Sarah Hill

• Jurisdiction: Ireland
• Judge: Ms. Justice Baker
• Judgment Date: 18 January 2017
• Neutral Citation: [2017] IEHC 18
• Docket Number: Record No. C:IS:SETA:2016:000666,[2016 No. 228 CA]
• Court: High Court
• Date: 18 January 2017

[2017] IEHC 18

THE HIGH COURT ON CIRCUIT

Baker J.

Record No. C:IS:SETA:2016:000666

SOUTH EASTERN CIRCUIT COUNTY OF TIPPERARY

IN THE MATTER OF PART III, CHAPTER IV OF THE PERSONAL INSOLVENCY ACTS 2012 - 2015

AND IN THE MATTER OF SARAH HILL OF PALMERS HILL, CASHEL, COUNTY TIPPERARY (A DEBTOR)

AND IN THE MATTER OF AN APPLICATION PURSUANT TO S. 115A (9) OF THE PERSONAL INSOLVENCY ACTS 2012 - 2015

Insolvency – The Personal Insolvency Acts 2012-2015 Personal Insolvency Arrangement (‘PIA’)

Facts: The debtor had filed an appeal against the Circuit Court order for refusing the debtor's application under s. 115A (9) of the Personal Insolvency Acts 2012-2015 (‘Acts’) and upholding the lender's objection. The question now arose for determination was whether there existed a relevant debt within the meaning of s. 115 A (18) of the Acts at the time of commencement of process so as to confer jurisdiction to the Circuit Court to make the impugned order under. s. 115 (9) of the Acts.

Ms. Justice Baker held that the debtor did not have a relevant debt in respect of which a Personal Insolvency Arrangement (‘PIA’) could be approved and thus, the provisions of s. 115A (9) of the Acts had no applicability. The Court found that the isolated incidence of making payments of the mortgages with conversation over phone did not establish that an alternative repayment arrangement was in place. The Court found that as on January 1, 2015, the debtor was not in arrears and the alternative payment arrangement made by the debtor with the bank was not of the type envisaged under s. 115A.

JUDGMENT of Ms. Justice Baker delivered on the 18th day of January, 2017.

1 This judgment is given in an appeal by the debtor of an order of the Circuit Court of 19th October, 2016, by which it upheld the objection of Pepper Finance Corporation (Ireland) DAC (‘Pepper’) and refused an application by the debtor under s. 115A(9) of the Personal Insolvency Acts 2012 to 2015 (‘the Acts’).

2 One net question arises for determination in this appeal, whether the debtor had at the time of the commencement of the process a relevant debt such that the jurisdiction to make an order under s. 115A (9) existed.

3 Ms. Hill made a proposal for a Personal Insolvency Arrangement (‘PIA’) which was rejected at the vote taken at a meeting of her creditors on 17th June, 2016, at which all of her creditors holding secured and unsecured debt were present and voted. The total debts of the debtor are €166,643.71, of which €150,976.66 is secured on her principal private residence at Palmers Hill, Cashel, Co. Tipperary. Pepper is the owner of that security and debt.

4 The premises has an estimated value of €55,000, as a consequence of which the debtor was shown to have a significant negative equity. The PIA put to the meeting of creditors provided for the restructuring of the mortgage, the write-off of a substantial part of the debt, the payment on an interest only basis for a period of 6 years and the payment of capital and interest on an annuity basis for the balance of a 25-year term. It was anticipated by the Personal Insolvency Practitioner (‘the PIP’) engaged to act on behalf of the debtor that the restructured mortgage would enable the debtor to continue to reside in her home. The proposal also included a provision for the fixing of interest at 5.15% for the full 25-year mortgage term. As is required by the legislation, the proposals to restructure the mortgage repayments and term were made having regard to the current and projected income and reasonable living expenses of the debtor.

5 The other creditor who attended and voted at the meeting, Affinity Credit Union Limited, held an unsecured debt and voted in favour of the proposal.

6 The debtor is employed part-time as a bookkeeper and lives with her daughter in her residence which had been purchased jointly with her former partner, from whom she is now estranged.

