PIA Initiation
S.I. No. 330/2013 –
Personal Insolvency Act 2012 (Value above which a debtor must not transfer, lease, grant security over, or otherwise dispose of any interest in property) Regulations 2013.
Notice of the making of this Statutory Instrument was published in
The Regulations
“Iris Oifigiúil” of 3rd September, 2013.
The Insolvency Service of Ireland, in exercise of the powers conferred on it by section 3 of the Personal Insolvency Act 2012 (No. 44 of 2012) (the “Act”), hereby makes the following regulations:
1. These Regulations may be cited as the Personal Insolvency Act 2012 (Value above which a debtor must not transfer, lease, grant security over, or otherwise dispose of any interest in property) Regulations 2013.
2. These Regulations are made for the purposes of section 81(5) and section 118(5) of the Act.
3. The amount of €650 is hereby prescribed as the value above which a debtor in respect of whom a Debt Settlement Arrangement is in effect shall not transfer, lease, grant security over, or otherwise dispose of any interest in property otherwise than in accordance with the terms of the Debt Settlement Arrangement.
4. The amount of €650 is hereby prescribed as the value above which a debtor in respect of whom a Personal Insolvency Arrangement is in effect shall not transfer, lease, grant security over, or otherwise dispose of any interest in property otherwise than in accordance with the terms of the Personal Insolvency Arrangement.
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GIVEN under the seal of the Insolvency Service of Ireland,
30 August 2013.
LORCAN O’CONNOR,
Director of the Insolvency Service of Ireland.
EXPLANATORY NOTE
(This note is not part of the Instrument and does not purport to be a legal interpretation)
These Regulations prescribe the amount of €650 as the value above which a debtor in respect of whom a Debt Settlement Arrangement or, as applicable, a Personal Insolvency Arrangement is in effect shall not transfer, lease, grant security over, or otherwise dispose of any interest in property otherwise than in accordance with the terms of the Debt Settlement Arrangement or, as applicable, the Personal Insolvency Arrangement.
S.I. No. 416/2015 –
Personal Insolvency Act 2012 (Written Statement Disclosing All of the Debtor’s Financial Affairs) Regulations 2015.
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Notice of the making of this Statutory Instrument was published in
“Iris Oifigiúil” of 2nd October, 2015.
The Insolvency Service of Ireland, in exercise of the powers conferred on it by section 3 of the Personal Insolvency Act 2012 (No. 44 of 2012), hereby makes the following regulations:
The Regulations
Citation and Commencement
1. These Regulations may be cited as the Personal Insolvency Act 2012 (Written Statement Disclosing All of the Debtor’s Financial Affairs) Regulations 2015.
2. These Regulations come in to operation on 5 October 2015.
Written Statement Disclosing all of the Debtor’s Financial Affairs in Respect of a Debt Relief Notice
3. The information prescribed for the purposes of section 27(1)(a)(i), 27(1)(a)(ii), and 27(1)(b), of the Act shall be the following in so far as the debtor can reasonably ascertain and the relevant information is applicable to the debtor:
(a) the full name, address and telephone contact details of the debtor’s creditors;
(b) a full description of the debtor’s debts and other liabilities;
(c) whether each of these debts and other liabilities are secured debts or unsecured debts;
(d) the amount of each debt or other liability (including principal, interest, costs and arrears) due to each of the debtor’s creditors at the date of the written statement;
(e) any contingent and prospective debts or other liabilities of the debtor (including any guarantee or similar commitment signed by the debtor in respect of any other person) and the times at which such debts or other liabilities will become due for payment.
4. The information prescribed for the purposes of section 27(1)(a)(iii) and 27(1)(b) of the Act shall be the following in as far as the debtor can reasonably ascertain and the relevant information is applicable to the debtor:
(a) a full description and current market value of existing and prospective assets of the debtor;
(b) the address or location of these assets;
(c) whether these assets are held jointly or collectively with any other person and if held collectively, the debtor’s ownership percentage or other interest;
(d) the financial institution where any of these assets are held.
5. The debtor shall provide full details, including any documentary evidence, of the efforts made by him or her to reach an alternative repayment arrangement with his or her creditors or any of them, for the purposes of section 27(1)(a)(iv) of the Act.
6. A debtor shall provide full details of his or her monthly income and monthly expenditure for the purposes of section 27(1)(b) of the Act and such details shall include:
(a) where income or expenditure is received or made other than on an individual basis by the debtor, details of any joint or collective arrangements which apply in respect of such income or expenditure;
(b) an averaging of the income and expenditure on a monthly basis where the income is not received or the expenditure made on a monthly basis.
Written Statement Disclosing all of the Debtor’s Financial Affairs in Respect of the appointment of a Personal Insolvency Practitioner
7. The information prescribed for the purposes of section 49(1)(a)(i), 49(1)(a)(ii) and 49(1)(b) of the Act shall be the following in so far as the debtor can reasonably ascertain and the relevant information is applicable to the debtor:
(a) the full name, address and email or telephone contact details of the debtor’s creditors;
(b) a full description of the debtor’s debts and other liabilities;
(c) whether each of these debts and other liabilities are secured debts or unsecured debts;
(d) the amount of each debt or other liability (including principal, interest, costs and arrears) due to each of the debtor’s creditors at the date of the written statement;
(e) any contingent and prospective debts or other liabilities of the debtor (including any guarantee or similar commitment signed by the debtor in respect of any other person) and the times at which such debts or other liabilities will become due for payment.
8. The information prescribed for the purposes of section 49(1)(a)(iii), 49(1)(a)(iv) and 49(1)(b) of the Act shall be the following in as far as the debtor can reasonably ascertain and the relevant information is applicable to the debtor:
(a) a full description of the current and prospective assets of the debtor;
(b) the address or location of these assets;
(c) where the assets comprise real property, whether the debtor’s title is freehold, leasehold or other;
(d) whether these assets are held jointly or collectively with any other person and if held collectively, the debtor’s ownership percentage or other interest;
(e) the financial institution and account details where any of these assets are held;
(f) in the case of assets which may give rise to income to the debtor or are shares or other securities, the name and address of the obligor or issuer;
(g) the purchase date, original cost and current market value of each asset.
9. A debtor shall provide full details of his or her monthly income and monthly expenditure for the purposes of section 49(1)(b) of the Act and such details shall include:
(a) a breakdown as between the different items of income and expenditure;
(b) an averaging of the income and expenditure on a monthly basis where the income is not received or the expenditure made on a monthly basis;
(c) where income or expenditure is received or made, other than on an individual basis by the debtor, details of any joint or collective arrangements which apply in respect of such income or expenditure.
Revocation
10. The Personal Insolvency Act 2012 (Written Statement Disclosing All of the Debtor’s Financial Affairs) Regulations 2013 are revoked.
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GIVEN under the seal of the Insolvency Service of Ireland,
1 October 2015.
LORCAN O’CONNOR,
Director of the Insolvency Service of Ireland.
EXPLANATORY NOTE
(This note is not part of the Instrument and does not purport to be a legal interpretation.)
These Regulations prescribe the information to be contained in the written statement of a debtor who wishes to become a specified debtor or, as applicable, a party, as a debtor, to a Debt Settlement Arrangement or a Personal Insolvency Arrangement, disclosing all of his or here financial affairs, including information in relation to his or her creditors, debts and assets.
S.I. No. 594/2017 –
Personal Insolvency Act 2012 (Worth of Motor Vehicle) Regulations 2017
I, CHARLES FLANAGAN, Minister for Justice and Equality, in exercise of the powers conferred on me by section 3 and section 26 (6)(c)(iii)(I) of the Personal Insolvency Act 2012 (No. 44 of 2012), hereby make the following regulations:
1. (1) These Regulations may be cited as the Personal Insolvency Act 2012 (Worth of Motor Vehicle) Regulations 2017.
(2) These Regulations shall come into operation on 1 February 2018.
2. The amount of €5,000 or less is prescribed for the purposes of section 26 (6)(c)(iii)(I) of the Personal Insolvency Act 2012 (No. 44 of 2012).
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GIVEN under my Official Seal,
15 December 2017.
CHARLES FLANAGAN,
Minister for Justice and Equality.
EXPLANATORY NOTE
(This note is not part of the Instrument and does not purport to be a legal interpretation)
These Regulations set out the worth of a motor vehicle for the purpose of section 26 (6)(c)(iii)(I) of the Personal Insolvency Act 2012 .
Cases
McManus a debtor
[2016] IEHC 279
IN THE MATTER OF PART 3, CHAPTER 3 OF THE PERSONAL INSOLVENCY ACT 2012 (AS AMENDED)
AND IN THE MATTER OF FERGAL MCMANUS OF SANTA MARIA ALACKEN, CAVAN, A DEBTOR
JUDGMENT of Ms. Justice Baker delivered on the 27th day of May, 2016.
1. On the 11th February, 2016 the High Court issued a protective certificate to the debtor pursuant to s. 95(6) of the Personal Insolvency Acts2012 – 2015 (“The Acts”), and on the 18th April, 2016 the period of protection was extended for an additional 40 days from the date of the expiry of the certificate on the 21st April, 2016.
2. This judgment is given on the notice of objection filed on the 25th February, 2016 by a creditor, Clones Credit Union Limited (“the Credit Union”), pursuant to s. 97 of the Act.
3. The application came on for hearing before me on notice of motion grounded on the notice of objection and an affidavit of the objecting creditor. A replying affidavit of the debtor was sworn on the 18th April, 2016.
4. The grounds of objection are stated as being:
(a) That the creditor suffers irreparable loss arising from the issuance of the
protective certificate which would not have otherwise occurred.
(b) That the procedural requirements of the Personal Insolvency Act 2012 as
amended, had not been complied with by the debtor.
(c) That the debtor has made material non-disclosure in his prescribed financial
statement placed before the High Court for the purposes of the
issuance of the protective certificate.
(d) That the proposed Personal Insolvency Arrangement unfairly prejudices the
interest of the objecting creditor and other creditors.
