The Supreme Court has upheld a finding that a County Wexford farmer was insolvent for the purposes of personal insolvency legislation, while sending the assessment of his proposed debt arrangement back to the High Court.
In a judgment delivered on 30 November 2023, Ms Justice Baker said a debtor’s assets may be considered when deciding whether debts can be paid as they fall due. There is no general rule excluding a principal private residence or business assets from that assessment. Whether an asset is readily realisable depends on the evidence about its value, the market, practical or legal obstacles to sale, and the time a sale would take.
The case concerned Fergus O’Connor and Promontoria Oyster DAC, which objected to a Personal Insolvency Arrangement (PIA) proposed for him. The arrangement had been rejected by creditors, but the Circuit Court approved it under section 115A of the Personal Insolvency Act 2012. The High Court dismissed Promontoria’s appeal.
The proposed PIA restructured the secured debt over 30 years, with no reduction in the amount owed. It did not require the sale of property or other assets. The judgment recorded that the PIA valued assets at about €1.84 million and debts at about €1.12 million. Promontoria argued that selling land could provide enough to repay the debts.
The Supreme Court said the insolvency test focuses on whether assets can be realised in time to meet debts as they fall due, rather than simply comparing total assets and liabilities. It noted that registered lis pendens affecting some farmland could obstruct a swift sale. The High Court had accepted evidence that resolving those obstacles would take time, and the Supreme Court found its conclusion that O’Connor was insolvent sustainable on the evidence before it. It therefore dismissed the appeal on that finding.
However, the Court criticised the evidence supporting the PIA and the lower courts’ assessment of its fairness. It said key details were missing about when debts fell due, demands for payment, the saleability or severability of land, and the effect of selling part of the farm on the business. The Court also said the evidence did not adequately address whether the arrangement was fair and sustainable for creditors.
The Supreme Court did not itself decide whether the PIA should be approved. It remitted that issue to the High Court for assessment under section 115A. The arrangement’s ultimate approval therefore remained unresolved in this judgment.