The High Court has upheld two creditors’ objection to a debt settlement arrangement after finding that a personal insolvency practitioner’s request for proof of their debt was invalidly served and defective.
Mr Justice Mark Sanfey ruled that the creditors had not agreed in advance to receive the statutory proof-of-debt notice by email. The email seeking consent referred generally to “these documents” and the protective certificate and supporting documents, but did not identify a notice requiring proof of debt. The practitioner’s letter also relied on a provision governing personal insolvency arrangements rather than debt settlement arrangements.
The creditors held a judgment debt of €134,651.58, including taxed legal costs. Although the debt had appeared in an earlier draft arrangement and in the debtor’s financial documents, the practitioner sought a separate proof of debt. The creditors’ solicitors received the request by email but overlooked it. The practitioner said he was entitled to seek proof and had followed the usual process; the judge agreed he could require proof and saw no difficulty in principle with the 14-day period. But the request’s serious consequences meant it had to be properly served and compliant with the applicable provision.
Because the creditors were excluded from the creditors’ meeting, the arrangement proceeded through single-creditor approval. The judge said the resulting procedure was fatally flawed and could not stand. The creditors’ appeal from the Circuit Personal Insolvency Court’s 2021 approval therefore succeeded, and their objection to the arrangement was upheld.
The court did not decide whether the debtor was insolvent or whether the arrangement unfairly prejudiced the creditors. The judge said those issues did not need to be addressed after his finding on procedure and that it would be unhelpful to express a view on unfair prejudice while the parties might try to resolve their differences.
The judge directed each party to make written submissions on costs or the form of the order within 14 days. He said he would then make a final order, with the option of a short hearing if needed. The judgment does not state that a final order had yet been made.