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Cite as: [2019] IEHC 889

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MIDLAND CIRCUIT

THE HIGH COURT

CIRCUIT APPEAL

[2019] IEHC 889

COUNTY OF LAOIS

[2019 No. 1 CA]

IN THE MATTER OF THE PERSONAL INSOLVENCY ACTS, 2012-2015

AND IN THE MATTER OF REBECCA FORDE EGAN (A DEBTOR)

JUDGMENT of Mr. Justice Denis McDonald delivered on 20th December, 2019

1. This is an appeal by Bank of Ireland Mortgage Bank (“the bank”) from an order of Her

Honour Judge Mary Enright in the Circuit Court made on 20th December, 2018 in which

she rejected the objection of the bank to an application under s. 115A (9) of the Personal

Insolvency Act, 2012 (“the 2012 Act”) as amended by the Personal Insolvency

(Amendment) Act, 2015 (“the 2015 Act”). Although not recorded in the copy order of the

learned Circuit Court judge provided to me, it appears to be the case that an order was

also made pursuant to s. 115A (9) confirming the coming into effect of a personal

insolvency arrangement proposed on behalf of the above-named debtor, Ms. Rebecca

Forde Egan, by Mr. Darragh Duffy, her personal insolvency practitioner (“the

practitioner”). The main features of the proposed arrangement are outlined in para. 4

below. As this is a Circuit Appeal, the application of the practitioner under s. 115A (9) was

fully reheard by this court together with the objection filed on behalf of the bank.

Relevant facts

2. Ms. Forde Egan is a public servant employed by the Health Service Executive (“HSE”).

She and her husband, Mr. Larry Egan, have three children aged 14, 18 and 20

respectively. Mr. Egan was adjudicated a bankrupt in 2009. He was subsequently

discharged from bankruptcy in 2014. The family lives in County Laois and there is no

dispute between the parties that the family home constitutes the principal private

residence of Ms. Forde Egan for the purposes of s. 115A of the 2012 Act. It was agreed,

in the course of the proceedings before the Circuit Court, that the market value of the

family home is €410,000.

3. Ms. Forde Egan is indebted as follows:-

(a) There is a sum of €624,457 due to the bank in respect of a loan account secured

over the family home. Subject to Mr. Egan’s bankruptcy, both he and Ms. Forde

Egan are jointly and severally liable to the bank in respect of this loan. The

implications which flow from the bankruptcy are considered in more detail below.

(b) Ms. Forde Egan has a credit card debt of €2,072 which is owed to Allied Irish Banks

Plc;

of €1,313;

(d) There is a sum of €11,960 owed to Close Brothers Motor Finance on a hire purchase

agreement in respect of a motor vehicle.

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4. The most significant features of the proposed arrangement are as follows:-

(a) It is proposed that the arrangement will be put in place for a period of six years

which is the maximum period permitted under the 2012-2015 Acts;

(b) The outstanding balance on the mortgage loan secured on the family home will be

written down from €624,457.00 to €451,000.00 with the residual balance of

€173,457.00 being treated as unsecured debt in respect of which a dividend in the

total sum of €40,651.00 will be paid to the bank over the course of the proposed

arrangement;

will be extended to 23 years. The interest rate is to remain at the existing tracker

rate based on the ECB rate plus a margin of 0.50% resulting in a monthly mortgage

payment of €1,780.00 (of which €961.00 per month will be paid by Ms. Forde Egan

and the balance by Mr. Egan);

(d) A dividend of 23 cent in the euro will be paid to all of the unsecured creditors. The

bank will share in this dividend as set out at (b) above.

5. At the meeting of creditors, the bank (together with Bank of Ireland) voted against the

proposed arrangement while Allied Irish Banks Plc and Close Brothers Finance Ltd voted

in favour. In percentage terms, 97.66% in value of creditors voted against the proposed

arrangement while 2.35% in value voted in favour. Thereafter the practitioner brought

an application pursuant to s. 115A (9) to the Circuit Court. Under s. 115A (9) the court is

empowered (subject to satisfaction of a wide range of conditions) to confirm the coming

into effect of a proposed arrangement notwithstanding that it has not been supported by

a majority of creditors. It is unnecessary, at this point, to set out all of the conditions

that must be satisfied in s. 115A. It is sufficient to note that they include the following

conditions:-

(a) One of the debts of the debtor must be secured over his or her principal private

residence;

(b) The debt secured over that residence must have been in arrears as of 1st January,

2015 (or at minimum the debtor must have entered into an alternative repayment

arrangement with the secured creditor in advance of 1st January, 2015);

6. A notice of objection was filed on behalf of the bank in the course of the Circuit Court

proceedings. In that notice, the bank objected to the proposed arrangement on a number

of grounds namely:-

(a) It was contended that the arrangement will not enable the bank to recover the debt

due to it to the extent that the means of Ms. Forde Egan reasonably permit (as

required by s. 115A (9) (b) (ii) of the 2012 Act);

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(b) The case was made that the proposed arrangement is unfair and inequitable

contrary to the requirements of s. 115A (9) (e);

arrangement (relying on s. 115A (9) (f) and s. 120 (a) of the 2012 Act);

(d) It was submitted that no valid class of creditors has accepted the proposed

arrangement;

(e) Invoking s. 115A (10) (a) (i) of the 2012 Act, the bank also submitted that the

conduct of Ms. Forde Egan in the two-year period prior to the issue of the protective

certificate does not support the grant of relief;

(f) Relying on s. 115A (10) (b), the bank submitted that an alternative proposal which

it made to the practitioner was affordable by Ms. Forde Egan and would have

allowed her creditors to recover the debts due to them to the extent that her

means would reasonably permit.

7. Although not specifically identified in the notice of objection, the principal argument made

on behalf of the bank in the course of the appeal was that, if the court were to approve

the arrangement by granting the order sought by the practitioner under s. 115A (9), this

would have the effect of depriving the bank of its rights against Mr. Egan, the former

bankrupt, under the provisions of s. 116 (6) of the 2012 Act. It was alleged that such an

outcome is so self-evidently unfair and prejudicial to the rights and interests of the bank

that the court is precluded by s. 115A (9) (e) and (f) from approving such an

arrangement. As this was the principal argument raised by the bank on appeal, I will

address this issue first. To the extent that it is still necessary to do so, I will, thereafter,

consider the remaining issues which arise for consideration.

Would confirmation of the proposed arrangement deprive the bank of its rights

against Mr. Egan under s. 116 (6)?

