Section 115A Applications Must be Made by a Personal Insolvency Practitioner

In Reilly & Personal Insolvency Acts 2012-2015 [2017] IEHC 558, Baker J, 5 October, 2017, the High Court held that applications to Court under Section 115A of the Personal Insolvency Acts 2012-2015 (the Acts), for approval of a Personal Insolvency Arrangement (PIA) despite its rejection by creditors, must be made by a Personal Insolvency Practitioner (PIP) and not by the Debtor themselves.

Background

In this case a PIP made a proposal for a PIA on behalf of the Debtor but it did not receive the necessary support of creditors. The Circuit Court refused an application under Section 115A to approve the PIA notwithstanding its rejection and the Debtor appealed.

Bank of Ireland (the Bank), raised a preliminary issue that the appeal was not properly constituted, as it was not brought by the PIP, but by the Debtor. The Bank argued that the involvement of a PIP is mandatory in all applications under the Acts. Solicitors for the Bank indicated that they would consent to the PIP being substituted for the Debtor in the appeal. That offer was rejected.

Decision

The High Court noted that the language of Section115A is clear and grants a PIP the power to make an application to Court to review a PIA where the PIP considers that there are reasonable grounds for the making of such application. Accordingly, the power vested in the PIP is only to be exercised in appropriate cases, and where the PIP can justify the making of the application on reasonable grounds.

The High Court was of the view that the Acts set out clearly how an application under Section 115A is to be brought and the engagement of a PIP at the procedural stages is a mandatory requirement. The Court noted that the Oireachtas had decided that application under Section 115A is to be made by a PIP, who must in so doing make a judgement that there are reasonable grounds for making the application. The Court also observed that such procedural rules are not unknown in corporate insolvency law.

Noting the clear and unequivocal language in Section 115A, the Court held that an application for review by the Court under Section 115A must be commenced by a PIP on behalf of a debtor, and could not be brought or instituted by a debtor himself or herself.

The Court also held any appeal to the High Court is brought within the procedural confines of the Circuit Court jurisdiction. Accordingly, the appeal from the Circuit Court must also be brought by a PIP.

The Court was of the view that these procedural requirements did not limit the access of a debtor to the Court, but regulated that access in the interests of the process and also limited unnecessary and unmeritorious applications.

The Court acknowledged the practical problems that might result from its decision noting that while the Acts allow for the fees of the PIP in preparing a PIA and calling a meeting of creditors, it makes no mention of the costs a PIP might incur in lodging an application under Section 115A, or in any appeal. The Court also acknowledged that a PIP might be concerned that he or she might be ordered to pay the costs of any successful Court application or appeal. That said, the Court was of the view that if a PIP lodged an application in good faith and in exercise of his or her professional and reasonable judgement, it would be unlikely that they would be ordered to pay costs.

In the circumstances, the Court upheld the preliminary objection raised by the Bank, and dismissed the Debtor's appeal.

For further information please contact Paula Mullooly.

Date published: 31 October 2017