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You are here: BAILII >> Databases >> High Court of Ireland Decisions >> O'Connor (A Debtor) [2015] IEHC 320 (21 May 2015)
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Cite as: [2015] IEHC 320
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Judgment
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Neutral Citation [2015] IEHC 320 THE HIGH COURT [2014 No. 196 CA.] IN THE MATTER OF PART 3, CHAPTER 4 OF THE PERSONAL INSOLVENCY ACT 2012 IN THE MATTER OF JOSEPH O’CONNOR OF BENEDINE, NENAGH, COUNTY TIPPERARY, A DEBTOR JUDGMENT of Ms. Justice Baker delivered on the 21st day of May, 2015 1. This is an appeal from a decision of the Circuit Court of the 3rd October, 2014 made by Judge Enright, a specialist judge appointed for the purposes of applications under the Personal Insolvency Act 2012 (“the Act of 2012”), by which she upheld the objection of Bank of Ireland (“the Bank”) to the personal insolvency arrangement (“the PIA”) proposed by Joseph O’Connor, a debtor. The matter came on for hearing before me grounded on the documentation which was before the Circuit Court, and on lengthy legal submissions from counsel. 2. Before turning to the grounds of objection I briefly outline the facts. Facts 4. The Bank’s debt comprises 22.2% of the total debt, and 70.1% of the secured debt of the debtor. Because the Bank is owed more than 50% of the secured debt of the debtor it had a blocking vote, and the PIA could not be approved without its support. 5. A notice of a meeting for the purpose of considering the PIA in the statutory form was sent to the Bank on the 8th July, 2014 for a meeting scheduled to be held at 11am on the 23rd July, 2014 at premises in Dungarvan, Co Waterford. The PIA was subsequently amended and the amended PIA was furnished to the Bank one day before the scheduled creditors’ meeting. 6. As is required by the legislation the PIP requested that creditors submit proof of debt within 14 days of the letter. Ulster Bank, one of the creditors, did not prove its debt, although its claim was included by the PIP for a dividend in the proposal put to the meeting. That inclusion is one of the grounds of objection raised by the Bank. 7. The Bank determined to vote against the proposal and emailed a proxy form to the PIP appointing him as its proxy to vote against the proposal at the meeting. The email was sent just before 4pm, the deadline, on the 22nd July 2014. 8. The chairman of the creditors’ meeting refused to accept the proxy instrument. 9. An officer of the Bank, Ms Ormiston, attended at the creditors’ meeting to vote in person on behalf of the Bank. For that purpose she presented evidence of her authorisation to act on behalf of the Bank to the PIP who acted as chairman of the meeting. The PIP rejected her evidence and did not permit her to vote. 10. Thus the Bank’s blocking vote was not cast against the PIA which was deemed to have been approved pursuant to the provisions of s.108 (8) of the Act. 11. By notice of objection dated the 1st August, 2014 the Bank notified the Circuit Court, the Insolvency Service of Ireland and the PIP of its objection to the PIA coming into force on the five grounds set out therein. 12. The application to approve the PIA was heard by Judge Enright on the 1st September, 2014. The objection of the Bank was grounded on the affidavit of Ms Anthea Ormiston sworn on behalf of the Bank on the 28th August, 2014. Written submissions were furnished to the court, which having reserved its judgment to the 3rd October, 2014, upheld the Bank’s objections. 13. The effect of the Circuit Court decision is that the PIA procedure has come to an end and the debtor no longer has the benefit of a protective certificate. Section 114 (3) of the Act of 2012 provides that:-
2) Whether the Bank was unlawfully prevented from casting a vote personally at the creditors’ meeting. 3) Whether the creditors’ meeting ought to have been adjourned having regard to the variations in the proposal. 4) Whether Ulster Bank was improperly included for a dividend despite not having submitted proof of debt. 15. It fell first to me to determine the appropriate means by which this appeal would be prosecuted. The Act of 2012 is silent on the mode of an appeal, and indeed on the entitlement to an appeal. There is nothing however to displace the provisions of the s. 37 (1) of the Courts of Justice Act 1936 which provides in all cases an appeal from the decision of the Circuit Court:
18. Furthermore, the appeal is confined to the grounds already argued in the Circuit Court, and that this is clear by analogy with appeals to the Supreme Court from the decision of Denham J. in Blehein v. Murphy & Ors. [2000] 2 IR 231 at p.240:-
21. The second question that fell for determination was how the appeal should proceed. Following argument, counsel for both parties agreed that, while formally the debtor ought to present the case, the only matters of substance before me on the appeal, and the only matter of substance before the Circuit Court, were the four points of objection raised by the Bank, and no argument was made that the formal proofs for the approval of the PIA were in order. Accordingly the Bank presented its grounds for objection and the debtor responded. 22. Counsel facilitated the hearing considerably by narrowing the issues to facilitate the management of the appeal process. 23. Before considering the questions raised in the appeal I briefly outline the provisions of the legislation with regard to the holding of a creditors’ meeting and procedures at such a meeting. The Creditors’ Meeting 25. Section 106(2) of the Act of 2012 provides for the giving by the PIP of at least 14 days’ written notice of the meeting, and s.107 sets out the documents that must be given to creditors when a creditors’ meeting is summoned. 26. Section 108(1) provides for voting rights and mandates as follows:
