High Court: Personal Insolvency Practitioner not “sole voice” to be heard in court review of PIA

About this case:

• Judgment:
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Section 115A

Section 115A(1) of the Personal Insolvency Acts 2012 to 2015 provides jurisdiction to the relevant court following a review under s. 115A(9) to confirm the coming into operation of a proposed PIA notwithstanding that it was rejected at a statutory meeting of creditors.

The primary purpose of the section is to approve a PIA where the arrangement will permit a debtor to continue to own or occupy his or her principal private residence.

Section 115A states:

“(1) Where—

the personal insolvency practitioner may, where he or she considers that there are reasonable grounds for the making of such an application and if the debtor so instructs him or her in writing, make an application on behalf of the debtor to the appropriate court for an order under subsection (9).”

In the High Court, it was to be determined whether in the light of the statutory provisions and the central and substantive statutory role of a Personal Insolvency Practitioner (PIP) in the review by the court of a proposed PIA under s. 115A, there exists a residual right in the debtor to directly engage in the process.

Justice Baker noted that “some 400 applications under s. 115A” had been suspended pending the outcome of this test case.

Sole voice to be heard?

Re Darren Reilly & the Personal Insolvency Acts 2012 to 2015 IEHC 558 was the starting point of argument in the present applications. Re Darren Reilly is authority “for a narrow proposition, that the involvement of the PIP in the process is mandatory, and that a debtor does not have an independent or free standing right to appeal a decision of the Circuit Court under s. 115A”.

However, Justice Baker explained that Re Darren Reilly is not authority for the present question, which asks “whether the voice of the PIP is the sole voice to be heard on behalf of a debtor in the statutory review”.

Justice Baker was satisfied that the intermediary role of the PIP “does not readily permit that he or she would argue the interest of the debtor at the hearing of the review under s. 115A(9) where the legal and factual matters engaged in the discretionary judgment of a court, and the objections of a creditor or creditors are to be considered. The PIP has not become the voice of the debtor at the review”.

She continued, “…as a debtor has an interest to protect and as the Oireachtas has not expressly identified that the debtor may not be heard on the application, counsel for the ISI is correct and the voice of the debtor is not intended to be silenced. That voice may be heard only if the application is properly before the court”.

Justice Baker also rejected the argument of counsel for the objecting creditors that the consequence of the interpretation advanced by the ISI would lead to litigation chaos.

Accordingly, Justice Baker was satisfied that the Act did not envisage that the PIP was the sole voice to be heard at the court review.

Application for costs against a PIP

The Insolvency Service of Ireland (ISI) argued that “PIPs remain reluctant to commence applications under s. 115A because they are fearful of an adverse costs order being made against them personally if the application is unsuccessful”, that this fear of personal liability will continue to discourage applications, and that such a “chilling effect” could have a serious impact on the operation of the Act and in particular on s. 115A.

The question of whether costs could be awarded against a PIP was already considered in Re Nugent and Re Darren Reilly – the principle being that costs would be granted against a PIP in exceptional circumstances or where the PIP acted in bad faith.

“Having regard to the particular and express public interest that is performed by a PIP in the insolvency process, and the fact that the PIP has no economic or personal interest in the outcome of an application, save for any fees which might come to accrue under a PIA which might come into effect following a making of an order of court, I consider that a costs order would not be made, unless it can be shown that a PIP acted without bona fides or dishonestly, or ‘acted with any impropriety’.”

Justice Baker said that correspondence threatening an application for costs against a PIP was “not appropriate”, and “not a practice which a court would condone”.

As such it was emphasised that the circumstances in which an order for costs against a PIP would be made would be “truly exceptional”.