The High Court has ruled that refinancing a mortgage restructured through a personal insolvency arrangement can trigger a creditor clawback calculated by reference to the property’s value at the time of refinancing, rather than the amount of the new loan.
Mr Justice Liam Kennedy delivered the judgment on 20 November 2024 in proceedings brought by Mark Roache and Amanda Roache against Start Mortgages Designated Activity Company. The plaintiffs sought a determination under Order 3(7) of the Rules of the Superior Courts about the operation of section 103 of the Personal Insolvency Act 2012.
The couple’s mortgage debt to the defendant had been reduced from €350,084 to a secured balance of €250,000 under their personal insolvency arrangements. The arrangements attributed a value of €240,000 to their principal private residence and treated €100,084 of the debt as written down. The relevant arrangement terms provided for a clawback if the property was sold or otherwise disposed of above its attributed value, and the Act expressly includes refinancing within “other disposal”.
In 2023, the plaintiffs sought to refinance with Bank of Ireland on a proposed €250,000 mortgage. Start Mortgages included an €85,000 clawback in its redemption figure, using its estimated property value of €335,000 and the €250,000 PIA value. The plaintiffs argued that any calculation should instead use the refinancing loan amount, which would produce a €10,000 clawback. Their loan application attributed a value of €380,000 to the property.
The court held that section 103’s references to the property’s “value” meant its objective value at disposition, not the sum borrowed in a refinancing. It read subsections 103(3) and (4) together, finding the latter’s formula—comparing the property’s value on disposition with the value attributed in the arrangement—particularly supported the lender’s interpretation. The court also considered the wider statutory protections for secured creditors and the provisions allowing deductions for qualifying improvements and disposal costs.
The judgment addressed the statutory meaning of the clawback; it did not determine a final valuation of the property or order payment of €85,000. The plaintiffs were not entitled to the relief sought in their special summons. The matter was listed for 29 November 2024 to deal with costs and ancillary matters.