The High Court has criticised a personal insolvency practitioner for mischaracterising a Revenue debt in a proposed arrangement and for not properly addressing a creditor’s objections. The court made no order and took no further action because the application had been withdrawn and Pepper Finance Corporation (Ireland) DAC was not seeking costs or other relief.
The judgment concerns an application under section 115A(9) of the Personal Insolvency Acts, brought on behalf of Jonathan Bourke by personal insolvency practitioner John O’Callaghan. Pepper, the largest creditor, objected to the arrangement. It later drew the court’s attention to the fact that the proposal described Revenue’s full €558,601.66 claim as preferential, although Revenue’s proof of debt identified only €351,627.22 as preferential.
The proposal said Revenue would be repaid in full, partly through monthly payments and an expected lump sum linked to a hoped-for liquidity event at XS Direct, an underwriting business in which Bourke held shares. Revenue had opted into the proposed arrangement. The arrangement was rejected by creditors after Pepper voted against it, and Bourke then sought court approval. That application was withdrawn on 4 April 2022. Revenue’s bankruptcy petition subsequently proceeded, and Bourke was adjudicated bankrupt on 25 April 2022.
After Pepper questioned the classification, O’Callaghan said the wording was an error and that he had intended to show Revenue would be paid in full. He also said Revenue had indicated it would opt in only if paid in full. Revenue disputed that it had ever said the entire debt should be classed as preferential, saying preferential status has a statutory meaning and Revenue could not determine which part of a taxpayer’s debt qualified.
The judge said the arrangement’s repeated description of the entire claim as preferential could have led creditors to believe Revenue was entitled to priority over unsecured creditors. That mattered to their assessment of the proposal and of the likely outcome in bankruptcy. The judge accepted that the practitioner had worked diligently to find a solution, but found his explanation unconvincing and unsupported by the evidence. The court concluded that he had provided misleading information, failed to engage properly with Pepper’s objections and did not give the court an adequate explanation. His conduct in this case fell well below the ethical standards expected of a personal insolvency practitioner.
The judgment was an examination of the circumstances surrounding the withdrawn application, not a decision approving the arrangement. The court said no further action was appropriate. It emphasised that practitioners must present accurate, complete and open information to creditors and the court.