8. Section 116 of the 2012 Act deals with the effect of an arrangement. Under s. 116 (3),

while a personal insolvency arrangement is in effect, a creditor who is bound by it is

prevented from taking a variety of steps in relation to a specified debt. These include the

initiation of legal proceedings, the prosecution of legal proceedings already in being, or

the taking of any step to secure or recover payment. Furthermore, under s. 116 (4) a

creditor is prevented from applying for the issue of a bankruptcy summons under s. 8 of

the Bankruptcy Act, 1988 (“the 1988 Act”). The same subsection prevents a creditor

from presenting a petition to have the debtor adjudicated a bankrupt in respect of a debt

covered by the arrangement.

9. However, there is an express saver for the rights of creditors in s. 116 (6) insofar as

persons jointly liable with the debtor are concerned. Section 116 (6) expressly permits a

creditor to take action against a person who is jointly liable with the debtor. Section 116

(6) is in the following terms:-

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“(6) Nothing in subsections (3) and (4) shall operate to prevent a creditor taking the

actions referred to in that subsection as respects a person who has jointly

contracted with the debtor or is jointly liable with the debtor to the creditor and

that other person may sue or be sued in respect of the contract without joining the

debtor.”

10. The provisions of s. 116 (6) have been considered in a number of cases. The leading

decision is that of Baker J. in J.D. [2017] IEHC 119. In that case, the debtor was jointly

and severally liable together with her former husband to a secured creditor, EBS. There

was a breakdown of the marital relationship which resulted in the couple separating.

Thereafter the husband failed to make any contribution towards the mortgage

repayments. An arrangement was proposed on behalf of the debtor by a personal

insolvency practitioner. An application was subsequently made by the practitioner

concerned for an order under s. 115A (9). That application was opposed by EBS on the

basis that the arrangement was proposed on behalf of one joint and several debtor only

and it was alleged by EBS that it would be manifestly prejudicial and unfair to it to

confirm such an arrangement in light (inter alia) of the implications for EBS in respect of

its rights against the co-debtor husband.

11. In her judgment in that case, Baker J. very carefully and comprehensively analysed the

relevant provisions of the 2012-2015 Acts in the context of joint and several debtors. In

para. 39 of her judgment, she drew attention to the fact that there is nothing in the

2012-2015 Acts which requires that joint debtors may only seek relief under the Acts by

means of interlocking arrangements. At para. 40, she continued in the following terms:-

“40. I consider that s. 115A(9)(iii) expressly envisages circumstances where a debtor

does not have ownership of the entire interest in his or her principal private

residence, and may not be the owner of all of the interest in the property whether

subject to a mortgage or otherwise. The subsection is broadly stated as engaging

the question of whether the debtor may avoid disposing of an interest and may

avoid having to dispose of all or a part of his or her dwelling.”

12. At para. 41 of her judgment Baker J. made clear that joint debts are included within the

scheme of the Acts and that a debtor is not precluded from seeking relief under s. 115A

by reason of the fact that he or she does not own the entire interest in the principal

private residence and is not the sole mortgagor.

13. In J.D., EBS argued that, properly construed, s. 116 (6) applies solely to joint debts and

does not apply to joint and several debts. This argument was rejected by Baker J. Baker

J. referred to the approach taken by Laffoy J. in ACC Bank v. Malocco [2003] 3 I.R. 191

where, in the context of s. 17 (1) of the Civil Liability Act, 1961, Laffoy took the view that

it was “immaterial whether the debtors are jointly liable or jointly and severally liable for

the debt”. At para. 55 of her judgment Baker J. confirmed that she believed it was also

immaterial in the context of the 2012-2015 Acts whether the debts of the debtor and her

former spouse were joint or joint and several.

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14. With regard to the argument made by EBS that it would be unfairly prejudiced by the

proposed arrangement, Baker J. drew attention to the standard terms of the arrangement

proposed in that case which expressly provided that any person who borrowed money as

a joint borrower with the debtor would continue to be liable to the relevant creditor

notwithstanding the approval of the arrangement. She also drew attention to the

provisions of s. 17 (1) of the Civil Liability Act, 1961 which provides that the release of or

settlement with one concurrent wrongdoer will only discharge the other concurrent

wrongdoers where such release or settlement indicates an intention that the others are to

be discharged. In light of the provisions of Clause 10.4 of the standard terms of the

arrangement proposed in that case, it was clear that s. 17 (1) of the 1961 Act did not

release the debtor’s husband from his liabilities under the mortgage. At para. 55-58 of

her judgment, Baker J. disposed of the unfair prejudice argument as follows:-

“55. The protection for the creditor, … is contained within the PIA itself and the express

terms thereof, by which it can be readily ascertained that no inference can be

drawn, or is intended to be expressed, that the creditor intends by virtue of the

agreement with the debtor to discharge any co-debtor. For that reason, and having

regard to the approach taken by Laffoy J. in A.C.C. Bank Plc v. Malocco, I consider

that it is immaterial whether the debts of the debtor and her former spouse are

joint, or joint and several, and the contractual protection expressed in the proposed

PIA, and the statutory protection from s. 17 of the Civil Liability Act 1961 combine

to afford protection to the creditor with regard to its claim against [the debtor’s

husband], who is not a party to the restructured arrangement.

56. Similar considerations will arise with regard to the security interests that the Bank

enjoys in respect of [the debtor’s husband] who is a co-mortgagor.

57. I return later in this judgment to the practical effect of the PIA, but on the figures

currently available, the principal private residence of the debtor has a value well

below the amount owed on the mortgage, and insofar as EBS might seek to recover

possession against [the husband] it will undoubtedly be met by an argument that

an order for possession has no practical import as Ms. D and her children will

continue to reside in the house and may, as a matter of law, continue to do so

provided the terms of the restructured mortgage are met.

58. Therefore, it seems to me that the argument of EBS that it is unfairly prejudiced

with regard to the enforcement of its security interest in the premises insofar as

[the husband] is concerned is not borne out by the law or the facts. The prejudice

to EBS will be caused, not by the fact that [the husband] has not been brought into

the restructured arrangement, but by the extent of the negative equity, and not by

virtue of any unfairness arising from [his] non-involvement with the process ….

Therefore, any consideration of the argument of unfairness arising from the revised

mortgage falls to be considered on its merits, and whether it unfairly prejudices

EBS in itself, and not by reason of the argument regarding the co-mortgagor.”