28. The objections relate primarily to the interpretation and application by the PIP of the requirements of these Regulations in the conduct of the meeting and the counting of votes. 29. I turn now to consider the first objection, that with regard to the proxy vote. The Exclusion of the Proxy Vote of the Bank
32. The Bank, having received notice of the creditors’ meeting, sought to vote by proxy. No issue arises as regards the delivery by the Bank of a completed proxy form prior to 4pm on the day before the scheduled creditors’ meeting. Some email correspondence occurred between the Bank’s representative and the PIP as to the time for admitting a proxy form, but the question of time limits is not now in contention. On 22nd July, 2014 an instrument creating a proxy vote was emailed by the Bank’s representative, Jane McDevitt, directing a no vote on the proposal. 33. The chairman of the meeting declined to accept the instrument creating the proxy and deemed it to be invalid, and not completed pursuant to the statutory requirements. By email of 22nd July, 2014 the PIP wrote to the Bank notifying it of this view, and furnishing the legal advice received on which the view was based. In that context the Bank appointed a person to attend and vote personally at the meeting the following day. 34. Before considering the detailed reasons for rejection, it is convenient that I set out the provisions of the Regulations providing the formal requirements for a proxy. The Regulation providing for a proxy 35. Regulation 7(2) provides that the instrument appointing the proxy:-
38. The proxy form actually completed by the Bank is as follows, and I use the upper case format employed: INSTRUMENT APPOINTING A PROXY IN THE MATTER OF A CREDITORS’ MEETING PURSUANT TO THE PERSONAL INSOLVENCY ACT, 2012 AND THE PERSONAL INSOLVENCY ACT, 2012 (PROCEDURES FOR THE CONDUCT OF CREDITORS’ MEETINGS) REGULATIONS 2013 AND IN THE MATTER OF JOSEPH O’CONNOR OF Benedine, Nenagh, Co. Tipperary, A DEBTOR Mitchell O’Brien OF the Insolvency Resolution Service, Garraun Fadda, Dungarvan, Co. Waterford is hereby appointed agent and proxy for the undersigned in the above matter, to represent and vote for the undersigned against (No) the approval of a proposal at the creditor’s meeting to be held in respect thereof on 23rd July, 2014. For and on behalf of the Governor and Company of the Bank of Ireland ANTHEA ORMISTON (Signed) SIG8150 SIGNATURE OF WITNESS (Signed) 22nd July, 2014 Grounds of Exclusion Ground one: the form of the instrument
44. As is clear from that extract Laffoy J. considered a number of mandatory requirements arose by virtue of the proxy rules relating to creditors’ meetings in the context of corporate insolvency and the appointment of a liquidator. The proxy form must be in one of the two prescribed forms, and where the creditor is a corporation a form of proxy must be either under its common seal or under the hand of some officer duly authorised and, and this is the factor which is identified as missing in the proxy advanced by the Bank in this case, the fact of authorisation must be stated on the instrument creating the proxy itself. 45. Counsel for the debtor argues that the proxy form advanced by the Bank did not contain a declaration that Ms. Ormiston was an authorised person. That she was duly authorised is not now in doubt, what is argued is that the proxy form ought to have, but did not, contain a statement that she had been duly authorised. 46. Counsel for the debtor argues that in an interpretation of the Regulations for the purpose of the personal insolvency legislation the court must have regard to the authorities on the form of a proxy in the context of company legislation 47. Counsel for the Bank argues that the personal insolvency Regulations are clear, and do not fall to be interpreted in the context of the complex and mandatory nature of the corporate insolvency rules. He argues that the personal insolvency legislation is a complete statutory code, and that it would be incorrect to interpret the provisions of that code, and the Regulations made hereunder, and in particular the Regulation which provide the form of proxy, in the light of the case law in corporate insolvency, and that the new statutory personal insolvency code ought not to be trammelled by the jurisprudence in incorporate insolvency. 48. In the light of the argument I turn now to examine the Act of 2012 The Act of 2012 50. The legislation states as its purpose the regulation of personal, and not corporate, insolvency and the Act expressly provides that the option of personal insolvency be considered as an alternative to bankruptcy. The legislation proposes an “orderly and rational” means by which both creditors and insolvent debtors may regulate their affairs. 