The High Court has terminated the personal insolvency arrangements of Thomas and Linda Colton after finding that they failed to disclose a Lanzarote property transaction and related company resources during the process that led to approval of the arrangements.
In a judgment delivered on 18 July 2022, Mr Justice Alexander Owens said the omissions breached the debtors’ duties of good faith and full and honest disclosure. He found that they misled Mars Capital Ireland DAC, a secured creditor, into agreeing to arrangements that caused it material detriment. The court ordered termination under section 122(3)(b) of the Personal Insolvency Act 2012.
The arrangements had been confirmed by the High Court on 7 February 2022 under section 115A(9). The termination applications were brought by the debtors’ personal insolvency practitioner, Eugene McDarby, under section 122(1)(c). Mars joined the applications. The judgment also concluded that Mars and the practitioner had established grounds under sections 122(1)(a) and (c).
The court said the Coltons’ financial statements did not disclose their September 2021 purchase of a villa in Lanzarote, a €178,500 loan from a Spanish bank secured on the property, or the Spanish bank account opened to service the asset. The statements also failed to disclose significant company funding for the purchase and later renovation. The judgment said the company’s activities and resources were relevant to the couple’s means, beyond their stated salaries.
The affidavits gave differing figures for the property and refurbishment costs. One account put the property cost at €263,185, plus fees and taxes, and renovation spending at €226,778. A letter from Thomas Colton gave a combined cost of €406,278. The court said even the lower figure indicated company spending of more than 22 times the amount made available to unsecured creditors under the arrangements, which was just over €10,200.
The arrangements lasted 12 months. They reduced the secured capital sum on the family home from about €678,500 to €640,000, with Mars agreeing to the reduction, and lowered the restructured monthly mortgage payment to €2,673.06. Unsecured creditors were to receive nominal payments funded by €15,000 in family contributions.
The judge rejected an alternative variation as disproportionate. He said the omissions were too significant to justify a revised arrangement, any viable changes would effectively create new arrangements, and the affidavits did not show a clear fair path for creditors. He said none of the alternative orders under section 122(3) was appropriate.