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15. It is clear from this extract from the judgment of Baker J. in J.D. that she took the view

that EBS was entitled to continue to pursue the debtor’s husband in respect of the debt

for which he was jointly and severally liable together with the debtor. However, Baker J.

pointed out that, at a practical level, EBS might not be in a position to recover possession

of the property in circumstances where the property was occupied by the debtor and her

children and in circumstances where the debtor was honouring the terms of the proposed

arrangement. Baker J. pointed out that this practical difficulty for EBS in pursuing the

debtor’s husband was caused not by the terms of the arrangement but by the extent of

the negative equity in the family home. The full extent of that negative equity had

already been priced into the arrangement which the debtor would be obliged to

implement and honour. If the debtor performed her obligations under the arrangement, it

would be difficult for EBS in that case to pursue the debtor’s husband since they would be

met with the argument that the debtor was herself entitled to remain in the property (so

long as she honoured the terms of the proposed arrangement) and, given the extent of

the negative equity, no useful purpose would be served by granting relief against the

husband.

16. Section 116 (6) was also considered by me in two judgments. In the first of those cases,

namely Lisa Parkin [2019] IEHC 56 I had to consider whether a secured creditor

(Permanent TSB) would be unfairly prejudiced as a consequence of an arrangement

entered into solely by the debtor who, like in the present case, was jointly and severally

liable together with her estranged husband on foot of the relevant mortgage loan. In

paras. 67-68 of my judgment in that case, I expressed the view that s. 116 (6) makes it

very clear that the arrangement will not in any way impede the ability of the secured

creditor to pursue the debtor’s husband. At para. 68 I said:-

“68. In light of these statutory provisions, I can see no reason why PTSB would not be

entitled to pursue a claim against Mr. Parkin, including a claim to enforce the

mortgage against him. It may well transpire that if such steps are taken by PTSB,

there will be an issue as to the extent of the beneficial interest of Mr. Parkin in the

principal private residence. That is not an issue on which I can or should express

any view at this stage. What is clear is that, even if an order is made affirming the

order of the Circuit Court, PTSB will not be prevented from pursuing Mr Parkin in

respect of his ongoing indebtedness to it and will not be prevented from taking

enforcement proceedings in respect of any interest he may have in the family

home. It will be a matter for the court in any such proceedings to determine what

relief might appropriately be granted and I can neither prejudge nor predict the

outcome of any such proceedings.”

17. Subsequently, in Ahmed Ali [2019] IEHC 138 a similar issue arose. In that case, the

secured creditor had already obtained an order for possession against the debtor’s

estranged wife who had been adjudicated a bankrupt but was subsequently discharged

from bankruptcy. In the course of her bankruptcy, the secured creditor had indicated

that it wished to value its security. As a consequence, its only remedy against her was to

rely on its security. It was argued on behalf of the secured creditor that the bank would

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be greatly prejudiced by the arrangement since it would have the effect of preventing it

from exercising its right of recourse against the security (i.e. the family home). However,

I came to the conclusion that the bank would not be unfairly prejudiced. At paras. 50-51

of my judgment I said:-

“50. The circumstances … are very unusual. Ordinarily, as I sought to explain in Lisa

Parkin … the bank would not be prevented, by the existence of a PIA in respect of

one joint and several debtor, from pursuing another joint and several debtor who is

not a party to the same or an interlocking PIA. But, in this case, it is clear that, if

the PIA proposal is approved, the bank will no longer be able to take possession of

the …property notwithstanding the order for possession already obtained against

Mrs Ali. In the course of the hearing, I suggested to counsel that although the bank

could clearly no longer seek possession of the … it might be possible for the bank to

pursue its claim as against Mrs. Ali by seeking a sale of the property in lieu of

partition. As the decision of the Supreme Court in Irwin v. Deasy [2011] 2 IR 752

at p. 778, shows, a mortgagee (other than a judgment mortgagee) is entitled to

pursue the remedy of partition. However, on further reflection, it seems to me to be

unlikely that the bank could realistically pursue an action for sale in lieu of

partitions (sic). I note from para. 52 of Mr. Baxter's affidavit, that the bank valued

its security for the purposes of the bankruptcy of Mrs. Ali at €192,200. Given that

the bank will recover more than that sum under the PIA, it is difficult to see that

the bank would be in a position to pursue an action for sale in lieu of partition.

However, I make no finding to that effect. It will be for the bank to decide what

remedy it may have in relation to the indebtedness of Mrs. Ali to it and I would not

wish to prejudge in any way the outcome of any proceedings that the bank might

be advised to take.

51. For the purposes of these proceedings …, I have come to the conclusion that the

bank is not unfairly prejudiced by the proposed arrangement. In the first place, as

noted above, the bank will recover more, under the PIA, than it would in the event

of the bankruptcy of Mr. Ali. Furthermore, if one looks at the value which the bank

placed on its security in the bankruptcy of Mrs. Ali, the bank will also recover more

under the proposed PIA than it would recover if it were to proceed with possession

proceedings against the property (having valued its security at €192,200).”

18. Counsel for the bank submitted that in Ahmed Ali the issue was framed solely as a matter

of unfair prejudice and there was no consideration of the effect of s. 116 of the 2012 Act.

It was submitted on behalf of the bank that s. 116 does not qualify the rights of secured

creditors as against non-arranging borrowers in any way and in particular does not make

those rights subject to a test for prejudice. Instead, it provides a stand-alone protection

for the contractual rights of creditors to rely on their security as against non-arranging

debtors. I do not disagree with this submission save to note that this was not an

argument that was raised in the notice of objection filed on behalf of the bank.

Furthermore, in most of the cases in which an issue has arisen in relation to s. 116, the

argument made on behalf of the relevant secured creditor is that the arrangement would

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in some way impede its ability to exercise its rights under s. 116 (6) such as to give rise

to an unfair prejudice.

19. The bank draws attention to the fact that, as a consequence of the bankruptcy of Mr.

Egan, his interest and that of Ms. Forde Egan in the family home are now severed. This

severance occurred as a matter of law. Under s. 44 (1) of the 1988 Act, all property

belonging to Mr. Egan at the date of his adjudication automatically vested in the Official

Assignee for the benefit of his creditors.

20. As Sanfey & Holohan “Bankruptcy Law & Practice”, 2nd ed., 2010, explain at para. 9-19,

the effect of the adjudication is to sever the joint tenancy in a jointly owned family home

and convert it into a tenancy in common. The non-bankrupt spouse and the Official

Assignee then hold separate and undivided moieties in the property. Thus, in the present

case, when Mr. Egan was adjudicated a bankrupt, any interest which he had in the family

home vested in the Official Assignee. However, it is important to bear in mind that there

is no evidence before the court as to the extent of his equity in the property. For the

reasons discussed in para. 26 below, it may have been very limited.