5. The notice of objection echoes the language of s. 97 of the Act, but it is also argued that the High Court has an inherent jurisdiction to set aside a protective certificate and remove the benefit of the protection thereby offered on the grounds that a debtor has failed to make full disclosure in the documents presented to the court on application for protection. That inherent jurisdiction of the court has already been considered by me in the matter of Nugent and Personal Insolvency Acts size=”2″ face=”Verdana”> [2016] IEHC 127, and both the objector and the debtor rely on the principles therein stated.
Statutory scheme
6. The personal insolvency legislation offers, for the first time, a scheme by which a personal debtor may avoid some of the more unfavourable consequences of being adjuducated bankrupt, by seeking to make an arrangement with his creditors. The issue of a protective certificate affords comprehensive protection to a debtor from all action by a creditor, and during its currency a creditor may not commence or continue proceedings against the debtor, or enforce a judgment. The period of protection is a window within which a debtor seeks to put in place a proposal for a Personal Insolvency Arrangement for submission to his creditors at a formal meeting.
7. The legislation requires an applicant to complete certain prescribed documents and statements and the prescription in the Rules regulating this documentation is of a very detailed kind. The scheme of the legislation requires the debtor to engage the services of a Personal Insolvency Practitioner (a “PIP”) and that the application be processed through the Insolvency Service of Ireland (the “ISI”). The degree of prescribed detail required to be given by a debtor must be seen in the context of the requirement of s. 91 of the Act that a debtor who wishes to avail of the legislation shall make a statutory declaration confirming that the documentation lodged with ISI is a complete and accurate statement of his assets, liabilities, income and expenditure.
8. Application for a protective certificate comes on before the court on notice to the ISI, and only after the ISI certifies, by means of a prescribed form, that the documentation is complete and that the application is ready to proceed. Notice is not required to be given to any other person or body, but s. 97 of the Act permits application by a creditor who has been given notice of the issue of the protective certificate to seek an order directing that the protective certificate shall not apply to that creditor.
9. The relevant provisions of s. 97 of the Act are as follows:
“97.— (1) Where a creditor is aggrieved by the issue of a protective certificate that creditor may within 14 days of the giving of notice of the issue of the protective certificate to that creditor apply to the appropriate court for an order directing that the protective certificate shall not apply to that creditor.
(2) A creditor who brings an application under subsection (1) shall give notice to the Insolvency Service and the relevant personal insolvency practitioner and to such other persons as the court may direct of that fact, and the application shall be made in such form as is provided for in rules of court.
(3) In determining an application under this section the court shall not make an order directing that the protective certificate shall not apply to that creditor unless it is satisfied that:
(a) not making such an order would cause irreparable loss to the
creditor which would not otherwise occur, and
(b) no other creditor to whom notice of the protective certificate has
been given would be unfairly prejudiced.”
10. Section 97 allows the court, on application by an aggrieved creditor, to direct that the protective certificate shall not apply to that creditor. An order under the section does not inure for the benefit of all the creditors and it does not of itself mean that the personal insolvency process cannot continue. The section is stated in the negative such that the court shall not make such an order unless it is satisfied, not merely that irreparable harm will be done to the creditor were the order not made, but that that irreparable harm would not otherwise occur. This suggests that the burden is on the applicant creditor.
Main grounds of objection
11. The primary complaint of the applicant relates to certain transactions surrounding the interest of the debtor in his principal private residence which he owns jointly with his wife, Eithne Doyle. I have been informed that Ms. Doyle has commenced proceedings under the Acts which are at present adjourned before the Circuit Court.
12. The Credit Union obtained liberty to enter final judgment against the debtor in the sum of €203,983.22 together with measured costs, by order of the Master made on the 27th October, 2015. The debtor was represented at the hearing before the Master and sought an adjournment, principally on the basis that he intended to seek a protective certificate under the personal insolvency legislation. The Master refused an adjournment and gave liberty to enter judgment.
13. The debtor then made application to set aside the order of the Master which remains listed in the non-jury list pending the determination of the within application.
14. On the 3rd November, 2015 the debtor made application to Barr J. for a stay on the entry of judgment, and Barr J. refused a stay having heard argument from the Credit Union that it would be prejudiced by a stay, as it would prevent it from registering a judgment mortgage.
15. Following on the refusal of the stay, the solicitors for the Credit Union took steps to mark judgment in the Central Office of the High Court.
16. The solicitor for the defendant in the meantime had written to the Central Office of the High Court, directly and without notice to the Credit Union, by letter of the 30th October, 2015, asking that the marking of judgment be delayed until the application for a stay and/or an appeal was determined. By a further letter of the 5th November, 2015 and after Barr J. had refused a stay, the solicitor for the defendant wrote to the Central Office of the High Court, and again did so without notice to the Credit Union, making scandalous suggestions with regard to certain actions taken by the solicitor for the Credit Union, and also suggesting that certain irregularities were apparent in the paperwork of the plaintiff, and that the plaintiff had failed to file an affidavit of debt. The letter suggested that judicial review of the decision to enter judgment was being contemplated.
17. Mr. McManus says in his replying affidavit that this correspondence with the Central Office of the High Court was to “properly protect and defend my position”, but he accepts now that he was mistaken in his belief that “something untoward had occurred” on account of the fact that the judgment papers were presented with “speed”. He says that he expected that several weeks would pass before the judgment would be entered and that he had engaged in the correspondence “to protect his position”.
18. Mr. McManus is a solicitor who says he does not in his professional practice deal in litigation in any manner whatsoever, and that the mistake was “genuinely” made. He fails to adequately explain how he permitted his own firm to act for him if he believed it, or he, did not have the requisite knowledge of practice and procedure to deal with the matter. I regard his letter to the Central Office as unusual, and not in accordance with good professional practice. That his correspondence did not in the events prejudice the objector, in that it did not delay entry of judgment, does not excuse him.
The registration of priority interests
19. On the 19th November, 2015 the Credit Union lodged with the PRA the relevant documentation for registration of its judgment as a judgment mortgage on the principal private residence of the debtor, being the property in Folio CN 13881F County Cavan. The PRA notified the solicitor for the Credit Union by letter of the 6th January, 2016, that on the 14th December, 2015, five days before the judgment was lodged for registration as a judgment mortgage, two legal charges had been lodged for registration, and that, as these were protected by a priority entry registered on the 3rd November, 2015, it was proposed that the charges be registered on the Folio to rank in priority to the judgment mortgage. The two charges were lodged on the 14th December within the 44 day period of protection offered by virtue of Rule 162 of the Land Registration Rules 2012, following registration of a priority entry.
20. It is apparent, therefore, that the priority entry was registered on the 3rd November, 2015, the day on which the application before Barr J. for a stay on the entry of the judgment obtained by the Credit Union came on for hearing. It is also apparent that the two charges lodged with the PRA on the 14th December, 2015 had already been created before the Credit Union received the notice pursuant to s. 98(2)(b) of the Act, served on it as a creditor. Barr J. was not informed of these facts, nor were details of the charges or the debt secured thereby included in the documentation lodged by the debtor with ISI on foot of which the protective certificate issued.
21. The creation of the two charges and the filing of the priority entry with a view to giving a degree of priority to those charges is the primary focus of the application by the Credit Union, which argues that the effect of the issue of the protective certificate was such as to cause irreparable harm to it within the meaning of s. 97 of the Act. In addition, it asserts that the failure by Mr. McManus to disclose the existence of the priority entry and/or the charges subsequently registered as burdens on his principal private residence in his prescribed financial statement (“PFS”), completed on the 26th January, 2006, and supported by a statutory declaration of verification sworn on the 28th January, 2016, amounts to material non-disclosure, on foot of which the court should, in the exercise of its discretion, remove the benefit of the protective certificate.
22. The debtor deals with the creation of the charges and the alleged non-disclosure at some length in his replying affidavit. He explains that as early as June, 2015 he began the efforts to raise funds to enable him to put a meaningful proposal to his creditors for a Personal Insolvency Arrangement. He identified equity of approximately €120,000 in his principal private residence which he owns jointly with his wife. Attempts to organise an equity release through AIB were unsuccessful. In those circumstances, he sought the assistance of his wife’s mother and his parents, and in or around July, 2015 they collectively agreed to lend to the couple the total sum of €120,000, but conditional on obtaining security for that sum. As the only equity available to the couple was their joint equity in their principal private residence, an agreement was reached and reduced to writing in a memorandum dated the 2nd November, 2015, for the advance of a loan of €60,000 in the case of Mr. and Mrs. McManus, and a further €60,000 in the case of Mrs. Doyle, in consideration of natural love and affection, in further consideration of an agreement to repay the loan by 240 monthly instalments of €250, together with interest at an initial agreed rate of 2%, and in consideration of the granting of a charge over the lands comprised in Folio CN 13881F County Cavan. The initial agreement provided for drawdown within 44 days from the 2nd November, 2015, but a written and signed endorsement extended the date of drawdown to the 30th July, 2016. Mr. McManus says this was done in contemplation of an insolvency arrangement, but that fact does not appear in the written memorandum of agreement.
23. Mr. McManus in his replying affidavit says that he did not move, sell or “affect”, or in any way put his assets beyond the reach of creditors “other than in accordance with law”. At a later point in his affidavit, he says that he was “perfectly legally entitled to take steps to fairly deal with all of my creditors under the proposed Personal Insolvency Arrangement”. He maintains that his creditors are more likely to accept the proposed financial arrangement if there is available for distribution to them the sum of €60,000, half of the total funds from the loan agreement, and that what he was in essence doing, and this is the language of his counsel, was unlocking the equity in his principal private residence and accelerating or “manufacturing” the release of monies from that source.
The effect of registration of the charges: irreparable harm to the Credit Union?
24. The primary argument made by Mr. McManus with regard to the application by the Credit Union for an order pursuant to s. 97 of the Act is that the judgment mortgage of the Credit Union came to be registered too late and would have been defeated by the legislation irrespective of the registration of the charges.
