Moran Doyle v Personal Insolvency Acts 2012-2015 (Approved)

Factual and Procedural Background

This judgment concerns an appeal by the Debtor against the refusal by the Circuit Court of an application made by the Debtor's personal insolvency practitioner ("PIP") pursuant to section 115A(9) of the Personal Insolvency Acts 2012-2015 ("the Act"). The application related to the approval of a personal insolvency arrangement ("PIA"). The sole creditor, Company A, objected to the PIA on grounds relating to the Debtor's ability to comply with the arrangement, the likelihood of resolving indebtedness without bankruptcy, and alleged nondisclosure of shareholding in a company by the Debtor.

The PIA proposed restructuring the Debtor's mortgage secured on her principal private residence ("PPR"), which had a significant deficit between the mortgage balance and the property's market value. The arrangement included payments over 72 months, with a mortgage term extended to 20 years and a reduced secured debt amount. The PIA relied substantially on a €1,000 monthly maintenance payment from the Debtor's former husband, who is insolvent. The creditor contested the reliability of this payment and the Debtor's disclosure of ownership in a company, Carlow E-Learning Direct Limited ("the company").

The Circuit Court refused the application, and the Debtor appealed to the High Court.

Legal Issues Presented

1. Whether the Debtor is reasonably likely to be able to comply with the terms of the proposed personal insolvency arrangement under section 115A(9)(c) of the Act.
2. Whether the Debtor will be able to resolve her indebtedness without recourse to bankruptcy as required by section 115A(9)(b)(i) of the Act.
3. Whether the Debtor failed to comply with disclosure obligations under sections 50(3) and 91(1)(e) of the Act by allegedly not disclosing her shareholding in the company.

Arguments of the Parties

Objecting Creditor's Arguments

• The proposed PIA is unsustainable because it relies on a €1,000 monthly maintenance payment from the Debtor's insolvent former husband, whose payments are sporadic and unreliable.
• The Debtor will likely be unable to resolve her indebtedness without bankruptcy since the mortgage affordability depends on the maintenance payments continuing until the Debtor is 80 years old.
• The Debtor failed to disclose ownership of 99% of the shares in the company in her Prescribed Financial Statement, breaching disclosure obligations under the Act.
• The B1 annual returns for 2018 and 2019 indicate the Debtor retains 99% shareholding, contradicting the Debtor's assertion of transferring shares to her daughter, suggesting nondisclosure is deliberate and fatal to the application.
• Without a court order enforcing maintenance payments, there is a risk the Debtor's former husband could cease payments by availing of insolvency processes, undermining the PIA's sustainability.

Debtor and PIP's Arguments

• The Debtor receives reliable and consistent maintenance payments of €1,000 per month from her former husband pursuant to a maintenance agreement dated 2016.
• The former husband is a director of the company, which is a successful going concern generating income sufficient to support maintenance payments.
• The Debtor transferred her shareholding in the company to her eldest daughter in accordance with the maintenance agreement, supported by a letter from the company’s accountants acknowledging an administrative oversight in B1 filings.
• The absence of a court order enforcing maintenance payments is not a barrier to approval, as established in precedent, and the PIA allows for future enforcement if necessary.
• The Debtor is reasonably likely to comply with the PIA terms, can continue working without compulsory retirement age, and will become entitled to a state pension, supporting the arrangement's sustainability.

Table of Precedents Cited

Court's Reasoning and Analysis

The court examined the sustainability of the PIA, focusing on whether the Debtor is reasonably likely to comply with its terms and resolve indebtedness without bankruptcy. It considered the reliance on maintenance payments from the former husband, who is insolvent but has consistently made payments under a maintenance agreement. The court acknowledged the creditor’s concerns about the reliability of these payments but found no evidence to suggest the payments would cease, especially given the company’s apparent ongoing success and the former husband’s role therein.

The court addressed the alleged nondisclosure of shareholding in the company by analyzing contradictory B1 annual returns and an accountancy firm's letter acknowledging an administrative error. It concluded that the Debtor had transferred her shares in accordance with the maintenance agreement and that the discrepancies in filings were due to oversight rather than deliberate concealment. Therefore, the court found no breach of disclosure obligations under the Act.

In assessing the overall viability of the PIA, the court applied the statutory test that requires reasonable likelihood rather than certainty of compliance. It noted the PIA’s structure, allowing for a "road test" over six years, and the creditor’s ability to enforce security or bankruptcy proceedings if the Debtor defaults. The court also considered that bankruptcy would likely yield a less favorable outcome for the creditor.

Accordingly, the court was satisfied that the PIA met the statutory requirements and was sustainable.

Holding and Implications

The court SET ASIDE the order of the Circuit Court refusing approval of the PIA and CONFIRMED the coming into effect of the proposed personal insolvency arrangement in accordance with its terms.

This decision allows the Debtor to proceed with the PIA, restructuring her mortgage and debt obligations under the terms approved by the court. The ruling does not establish new precedent beyond affirming the application of existing principles regarding maintenance payments and disclosure obligations in the context of personal insolvency arrangements.