The matter of the Personal Insolvency Acts 2012-2015 and Rebecca Forde Egan (a Debtor)

• Jurisdiction: Ireland
• Judge: Mr. Justice Denis McDonald
• Judgment Date: 20 December 2019
• Neutral Citation: [2019] IEHC 889
• Docket Number: [2019 No. 1 CA]
• Court: High Court
• Date: 20 December 2019

IN THE MATTER OF THE PERSONAL INSOLVENCY ACTS, 2012-2015 AND IN THE MATTER OF REBECCA FORDE EGAN (A DEBTOR)

MIDLAND CIRCUIT

COUNTY OF LAOIS

[2019] IEHC 889

[2019 No. 1 CA]

THE HIGH COURT

CIRCUIT APPEAL

Personal insolvency arrangement – Prejudice – Personal Insolvency Act 2012 s. 115A – Bank objecting to an application under s. 115A (9) of the Personal Insolvency Act 2012 – Whether granting the order sought by the debtor’s personal insolvency practitioner under s. 115A (9) would have the effect of depriving the bank of its rights against the former bankrupt

Facts: Bank of Ireland Mortgage Bank (the bank) appealed to the High Court from an order of Judge Enright in the Circuit Court made on 20th December, 2018 in which she rejected the objection of the bank to an application under s. 115A (9) of the Personal Insolvency Act 2012 as amended by the Personal Insolvency

(Amendment) Act 2015. An order was also made pursuant to s. 115A (9) confirming the coming into effect of a personal insolvency arrangement proposed on behalf of the debtor, Ms Forde Egan, by Mr Duffy, her personal insolvency practitioner (the practitioner). As this was a Circuit Appeal, the application of the practitioner under s. 115A (9) was fully reheard by the High Court together with the objection filed on behalf of the bank. A notice of objection was filed on behalf of the bank in the course of the Circuit Court proceedings. In that notice, the bank objected to the proposed arrangement on a number of grounds namely: (a) the arrangement will not enable the bank to recover the debt due to it to the extent that the means of Ms Forde Egan reasonably permit (as required by s. 115A (9) (b) (ii) of the 2012 Act); (b) the proposed arrangement is unfair and inequitable contrary to the requirements of s. 115A (9) (e); (c) the bank is unfairly prejudiced by the proposed arrangement (relying on s. 115A (9) (f) and s. 120 (a) of the 2012 Act); (d) no valid class of creditors has accepted the proposed arrangement; (e) the conduct of Ms Forde Egan in the two-year period prior to the issue of the protective certificate does not support the grant of relief (invoking s. 115A (10) (a) (i) of the 2012 Act); (f) an alternative proposal which the bank made to the practitioner was affordable by Ms Forde Egan and would have allowed her creditors to recover the debts due to them to the extent that her means would reasonably permit (relying on s. 115A (10) (b)). Although not specifically identified in the notice of objection, the principal argument made on behalf of the bank in the course of the appeal was that, if the court were to approve the arrangement by granting the order sought by the practitioner under s. 115A (9), this would have the effect of depriving the bank of its rights against Mr Egan, the former bankrupt, under the provisions of s. 116 (6) of the 2012 Act. It was alleged that such an outcome is so self-evidently unfair and prejudicial to the rights and interests of the bank that the court is precluded by s. 115A (9) (e) and (f) from approving such an arrangement.

McDonald J rejected the objections which had been made on behalf of the bank to the application under s. 115A. It seemed to him that all of the requirements of s. 115A were satisfied in this case. Although he had not dealt, in this judgment, with each of the individual requirements of s. 115A, he confirmed that he had considered each one of them and he was of opinion that they had all been satisfied.

McDonald J held that the appeal of the bank must be dismissed and the order of the Circuit Court judge affirmed. McDonald J would hear the parties as to whether any consequential orders were required.

Appeal dismissed.

JUDGMENT of Mr. Justice Denis McDonald delivered on 20th December, 2019

1 This is an appeal by Bank of Ireland Mortgage Bank (“the bank”) from an order of Her Honour Judge Mary Enright in the Circuit Court made on 20th December, 2018 in which she rejected the objection of the bank to an application under s. 115A (9) of the Personal Insolvency Act, 2012 (“the 2012 Act”) as amended by the Personal Insolvency (Amendment) Act, 2015 (“the 2015 Act”). Although not recorded in the copy order of the learned Circuit Court judge provided to me, it appears to be the case that an order was also made pursuant to s. 115A (9) confirming the coming into effect of a personal insolvency arrangement proposed on behalf of the above-named debtor, Ms. Rebecca Forde Egan, by Mr. Darragh Duffy, her personal insolvency practitioner (“the practitioner”). The main features of the proposed arrangement are outlined in para. 4 below. As this is a Circuit Appeal, the application of the practitioner under s. 115A (9) was fully reheard by this court together with the objection filed on behalf of the bank.