25. Section 102(7) of the Act as amended provides as follows:
“(7) Subject to subsections (3)(b), (9) and (10) a creditor who has registered a judgment mortgage against a debtor more than three months before the Insolvency Service’s issue of the protective certificate is a secured creditor for the purposes of a Personal Insolvency Arrangement.”
26. This provision reflects s. 51 of the Bankruptcy Act 1988, as amended.
27. The Credit Union judgment was lodged for registration as a judgment mortgage on the 19th November, 2015. The application for the protective certificate issued on the 12th February 2016. In those circumstances the judgment mortgage is impacted by the provisions of s. 102(7), and Mr. McManus is correct that that loss of priority over simple contract creditors, essentially the loss of the security afforded by a judgment mortgage, would have happened irrespective of the registration of the charges, because it was registered within the three month period provided by s. 102 (7).
28. Priority for a judgment mortgage has been limited since 1988 under the bankruptcy regime, and since 2012 by the provisions of s. 102(7), and in those circumstances the loss of priority over simple contract creditors, of which the Credit Union complains, does not arise from the registration of the charges or the priority entries, but would have occurred as a matter of law. It is the timing of the registration of the judgment mortgage that defeats it, and it is argued in those circumstances that the registration of the charges is not a matter that has any practical consequence for the creditor, and is not therefore a harm or loss as defined by s. 97 (3) which would not otherwise occur.
29. Counsel for the Credit Union counters that argument by suggesting that absent a protective certificate, the Credit Union had a number of options available to it, including the pursuit of an order of garnishee against the monies agreed to be advanced by the family members. Further, it is suggested that having regard in particular to the decision of Laffoy J. in MIBI v. Stanbridge [2008] IEHC 389; [2011] 2 IR 78, that an application pursuant to s. 74 of the Land and Conveyancing Law Reform Act 2009, that the charge be deemed a fraudulent preference, would be successful, as it is clear from the affidavit evidence of Mr. McManus that the device he put in place to borrow monies from his parents and his mother in law, was one that was in discussion for some time, and did in fact prefer the new creditors over existing creditors.
Decision on the effect of the certificate
30. The loss the Credit Union suffers by reason of the issue of the protective certificate is a loss of status as a secured creditor having regard to the provisions of s. 102(7). The issue of the protective certificate also has the practical and legal effect that the Credit Union may not bring any proceedings to impugn the charges during the currency of protection, whether pursuant to s. 74 of the Land and Conveyancing Law Reform Act 2009 or otherwise.
31. An order setting aside the protective certificate or an order pursuant to s. 97 would not at this juncture have the effect that the charges would be ordered to be removed from the Folio. The charges have not been exhibited, but appear as burdens on the Folio. I note that the agreement to create the charges is stated in bald terms, and although it might have been the intention of the parties that the charges would be contingent and would operate only if the creditors of Mr. McManus approved the Personal Insolvency Arrangement, the loan agreement and the agreement for the creation of the charges does not reflect such a condition, and is not expressly linked to the personal insolvency process. There is for example, no agreement that the monies would be held on trust for the benefit of the creditors or a proposed personal insolvency arrangement. On the face of the agreement it was an unconditional and executed agreement for a secured loan and not a contingent loan.
32. I consider that the Credit Union has, by reason of the issue of the protective certificate, suffered an irreparable loss that it would not have otherwise suffered, because the existence of the protective certificate means that the Credit Union may not during its currency seek to bring any declaratory or other proceedings in regard to the validity of the charges, or the question of the priority. If the creditors of Mr. McManus approve a Personal Insolvency Arrangement it will be too late for the Credit Union to challenge the charges or seek otherwise to make a claim against the monies agreed to be advanced by the family agreement Accordingly, I do not accept the argument made by counsel for Mr. McManus that the Credit Union has not established one of the proofs required for an application under s. 97 and that the loss of status and priority is one that would have happened irrespective of whether the charges were put in place. The Credit Union has lost the possibility of any challenge to the charges as a direct result of the issue of the protective certificate.
The effect of non disclosure
33. The legislation offers no guidance as to what matters ought to inform the court in the exercise of its jurisdiction under s. 97. It could be argued that every creditor suffers some harm as a result of the issue of a protective certificate, because of the comprehensive protection afforded to a debtor during the currency of protection. The harm which the legislation envisages and which forms the basis for an application under s. 97 must be irreparable and of a type which would otherwise not occur but for the issue of the protective certificate. The legislation does not, as in the context of an examinership, contain a requirement as found in s. 541 of Part 3 of the Companies Act 2014 that an objecting creditor show “unfair prejudice” by a scheme of arrangement. The authorities under that provision do not offer much assistance.
34. I consider that for a creditor to seek relief under s. 97 it is necessary to show that something other than the ordinary statutory consequence of the issue of the protective certificate has occurred. The legislation grants an umbrella of protection for the purposes of giving a debtor the opportunity of resolving his indebtedness in a rational way, and a creditor who wishes to breach that umbrella or seek an order that the debtor is not protected from action by him must show some specific and distinct prejudice. This is in my view implicit in the long title to the Act of 2012, that the legislation intended to permit the rational resolution of debt for the purpose of enabling a debtor to participate in the financial life of the State and in the common good, as explained in my judgment in Re P. (a Bankrupt) [2016] IEHC 117.
35. I consider that the Credit Union has shown a particular prejudice, not by reason of the date of the issue of the protective certificate in itself, but because of the device that the debtor used to create two legal charges on his principal private residence in the period leading up to the application for protection. The particular prejudice is that the Credit Union may not bring proceedings to set aside those securities and should Mr. McManus be in a position to put before his creditors an acceptable proposal for a Personal Insolvency Arrangement, the Credit Union loses any right or entitlement to move to set aside the charges, and the value of its debt will suffer a significant diminution.
36. The jurisprudence of the High Court and Supreme Court would suggest that the court may exercise its jurisdiction arising from a material non-disclosure merely on account of a desire to express displeasure or to effectively punish the person guilty of non-disclosure. However, the exercise by the court of its jurisdiction to order that a protective certificate not impact on a named creditor ought to be exercised cautiously having regard to the long title in the Act which characterised the legislation as one seen to be in the common good, as it could be said that the court ought to be positively disposed towards the granting of a protective certificate if such will permit the continued engagement of a debtor in the economic life of the State. Further, the provisions of s. 97 are expressed in the negative and therefore the onus is on the creditor to establish the non-disclosure.
37. I consider in those circumstances that the court would be unlikely, save in exceptional circumstances, to make an order under s.97 merely on account of its desire to express its displeasure, and that the court in exercising its jurisdiction must weigh the various factors, and must also take the interests of all parties into account. This is the essence of the discretionary power of a court, namely that the court will not exercise its discretion on rigid grounds but will do so in the context of all of the factors which it considers to be relevant.
38. Further, I consider that as the legislation does not mandate the court to accede to the application of a creditor who meets the threshold requirements of s. 97 (3), the court retains an element of discretion to make an order. In that regard, and in the light of the considerations explained by me in Re Nugent and the imperative of full and frank disclosure required by the Acts, I consider that I ought not ignore that the Mr. McManus did not disclose the existence of the charges and of the family loan agreement in his application for a protective certificate, and the PFS before the court when the certificate was granted gave a wholly wrong impression that there was a degree of valuable equity in the principal private residence of Mr. McManus.
39. For the reasons explained above, I reject the argument of counsel for Mr. McManus, that I ought to entirely ignore the existence of the charges and the fact that they and the family loan agreement were not disclosed to the court on the application for the protective certificate because the charges themselves did not defeat the judgment mortgage of the Credit Union.
40. I am satisfied that I ought to be influenced by the fact that the charges and the loan agreement were not disclosed to the court on the hearing of the application for a protective certificate, and that they came to light as a result of happenstance, and because the Credit Union had lodged its judgment for registration as a judgment mortgage against the same property as is burdened by the charges. In those circumstances, I am satisfied that the application invokes the discretion of the court as explained by me in Re Nugent.
41. I am satisfied that the Credit Union has met the statutory test, and that my discretion ought to be exercised in favour of making an order pursuant to s. 97 declaring that the protective certificate shall not apply to the Credit Union. No argument was made that any other creditor would be unfairly prejudiced by the order as the creditors are all either secured or are owned very small sums.
42. The order sought by the Credit Union does not inure for the benefit of all the creditors and it does not of itself mean that the personal insolvency process cannot continue. In the decision in Re Nugent I have already determined that the High Court has a jurisdiction in its discretion to set aside the extension of a protective certificate and that one consideration that will bear on the court’s decision is whether there has been a material non-disclosure by a debtor. Counsel for Mr. McManus argues that the jurisdiction of the court in regard to the grant of a protective certificate is circumscribed by the fact that the court is mandated to issue the protective certificate provided the statutory tests are met, but that in the case of an application for an extension of the period of protection the court has a discretion under the legislation.
43. Because I am satisfied that the Credit Union is entitled to an order under s. 97, I do not propose to deal in this judgment with the broad question of whether different principles are in play in an application to the court to set aside a protective certificate from those applicable to an application to set aside an extension of a certificate after the expiration of the initial period of protection of 70 days, as explained by me in my judgment in Re Nugent.
44. Further, because of the specific prejudice I have found, I also do not propose dealing with the other matters argued not to have been disclosed by the debtor in his application for a protective certificate, and whether these are material or arose as a result of differences in figures that emerged in the course of the proceedings, or as a result of genuine error.
45. I propose therefore making an order that the protective certificate shall not apply to the Credit Union.
Nugent Personal Insolvency (Costs)
[2016] IEHC 309 JUDGMENT of Ms. Justice Baker delivered on the 8th day of June, 2016.
1. On the 10th March, 2016, I delivered judgment in the substantive application of Danske Bank for an order setting aside an extension of a protective certificate granted ex parte to James Nugent, a debtor, on the 10th February, 2016. For the reasons set out in that judgment I made an order setting aside the extension of the protective certificate. See Nugent & Personal Insolvency Acts [2016] IEHC 127.