21. As noted in para. 2 above, Mr. Egan has since been discharged from bankruptcy. The

bank submits that, as a consequence of the provisions of s. 85 (3A) of the 1988 Act (as

amended) Mr. Egan now holds, on a purely several basis, the interest previously vested in

the Official Assignee. The bank submits that the effect of this statutory provision is that

the former joint tenancy that existed between Ms. Forde Egan and her husband remains

severed. Section 85 (3A) of the 1988 Act provides that, on the 3rd anniversary of the

adjudication in bankruptcy, the estate or interest of the bankrupt in the family home will

re-vest in the bankrupt. Section 85 (3A) is in the following terms:-

“(3A) Subject to subsections (3B) to (3F), where on the 3rd anniversary of the date of the

making of the adjudication order in respect of a bankruptcy—

(a) the unrealised property of the bankrupt referred to in subsection (3) includes

an estate or interest in what was, at the date of the making of the

adjudication order, the family home, shared home or principal private

residence of the bankrupt, and

(b) in the case of the family home or shared home, the Official Assignee has not

applied to the Court for an order for sale of that home,

that estate or interest shall, on that 3rd anniversary, stand re-vested in the

bankrupt without the need for any conveyance, assignment or transfer.”

22. It might be thought that s. 85 (3A) has no application in the present case given that Mr.

Egan was declared a bankrupt as long ago as 2009 and this amendment to the 1988 Act

was only made in 2016 as a consequence of s. 10 of the Bankruptcy (Amendment) Act,

2015 (“the 2015 Act”) which was commenced on 29th January, 2016 by S.I. 34/2016.

However, it is clear from s. 85 (3F) that s. 85 (3A) is intended to have retrospective

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effect. Section 85 (3F) provides that, where the adjudication order was made more than

two years and six months prior to coming into operation of s. 10 of the 2015 Act, the

reference in s. 85 (3A) to the third anniversary is instead to be taken to be a reference to

the day falling six months after the day s. 85 (3A) came into operation (namely 29th

January, 2016). In those circumstances, the bank submits (in my view correctly) that Mr.

Egan’s interest (whatever that may have been) in the family home re-vested in him by

operation of s. 85 of the 1988 Act (as amended) on or about 30 July, 2016. As noted in

the written submissions delivered on behalf of the bank, the 1988 Act (as amended) does

not provide that the re-vesting has the effect of restoring the joint tenancy. As a

consequence, the bank submits that Mr. Egan and Ms. Forde Egan now hold separate

moieties in the family home as tenants in common. This seems to me to be correct to the

extent of any interest held by Mr Egan in the home.

23. On the basis that Mr. Egan and Ms. Forde Egan now hold separate moieties in the family

home as tenants in common, it is submitted by the bank that:

“…in circumstances where a Debtor owns only 50% of the PPR, that she cannot

offer 100% of the value of the PPR as security for the mortgage loan for which she

is – on foot of the co-borrower’s bankruptcy – now solely liable to the Bank”.

24. On the basis of the scenario described in paras. 22 to 23 above, the bank essentially

makes two submissions:-

(a) In the first place, the bank submits that the court cannot approve the arrangement

under s. 115A (9) in circumstances where it would be necessary to sell or partition

part of the family home for the purposes of upholding the right of the bank to rely

on its security over the family home as against Mr. Egan. This submission is made

in light of the provisions of s. 104 (1) and s. 115A (9) (b) (iii) of the 2012 Act.

Under the latter provision, the court cannot make an order confirming the coming

into effect of a proposed arrangement unless the court is satisfied that there is a

reasonable prospect that confirmation of the arrangement “will…enable the debtor

not to dispose of an interest in, or not to cease to occupy, all or a part of his or her

principal private residence”. The bank submits that this condition cannot be

satisfied in the present case in circumstances where, under s. 116 (6) it must be

entitled to pursue a remedy against Mr Egan under s. 31 (2) (a) of the Land and

Conveyancing Law Reform Act, 2009 (“the 2009 Act”) under which the bank could

seek an order for partition of the family home or an order for sale of the family

home in lieu of partition.

(b) Secondly, the bank draws attention to the observation made by me in Ahmed Ali at

para. 50 that it seemed to me to be unlikely that the bank in that case could

realistically pursue an action for sale in lieu of partition in circumstances where the

bank was likely to recover more under the proposed arrangement in that case than

it would by seeking to enforce the mortgage over the interest of the ex-wife of Mr.

Ali in the family home (in circumstances where the bank had valued its security at a

figure less than the amount that would be paid to it under the terms of the

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arrangement). The bank argues, however, that it would be unfair and prejudicial to

its interests if it were to be precluded from realising Mr. Egan’s “50%” share in the

family home. As set out in para. 6.5 of the bank submissions, the case made by it

in this context is as follows:-

“6.5 It is a term of the proposed Arrangement that the debt due to the Bank

which is secured on the PPR – which was valued at €410,000.00 – is to be

written down from €624,457.00 to €451,000.00. Accordingly, in

circumstances where the Debtor’s interest is worth only €205,000.00, it is

respectfully submitted on behalf of the Bank that it would be unfair and

prejudicial for the Bank’s interests if the Bank were to be precluded from

realising the other 50% of its security.”

25. In paras. 28 to 33 below, I deal, in turn, with these two limbs of this element of the

objection made on behalf of the bank. Before doing so, I should make clear that, in my

view, the bank is not correct in characterising the effect of the arrangement as an offer by

Ms. Forde Egan as owner of “only 50% of the PPR” to offer 100% of the value of the PPR

as security for the mortgage loan for which she is now solely liable to the bank (as a

consequence of the bankruptcy of Mr. Egan). In the first place, the bank has offered no

evidence to support its contention that Ms. Forde Egan owns only 50% of the family

home. While the bank may argue that the onus of proof lies on the practitioner in an

application of this kind, it is noteworthy that at no time in the course of the Circuit Court

proceedings was any such issue raised by the bank. The notice of objection makes no

reference to it. Likewise, the affidavit of John Nolan sworn on behalf of the bank in

support of the objection makes no reference to it. There was therefore no reason why the

practitioner or Ms. Forde Egan should address this issue in their respective evidence in

the course of the Circuit Court proceedings. The issue was raised for the first time in the

written submissions delivered on behalf of the bank in the weeks immediately prior to the

hearing in October 2019. In these circumstances, I do not believe that it is correct to

assume that Ms. Forde Egan and Mr. Egan have each a 50% interest in the family home.

