The High Court allowed Jacqueline and James Hayes’s appeal against a Circuit Court decision that had upheld a creditor’s objection to their interlocking personal insolvency arrangements (PIAs). It ordered the arrangements to come into force despite their rejection by creditors at a statutory meeting.
The judgment, delivered by Ms Justice Baker on 1 November 2017, concerned an application under section 115A(9) of the Personal Insolvency Acts 2012–2015. The couple’s PIAs were rejected by creditors in August 2016. The Circuit Court upheld Shoreline Residential DAC’s objection in February 2017, and the debtors appealed.
Shoreline holds security over the couple’s principal private residence. The proposals would reduce its mortgage debt from €323,626.21 to €190,000, the stated value of the home, and extend the mortgage term to 27 years. They provided for interest-only payments during the six-year PIA and a fixed interest rate of 3.65% over the extended term. The proposed monthly mortgage payment was €1,080.58.
Shoreline argued that the arrangements were unsustainable and unfairly prejudicial. It said the couple might be unable to afford repayments after James Hayes retired, and challenged fixing the interest rate for such a long period. The judgment recorded that the family’s joint monthly income was €3,112.65 and the proposed budget left a monthly surplus of €89.85. The couple had two dependent children.
Justice Baker rejected the sustainability objection. She found the arrangements reasonably likely to be sustainable during their term and into the reasonably foreseeable future. She said the projected shortfall in a later year depended on assumptions too far ahead to determine the issue, while the court should not disregard evidence about reasonably foreseeable circumstances.
On interest, the judge found Shoreline had not provided sufficient evidence that the 3.65% rate would unfairly prejudice it. Shoreline was an investment fund, rather than a lending bank, and the evidence did not establish its financing costs or show that it would need to borrow to fund the investment. The judge said the rate had to be assessed in light of Shoreline’s circumstances as an investor.
The court also compared the proposed return with the likely outcome in bankruptcy. It accepted a bankruptcy return estimate of about €183,255 if Shoreline relied on its security, and found the return under the PIAs was better even on that calculation. The judge said fairness required consideration of all circumstances, including the aim of preserving the family home and whether the debtors’ means had reasonably been brought to bear.
Taking those matters together, the High Court allowed the appeal and ordered the PIAs to come into force despite creditor rejection. The judgment did not guarantee the couple’s continued solvency in all future circumstances.