2. This judgment is given in the application by Danske Bank for an order that the costs of that application be borne by the personal insolvency practitioner, Tom Murray, who acted on behalf of the debtor for all purposes related to the personal insolvency application, and the application for the extension of the protective certificate.
3. An order for costs in respect of the application against the debtor, Mr. Nugent, was made by me without any real opposition from Mr. Nugent. Mr. Nugent was adjudicated bankrupt by order of Costello J. on the 4th April, 2016 in which she awarded costs against him in favour of Danske Bank, the petitioning creditor, and that order was not opposed.
4. Danske Bank argues that as the personal insolvency practitioner (“PIP”) is deemed for the purposes of the personal insolvency legislation to be the party making the application, and because of the central role that the PIP plays in the statutory process, that the PIP ought to bear responsibility for the costs incurred by Danske in the successful application to set aside the extension of the certificate. The Bank relies in particular on para. 31 of my judgment where I stated as follows:-
“31. A Personal Insolvency Practitioner is in a unique role, not equivalent to the role of an examiner or a liquidator appointed by the court under the Companies Acts, although some similarities can be noted. The PIP is required to be interposed between the Insolvency Service of Ireland and the debtor. A debtor may not engage with the process envisaged by the Act, whether to seek a personal insolvency arrangement, or a debt settlement arrangement without employing a PIP. The PIP takes a role between the administrative functions of the Insolvency Service of Ireland and the creditors. The PIP is required for example to consider whether a debtor may avail of the options available under the personal insolvency legislation as an alternative to bankruptcy. The PIP is required to undergo an examination and to apply for registration as a PIP before he or she can operate within the State. Further, by S. 14 of the Bankruptcy Act 1988, a court shall, before making an order of adjudication, consider whether the debtor’s inability to meet his engagement could be more appropriately dealt with by a personal insolvency arrangement or a debt settlement arrangement, and the court hearing a petition in bankruptcy must be satisfied that this option has been explored by a PIP who has considered the alternatives and whose professional view is a factor taken into account by the bankruptcy court. All interactions that the debtor has with the Insolvency Service of Ireland, on the one hand, and the court, on the other hand are through the PIP, and this puts the PIP in a unique position of responsibility to the Insolvency Service of Ireland, the court, the creditors and of course to the debtor. That this imports a duty of frankness and full disclosure seems to me to be unequivocal, and while the PIP is not an officer of the court in a true sense, he is a professional engaged with a process in respect of which the court expects a full, professional and objective approach. The PIP may, but does not always engage a solicitor, but the obligation of frankness must be one which the PIP bears personally by virtue of his unique role at the centre of the process, and as the person uniquely with standing to bring application to the court.”
5. It is argued in particular that because of the central and unique role played by the PIP in the personal insolvency process, and because it is the PIP who makes the application, and is responsible for the preparation and presentation of the paperwork, that he ought to be held accountable in respect of the costs of the application. The “event” for the purposes of costs is said to be the granting by me of the order setting aside the extension of the protective certificate on the grounds, inter alia, that the debtor had failed to make full and frank disclosure to the court in making the application for extension.
6. The argument of the Bank is essentially that as I held that the PIP bore personally an obligation of frankness, and arising from his unique role at the centre of the process, he uniquely has standing to bring application under the statutory scheme to the court, his failure to comply with his duty of disclosure to the court means he personally should bear the costs. Had the PIP made full disclosure to the court, it is argued the protective certificate would not have been extended.
Costs against non-parties
7. Under the scheme of the personal insolvency legislation the PIP bears responsibility for processing the application and dealing with the paperwork, but in my view the PIP is still properly characterised as a non-party for the purposes of considering whether costs should be awarded against him. The PIP has a central role in the procedures under the legislation, but he has no personal interest in the result and any order that is made under the legislation is made for the benefit of, or affects, the debtor in his personal capacity, and not the PIP. Thus, the role of the PIP is to some extent analogous to the role of an examiner, or a solicitor or another professional acting in a role, albeit that application for a protective certificate and for the court’s approval of a DSA or a PIA may not be made other than with the assistance of a PIP.
8. The leading judgment on the jurisdiction of the court to make an order for costs against a non-party, and the criteria that are engaged, is the judgment of Clarke J. in Mooreview Developments Ltd. v. First Active Plc. [2011] IEHC 117; [2011] 3 IR 615. In a reasoned, analytical judgment he considered that the jurisdiction to award costs against a non-party who had not been joined to the proceedings, even for the mere purposes of making an order for costs against such party, derived from s. 53 of the Supreme Court of Judicature (Ireland) Act, 1877, which vested in the court a clear jurisdiction in its discretion to award costs against any person, including a person not a party to the litigation. Clarke J. considered inter alia that this broad approach to the jurisdiction of the court “accords with the view that the court should have full control over proceedings before it” (at para. 3.28)
9. The judgment of Clarke J. in Mooreview Developments v. First Active Plc. dealt with an application for costs against the director of a company in long-running and complex litigation where he was satisfied that the main beneficiaries of the litigation, had it been successful, was that director and his wife. It was clear also in that case that an order for costs against the company, and the other companies in the group of which it was a part, was unlikely to be met. Clarke J. considered that certain factors should guide the court in the exercise of its jurisdiction to award costs against a non-party and he approved a passage from the judgment of Tompkins J. in Carborundum Abrasives Limited v. Bank of New Zealand (No. 2) [1992] 3 NZLR 757, and from which the following principles emerge:
a. It is not necessary to establish impropriety fraud or bad faith on the part of a non-party.
b. If it is the case that that non-party had a “direct personal financial interest” in the result, the court would take into account the fact that a non-party initiated or controlled the litigation, and might derive a financial interest, the court should take into account that he or she should not always be permitted to do so with no risk of costs.
c. Consideration should be given to the fact that if the party to the proceedings is an insolvent company, the reason that party, and not an individual plaintiff or defendant, is in the proceedings ought to have some influence on the court if the non-party may hope to have some financial benefit or gain from the fruits of the litigation, whether by the preservation of assets or otherwise.
d. The court should also take into account the likelihood of costs being met by a corporate entity.
e. The reasonableness of the course adopted by the non-party is also a factor, as is whether the proceedings were pursued in a “reasonable fashion” (per Clarke J. at para. 4.9)
10. Clarke J. helpfully identified the policy reason behind the exercise of this jurisdiction was “to prevent parties having a ‘free ride’ as to how they would conduct litigation, designed for their benefit, without there being any risk of a meaningful cost order being made against them.” That policy reason must in my view be a key to understanding how the court will approach an application for costs against a non-party who is a professional person and who has no direct or indirect interest in the result of the litigation. In the Mooreview Developments litigation Clarke J. was satisfied that it was reasonable to conclude that Mr. Cunningham did have a personal financial interest in the result of the litigation and did make an order that he be personally liable for the costs of the various proceedings.
11. Some assistance can also be found in the judgment of Costello J. in re Wogan’s (Drogheda) Ltd. [1993] WJSC-HC 2783 (delivered on the 9th February, 1993) where he considered the question of whether costs in an examinership, where he had held that the petition seeking protection under the then relevant legislation contained false information which must have been known by the directors of the company, could be awarded against the examiner. The application for those costs was made by the Revenue Commissioners and a creditor who had appeared on the initial application for protection and on the confirmation application. Costello J. held that there was no power under s. 29 of the Companies (Amendment) Act, 1990 to make an order that the examiner should pay costs to any party to proceedings but he did consider that such a power arose under the provisions of O. 99, r. 1 of the Rules of the Superior Courts. Costello J., however, considered that while he did have jurisdiction to award costs against the examiner:
“I do not think that the interests of justice require me to make an order that the examiner should pay the creditor’s costs. I think that such an order might be made in very exceptional circumstances but whilst the circumstances in this case were such as to justify the refusal of an order in the examiner’s favour under s. 29, I do not think they can justify an order against him under Order 99. I must therefore refuse this application.” (at p. 2813)
12. The Supreme Court delivered a judgment on the question of costs which I also find persuasive, in the case of Dunne v. Minister for Environment & Ors. [2007] IESC 60 where Murray J., having outlined the first principle of law, that costs normally follow the event, pointed to the fact that this rule “has an obvious equitable basis”, and must engage the court in considerations of “the interests of justice”.
13. The jurisdiction of the court therefore is one which it exercises in its discretion and in the interests of justice, although the discretion is to be exercised on a reasoned basis and the court is not at large. This principle is well established.
14. The Supreme Court recently delivered a judgment in Miley & Ors. v. Employment Appeals Tribunal & Ors. [2016] IESC 20, on appeal from the High Court which had awarded costs against the EAT following the making of an order of certiorari quashing a determination of that body. The court held that the EAT was entitle prima facie to impunity from costs, it being a statutory tribunal, and because it was not a legitimus contradictor in the litigation and did not take part in the proceedings.
15. Denham J. giving the judgment of the Court went on to consider whether the EAT might have lost its immunity by reason of mala fides or impropriety and was persuaded by the jurisprudence relating to the award of costs against members of the judiciary which while they have been held to have a prima facie immunity, do not have absolute immunity. She held that errors of law or fact are matters of appeal and not matters of impropriety, but that the standard of the hearing was “wanting” and not one that anybody with adjudicative function would “aspire to in this day and age nor was it conduct which participants in proceedings should be required to accept”. It was not however in her view impropriety. The court refused to award costs against the EAT because it was not satisfied that it had acted with mala fides or impropriety.
16. The Supreme Court quoted with approval the judgment of Dunne J. in KCB Private Security v. Appeals Board & Anor. [2009] IEHC 549 that “a complete immunity might be unjust”, but refused to award costs because the Appeals Board was a quasi-judicial body “in a similar and analogous position to that of a judge”.
17. I consider that the closest analogy to the role adopted by a PIP in the procedures under the personal insolvency legislation is that of an examiner, and I have already noted this in the substantive judgment. The PIP does not act in a quasi- judicial manner, but does have a unique and burdensome obligation to the court in the manner in which an application is presented for protection, and a high degree of frankness and trust is required for the process to function in the manner envisaged. In those circumstances there is, it seems to me, no reason in principle why costs could not be awarded against a PIP in a suitable case, although I consider, as did Costello J. in Wogan, that such jurisdiction would be exercised sparingly and in exceptional circumstances.