Given Mr. Egan’s bankruptcy, Ms. Forde Egan may well have a greater equity than him in

the family home to the extent that she made payments in part discharge of the mortgage

during the period of his bankruptcy. In this regard, it is noteworthy that when Mr. Nolan,

in his affidavit dealt with the conduct of Ms. Forde Egan in relation to payments made on

foot of the mortgage, he referred only to payments made by her. He made no reference

to any payments made by Mr. Egan.

26. Secondly, it has not been established that s. 85 (3A) has any application in this case. In

circumstances where it is clear from Mr. Nolan’s affidavit that the debt due to the bank

exceeds the value of the property and where the relevant mortgage payments were being

made by Ms Forde Egan, it seems unlikely that Mr. Egan had any significant equity in the

property at the time of his adjudication or thereafter and it may even be the case that he

had no equity in it. Accordingly, it is by no means certain that he had an equity in the

property capable of forming part of the unrealised property of a bankrupt within the

meaning of s. 85 (3) of the 1988 Act (as amended). That said, for the purposes of this

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judgment, I am prepared to assume that he has some level of equity in the family home

and that s. 85 is engaged.

27. Thirdly, and more importantly, it is simply wrong to suggest that Ms. Forde Egan “cannot

offer 100% of the value of the PPR as security for the mortgage loan…”. Ms. Forde Egan

is making no such offer under the terms of the proposed arrangement. The security is

already in place. The purpose of the arrangement is to restructure the debt owed by Ms.

Forde Egan. The arrangement does not affect the underlying security in any way. Prior

to the arrangement taking effect, Ms. Forde Egan remained liable in full for the debt due

to the bank. The fact that the interest in the property which forms security for that debt

may be affected by the bankruptcy makes no difference to the extent of Ms. Forde Egan’s

liability. As explained by Baker J. in J.D., Ms. Forde Egan is entitled under the 2012-2015

Acts (through her practitioner) to propose an arrangement with her creditors under which

her indebtedness would be written down to a more viable level. That is so whether her

debts are secured or unsecured. It is equally so irrespective of the value of the security.

In no sense is she offering anything by way of security. She is simply seeking to

compromise the level of her indebtedness to her creditors without disturbing the existing

security in any way.

The argument based on s. 115A (9) (b) (iii)

28. As noted in para. 24 (a) above, the court is precluded by s. 115A (9) (b) (iii) from making

an order confirming the coming into effect of a proposed arrangement if the court cannot

be satisfied that there is a reasonable prospect that confirmation of the proposed

arrangement will enable the debtor “…not to dispose of an interest in, or … not to cease to

occupy all or a part of his or her principal private residence”. The argument of the bank is

that, since it cannot be prevented from taking action against Mr. Egan to enforce its

security (most likely by an action for partition or for sale in lieu of partition) the condition

set out in s. 115A (9) (b) (iii) cannot be satisfied in this case. The bank argues that,

inevitably, its right to enforce its security against Mr. Egan must mean that the court

cannot be satisfied that there is a reasonable prospect that confirmation of the proposed

arrangement will enable Ms. Forde Egan to remain in the family home.

29. The first point to be made is that there can be no doubt but that the bank is entitled,

notwithstanding any order made in these proceedings, to take such action as it may be

advised to enforce its security as against Mr. Egan. That is clear from the decision of

Baker J. in J.D. It is also clear from the express terms of the proposed arrangement in

this case. As in J.D., the proposed arrangement, here, includes standard terms 10.3 and

10.4. More importantly, even if it be the case that the liability of Mr. Egan and Ms. Forde

Egan is now several rather than joint and several, the judgment of Baker J. in J.D. puts

beyond doubt that s. 16 (6) can be relied upon by the bank notwithstanding that it refers

to “a person who has jointly contracted with the debtor or is jointly liable with the

debtor…” (emphasis added).

30. Given the undoubted right of the bank to pursue action against Mr. Egan, whether by

partition or by an order for sale in lieu of partition, it might seem to follow, as a necessary

consequence, that s. 115A (9) (b) (iii) cannot be satisfied. However, in my view, it would

Page 12 ⇓

be entirely wrong to reach that conclusion. I have formed that view for a number of

reasons:-

(a) In the first place, all that needs to be established is that there is a “reasonable

prospect” that confirmation of the proposed arrangement will ensure that Ms. Forde

Egan can remain in the family home. A reasonable prospect clearly does not

require that there must be absolute certainty that confirmation of the arrangement

will bring about that result.

(b) Secondly, I am satisfied that there is a reasonable prospect that confirmation of the

proposals will achieve that result. In this context, while the bank is undoubtedly

free to pursue such action as it may be advised in relation to the realisation of any

interest held by Mr. Egan in the family home, there are significant practical hurdles

facing the bank in taking any such action. There is no certainty that a court will be

prepared to grant relief under s. 31 of the 2009 Act. It is clear from the language

of s. 31 (3) of the 2009 Act that the jurisdiction of the court to make orders for

partition (or sale in lieu of partition) under s. 31 is discretionary. It is likely that, in

the exercise of its discretion, the court will be influenced by the approach taken by

the courts under the predecessor legislation that was in place prior to the

enactment of the 2009 Act. As discussed in the judgment of Finnegan J. (as he

then was) in the Supreme Court in Irwin v. Deasy [2011] 2 IR 752 at p. 780, the

court would not make an order for sale in lieu of partition (under the predecessor

legislation) where good reason was shown as to why such an order should not be

made. While this defence was based on the language of s. 4 of the Partition Act,

1868, it is instructive to have regard to the approach taken by the Irish courts in

relation to that provision. The decision of Denham J. (as she then was) in First

National Building Society v. Ring [1992] 1 IR 375 (one of the authorities to which

Finnegan J. drew attention in Irwin v. Deasy) is particularly instructive. In that

case, Denham J. refused to make an order for sale in lieu of partition in

circumstances where the co-owner was an innocent party who, together with her

family, would suffer considerably if her part of the family home were sold.

of relevance to any proceedings that may be taken by the bank to enforce its

security as against Mr. Egan. These include:-

(i) The fact that, under the proposed arrangement, the bank stands to be paid

more than it will be paid by realising its security over any interest which Mr.

Egan may have in the family home. In this context, on the basis of the case

made by the bank, the most that the bank would recover through a sale of

Mr. Egan’s interest in the family home (based on the agreed valuation of the

property) is €205,000. In contrast, the bank will be paid more than the

value of the property under the proposed arrangement. It will be paid

€451,000 (which is €41,000 more than the agreed value of the property) by

way of capital. It will also be paid an additional €40,651 by way of dividend.