51. There is nothing in the legislation that links any of its provisions to the Companies Acts, although there are a number of express references in the body of the legislation to the Bankruptcy Act 1988. I consider that the legislation provides a complete and new code by which an insolvent debtor may make binding arrangements with his or her creditors, and the Circuit Court, and in limited circumstances the High Court, has a jurisdiction to give directions with regard to certain matters, to issue a protective certificate, and ultimately to approve the coming into affect of a PIA following its approval of a proposal for such an arrangement by a creditors’ meeting. 52. The legislation fully regulates the procedures at a creditors’ meeting. It would be fair to say that the Act and the structures that it creates are, in relative terms, less complex and burdensome than those found in either the old, and to some extent the current, bankruptcy regime or those regulating corporate insolvency. In its form the legislation is intended to be a self-contained and new insolvency regime, and it is expressly sought that the regime be rational and orderly. While there is nothing in the legislation that expressly mandates that the procedure be either cost effective or speedy, the Regulations made under the Act prescribe the fees of the PIP, the form of prescribed financial statements, the power of the Personal Insolvency Service of Ireland to fix levels of reasonable expenditure etc., and taken together they establish a regime the clear purpose of which is to facilitate insolvent personal debtors whose means are clearly limited. In that regard I am fortified by s. 147 of the Act 2012 by which Court has a discretion to defer a bankruptcy petition, presumably with the aim of engaging the less burdensome procedures established by the Act. 53. Even without consideration of the purpose of the legislation it seems to me that the correct approach must be to consider whether the Regulation providing for a proxy is clear on its face. 54. The Regulations made under the 2012 Act, and in particular Reg. 7 of S.I. 335/2013 which I quoted above, while it does mandate that the instrument creating the proxy be in the form set out in the schedule, in its express terms quite clearly permits of a departure from that form provided the document is “substantially to like effect”. Thus it could not be said that the Regulation required in all cases that the statutory form and no variation thereof was always mandated. A variation, provided it is of the same substance and effect as the statutory form, is admissible. 55. I consider that Reg. 7(2) does not create a mandatory form of proxy, and permits of a proxy form which in its substance and effect sufficient to constitute authority to a person to attend and vote at a creditors’ meeting for the purpose of considering a proposal for a PIA. 56. Further Reg. 7(3) is quite clear and imposes a number of statutory and mandatory requirements as to the means of execution of the proxy form. These can be set out as follows:-
b) The instrument must be under the hand of the creditor, if the creditor is a natural person. c) If the creditor is a company or other body corporate it must be under the hand of the secretary or another person d) Such other person, i.e. a person other than the company secretary, must be duly authorised by the company or body corporate but there is no express mandatory requirement that the instrument state the fact of authorisation. 58. In the interpretation of the Regulation and in the absence of ambiguity the words must be given their plain meaning. 59. Furthermore, regard must be had to the well established requirement that a legislative scheme inform interpretation. At paragraph 12.11 of Dodd Statutory Interpretation in Ireland (Tottel Publishing, 2008) the author makes the following general statement, which I adopt:-
63. I adopt the dicta of Lafoy J. in Re Michael Madden Quality Meats Ltd. (in voluntary liquidation) that to ignore the mandatory nature of O.74 r.75 would be to surrender the rule “nugatory or superfluous”, and by analogy to create a mandatory requirement, when one is not required by the clear words of the Regulation, as is the case in Reg. 7(2), would be to ignore the language of the Regulation and make its broad approach to substance and not form nugatory or superfluous. 64. In my view the provisions of Reg. 7(3) are clear and do not admit of an interpretation which would have the effect that the particular form in the appendix to the Rule is mandatory, and the Rule read in its entirety has the opposite effect and points to the substance and not the form of the instrument as being the true matter in consideration. There is nothing in the Regulation which requires the fact of authorisation to be stated in the instrument, and one ought not to be implied, whether from the wholly different operative statutory regime or otherwise. The second point: evidence of authority 66. Counsel for the Bank points to the Regulation itself as evidence of the statutory intent that no requirement of evidence of the source of authorisation is required. 67. Regulation 7(5) governs the power of a chairperson to accept a completed instrument appointing a proxy this provides as follows:-