18. The guiding principle is the interests of justice and certain factors bear on the interests of justice in the present case and to which I have regard. The relevant factors are as follows:
19. The substantive judgment was the first judgment of a superior court on the role of the PIP in the scheme of the personal insolvency legislation, and counsel has informed me that since it was delivered by me only two months ago it has been opened before every specialist judge of the Circuit Court. The interests of clarifying the law therefore were served by the litigation and that public interest is one that benefits the operation of the legislation and the practice and procedure of PIPs operating within the scheme and of the specialist judges of the Circuit Court. That factor is one that must bear on my consideration, as does the fact that the PIP in this case was operating in a new legislative scheme where no guidance was available from the superior courts as to the extent and nature of the role of the court.
20. I also consider that some of the criteria and factors outlined by Clarke J. in Mooreview must bear on my decision. In particular, I consider that it is relevant that the PIP has no personal benefit to gain from the application, nor indeed from the personal insolvency process, and it is fair to say that the scale of fees charged by a PIP in these matters is modest.
21. Further, the PIP is required to be engaged by a debtor, and a debtor may not process an application under the legislation other than through the agency of a PIP. This has the effect that while an individual PIP may of course refuse to act for a debtor, or may cease to act for such debtor, it is almost inevitable that once a PIP commences the process on behalf of a debtor he or she will remain with the process until it reaches a conclusion, whether as a result of a creditors’ meeting and the approval of a court of a DSA or a PIA, or because the process is discontinued or fails.
22. A PIP does have to exercise a high degree of scrutiny, but I am not satisfied in this case that the PIP was fully informed by the debtor with regard to some of the matters which led to my decision, and in particular, while the PIP did know, or must have known, of the various adjournments of the bankruptcy petition and the extent to which they were contested, I consider that the failure of the PIP to deal adequately with the investments and projected income and capital from the investments of the debtor, that this arose more because, in my view, the PIP did not sufficiently engage with the detail of those investments, rather than from any mala fides on his part, or because he failed to address the issues in regard to those investments at all. I consider that the PIP who is an experienced accountant and insolvency practitioner did fail to engage with many of the assumptions made by Ernst & Young, whose report was at the time of the application for the extension of the certificate, two years old and was based on projections and contingencies which had not yet been realised. His approach to the financial circumstances and projections was cursory and did not sufficiently and coherently engage with those factors. This did not arise in my view as a result of mala fides and the primary blame must in my view lie with the debtor who himself was an experienced businessman.
23. For these reasons, it seems to me that I ought not award the costs of the application to set aside the extension of the protective certificate against the PIP, as to do so would not be in the interests of justice, would fail to have regard to the fact that this legislation is new and still relatively untested, that the PIP did not act mala fides, but rather perhaps carelessly or without sufficient and detailed engagement with the facts, and because he had no personal benefit to gain from the application.
Nugent & Personal Insolvency Acts
[2016] IEHC 127
JUDGMENT of Ms. Justice Baker delivered on the 10th day of March, 2016.
1. This judgment is given in the motion by Danske Bank (“Danske”) for an order setting aside an extension of a protective certificate granted ex parte me on the 10th February, 2016 on application by the personal insolvency practitioner (“the PIP”) on the grounds that the ex parte application was made with a lack of candour. The application is made pursuant to the inherent jurisdiction of the High Court and/or pursuant to the provisions of s. 97 of the Personal Insolvency Acts 2012 – 2015 (“the Act of 2012”) and/or O.76A, r.19 of the Rules of the Superior Courts.
Background
2. Mr. Nugent is a businessman, and on 8th January, 2012 the Master of the High Court granted liberty to Danske to enter final judgment against him in the sum of €8,469,490.43. The judgment was registered in the Central Office of the High Court on 19th March, 2013. Danske claims that the debtor remains indebted to it in the sum of approximately €9.5 million excluding costs, and that interest on the judgment sum continues to accrue.
3. Danske presented a petition that the debtor be adjudged bankrupt on 5th February, 2015 and the petition has been adjourned on eight occasions on application by the debtor, for the express purpose of enabling the PIP to apply for a protective certificate under the Act of 2012 and to seek to put in place a personal insolvency arrangement under the legislation. The adjournments were contested, and affidavits have been sworn by Danske and by Mr. Nugent for that purpose. The bankruptcy petition stands adjourned to Monday 14th March 2016.
4. Application was made to me for a protective certificate pursuant to s.95 (2) of the Act of 2012 on 3rd December, 2015 and that order was made for the statutory period of 70 days from the date of issue. That 70-day period was due to expire on 11th February, 2016. Danske did not appeal the grant of the protective certificate and the grounding affidavit sworn in respect of the present motion states that it determined not to do so as a matter of expediency.
The statutory regime
5. Section 95 of the Act of 2012 makes provision for the grant of a protective certificate to a debtor who establishes the statutory proofs. The effect of the grant of a certificate is that during its currency the debtor is protected from any action or enforcement proceedings by his creditors, and by virtue of s. 96 of the Act a creditor to whom notice of the issue of a protective certificate has been given shall not initiate or continue legal proceedings, nor take any steps to secure or recover payments or judgment, or on foot of any security. Whilst a protective certificate remains in force a bankruptcy petition may not be presented, or, in a case where a petition for bankruptcy has already been presented, may not be processed. The issuing of a protective certificate is a matter of considerable benefit to a debtor in that it gives breathing space in which to seek to come to an arrangement with creditors, and avoid the less benevolent consequences of bankruptcy.
6. The long title of the Act of 2012 recites a need perceived by the Oireachtas that debtors be assisted in resolving their indebtedness…
“without recourse to bankruptcy and to thereby facilitate the active participation of such persons in the economic activity of the State.”
7. I have already considered the import of the legislation in Re P. Bankruptcy [2016] IEHC 117. The intention of the Oireachtas was to facilitate a debtor to avoid bankruptcy, and this was seen as being a matter in furtherance of the common good. I will return later to the proposition that the court might take a certain approach to an application where a person seeks the protection, or the continued protection, of a protective certificate, and whether the purpose of the Act of 2012 suggests that I should approach a creditor’s opposition to such application with some degree of caution.
8. Application for a protective certificate is brought pursuant to the provisions of s.93 of the Act by a personal insolvency practitioner, and on notice to the Insolvency Service of Ireland. The Insolvency Service of Ireland, provided it is satisfied that the application is in order, provides for an application to be made to the appropriate court for the issuing of a certificate pursuant to s. 95(2). The court, once it is satisfied that the criteria and eligibility requirements are met, is mandated to issue a certificate:
“(2) Where the appropriate court receives the application for a protective certificate and accompanying documentation pursuant to subsection (1)(a), it shall consider the application and documentation and, subject to subsection
(3)—
(a) if satisfied that the eligibility criteria specified in section 91 have been satisfied and the other relevant requirements relating to an application for the issue of a protective certificate have been met, shall issue a protective certificate, and
(b) if not so satisfied, shall refuse to issue a protective certificate.”
9. The eligibility criteria are set out in s. 91, and no issue arises as to whether the debtor does satisfy these. Application is made to the specialist judges of the Circuit Court save where the level of debt exceeds €2.5m, when application is to the High Court.
Application to set aside
10. Danske makes an application that I set aside the order made by me on the 10th February, 2016 by which I extended the original period of the protective certificate for a further period of 40 days. The application is made in reliance on the inherent jurisdiction of the court and/or pursuant to s.97 of the Act of 2012 as amended. It is convenient that I consider the extent of the jurisdiction of the High Court in this application before I turn to consider the application.
11. Section 95 of the Act and O.76A r.15 of the Amended Rules of the Superior Courts provide for the making of an ex parte application to extend the period of a protective certificate. The application is on notice to the Insolvency Service of Ireland under r.17, but not on notice to any of the creditors. The court may in its discretion direct under r.15 (2) that notice of the application for extension be given to any person as it may direct.
12. The application for the original protective certificate was heard by me on the 3rd December, 2015 on notice to the Insolvency Service of Ireland, although the Service did not participate in the hearing. There was nothing unusual about this and as the application met the statutory criteria, the order was made.
13. The application for the extension of the time was made ex parte to me on the 10th February, 2016, and the Insolvency Service of Ireland, having been served with notice of the intention to make the application, did not offer any opposition to the making of the order.
14. Thus the scheme of the legislation and the Rules of the Superior Courts provide for the making of an application ex parte for the extension of a protective certificate. Practice and procedure in the High Court makes provision for the granting of relief ex parte in various types of applications, and it cannot be said that the form of application for extension of the period of a protective certificate under s. 95 (6) of the Act of 2012 arises by virtue of a unique statutory provision, or is a unique jurisdiction of the court.
15. The court, in making an order for the extension of a protective certificate, is continuing the umbrella of protection afforded to a debtor by virtue of the certificate such that his/her creditors may not proceed to seek judgment or enforce any judgment or take any other action on foot of a debt. The period of protection is a matter of significant benefit to a debtor, and the extension of the period accordingly also offers a measure of advantage in the same way. The statutory requirement that application be made to the court for the extension of a protective certificate, and the fact that the legislature did not provide for an automatic once-only, or further, extension, imports a requirement that the court be satisfied that the extension is merited, not merely on account of the way in which the debtor has engaged with the insolvency process during the period of the original certificate, but whether the extension of the period is likely to prove beneficial to the process as a whole. This is apparent from the express language of s. 95 (6):
“(6) Where a protective certificate has been issued pursuant to subsection (2)(a), the appropriate court may, on application to that court by the personal insolvency practitioner, extend the period of the protective certificate by an additional period not exceeding 40 days where—
(a) the debtor and the personal insolvency practitioner satisfy the court that they have acted in good faith and with reasonable expedition, and
(b) the court is satisfied that it is likely that a proposal for a Personal Insolvency Arrangement which is likely—
(i) to be accepted by the creditors, and
(ii) to be successfully completed by the debtor,
will be made if the extension is granted.”
