High Court: Debtor does not have locus standi to appeal application brought by personal insolvency practitioner

About this case:

• Judgment:
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Finding in favour of Bank of Ireland raising the issue as a creditor, Ms Justice Marie Baker stated that even though the debtor was an aggrieved person impacted by the decision, this could not override the procedural constraints.

Background

A personal insolvency practitioner (PIP), on behalf of Mr Darren Reilly (the Debtor), made a proposal for a Personal Insolvency Arrangement (PIA) under the Personal Insolvency Acts 2012-2015 pursuant to his function in that regard.

The proposal did not receive the requisite support of creditors at a meeting of creditors held to consider the proposal in November 2016.

The PIP lodged an application pursuant to s. 115A that the court would approve the PIA notwithstanding the result of the vote at the meeting of creditors.

In June 2017 a specialist judge sitting at Monaghan Circuit Court refused the application under s. 115A(9) of the Personal Insolvency Acts 2012-2015.

Important Preliminary Issue

The decision of the specialist judge was appealed and the present judgment from the High Court dealt with a preliminary issue raised by Bank of Ireland – the question considered by Justice Baker was whether the notice of appeal from the order of the specialist judge was properly constituted.

Bank of Ireland argued that the appeal was not validly brought as it was not made by the PIP, but rather by the Debtor himself.

Bank of Ireland argued that the appeal must fail as the involvement of a PIP in all stages of the process, including an appeal from a determination by the Circuit Court, is mandatory in all applications under the Personal Insolvency Acts 2012-2015.

On behalf of Mr Reilly, it was argued that his interests would be affected by the appeal, and therefore he had sufficient locus standi to prosecute the appeal.

Justice Baker emphasised that the present judgment was not concerned with the merits of the case – but limited to considering the role of the PIP in the insolvency process, where the engagement of the PIP ends, and the broad question of the interplay between a debtor and the PIP.

Decision

The Debtor argued that once a PIP performed his or her functions and brought the matter as far as the application for a review under s. 115A, the process may be continued by a debtor, if necessary by appealing a refusal of the Circuit Court for review under s. 115A.

Consequently, once the procedural steps have been taken, the procedure is complete and the s. 115A application is properly before the Circuit Court. In those circumstances, it was argued by the Debtor that an appeal is governed solely by s. 37 of the Act of 1936 as amended by the Act of 2013.

Relying on East Donegal Co-operative Livestock Mart Limited & Ors. v. The Attorney General 1 I.R. 317, the Debtor argued that “as a creditor has a right to appeal from a decision under s. 115A, a debtor must have such a right and that right of the debtor cannot be constrained by any requirement that the appeal may only be brought with the concurrence of the PIP”

However, Justice Baker stated that the fact that a debtor is an aggrieved person impacted by the decision of a court did not mean “in itself that a debtor may initiate an appeal without observing the statutory and clearly mandatory provisions of the legislation setting out the procedural requirements to commence application under the Act”.

In effect, the debtor sought to argue that the High Court hearing the appeal from the Circuit Court could engage a jurisdiction different to the Circuit Court. Rejecting this, Justice Baker stated that the High Court was “as constrained by procedural requirements” and could hear an application only if it was correctly before it, in the same way and to the same extent as the Circuit Court.

An application under s. 115A(1) can only be instituted by a PIP, and a debtor has no statutory standing to initiate the application without the active and substantive engagement of the PIP with the process. The appeal court is constrained by the jurisdictional limitations and cannot engage with the application unless it is brought by the persons who were before the Circuit Court.

Justice Baker stated that she was conscious of the practical problem this conclusion might cause in certain cases; in particular the consideration of fees incurred by the PIP in lodging an application under s. 115A, or an appeal from an order refusing relief – notably absent from any express provision in the legislation.

In all likeliness, if a PIP lodges an application bona fide, and prosecutes an appeal, the usual order sought by successful creditors w0uld be one made against the debtor, not against the PIP.

The fact that the court may, in exceptional circumstances, award costs against a PIP could not mean that a PIP ought not to play the statutory role envisaged by the Personal Insolvency Acts 2012-2015 in the bringing of an appeal from a decision of the Circuit Court under s. 115A.

Notwithstanding these practical considerations, Justice Baker stated that this could not lead her to construe the statute any differently.

Dismissing the appeal, Justice Baker held that the preliminary objection raised by Bank of Ireland was correct – the appeal of the Debtor from the decision of the Circuit Court was not properly constituted.

Justice Baker added that she would hear the parties on whether an order for substitution ought to be made.