High Court clarifies time frame for personal insolvency applications

A High Court ruling is good news for a large number of debtors appealing findings that their applications for court approval of personal insolvency arrangements were made out of time.

Mr Justice Denis McDonald’s ruling clarifies a provision of the Personal Insolvency Acts concerning court approval of a Personal Insolvency Arrangement (PIA).

He rejected arguments by a fund the Acts require that a debtor seeking court approval for a PIA must make, and serve, the proceedings within 14 days of a creditors meeting which had refused approval.

Appeal

Instead, he granted an appeal by a debtor against a Circuit Court finding last October that the debtors’s application aimed at getting approval for his PIA was not “made” within the 14 day period provided for in Section 115A(2) of the Personal Insolvency Acts 2012-2015 (the Acts).

The judge disagreed with the Circuit Court the word “made” in that context also meant “served”.

The debtor owes a total sum of around €755,000 and 60.7 per cent of his creditors had voted in favour of the proposed PIA.

One creditor, Mars Capital Ireland DAC, owed some 40 per cent of the total debt, voted against the PIA.

Mr Justice McDonald noted a majority of secured creditors voted in favour of the PIA. However, when it came to unsecured creditors, Mars, holding 50.1 per cent of the unsecured debt, voted against while the other unsecured creditors voted in favour.

That created a situation where the debtor had to apply to court, under Section 115A(9), to approve the coming into effect of the PIA.

Section 115A provides such an application should be “made” not later than 14 days after the creditors meeting.

In the man’s case, the Section 115A(9) application was issued on December 19th within the 14 day period.

However, Section 115A(2) requires the application should be on notice to the Insolvency Service of Ireland, each creditor concerned and the debtor.

Service on creditors was effected by posting the notice of motion on December 22nd 2016, more than 14 days after the creditors meeting.

Mars ultimately argued in the Circuit Court the PIA was out of time because it was not “made” within the 14 days prescribed by Section 115A(2). It argued the application was not “made” until it was served.

Application

The Circuit Court agreed the application could not be said to be “made” unless and until all of the parties had been served.

The debtor’s Personal Insolvency Practitioner appealed to the High Court and, in his judgment this week, Ms Justice McDonald allowed the appeal.

The judge noted the same issue has arisen in a substantial number of cases in the Circuit Court and his decision has implications for a “large” number of other appeals awaiting hearing.

He fully accepted the Oireachtas intended to create a “tight timeframe” for bringing an application under Section 115A.

This was clear from the 14 day period prescribed for making such an application and the fact the courts have no power to extend that time, he said.

However, it also appears clear from the 2012-15 Acts the Oireachtas specifically had in mind the making of an application could be achieved by bringing it to the court office, he said.

A consideration of Section 115A(2) and Section 140 of the Acts “strongly suggests” the Oireachtas did not contemplate the application would also have to be “served” on the notice parties before it could be considered to have been “made”, he said.

He concluded an application under Section 115A(9) for approval of a PIA is made once the application has been lodged in the relevant court office.

Section 115A(2) does not require that service be effected on the statutory notice parties within the 14 day period, he ruled.