16. The extension of the protective certificate affects the rights and interests of creditors. Given that all creditors are impacted to the same extent in that none of them may seek enforcement or judgement during the period, there is no question of the loss of priority during the period of protection. However, there may be many reasons why a delay in obtaining or recovering judgment is prejudicial to a creditor.
17. I consider, accordingly, that the making of an order extending the period of the protective certificate is a matter which engages the constitutional guarantee of fair procedures. This arises by virtue of the presumption of constitutionality afforded to post 1937 statutes as identified by the Supreme Court in East Donegal Co-operative v. Attorney General [1970] I.R. 317, and has resulted in an approach to statutory interpretation which has guided the approach of the court in considering exercise of statutory powers.
18. Whether the court had an inherent jurisdiction to set aside an order made ex parte has been considered by McCracken J. in Voluntary purchasing groups Inc. v. Insurco International Limited & Anor [1995] 2 ILRM 145 in the context of the old O. 39 which dealt with procedures under the Foreign Tribunals Evidence Act 1856. He took the view that the court had an inherent jurisdiction to set aside an order made ex parte for reasons explained as follows:
“In my view however quite apart from the provisions of any rules or statute, there is an inherent jurisdiction in the Court in the absence of an express statutory provision to the contrary, to set aside an Order made ex parte on the application of any party affected by that Order. An ex parte Order is made by a judge who has only heard one party to the proceedings. He may not have not have had the full facts before him or may even have been misled, although I should make it clear that is not suggested in the present case. However, in the interests of justice it is essential that an ex parte Order may be reviewed and an opportunity given to the parties affected by it to present their side of the case or to correct errors in the original evidence for submissions before the Court. It would be quite unjust that an Order could be made against a party in its absence and without notice to it which could not be reviewed in the application of the party affected.”
19. The recent and authoritative judgment of Hogan J. in Re Belohn Limited and Merrow Limited [2013] IEHC 157 provides a helpful summary of the principles, and a guide as to how those principles impact upon the approach of a court to an application to set aside an ex parte order. Hogan J. held that there is to be imported an implied right in any party affected by an order made ex parte which affects the interests and rights of a party to apply to set aside or vary such order. In para. 13 of his judgment Hogan J., having considered the judgment of the Supreme Court in East Donegal Co-operative v. Attorney General and Dellway Investments Limited v. National Asset Management Agency [2011] IESC 14, [2011] 4 I.R. 1, said the following:
“Applying these principles, it is plain that any interim order made ex parte interferes with the contractual rights of secured creditors, even if the examinership procedure does not present the reputational issues which were also in view in both Dellway Investments and Custom House Capital. The mere fact that the order interferes with a constitutionally protected right – whether as a property right (such as a contractual right of that kind) or a right to fair procedures – does not in and of itself make this process unconstitutional, for as Costello J. put it in Daly v. Revenue Commissioners [1995] 3 I.R. 1, 11, “legislative interference in property rights occurs every day of the week and no constitutional impropriety is involved.” But all of this does mean that any interim order made in examinership process is of a necessity a provisional one, precisely because the court could not constitutionally be given the power by means of a final order to override such due process and property rights prior to at least hearing the affected parties and for all the reasons given by the Supreme Court in D.K. and applied by that Court in Dellway Investments.”
20. I adopt that statement of principle and practice of Hogan J. in Re Belohn Limited and Merrow Limited, and consider that it has the effect in the present case that the order made by me on the 10th February, 2016 must be seen as one in respect of which application to set aside may be made. I consider therefore that the High Court does have a power to set aside an order extending the period of a protective certificate and this is a concrete realisation of the constitutional imperative of fair procedure and arises from the presumption that the Act of 2012 is constitutional in its impact and effect.
21. But this does not fully address the issue before me, namely the criteria that may be engaged by the High Court in setting aside an order extending the certificate. To answer this question involves an understanding of the scheme of the Act of 2012 and the consideration of whether the High Court is exercising an identical jurisdiction to that of the specialist judges appointed by virtue of Part 6 of the Act. The specialist judges exercising their statutory function under the Act are constrained by the powers and functions conferred by the Act of 2012, and do not exercise the full powers of a Circuit Court judge under the Courts Acts or under the Constitution. The specialist judges for example do not seem to have any power to engage principles of equity, or common law provisions outside those powers expressly conferred. The specialist judge, while the role is not merely an administrative one, does not act with full judicial powers.
22. The question arises whether the High Court in exercising its power under s. 5 is engaged in the exercise of its full original jurisdiction, or whether it is constrained in its powers and functions in the same way as the specialist judges of the Circuit Court. The legislation is silent on this, and having regard to the fact that the original jurisdiction of the High Court arises not merely by statute but also under the Constitution, I consider that any constraint on the jurisdiction of the High Court could arise only were it to be expressly contained in a statutory provision. I conclude, in the absence of such express limitation, that the High Court is exercising its full original jurisdiction in hearing any application under the Act of 2012.
23. This has the consequence in the present case that in my consideration of the application to set aside the order extending the period of the protective certificate, that I am confined to the provisions of s. 97 of the Act of 2012 in regard to the factors that bear on my decision. S. 97 provides as follows:
“97.— (1) Where a creditor is aggrieved by the issue of a protective certificate that creditor may within 14 days of the giving of notice of the issue of the protective certificate to that creditor apply to the appropriate court for an order directing that the protective certificate shall not apply to that creditor.
(2) A creditor who brings an application under subsection (1) shall give notice to the Insolvency Service and the relevant personal insolvency practitioner and to such other persons as the court may direct of that fact, and the application shall be made in such form as is provided for in rules of court.
(3) In determining an application under this section the court shall not make an order directing that the protective certificate shall not apply to that creditor unless it is satisfied that—
(a) not making such an order would cause irreparable loss to the creditor which would not otherwise occur, and
(b) no other creditor to whom notice of the protective certificate has been given would be unfairly prejudiced”.
24. I will deal more fully below with the argument of counsel for the debtor that the test that must be applied by me in hearing the application to set aside is that found in s. 97, namely that the objecting creditor must show that it is being caused irreparable loss which would otherwise not occur, but I turn now to consider the jurisprudence of the Court with regard to applications to set aside an order made ex parte.
25. Hogan J. in Re Belohn Limited and Merrow Limited, having determined that the application before him was permissible, did not expressly deal with the question of whether the statutory provisions allowing for the appointment of an interim examiner would be determinative of his approach to the application to set aside. I consider however that there is implicit in his finding in that case, where he did set aside the appointment of an interim examiner on the grounds of non disclosure, that the order to set aside was “essentially restitutionary in nature” as it involved the setting aside of an order which was tainted by non disclosure. His judgment it seems to me is a strong authority for the proposition that the application to set aside is determined by the court on broad principles of fairness and the solemnity of the court and its process. The decision of Hogan J. guides my approach to the question in the present case, and I consider that my jurisdiction is not constrained by the statutory provisions contained in s. 97, and must be seen in the broader context of the requirement of candour and disclosure in ex parte applications, and because the operation of a constitutionally complete ex parte procedure must involve a degree of respect for the court by those who make such application.
Setting aside ex parte relief
26. In the circumstances I consider that I can obtain some guidance on the approach of the Court generally to the duty of a person applying for ex parte relief. Clarke J. set out the principles in what is now the leading case of Bambrick v. Cobley [2005] IEHC 43. Application was made to him to set aside a mareva type order made ex parte on the grounds that the applicant had failed to disclose what were said to be objectively material facts. As he pointed out full and frank disclosure in ex parte applications has been identified as a “golden rule” in Tate Access Floors Inc. v. Boswell [1993] All ER 303 and Clarke J. adopted the dicta of Sir Nicholas Browne-Wilkinson V-C that the rule was well established and important. Clarke J. held that there was:
“… a clear obligation on a plaintiff moving for a mareva type injunction to make full disclosure to the court of all matters relevant to the exercise of the courts discretion.”
27. As to what is required to be disclosed in furtherance of candour, Clarke J. identified this in Bambrick v Cobley:
“While I am not prepared to hold on the evidence that the plaintiff deliberately mislead the court I am constrained to the view that as a solicitor the plaintiff, in particular, ought to have been aware to his duty to disclose all material facts and must be regarded as significantly culpable in failing to bring to the attention of the court matters which on any objective view would have had the potential to influence the courts determination”
The borderline between material and non-material facts can sometimes be uncertain and he identified what I accept is the correct test namely that:
“…the test by reference to which materiality should be judged is one of whether objectively speaking the facts could reasonably be regarded as material with materiality to be construed in a reasonable and not excessive manner.”
28. Keane J. in McDonagh v Ulster Bank (Ireland) Limited [2014] IEHC 476 adopted and applied the approach of Clarke J. in Bambrick v Cobley and made an order discharging an interim injunction granted ex parte on the grounds of lack of candour.
Was the application under section 95 ex parte?
29. The PIP argues that the application before me for the extension of the period of the protective certificate was not truly an application ex parte as it was made on notice to the Insolvency Service of Ireland. The fact that the application was not on notice to the creditors does not, it is argued, make it an ex parte application. I do not consider this submission to be well founded, as the application for the extension may properly be described as ex parte in that the persons affected or likely to be affected thereby were not on notice. An ex parte application is not merely one to which no person or body is on notice, but one of which the person whose interests are impacted is not on notice. I accept that the legislation and the Rules providing for the making of an application were formulated in a way that permitted, or perhaps even required, the application to be made ex parte to the court, but the jurisprudence which I have referred to leads me to the inevitable conclusion that any person whose interests are affected by the order may have a right to seek to set aside such an order, even if that person might not be required by the statute or the rules to be on notice. This result flows from the approach identified by Hogan J. in Re Belohn Limited and Merrow Limited, where he held that the making of an order ex parte without the availability of a remedy to set aside could not be constitutionally sanctioned.
