The High Court has dismissed an appeal seeking approval of a proposed personal insolvency arrangement for a self-employed builder, finding that the plan did not comply with statutory protections for a secured creditor.
Mr Justice Denis McDonald delivered the judgment on 11 November 2019. The appeal followed a Circuit Court order refusing the application on 11 January 2019. The debtor’s personal insolvency practitioner brought the appeal on his behalf. Mars Capital Ireland No. 2 DAC opposed it.
The dispute focused on a property in Balbriggan jointly owned by the debtor and his former wife, who lives there with their children when they are not staying with him. The property secured a loan of €181,146, which was not in arrears and was being serviced by the former wife. Under the proposed arrangement, the debtor would transfer his beneficial interest to her, and no payment would be made to the lender for his liability on that mortgage.
The practitioner argued that the former wife would remain liable for the loan and that the lender would retain the property security. The court concluded that, in substance, the arrangement would extinguish the debtor’s liability and reduce his share of the debt to zero. Because the mortgage would remain over the property, the security was retained for the purposes of section 103(2) of the Personal Insolvency Act 2012. That provision does not allow the principal sum to be reduced below the value of retained security unless the secured creditor agrees.
The judge said the arrangement therefore contravened section 103(2) and could not be confirmed. He dismissed the appeal. The decision did not affect the lender’s rights against the former wife as joint borrower.
The proposed arrangement also addressed a family home in County Louth, mortgaged to Mars Ireland. It would have reduced the secured principal from €639,462.70 to the property’s stated market value of €220,000, with a 12-month payment moratorium and a later reduced interest rate. The judge did not decide the remaining objections in detail. He made brief observations, including that the practitioner had provided evidence supporting retention of the family home, but more comprehensive medical evidence about the younger child’s condition would be advisable if that issue remained live. He also said the lender’s evidence was insufficiently detailed to establish the claimed losses from the proposed interest rate.
The judgment further stated that Ulster Bank and Bank of Ireland, which had voted for the arrangement, should be treated as a separate creditor class from Mars Ireland. That observation did not change the outcome: the arrangement was incapable of confirmation because of its treatment of the Balbriggan mortgage.