The High Court dismissed Promontoria (Scariff) DAC’s objection to a proposed personal insolvency arrangement for Gary Hyde, finding that GE Capital Woodchester Ltd had waived its secured status and was correctly treated as an unsecured creditor when creditors voted.
Mr Justice Denis McDonald delivered judgment on 9 March 2020. Promontoria argued that the practitioner, Alan McGee, had wrongly classified GE Capital’s €36,021.11 judgment mortgage debt as unsecured. It said including the debt among secured votes would have left less than half the secured debt voting in favour, so the statutory approval threshold would not have been met.
The challenge based on the classification was not included in Promontoria’s original notice of objection. It appeared later in an affidavit and was the issue argued at the hearing on 17 January 2020. The judge expressed reservations about the way the challenge had been raised, including that the practitioner had not had a proper opportunity to address all the legal arguments. He did not decide whether the objection could properly be expanded after the statutory filing deadline, as that point had not been argued. He nevertheless considered the merits.
GE Capital’s proof of debt form did not state that it held security. The practitioner’s position was that GE Capital had thereby waived its secured status. Promontoria argued that a creditor could lose that status only through procedures expressly set out in the Personal Insolvency Acts, including provisions dealing with proof of security, elections to be treated as unsecured and valuation of security.
The court held that those statutory procedures did not exclude waiver under general law. It found that GE Capital’s proof of debt showed it had accepted that it had no security over Mr Hyde’s property. The judgment also noted an agreed €425,000 valuation of the family home between Mr Hyde, the practitioner and Promontoria, against Promontoria’s debt of €589,915.09. In the court’s view, separately valuing GE Capital’s later-ranking judgment mortgage would have been a barren exercise where the home’s value was below the first charge debt.
The judge concluded that GE Capital had waived secured status and was correctly treated as unsecured for voting. He found the statutory voting requirements were satisfied: more than half the secured debt and more than half the unsecured debt voted in favour. The proposed arrangement had therefore been approved by creditors, and Promontoria’s objection was dismissed. The judgment determined this objection; it did not itself state that the arrangement had come into effect.