30. Before dealing with the matters alleged to amount to lack of candour in the present case, I turn briefly to consider the role of the PIP in the insolvency process.
The PIP
31. A Personal Insolvency Practitioner is in a unique role, not equivalent to the role of an examiner or a liquidator appointed by the court under the Companies Acts, although some similarities can be noted. The PIP is required to be interposed between the Insolvency Service of Ireland and the debtor. A debtor may not engage with the process envisaged by the Act, whether to seek a personal insolvency arrangement, or a debt settlement arrangement without employing a PIP. The PIP takes a role between the administrative functions of the Insolvency Service of Ireland and the creditors. The PIP is required for example to consider whether a debtor may avail of the options available under the personal insolvency legislation as an alternative to bankruptcy. The PIP is required to undergo an examination and to apply for registration as a PIP before he or she can operate within the State. Further, by S. 14 of the Bankruptcy Act 1988, a court shall, before making an order of adjudication, consider whether the debtor’s inability to meet his engagement could be more appropriately dealt with by a personal insolvency arrangement or a debt settlement arrangement, and the court hearing a petition in bankruptcy must be satisfied that this option has been explored by a PIP who has considered the alternatives and whose professional view is a factor taken into account by the bankruptcy court. All interactions that the debtor has with the Insolvency Service of Ireland, on the one hand, and the court, on the other hand are through the PIP, and this puts the PIP in a unique position of responsibility to the Insolvency Service of Ireland, the court, the creditors and of course to the debtor. That this imports a duty of frankness and full disclosure seems to me to be unequivocal, and while the PIP is not an officer of the court in a true sense, he is a professional engaged with a process in respect of which the court expects a full, professional and objective approach. The PIP may, but does not always engage a solicitor, but the obligation of frankness must be one which the PIP bears personally by virtue of his unique role at the centre of the process, and as the person uniquely with standing to bring application to the court.
32. I turn now to consider the matters in respect of which the lack of candour is alleged.
The financial basis for a personal insolvency arrangement
33. The application for an extension of the period of the protective certificate was made on the grounds that the debtor expected to be in a position to complete the contracts for the development of a thousand nursing home beds in respect of which he hoped to recover the sum of almost €4m for distribution to creditors in the context of a personal insolvency arrangement. The grounding affidavit of the application for the extension was sworn by the PIP, Tom Murray, on 8th February, 2016. He describes the financial affairs of the debtor as “extremely complex”, but which were expected to provide “a brilliant return for creditors if successful”. He explained that the debtor hoped to achieve a significant financial return from an investment, as follows:-
“10. I say that the debtor is a Director in Preference Healthcare who have concluded an agreement with Ground Lease Capital Partners, a partnership of US pension funds, to finance on a long term basis the development of an initial one thousand nursing home beds at a capital cost of €100m.
11. I say and I am informed that Balfour Beatty Plc, a world renowned construction company, has joined the agreement to act as construction partners to Preference.
12. I say and I am informed that over the past year, the group have sourced land sites sufficient to complete the development along with securing planning permissions. The locations are cleared and ready for construction. The programme will completed with eighteen months giving rise to over one thousand long term jobs. I say that the project will include a full operational management team of finely experienced clinical and caring staff with extensive nursing home management in Ireland and internationally. I say that this project has the support of government department and its agencies.
…
14. I say that as part of the project, the debtor stands to receive circa €1.2m in repayment of a director’s loan with the option of selling his shares (5%) in the company to generate a further €2.76m. These monies are to be contributed to the arrangement for the benefit of creditors and particularly to the benefit of Danske as the dominant creditor.”
34. Danske argues that the debtors failed conspicuously to disclose the true details of that possible source of funds by reference to the affidavits sworn by the debtor in his application for an adjournment of the bankruptcy petition, and other matters. The debtor disputes the relevance of any matters that arose in the context of the bankruptcy petition, and I reject that suggestion, partly because the bankruptcy legislation envisages a close connection between processes in bankruptcy and engagement with the insolvency legislation, but also because coherence between the affidavit evidence of the debtor in the two processes is desirable.
35. In an affidavit sworn 27th November, 2015, by Mr. Nugent, in support of his application for an adjournment of the bankruptcy petition, relied, inter alia, on an argument that his debts could more appropriately be dealt with by a personal insolvency arrangement. He identified the underlying financial basis for such an arrangement as “the payment of €2m in project management fees” arising from the construction of a thousand nursing home beds by the end of 2016. He avers that the relevant parties had met in Dublin prior to the end of October, 2015, and confirmed that the “project is progressing as planned and that the process is in its very final stage”. He said that “the funding is fully agreed” in the sum of €200m and that the construction company Balfour Beatty plc “have been fully retained”. He exhibited correspondence from Ground Lease Capital Partners LLC of 18th November, 2015, which confirmed that the parties were “working diligently towards the finalising of an agreement for an initial investment of some €100m to develop care homes in Ireland”. He identified that circa 2% of the initial investment of the €100m would be “allocated by way of payment for project management services” to himself which he, in turn, would “use to pay third party suppliers for work they had done in conjunction with the sourcing of the land”.
36. When the debtor was cross examined in aid of execution before the Master of the High Court, on a date which was not identified to me but which was in the last number of months, he swore that he expected to recover a sum of approximately €1.4m in respect of fees owed to him by a company, Limra Healthcare Limited/ Limra Pensions Limited. He described the company Preference Healthcare as a “branded company”, and which would have a number of nursing homes “underneath it”. He described the structure of the companies as involving “a lot of complexities” and that he was responsible for design and build in project management.
37. The application to extend the period of the protective certificate was grounded on the affidavit of the PIP. He stated that Mr. Nugent expected to receive substantial monies through the repayment of a director’s loan to Preference Healthcare, and he made no reference to management fees. In his replying affidavit to the motion to strike out sworn on 29th February, 2016, Mr. Murray explained the connection between Limra Health Limited and Ground Lease Capital Partners LLC, and said that the latter was “now the funding partner for the project”. He explained the change in the financial profile of the debtor as arising from the fact that the payment of €2m as management fees would result in a significant personal tax liability and that it was considered “more prudent” that the debtor would seek to collect his director’s loan of €1.2m from Pragma Services Limited which would, in turn, invoice Preference for services it would perform.
38. Added to that, the debtor would sell his shareholding in Preference for €4.125m which would result in a net sum after tax of €2,763,750.
39. The loan to Pragma Services Limited had been identified in the director’s prescribed financial statement prepared for the purposes of the initial application for the protective certificate. The fees accruing from Pragma Services Limited of €2m were also identified. As both of those figures were identified in the paperwork lodged with the Insolvency Service of Ireland, there may have been no requirement that the source of funds be identified specifically in the application for the extension of the protective certificate. However, the PIP in his affidavit grounding the application for extension of the protective certificate identified that a “concluded agreement” with Ground Lease Capital Partners LLC had been achieved and that a concluded agreement Balfour Beatty plc was also in place. In his second affidavit, he exhibits a letter, which I regard as of some significance, of 24th February, 2016, from the London solicitors who act for Ground Lease Capital Partners LLC, which refers to “the potential provision” of funding and to the “proposed transaction”, and makes it quite clear that no concluded agreement has been achieved and that “all necessary due diligence and contractual matters remained to be dealt with”. That letter is dated some more than two weeks after the order extending the protective certificate, and creates, in my mind, serious doubt as to whether Preference Healthcare has concluded an agreement with Ground Lease Capital Partners LLC, and whether in that context, the finance to develop the nursing home beds is or is likely to be available. It is four months since the date of the meeting referred to in the affidavit of the debtor in his affidavit grounding his application for an adjournment of the bankruptcy petition. At that stage, the debtor expected the paperwork to be completed by 4th December, 2015. At the hearing before me on 4th or 5th March, 2016, no paperwork, other than the letter from the London solicitors of the possible investor, was available and that points to no more than ongoing negotiations.
40. It is not my role at this hearing to consider the true position of the finances of Mr. Nugent, but I do consider that the affidavit grounding the application for the extension of a protective certificate wholly failed to identify the true picture with regard to the projected source of funds.
41. Even more potentially problematic is the suggestion in the affidavit grounding the application for the extension that Mr. Nugent’s share in the company Preference Healthcare was valued at €2.76 million after tax and that he had the “option” of selling these. The debtor in his statement of affairs sworn on the 6th July, 2015 valued his shareholding in that company at “nil” and in his prescribed financial statement completed on the 6th November, 2015 for the purposes of the initial application for the protective certificate valued it at €50.00. The PIP attempted to explain the position by accepting that “as matters currently stand”, the company is almost valueless, but expected that “within the next number of days” if the project commences as expected, that the value would be in line with the report furnished by Ernst and Young exhibited to his replying affidavit. That report was a draft report dated 28th April, 2014 and bears some scrutiny. It is quite clearly gives valuations contingent upon the availability of capital, which I have noted above is less than certain. The report was clearly based on data provided by management and throughout it was referred to as a preliminary working draft.
42. The PIP does not give any coherent explanation in his replying affidavit of the 29th February, 2016 as to how he could now rely on a working draft report which is two years old, and based on projections and contingencies which have not yet been realised. His affidavit was given as one of an experienced accountant and insolvency practitioner and the body of the report goes nowhere near supporting his valuation of the shares of the debtor, and does not engage at all with many assumptions made by Ernst and Young, and with the fact that the capital basis for any ongoing activity by reference health care is not yet agreed. The report estimates the value of the company, based on the successful delivery of 750 beds at €110.6 million.
43. I regard the omission of these explanations and details from the grounding affidavit as material and being matters that might have been relevant to the exercise of my statutory jurisdiction under 95(6) of the Act 2012.
44. It is also a matter of great concern that the PIP did not inform me at the ex parte hearing that the status of Preference Healthcare at the time of the application, was “strike off listed”. No evidence has been adduced as to any step being taking to regularise the position of the company, if that is to happen at all, although counsel did say that the matter was “in hand”.
