The High Court adjudicated Alison Smyth bankrupt after refusing her request to adjourn, stay or dismiss a creditor’s petition so she could pursue a further debt settlement arrangement.
In a judgment delivered on 16 January 2017, Ms Justice Costello said the court had already allowed time for Ms Smyth to pursue an arrangement. Her proposal had been rejected by the Governor and Company of the Bank of Ireland, which held enough voting rights to block it. The court could not compel a creditor to accept a debt settlement arrangement, she said.
The bank had obtained judgment against Ms Smyth for €2,797,754.52 in November 2014. A bankruptcy summons followed in October 2015, and the bank presented its petition in January 2016. The petition was repeatedly adjourned while Ms Smyth explored personal insolvency options.
Her proposed debt settlement arrangement offered €150,000 from her grandmother towards debts totalling €8,355,658. After fees, unsecured creditors would have received €145,287.50, or about 1.74% of the total debt. The judgment said creditors would receive nothing through bankruptcy. The bank held 37.62% of the voting rights and voted against the proposal; 65% approval was required.
Ms Smyth argued that continuing the petition served no proper purpose because she had no assets or income available to repay creditors, and that the court could allow a second attempt at a debt settlement arrangement. The bank argued that the insolvency process had run its course and that the legislation did not give the court power to review or impose a rejected arrangement.
Justice Costello rejected the claim that continuing the petition was, without more, an abuse of process. She said the legislation allowed creditors to reject a debt settlement proposal even where bankruptcy would produce a worse financial outcome. The court also found no reasonable or practical prospect of a new arrangement, given the bank’s stated opposition and its ability to block a proposal.
The court refused to adjourn or stay the petition under section 14(2) of the Bankruptcy Act 1988, and refused to dismiss it. It found the statutory requirements for a creditor’s petition had been met and adjudicated Ms Smyth bankrupt under section 14(1).