cheldon argued that the proposed PIA in each case is not fair and equitable in relation to each class of creditor that has not approved the proposal and whose interests or claims would be impaired by its coming into effect;
(c) the proposed PIA in each case is alleged to be unfairly prejudicial to the interests of Cheldon.
The hearing of the application under s.115A together with Cheldon's objections took place over the course of two days namely on 23rd July, 2018 and on 8th October, 2018. Very helpful and detailed submissions were made by counsel on behalf of the Personal Insolvency Practitioner (‘the practitioner’) and on behalf of Cheldon. The submissions addressed each of the three grounds of objection summarised in para. 11 above.
I now consider, in turn, each of these grounds of objection.
The Revenue Commissioners were not represented at the hearing. However, counsel for Cheldon emphasised that s. 115A confers a far-reaching power on the Court. He argued that this places a significant onus upon the practitioner to satisfy the Court that all of the relevant statutory conditions are met. Counsel submitted that there were a number of issues of concern in relation to the way in which the Revenue Commissioners were dealt with in this case, namely:-
(a) in the first place, in s. 5 of the PIA in each case, it is stated that there are no ‘ permitted debts’ and no ‘ preferential debts’ and that the PIA does not include any ‘ excludable debts’. This is relevant in the context of s. 115A(8)(iii) which requires that, on an application under s. 115A the Court must be satisfied that the proposed PIA does not contain any terms that would release the debtor from ( inter alia) an...
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