Man’s personal insolvency arrangement inconsistent with law, judge finds

A High Court judge has refused to approve a personal insolvency arrangement for a self-employed father of two whose current family home is subject of a possession order and who has an interest in two other properties.

Mars Capital Ireland No 2, owed more than € 800,000 under mortgages on two properties in Co Louth and Co Dublin jointly owned by the man and his ex-wife and valued respectively at €220,000 and €230,000, had objected to the proposed arrangement (PIA).

Among various objections, it objected to the proposed writing down of a €639,462 mortgage debt secured on the current family home in Co Louth to its market value of €220,000.

It also objected to restructuring of that debt via the balance being treated as unsecured debt with a relevant dividend paid to Mars and a reduced principal sum repaid over 21 years.

Mars got an order in 2017 for possession of the property but has not to date recovered possession.

In relation to the Co Dublin property where the ex-wife lives, it objected to proposals the man transfer his beneficial interest in that property to her. She is servicing, under an interest-only arrangement, the mortgage on that property and the sum due under the mortgage loan is currently € 181,146.

It was stated the ex-wife is not willing to sell the property and the man’s Personal Insolvency Practitioner (PIP) believed a forced sale could be a drawn out process incurring legal costs and no material benefit for the man’s creditors.

Mars argued this proposal amounted to reducing from €230,000 to zero its security from the man over the Co Dublin property and that breached a provision of the Personal Insolvency Act 2015.

Personal Insolvency law

In a judgment published this week, Mr Justice Denis McDonald ruled the proposed arrangement concerning the Co Dublin property is not consistent with section 103.2 of the 2015 Act.

Section 103.2 prevents reduction of the principal sum due in respect of a secured debt to less than the value of the security in cases were the relevant security is not to be sold but will instead be retained.

The judge said the proposal that Mars will look solely in the future to the ex-wife for repayment of the debt amounted to reducing the man’s €230,000 debt to Mars to nil.

While there were “obvious pragmatic reasons” for the approach by the PIP, it was not consistent with section 103.2. The proposal meant a joint and several debt owed by the man and his ex-wife would become a sole debt due by her.

Given that finding, he said the court could not confirm the PIA and he must dismiss the PIP’s appeal over the Circuit Court’s rejection of it.

In other observations, the judge noted Mars argued the costs to it of enabling the man to remain in the detached property in Co Louth, when he could live in a smaller property in Co Louth fully owned by him, were disproportionately large.

The man, who has shared custody of the children, previously resided at the other Co Louth property but argued it is no longer appropriate as a family home due to its location and having 13 steps up to the front door, creating difficulties for one of his children who is autistic.

The property is valued at €157,000 and subject to a security of €162,527 in favour of Ulster Bank which voted for the PIA as had Bank of Ireland, owed some €90,732 under a loan also secured on the current family home property.

When issues are raised about whether a property is suitable for a family home it would be advisable for the PIP to ensure more comprehensive evidence is placed before the court concerning the child’s medical condition, the judge said.