Page 13 ⇓

In addition, it will be paid interest under the mortgage. I find it difficult to

understand why, in such circumstances, the bank would pursue an action for

sale in lieu of partition. It would seem to be entirely counterproductive to do

so. More importantly, I believe that it will be difficult to satisfy a court that it

is appropriate to make an order for sale in lieu of partition in such

circumstances (assuming that payments are being made to the bank as

envisaged by the proposed arrangement). While it would be both impossible

and wrong to seek to predict the outcome of such an application, it would be

equally wrong to shut my eyes to the factors outlined above.

(ii) It is also significant that the bank has not revealed what value it placed on its

security following Mr. Egan’s adjudication as a bankrupt. Given that the

adjudication took place in 2009, it may well be the case that the value placed

on the security was less than the figure of €205,000. In my view, that is an

issue that should have been addressed on affidavit by the bank if it was to

make the argument now pursued by it. The court should have been apprised

of all relevant facts in order to form a view as to whether the pursuit of any

enforcement proceedings against Mr. Egan would put in jeopardy any

arrangement proposed under the 2012-2015 Acts in respect of the debts of

Ms. Forde Egan. Whether Mr. Egan’s interest in the property is worth

€205,000 or something less than that, it seems to me that there are

significant practical difficulties facing the bank in seeking to bring

enforcement proceedings against Mr. Egan. I also note that the bank has, at

no stage, in these proceedings explained why it has not previously taken

action against Mr. Egan. In the written submissions delivered on behalf of

the bank, it was suggested that the explanation for not taking action against

Mr. Egan before now was “forbearance” on behalf of the bank. However, the

matter is not addressed on affidavit by Mr. Nolan and the court therefore is in

no position to understand why the bank did not pursue any form of action to

enforce its security against Mr. Egan notwithstanding that he was adjudicated

a bankrupt as long ago as 2009.

31. In all of the circumstances described in para. 30 above, it seems to me that the outcome

of any proceedings to enforce or realise the bank’s security as against Mr. Egan is so

uncertain that it is appropriate and safe to conclude that, if the court were to confirm the

proposed arrangements, there is, at minimum, a reasonable prospect (and, in truth, a

likely prospect) that this will secure the continued occupation of the family home by Ms.

Forde Egan and her children.

The argument that it would be unfair and prejudicial to the bank’s interests if the

bank were to be precluded from realising the interest of Mr. Egan in the family home

32. As noted above, the argument here is that it would be unfair and prejudicial to the bank’s

interests if it were to be precluded from realising its security over Mr. Egan’s interest in

the family home. This argument appears to proceed on the basis that, as acknowledged

by me in Ahmed Ali (and as further acknowledged in para. 30 above), there are likely to

be significant practical difficulties facing the bank in enforcing its security over Mr. Egan’s

Page 14 ⇓

interest in the event that the arrangement proposed on behalf of Ms. Forde Egan is

confirmed.

33. In my view, this argument is largely answered on the same basis as the argument

addressed in paras. 28-31 above. It seems to me to be entirely unreal to suggest that

the bank will be unfairly prejudiced if, for practical reasons, it is simply not feasible for

the bank to pursue enforcement against Mr. Egan as a consequence of the confirmation of

the proposed arrangement. This is for the very simple reason that the bank will fare

much better under the proposed arrangement than it would by pursuing action against

Mr. Egan (whether by way of partition or by way of sale in lieu of partition) to enforce its

security over his interest in the family home. As noted above, under the arrangement,

the bank will be paid €451,000 by way of capital (which represents a significant increase

above the market value of the family home). In addition, the bank will be paid interest

and it will also be paid a dividend of €40,651. In contrast, in the event of a bankruptcy,

the bank, as appendix 5 to the proposed arrangement shows, would recover no more

than €369,000. This would represent a return of 60 cent in the euro to the bank. This is

to be compared with the outcome under the arrangement. As appendix 5 demonstrates,

the bank will receive 72 cent in the euro under the proposed arrangement. It is therefore

impossible to see how the bank will be unfairly prejudiced in the manner suggested in the

submissions made on its behalf.

The banks alternative case on unfair prejudice

34. It is also submitted on behalf of the bank that the proposed arrangement is unfair,

inequitable and unfairly prejudicial to its interests in circumstances where (so the bank

contends) Mr. Egan, as a former bankrupt, “will enjoy continued residence in the PPR

while refusing to make his assets available to the Bank in reduction of the debt secured

on that property…”. The bank, nonetheless, acknowledges that the proposed arrangement

will not work unless Mr. Egan contributes to the monthly payments to be made to the

bank in respect of the mortgage debt.

35. In Mr. Nolan’s affidavit, he highlights that Mr. Egan will be entitled to a pension lump sum

in the amount of approximately €80,000 in 2021 which could be used in whole or in part

to reduce the mortgage debt to the bank. At paras. 7.7 to 7.8 of the written submissions

delivered on behalf of the bank the case is made that the effect of the proposed

arrangement is to frustrate the entitlement of the bank to realise its security as against

Mr. Egan while, at the same time, putting any future acquired assets including his pension

beyond the reach of his creditors. The bank submits that such a proposal is “so self-

evidently unfair and prejudicial” to the rights and interests of the bank that the court is

precluded by s. 115A (9) (e) and (f) from confirming it. This submission seems to me to

be based on the theory that the bank will be prevented, by this arrangement, from taking

action against Mr. Egan. This is wrong. As I have sought to explain, the bank is fully

entitled to take such action as it may be advised against Mr. Egan. While I believe that it

may well ultimately be difficult to persuade a court that any order should be made under

s. 31 of the 2009 Act, it would be plainly inappropriate to prejudge the outcome of any

such application. The bank will be fully entitled, in any such proceedings, to draw

Page 15 ⇓

attention to any factors that may influence the exercise of the court’s discretion under

section 31. The bank will therefore be free to draw attention to any pension lump sum

payment or other assets that may be available to Mr. Egan.

36. In the meantime, I do not believe that the pension assets of Mr. Egan are a matter to

which I can properly have regard in the context of the present application. They are not

assets of Ms. Forde Egan. As the decision of Baker J. in J.D. illustrates, Ms. Forde Egan is

entitled, through the practitioner, to make her own application for relief under the 2012-

2015 Acts. Moreover, Mr. Egan could not have brought an interlocking application at the

same time as the application was made by Ms. Forde Egan. He was not eligible for a

personal insolvency arrangement at that time. It is clear from the papers before the

court that he was not discharged from bankruptcy until 2014. Under s. 91 (1) (i) (iv) of

the 2012 Act, Mr. Egan would have been ineligible for a personal insolvency arrangement

at the time the protective certificate was sought in this case. Under s. 91 (1) (i) (iv), a

period of five years must elapse from the date of discharge from bankruptcy before a

debtor can become eligible for a personal insolvency arrangement.