69. It is argued in essence that the provisions of Reg. 7(5) are protective of the role of the chairman and entitle him or her to accept a document as substantially valid without further enquiry, and that to so permit is consistent with the purpose and intent of the legislation to create a rational and orderly means of dealing with personal insolvency. 70. In other areas of law the legislature has recognised and established such a presumption, and for example s. 61 of the Succession Act, 1965 provides a presumption in favour of a purchaser from a personal representative that he or she is acting correctly and within powers concerned within their powers. Equally s. 53 of that Act provides that a conveyance of land by a personal representative shall be conclusive evidence of title, and has been interpreted of being protective of purchasers and limiting the number of enquiries that need to be made. These are statutory examples of such a presumption or statutory protection, and I consider that Reg. 7(5) creates a similar class of presumption, with similar protective consequence and effect. Counsel for the debtor however, argues that there is no evidential presumption, and submits that the chairman of a creditors’ meeting cannot be expected to rely on his or her own personal knowledge of the authority of the person executing the instrument. He relies on the decision of Laffoy J. in In Re Mountview Foods Ltd. (in voluntary liquidation) [2013] IEHC 125 where Laffoy J. held that the chairman of a creditors’ meeting in the context of a resolution to wind up a company had no discretion to accept the instruments notwithstanding that he was in a position to say that he personally knew each of the persons who had signed the proxy forms and that each of them “owned” the relevant companies. Laffoy J. held that such discretion could not arise, and she did so because of what she regarded as the mandatory requirements of O.74 r.75 which I have considered above. 71. I reject that argument and I do not consider that the word “may” in Reg. 7(5) imports a discretion, but rather it seems to me to that the word is enabling i.e. the chairperson is enabled, permitted, or allowed to accept an instrument which has an appearance of being valid as sufficient evidence that the person executing the instrument has been validly appointed by the creditor concerned to effect the instrument. The enabling provision permits the chairperson to treat an appointee as having been validly appointed and does not give discretion to the chairperson to accept or reject a validly constituted instrument. Further, the Regulation creates a presumption of validity such that in the absence of evidence to the contrary a chairperson is not put on enquiry, and may accept an instrument if it is formally or substantially valid on its face. The third point: discretion 73. Thus it seems to me that the chairperson of the creditors’ meeting does have the discretion to consider whether the instrument creating the proxy is adequate and effective for its purpose, and that discretion is one which enables the chairperson to look to the form or, if necessary or desirable, to the substance. This is not a broad discretion to exclude a proxy other than for want of effect. I do not consider on the other hand that Reg. 7(5) creates a requirement that the chairperson seek evidence of authority, but rather that it empowers the chairperson to accept that a nominee is validly authorised, and may do so, and is empowered to do so, unless evidence to the contrary is shown which calls that authority or the validity of that appointment into question. 74. I do not consider that Reg. 7(5) gives a broad discretion to a chairperson of a meeting to refuse to accept an instrument of proxy, and his discretion is confined to considerations of the form, substance and effect of the instrument under Reg. 7(2). Application to the Facts 76. I consider that the Regulations do not require proof of the fact of authority to execute the instrument creating the proxy, and that accordingly the chairperson of the meeting was entitled to accept the proxy vote. Nothing was before the chairperson which could have or did in fact put him on notice of any frailty in authority. It was not necessary for him in the circumstances to look outside the proxy form itself which was valid on its face. Conclusion
b) The instrument therefore was effective. c) The chairperson had no discretion to exclude the proxy vote in the circumstances. d) There was no evidence to suggest that want of authority on the part of Ms. Ormond was before the chairperson of the meeting, and therefore as he had no reason to doubt the effectively and validity of the instrument. He was not put on enquiry. 79. Accordingly, in answer to the first question on this appeal, I consider that the proxy vote was unlawfully excluded from voting at the creditors’ meeting. Accordingly, the first objection of the Bank is shown. As this is determinative of the issue before me I do not consider it necessary or desirable to answer or to deal with the other grounds of objection, which arise only if the proxy vote was not operative. 80. Counsel for the debtor specifically requested that I deliver judgment on each of the four points of objection but having regard to the fact that I heard the appeal as a judge of the High Court hearing a Circuit Appeal, and, partly in recognition of the dicta of Kearns P. in Wicklow County Council v. Kinsella & Anor. [2015] IEHC 229 I consider that the precedential value of any findings or determinations on the other grounds would be limited.
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