Relevant facts

2 Ms. Forde Egan is a public servant employed by the Health Service Executive (“ HSE“). She and her husband, Mr. Larry Egan, have three children aged 14, 18 and 20 respectively. Mr. Egan was adjudicated a bankrupt in 2009. He was subsequently discharged from bankruptcy in 2014. The family lives in County Laois and there is no dispute between the parties that the family home constitutes the principal private residence of Ms. Forde Egan for the purposes of s. 115A of the 2012 Act. It was agreed, in the course of the proceedings before the Circuit Court, that the market value of the family home is €410,000.

3 Ms. Forde Egan is indebted as follows:-

(a) There is a sum of €624,457 due to the bank in respect of a loan account secured over the family home. Subject to Mr. Egan's bankruptcy, both he and Ms. Forde Egan are jointly and severally liable to the bank in respect of this loan. The implications which flow from the bankruptcy are considered in more detail below.

(b) Ms. Forde Egan has a credit card debt of €2,072 which is owed to Allied Irish Banks Plc;

(c) Ms. Forde Egan is indebted to the Bank of Ireland on a current account in the sum of €1,313;

(d) There is a sum of €11,960 owed to Close Brothers Motor Finance on a hire purchase agreement in respect of a motor vehicle.

4 The most significant features of the proposed arrangement are as follows:-

(a) It is proposed that the arrangement will be put in place for a period of six years which is the maximum period permitted under the 2012-2015 Acts;

(b) The outstanding balance on the mortgage loan secured on the family home will be written down from €624,457.00 to €451,000.00 with the residual balance of €173,457.00 being treated as unsecured debt in respect of which a dividend in the total sum of €40,651.00 will be paid to the bank over the course of the proposed arrangement;

(c) The mortgage loan account will be restructured. The remaining term of the loan will be extended to 23 years. The interest rate is to remain at the existing tracker rate based on the ECB rate plus a margin of 0.50% resulting in a monthly mortgage payment of €1,780.00 (of which €961.00 per month will be paid by Ms. Forde Egan and the balance by Mr. Egan);

(d) A dividend of 23 cent in the euro will be paid to all of the unsecured creditors. The bank will share in this dividend as set out at (b) above.

5 At the meeting of creditors, the bank (together with Bank of Ireland) voted against the proposed arrangement while Allied Irish Banks Plc and Close Brothers Finance Ltd voted in favour. In percentage terms, 97.66% in value of creditors voted against the proposed arrangement while 2.35% in value voted in favour. Thereafter the practitioner brought an application pursuant to s. 115A (9) to the Circuit Court. Under s. 115A (9) the court is empowered (subject to satisfaction of a wide range of conditions) to confirm the coming into effect of a proposed arrangement notwithstanding that it has not been supported by a majority of creditors. It is unnecessary, at this point, to set out all of the conditions that must be satisfied in s. 115A. It is sufficient to note that they include the following conditions:-

(a) One of the debts of the debtor must be secured over his or her principal private residence;

(b) The debt secured over that residence must have been in arrears as of 1st January, 2015 (or at minimum the debtor must have entered into an alternative repayment arrangement with the secured creditor in advance of 1st January, 2015);

(c) The arrangement must have been supported by at least one class of creditor.

6 A notice of objection was filed on behalf of the bank in the course of the Circuit Court proceedings. In that notice, the bank objected to the proposed arrangement on a number of grounds namely:-

(a) It was contended that the arrangement will not enable the bank to recover the debt due to it to the extent that the means of Ms. Forde Egan reasonably permit (as required by s. 115A (9) (b) (ii) of the 2012 Act);

(b) The case was made that the proposed arrangement is unfair and inequitable contrary to the requirements of s. 115A (9) (e);

(c) It was also alleged that the bank is unfairly prejudiced by the proposed arrangement (relying on s. 115A (9) (f) and s. 120 (a) of the 2012 Act);

(d) It was submitted that no valid class of creditors has accepted the proposed arrangement;

(e) Invoking s. 115A (10) (a) (i) of the 2012 Act, the bank also submitted that the conduct of Ms. Forde Egan in the two-year period prior to the issue of the protective certificate does not support the grant of relief;

(f) Relying on s. 115A (10) (b), the bank submitted that an alternative proposal which it made to the practitioner was affordable by Ms. Forde Egan and would have allowed her creditors to recover the debts due to them to the extent that her means would reasonably permit.

7 Although not specifically identified in the notice of objection, the principal argument made on behalf of the bank in the course of the appeal was that, if the court were to approve the arrangement by granting the order sought by the...