Proof of debt
45. Another matter relied on by the PIP in his application to extend the period of protection is engagement with Danske since the original protective certificate issued. In his affidavit grounding the application for the extension of the certificate the PIP says he engaged with the specified creditors, as is required under the legislation. He also says that the matter “progressed as normal and without issue” until he came to engage with the London solicitors acting for the U.S. pension fund, which I have dealt with above. He goes on later in the affidavit to say that the personal insolvency arrangement which he was putting together was likely to be accepted by the creditors including Danske, and that this serves the best interest of those creditors, “a point emphasised by my actions in seeking to engage with Danske and the debtor to date”. The suggestion was that Danske had been kept informed of progress, and if not actively supportive, at least it could be said it was not hostile. Danske through its solicitor avers that there has been no engagement between the PIP and the bank whatsoever save with regard to the completion of the bank’s proof of debt to which I will return below. He suggests that the impression given by the PIP was misleading and suggests that the proposition that creditor support would be forthcoming is one not founded in the facts of which the PIP was well aware, namely that Danske which holds well in excess of 65% of the total debt, has made it clear that none of the proposals made by the debtor were in its view credible.
46. The PIP in a letter of the 29th February, 2016 notified the solicitors acting for Danske that he had knowledge as of the 5th February, 2016, three days before he swore the affidavit grounding the application for the certificate, and five days before application was made to the court, that he was potentially exposed to “a professional negligence action” were he to accept that Danske had proved its debt within the time allowed by the legislation. No information was given to the court at the hearing of the ex parte application that there was any difficulty whatsoever with regard to the validity of the proof lodged by Danske, and this of course is of particular consequence in that Danske has more than 65% of the debt and would have in those circumstances under the legislation the power to veto any personal insolvency arrangement. The PIP in his replying affidavit suggests that Danske had available to it the option of applying to the High Court to have its proof of debt admitted. While I note that in his replying affidavit the PIP outlines a number of possible scenarios that could evolve at the creditors meeting, one of which was that Danske would be unable to vote, I cannot regard this as sufficient disclosure at the ex parte hearing of the facts surrounding the Danke proof of debt. I regard it as material that the PIP did not disclose at the very least his own view that the Danske debt was not properly proved, a view which he clearly held at the time of the ex parte application, and that it was possible that Danske would not be permitted to vote at the creditors’ meeting, with the result that a personal insolvency arrangement put to that meeting would more likely than not be accepted.
47. I reject the suggestion by the PIP that, having regard to the amending legislation of 2015, there exists now a mechanism by which the court may approve a personal insolvency arrangement notwithstanding that it has been rejected at a creditors’ meeting, as that provision envisages the court involvement in the context of seeking to protect the principal private residence of a debtor. What was not disclosed in the grounding affidavit for the extension or at the ex parte hearing, is that the principal private residence of the applicant, which he owns with his wife, has been the subject matter of an order for possession in favour of KBC Bank Ireland Plc, made in late October, 2015. In those circumsatnces, I reject the suggestion of counsel for the PIP that Danske, in bringing the application to set aside the extension of the certificate, is seeking to avoid the provisions of s. 115A as inserted by the Act of 2015, as Mr. Nugent does not have any identifiable principal private residence in respect of which the protection afforded by that new section might be availed of by him.
Conclusion on disclosure
48. I consider that the PIP failed to make appropriate disclosure and that some of the matters are matters which might have affected my mind in hearing the application for the extension of the protective certificate. In particular, I consider that the PIP has failed to identify with any clarity whatsoever the precise basis on which Mr. Nugent claimed to be close to achieving a substantial amount to meet a personal insolvency arrangement. The information furnished is at best incomplete, it is to a large extent so unclear as to be difficult to understand, and it is based on a number of assumptions, including assumptions made more than two years ago, that have not yet come to fruition. Furthermore the documentation contradicts that presented to the hearings in the bankruptcy court. That is a factor that might have influenced my approach to an extension of the protective certificate, as I was aware that the debtor wished to avail of a personal insolvency arrangement to avoid bankruptcy.
49. Furthermore, I note that the PIP failed to inform me that he had taken a view on legal advice with regard to the validity of the proof of debt lodged by Danske, and that it was possible in those circumstances that he would seek to hold a creditors’ meeting without the attendance of Danske.
50. Furthermore, the suggestion that there might have been available some scope for the court to exercise its discretion under s. 115A of the Act, as inserted by the Act of 2015, is misplaced having regard to another fact not disclosed, namely that the principal private residence of the debtor has been the subject of a recent order for possession in favour of another lending institution.
51. It is not necessary for the purposes of this application that I should take a view as to whether the PIP, or the debtor, deliberately sought to present the matter to me in a way that points to a lack of bona fides. As a matter of law the test before me is whether there was a significant and material failure to disclose matters which should have been disclosed and the test is an objective one as to what could have influenced me in the exercise of my jurisdiction in making the order ex parte. I am satisfied that the test is met.
Consequences of non-disclosure
52. It is clear from the judgment of Clarke J. in Bambrick v. Cobley that the court has a discretion, in cases where failure to disclose has been established, as to what order it will therefore make. The extent to which an applicant is culpable in respect of a failure to disclose is one factor and as he put it:
“a deliberate misleading of the Court is likely to weigh more heavily in favour of the discretion being exercised against the continuance of an injunction than an innocent omission.”
Clarke J. identified that there could be intermediate cases, and one factor was the extent of materiality.
53. I regard the non-disclosure in this case as being of matters which were material in the sense in which I have explained above. I also regard the failure of full and frank disclosure to be culpable, but in that I take my guidance from the judgment of Hogan J. in Re Belohn Limited and Merrow Limited where he accepted that the non-disclosure had come about as a result of a bona fide error and oversight and that no personal blame should attach to the petitioners or their advisors, but regarded the “objective relevance and materiality” of the matters not disclosed as being such that it would be unjust to allow the order to stand. Blameworthiness, then, does not have to be established as personal blameworthiness, and it is to be tested objectively in the light of the materiality of the matters not disclosed.
54. I regard the PIP as blameworthy in that objective sense. Further, I am not convinced that there was a genuine oversight on the part of the PIP, which led him not to disclose the true picture with regard to the funding for the nursing home schemes and the difficulty that he perceived with the proof of debt lodged by Danske.
55. I accept too that I have a discretion in the order I may make as a result of a finding that there has been material non-disclosure, and that this was culpable in the objective sense. That discretion must take into account a desire on the part of the court to express its displeasure at the failure, but also must bear in mind other circumstances which might be relevant.
56. Counsel for the PIP argues that Danske has not closed the door to the insolvency process and that this is clear from Danske’s affidavit grounding this application. He also points to the fact that we are, as he puts it “early” in the process, and that were I to now vacate the order extending the period of the protective certificate, I would be failing to recognise that the order was made in part of a process which has not yet crystallised. The process to which he refers is intrinsically tied up with the negotiations for funding from the US pension fund and that has been actively in train for several months, at the latest since October of 2015 as identified above.
57. I cannot ignore the fact that the timeframe envisaged by the personal insolvency legislation is broadly similar to that in examinership, and that the legislature in each of the two processes envisages the parties thereto moving with expedition and in the light of the strict time limits under each legislative scheme. Furthermore, the strictness of the time limits is in part a reflection of the impact on the interests of creditors by the suspension of their rights during the respective periods.
58. There might be some merit in that argument in another case, but having regard to the view that I have taken, and having regard also to the limited timeframe within which a protective certificate can operate, the delay between October, 2015 when negotiations were said to have almost reached a conclusion, is a matter that weighs on my considerations.
59. I accept that the purpose of the personal insolvency legislation is to avoid a debtor being made bankrupt, and that the personal insolvency regime offers a more benevolent means by which he or she can deal with indebtedness. This is envisaged by the Oireachtas as being in the common good. That statement of principle by the Oireachtas must influence me in my thinking, but it does not in the present case influence me to such an extent that I do not regard the absence of candour as central to the approach that I should take. The availability of a more benevolent or protective regime under the personal insolvency legislation imposes a heavy burden on a PIP coming before the court seeking a protective certificate, an extension of that certificate, or approval of a personal insolvency arrangement, to act with the utmost good faith and frankness. To gain the protection of the personal insolvency legislation where a bankruptcy petition has been adjourned pending an attempt to engage with the creditors under that regime, a PIP charged with the role of engaging with the court, the creditors and the Personal Insolvency Service of Ireland must do so with the greatest of solemnity and candour, and he is not in my view to see his role as being one of an advocate presenting in an adversarial system an argument in support of his client, but rather as a person who has responsibility and obligations to all elements of the system.
Section 97 of the Act of 2012
60. Counsel for the PIP argues that my jurisdiction ought to be exercised within the context of the provisions of s. 97 of the Act which allows the court to set aside a protective certificate, and ipso facto an order extending a certificate, on the application of an aggrieved creditor but which makes one of the tests applicable to such application that irreparable loss to the creditor would result from the making of the order. It is said that the proposed personal insolvency arrangement will be to the benefit of all creditors, and specifically to the credit of Danske as the largest creditor, but that the result of a bankruptcy would be that Mr. Nugent would not be in a position to conclude the contractual negotiations for the nursing home funding.
61. I cannot accept that argument, and I have explained above that the court is exercising its full original jurisdiction in this application. I consider that I ought not to exercise my discretion in favour of the continuance of the ex parte order in the present case as I see little or no reality in the conclusion of the contractual arrangements for which Mr. Nugent contends having regard to the fact that even now none of the players is committed to that scheme. Since the making of the order by me on the 10th of February, 2016 he has had a further period of four weeks, or three weeks if one counts the time up to the presentation of the motion to set aside the ex parte order, in which to conclude the contract. Even at the hearing of the motion the PIP was not in a position to put forward any further information that would indicate that the contractual process is coming to an end, and in that context whether the insolvency process was likely to be successful.
Conclusion
62. In my view there has been material and culpable non-disclosure and in the circumstances I propose making an order setting aside the order made ex parte on 10th February, 2016. In those circumstances there is no need for me to consider further the question whether Danske has proven its debt within the requirements of the Act.