37. Moreover, I must bear in mind that, on the basis of the material before the court, it is

clear that the arrangement proposed by the practitioner on behalf of Ms. Forde Egan will

achieve a better result than the alternative of making Ms. Forde Egan a bankrupt. While

that is not the only test of unfairness, it is a very important litmus test. In the context of

an examinership, it was described by O’Donnell J. as a “vital test” in his judgment in the

Supreme Court in McInerney Homes Ltd [2011] IESC 31 at para. 30 where he said:-

“30. In this case, the trial judge's approach to the question was to view the scheme

against the likely return to affected creditors under the likely alternative in the

event that there was no examinership, and no successful scheme. I agree that that

is a vital test. …”

38. Before reaching any final conclusion on the issue of unfair prejudice, I should, however,

first address the case made by the bank that, contrary to the requirements of s. 115A (9)

(b) (ii), the proposed arrangement will not enable the bank to recover the debt due to it

to the extent that the means of Ms. Forde Egan reasonably permits. If the bank is correct

in that contention, that would also provide a proper basis to form the view that the bank

would be unfairly prejudiced by the proposed arrangement. On the other hand, if I find

against the bank on that issue, the argument on unfair prejudice will, for all of the

reasons outlined above, fall away.

Section 115A (9) (b) (ii)

39. Under s. 115A (9) (b) (ii), the court must be satisfied that there is a reasonable prospect

that confirmation of the proposed arrangement will enable the creditors of Ms. Forde Egan

to recover the debts due to them to the extent that the means of the debtor reasonably

permit. In dealing with the bank’s concerns in relation to the s. 115A (9) (b) (ii) issue,

Mr. Nolan, in his affidavit, suggests that more significant payments will be made in

discharge of the mortgage debt during the currency of the proposed arrangement than in

the seventeen-year period thereafter. In para. 20 of his affidavit Mr. Nolan says that the

Page 16 ⇓

monthly payments to be made during the currency of the arrangement will rise to

€2,653.00 per month in years 5 and 6 but, thereafter, only €1,780.00 per month will be

paid for the remaining seventeen years. He also draws attention again, in this context, to

the pension lump sum of approximately €80,000.00 which will be paid to Mr. Egan in

2021. He suggests that, in these circumstances, the resources available to Ms. Forde

Egan would allow her to make more extensive monthly payments to the bank for the

remaining term of the mortgage than €1,780.00.

40. In my view, the very detailed and comprehensive affidavit sworn by Ms. Forde Egan in

response to the affidavit of Mr. Nolan provides an answer to the concerns raised by Mr.

Nolan. In the first place, Ms. Forde Egan explains that the payments to be made to the

bank during the currency of the proposed arrangement include not only the ongoing

mortgage payments that will require to be made but also payment of the significant

dividend that will be paid to the bank in respect of the unsecured element of the debt.

Ms. Forde Egan also explains that, in order to fund the payments to the bank, Mr. Egan,

notwithstanding that he has no ongoing liability to the bank for repayment of any part of

the loan, is making his income available to assist in making the monthly payments under

the arrangement. I should explain, at this point, that, as a discharged bankrupt, Mr.

Egan has no ongoing liability to the bank in respect of the mortgage debt. The bank’s

only entitlement to pursue Mr. Egan is in respect of his interest (whatever that might be)

in the family home. The bank is entitled to pursue that claim to the extent of that

interest and subject to the value which it placed on the security at the time of Mr. Egan’s

bankruptcy.

41. Ms. Forde Egan also explains, in considerable detail, the particular difficulties facing the

family arising from the health condition of one of the children which will require ongoing

support into the future. Given the highly personal nature of the evidence that is given by

Ms. Forde Egan, I do not believe that it would be appropriate to discuss it in any detail in

this judgment. It is sufficient to record that, in contrast to many of the cases which come

before the court, Ms. Forde Egan provides extensive detail in relation to the issue from

which it is clear that two of her children will still be in third level education after the

proposed arrangement comes to an end and one of them will require ongoing support and

assistance into the future.

42. In the circumstances, it is understandable that this issue (although raised in the notice of

objection and in Mr. Nolan’s affidavit) was not pursued in either the written submissions

or in the oral submissions of counsel at the hearing of this appeal.

43. It seems to me to be clear on the basis of the evidence before the court that the means of

Ms. Forde Egan are fully brought to bear under the proposed arrangement. In this

context, I should also record, at this point, that, as set out in appendix 2 to the proposed

arrangement, the income used to fund the arrangement and the ongoing living expenses

of the family has been supplemented by income from a border. In many cases which

come before the court, objecting creditors have highlighted alleged failures on the part of

a debtor to maximise their available income by failing to take in borders or tenants. The

Page 17 ⇓

fact that, in this case, the family has taken in a border provides additional evidence to

demonstrate that the means of Ms. Forde Egan are being brought to bear for the

purposes of the proposed arrangement.

44. As noted above, Mr. Nolan, on behalf of the bank, also draws attention, in the context of

s. 115A (9) (b) (ii) to the lump sum pension to be paid to Mr. Egan in 2021. I do not,

however, believe that a pension payment to a person who is not himself or herself the

debtor can be taken into account under s. 115A (9) (b) (ii). That subsection is concerned

with the means of the debtor and with no one else. Moreover, it must be borne in mind

that Mr. Egan, as a consequence of his bankruptcy, has been relieved of his personal

liability for the debts in respect of the mortgage. While the bank is clearly aggrieved that

Mr. Egan will receive this payment, his entitlement to receive it free of any ongoing

liability to the bank arises as a matter of law. He has borne the pain of bankruptcy and,

like every other discharged bankrupt, he is now free from his pre-existing indebtedness.

In the meantime, it remains open to the bank, pursuant to s. 116 (6) of the 2012 Act, to

seek to enforce its security over whatever interest he may have in the family home.

45. It is noteworthy that the bank did not raise any objection under s. 115A (9) (a) under

which the court must be satisfied that the terms of the proposed arrangement have been

formulated in compliance with s. 104. Although this point has not been raised by the

bank, it is one which I must, nonetheless, consider for the purposes of determining this

appeal. It is one of the preconditions to the making of an order under s. 115A (9). The

significance of s. 104 of the 2012 Act is that, in formulating a proposal for an

arrangement, the practitioner must have regard to the matters described in s. 104 (2).