Section 115A (9): power of the court to approve an arrangement

7 Section 115A(9) of the Act was inserted by the Personal Insolvency (Amendment) Act 2015 and created the power in the relevant court to confirm the coming into effect of a PIA notwithstanding that it had been rejected by the creditors at a creditors' meeting at which a vote was taken on the arrangement. The subsection provides as follows:

‘(9) The court, following a hearing under this section, may make an order confirming the coming into effect of the proposed Personal Insolvency Arrangement only where it is satisfied that—

(a) the terms of the proposed Arrangement have been formulated in compliance with section 104,

(b) having regard to all relevant matters, including the terms on which the proposed Arrangement is formulated, there is a reasonable prospect that confirmation of the proposed Arrangement will—

(i) enable the debtor to resolve his or her indebtedness without recourse to bankruptcy,

(ii) enable the creditors to recover the debts due to them to the extent that the means of the debtor reasonably permit, and

(iii) enable the debtor—

(I) not to dispose of an interest in, or

(II) not to cease to occupy, all or a part of his or her principal private residence,

(c) having regard to all relevant matters, including the financial circumstances of the debtor and the matters referred to in subsection (10)(a), the debtor is reasonably likely to be able to comply with the terms of the proposed Arrangement,

(d) where applicable, having regard to the matters referred to in section 104(2), the costs of enabling the debtor to continue to reside in the debtor's principal private residence are not disproportionately large,

(e) the proposed Arrangement is fair and equitable in relation to each class of creditors that has not approved the proposal and whose interests or claims would be impaired by its coming into effect,

(f) the proposed Arrangement is not unfairly prejudicial to the interests of any interested party, and

(g) other than where the proposal is one to which section 111A applies, at least one class of creditors has accepted the proposed Arrangement, by a majority of over 50 per cent of the value of the debts owed to the class.’

8 The statutory provisions were formulated to enable a qualifying applicant to preserve an entitlement to retain ownership, or remain in occupation, of a principal private residence in certain circumstances, and have the effect that a creditor holding security over a principal private residence of a debtor may find that its rejection of a PIA can be overridden by the court. The creditor holding security of that type is treated differently from creditors holding other security, or unsecured creditors.

9 However the court's power arises only where the debts which are proposed to be dealt with by a PIA include a ‘relevant debt’. Section 115A(18) defined a relevant debt as:—

‘“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.’

10 Section 115A(18)(a) does not give rise to any difficulty and it was the intention of the legislature to enable the court to override the result of a meeting of creditors only when the debtor did have a liability secured on his or her principal private residence. It is in regard to the balance of the definition of a relevant debt that the issue in this case comes to be determined.

11 It is common case that Ms. Hill was not, on 1st January, 2015, in arrears with her payments on the mortgage on her principal private residence. Her counsel argues that she did have a relevant debt, in that she had been in arrears on at least five occasions before 1st January, 2015, and had entered into an alternative repayment arrangement with her bank concerning these arrears.

12 I first set out the events that occurred in 2014 regarding payments by Ms Hill of her mortgage.

The late payments

13 The debtor failed to make the monthly payment on her mortgage on five separate occasions before 1st January, 2015. The relevant circumstances are as follows:

1. The debtor phoned an agent of the Bank on 28th March, 2014, advising she was in financial difficulty and was ‘struggling to pay her mortgage each month’ and asking if there was ‘anything to help her’ including an ‘interest only arrangement’. The reports of this conversation suggest that the agent of the Bank advised her that as the loan was relatively new, an interest only arrangement would not be advisable as the capital would be left outstanding. It is clear that in that conversation the debtor did ask that one of the alternative repayment arrangements of the type envisaged by the Central Bank Code of Conduct on Mortgage Arrears (‘the Code’) would be at least considered by the Bank, but the matter ended there.

2. The borrower made contact with her lender on 8th May, 2014, advising that she was in financial difficulty and the internal bank notes suggest that she was treated as being in ‘pre-arrears’ for the purposes of the Mortgage Arrears Resolution Process (‘MARP’) provided in the Code. On 9th May, 2014 an arrangement was made by phone with an agent of the Bank that the payment due could be made by Laser card a few days late. A few days earlier, in the course of a conversation initiated by the Bank the debtor had been asked to fill in a standard financial statement, one step in the resolution process required to be engaged by the lender under MARP.

3. The payment for July, 2014 was not made in the amount or on the date agreed and the borrower contacted an agent of the Bank by telephone and...