High Court Refuses to Review Rejections of Personal Insolvency Arrangements
In two recent decisions the High Court considered the provisions of Section 115A(9) of the Personal Insolvency Acts 2012 to 2015 (The Acts). The Section provides that a Court can give effect to a Personal Insolvency Arrangement (PIA) despite it having been rejected by creditors. It was designed to enable a qualifying debtor to retain their principal private residence in certain circumstances.
The Section applies where the debts to be dealt with by a PIA include a "relevant debt" which is defined as a debt secured on the debtor's principal private residence, and in respect of which (i) the debtor was in arrears with their payments on 1 January 2015, or (ii) the debtor, having been in arrears with their payments before 1 January 2015 has entered into an alternative repayment arrangement with the creditor.
In Hill and Personal Insolvency Acts [2017] IEHC 18, High Court, Baker J 18 January 2017 Ms Hill was not in arrears with her mortgage payments on 1 January 2015, however she argued that she had a relevant debt as she had been in arrears on at least five occasions before 1 January 2015, and had entered into an alternative repayment arrangement with her bank concerning these arrears.
The Acts do not contain a definition of "alternative repayment arrangement", nor what it means for a debtor to be in "in arrears with his or her payments". Accordingly the Court had regard to the Central Bank's Codes of Conduct for guidance.
Baker J noted that Section 115A(9) requires that the Court be satisfied that the proposed PIA enables a creditor to recover debts due to them to the extent that the means of the debtor reasonably provide, the proposal will enable the debtor to retain their principal private residence, and that the costs of enabling the debtor to do so are not disproportionately large. The Court must also be satisfied that the proposed arrangement is "fair and equitable" in relation to each class of creditors that has not approved the proposal. The Court is also required to consider the conduct of the debtor in the previous two years in seeking to pay the debts concerned.
Baker J was of the view that Section 115A is not intended to give a broad unfettered discretion to the Court to protect a principal private residence, as to do so could lead to an undesirable lack of certainty in financial arrangements, and to a lack of a proportionate approach to the interests of the debtor and creditor regarding such loans. She also noted that personal hardship or the hardship that might be experienced by a family is not a factor which it can take into account in making its decision.
On the facts Baker J held that there was no alternative payment arrangement entered into between Ms Hill and the Bank such as to bring her within Section 115A. The words of the Section suggest that there be more than a series of ad hoc or one-off acceptance of breach, but rather an arrangement as a result of which some alternative terms and conditions as to the repayment of a secured loan are agreed to govern the repayment obligations of the borrower. Although Ms Hill had made late payments on five occasions, no arrangement was made by which the contractual terms and conditions of the mortgage were varied by agreement, save in regard to the individual payment in question.
In the circumstances, Baker J considered that the provisions of Section 115A (9) were not engaged and Ms Hill did not have a relevant debt in respect of which a PIA could be approved by the Court.
Section 115A(9) also arose in Hickey and Personal Insolvency Acts [2017] IEHC 20, High Court, Baker J, 18 January, 2017 where the matter at issue was the time limit for bringing an application under the Section.
Section 115A(2) provides that the time limit for the bringing of an application under the Section is not later than 14 days after the creditors' meeting referred to. In this case the motion bringing the application was dated 1 September 2016, was lodged by e-mail on Friday, 23 September 2016, and was stamped and lodged in the Central Office of the High Court on 28 September 2016.
The meeting of creditors was held on 9 September 2016 and if that day were to be included in the 14 day period the time limit expired on 22 September 2016. If the day of the creditors' meeting was not to be reckoned time expired on 23 September 2016.
Section 18(h) of the Interpretation Act 2005 (The Act of 2005) provides that where a period of time is expressed to begin on or be reckoned from a particular day, that day shall be deemed to be included in the period and, where a period of time is expressed to end on or be reckoned to a particular day, that day shall be deemed to be included in the period.
The debtor argued that the Personal Insolvency legislation identifies 17 different time limits in various subsections and that the only subsections that use the word "after" are Sections 119A and 115A, all of the other time limits use the word "within" and this different use within the same statute was intentional.
Baker J considered that the debtor's arguments failed to have regard to the requirement of legal certainty in statutory time limits which was intended to be dealt with by the Act of 2005. Accordingly, she held that the debtor was out of time for the lodging of the application and, as the statutory time limit is strict, the application failed.
Comment
These decisions make it clear that the High Court is adopting a strict approach to the interpretation of the provisions of Section 115A. Debtors will need to establish that their circumstances clearly fall within the parameters of the Section before the Court will proceed to consider whether it should give effect to a PIA which has been rejected by a secured creditor.
For further information, please contact Paula Mullooly or a member of the knowledge team.
Date Published: 21 February 2017