The High Court has overturned a Circuit Court refusal and confirmed a personal insolvency arrangement for a self-employed builder, despite finding that he had not adequately explained his poor payment record before a protective certificate was issued.
Mr Justice Denis McDonald delivered the judgment on 3 December 2018 on an appeal brought by personal insolvency practitioner Daniel Rule on the debtor’s behalf. The proposed arrangement had been rejected by creditors in September 2017. The Circuit Court refused an application under section 115A of the Personal Insolvency Act in July 2018 to confirm it despite that vote.
The bank’s last recorded payment from the debtor was €4,000 on 9 June 2016. The judge said the debtor’s affidavits did not explain why he made so little to the bank while his business accounts showed profits of €36,929 in 2015 and €40,953 in 2016, with drawings of €51,406 in 2016. The failure to explain the record weighed heavily against relief, but the judge held that it did not require automatic dismissal. He said the debtor must explain poor payments, while the court must assess the evidence as a whole and also consider creditor conduct.
The proposed arrangement would run for 72 months. It would reduce the bank’s secured debt to €291,500, with the balance treated as unsecured, and provide for monthly mortgage payments of €1,126.86 during the arrangement. After it ended, the proposed payment would be €1,334.18 a month. The Revenue Commissioners supported the proposal and their preferential debt of €18,987 was to be paid in full. The judge noted that unsecured creditors would receive no dividend in a bankruptcy, while the arrangement offered them a small dividend that could increase if the debtor’s income rose.
The judge also considered the debtor’s failure to make mortgage payments during the protection period. He described the evidence about that period as unsatisfactory, but found no statutory requirement to meet liabilities during it and no sufficient basis to treat the non-payment alone as a reason to refuse relief. He distinguished the case from one involving a lack of candour.
The bank argued that the debtor could pay more after the arrangement expired, particularly if his building business improved. The judge found no concrete evidence supporting that prediction. He concluded the proposal used the debtor’s available means during its term and was fair to creditors, including the bank. He set aside the Circuit Court order and confirmed the arrangement according to its terms.