The High Court has refused an application to bring a personal insolvency arrangement into effect after finding that the process used to propose it was flawed and that the plan improperly provided for payment of a debt to Meath County Council.
In a judgment delivered on 23 March 2022, Mr Justice Mark Sanfey considered an appeal by Lyle Chambers against the Circuit Court’s refusal of an application under section 115A(9) of the Personal Insolvency Acts 2012–2015. The application had been made by his personal insolvency practitioner, Colm Arthur, after Bank of Ireland Mortgage Bank objected to the proposed arrangement.
The plan treated the council as a non-specified creditor that had opted out, but proposed paying it in full for an unpaid development levy during a 12-month mortgage moratorium. The levy was listed as €7,200 in the arrangement. The judgment said the balance had fallen to about €3,900 by July 2020, with monthly payments of €100 being made.
The court addressed two questions. First, it ruled that an excludable debt cannot be dealt with in a personal insolvency arrangement unless the creditor has consented, or is deemed to have consented, to its inclusion. Because the council had opted out, the arrangement could not provide for payment of its debt, including by describing the payments as “special circumstances costs”.
Second, the judge found that a development levy owed to a local authority did not fall within the Act’s definition of an excludable debt owed to “the State”. He said the cited cases about local authorities as emanations of the State concerned the specific context of EU directives and did not establish that local authorities were covered by that term in this domestic legislation.
Because the council was a second creditor and its debt was not excludable, the practitioner’s use of the single-creditor procedure under section 111A was inappropriate. A creditors’ meeting should have been convened to consider the proposal. The judge therefore concluded that the court could not approve the arrangement and refused the section 115A(9) application.
The judgment did not determine the bank’s other objections. Before making formal orders, the judge listed the matter for mention on the first Monday list after delivery of the judgment, giving the parties an opportunity to consider whether they could make progress towards resolving the debtor’s difficulties.