Among the matters described in s. 104 (2) is that set out in s. 104 (2) (c) namely:-

“the ability of other persons residing with the debtor in the principal private

residence to contribute to the costs [of, inter alia, mortgage loan repayments…and

necessary maintenance in respect of the principal private residence]”

46. As Mr. Egan is living with Ms. Forde Egan, his ability to contribute to the cost of the

mortgage repayment is a matter that the practitioner was required to take into account in

formulating the proposed arrangements.

47. In para. 9 of her affidavit, Ms. Forde Egan explains that Mr. Egan supports the

arrangement proposed here and is happy to make all his income available to assist in the

arrangement. It is further acknowledged in para. 7.2 of the bank’s written submissions

that a contribution will be made under the arrangement by Mr. Egan. It is therefore clear

that the proposed arrangement does have regard to the ability of Mr. Egan to contribute

to the cost of the mortgage loan repayments. It is, however, equally true, that the

arrangement does not envisage that any part of the lump sum pension payment to be

made in 2021 to Mr. Egan will be applied in discharge of the mortgage debt or in

discharge of any of the other debts of Ms. Forde Egan. It is also clear from the papers

before the court that Mr. Egan will contribute, on an ongoing basis, to the reasonable

living expenses of the household.

Page 18 ⇓

48. With regard to the lump sum pension payment to be made in 2021 to Mr. Egan, I do not

believe that it would have been appropriate, in the particular circumstances of this case,

to take that into account in formulating the proposed arrangement. I have come to that

conclusion for a number of reasons:-

(a) In the first place, this represents the payment of pension to Mr. Egan to provide a

source of income into the future after Mr. Egan’s working life comes to an end.

While I do not exclude the possibility that it would be appropriate, in some cases, to

take a pension payment to be made to a person living in the same home as the

debtor into account, I do not believe that it is appropriate to do so in this case

given the particular circumstances of the family as described by Ms. Forde Egan in

her affidavit;

(b) It also has to be borne in mind that Mr. Egan has no ongoing liability to make any

payment to the bank himself. He has been relieved of that liability as a

consequence of his discharge from bankruptcy. Given the particular family

circumstances facing his family, it is understandable that he would not wish to

make the lump sum in question available in part discharge of the mortgage debt

now owed solely by his wife, Ms. Forde Egan;

arrangement, make contributions to the ongoing cost of the mortgage repayments

and of the household expenses. There has accordingly been compliance with s. 104

(2) (c). In the circumstances, I do not believe that it would be open to me to

conclude, on the particular facts of this case, that there has been a failure to

comply with s. 104. It seems to me to follow that no issue arises in this case under

s. 115A (9) (a).

It also seems to me to follow that, for the respective reasons outlined in paras. 38

and 43 above, the bank’s case on unfair prejudice (discussed in paras. 34 – 38

above) must fall away.

Was the proposed arrangement supported by a valid class of creditors for the

purposes of s. 115A (9) (g)?

49. This was not an issue that was canvassed in the written submissions or in the oral

submissions of counsel on behalf of the bank. It was, however, raised in the notice of

objection and in the affidavit of Mr. Nolan. It is also a matter that I must consider for the

purposes of this appeal.

50. Section 115A (9) (g) requires the court to be satisfied that at least one class of creditors

has accepted the proposed arrangement by a majority of over 50% of the value of the

debts owed to that class. In this case, the practitioner suggested that there were two

classes who had voted in favour of the arrangement namely the “regular unsecured

creditors” (comprising Allied Irish Bank Plc) and the “hire purchase class of creditors”

(namely Close Brothers Motor Finance). In my view, neither of these constitute classes in

themselves. However, it seems to me that both Allied Irish Banks Plc and Close Brothers

Motor Finance together form a separate class of creditors from the bank and the Bank of

Page 19 ⇓

Ireland. Neither the bank nor Bank of Ireland can be placed in the same class as Allied

Irish Banks Plc and Close Brothers Motor Finance. In the first place, the bank is the

holder of a mortgage over the principal private residence of Ms. Forde Egan. It is well

established that such a creditor is in a different class to the remaining creditors of a

debtor. This was established in the decision of Baker J. in Sabrina Douglas [2017] IEHC 785.

Both the bank and Bank of Ireland are related companies. It seems to me that, in

those circumstances Bank of Ireland cannot be placed in the same class as the remaining

unsecured creditors of Ms. Forde Egan. As a related company of the bank, it was

inevitable that it was going to vote in the same way as the bank. Even if I am wrong in

treating Bank of Ireland in that way, this would make no difference. It is clear that the

value of the debts owed to Allied Irish Banks Plc and Close Brothers Motor Finance

significantly exceed the debt of €1,313.43 owed to the Bank of Ireland. In those

circumstances, it seems to me that, whether or not one includes Bank of Ireland as a

creditor with the other unsecured creditors of Ms. Forde Egan, the requirements of s.

115A (9) (g) are satisfied in this case. More than 50% in value of the unsecured class of

creditor have voted in favour of the arrangement.

51. I must, of course, have regard to the provisions of s. 115A (17) under which I am

required, to consider the overall number and composition of the creditors who voted at

the creditors meeting and the proportion of the debts of Ms. Forde Egan due to those

creditors. I appreciate that, in percentage terms, the total debts owed to the unsecured

creditors is a very small fraction of the amount owed to the bank. Nonetheless, it seems

to me that it would be wholly wrong to ignore the views of the majority of the purely

unsecured creditors of Ms. Forde Egan. The fact that a majority of the unsecured

creditors has voted in favour of the proposed arrangement seems to me to be very

important and I therefore do not believe that it would be appropriate under s. 115A (17)

to disregard their vote. Given that Ms. Forde Egan has only four creditors in total, it

seems to me that notwithstanding the relatively modest proportion of the debts due to

them, the unsecured creditors should be treated as a valid class for the purposes of s.

115A (9) (g) and s. 115A (17).

The conduct of Ms. Forde Egan

52. Again, this was not an issue that was ventilated in the course of the hearing. However,

some reliance is placed on this issue in Mr. Nolan’s affidavit and in the notice of objection.

Under s. 115A (10) (a) (i) the court, on an application of this kind, is required to have

regard to the conduct of a debtor within a two-year period prior to the issue of a

protective certificate and in particular to the attempts made by the debtor to seek to pay

his or her debts. In Mr. Nolan’s affidavit he says that the total payments made by Ms.

Forde Egan in the relevant two-year period running from June 2015 to June 2017 was no

more than €393.75 per month on average which represented only a small fraction of the

total amount due per month during that time of €2,800. This is an issue which I

addressed in Richard Featherston [2018] IEHC 683. In para. 19 of my judgment in that

case, I drew attention to the language of s. 115A (10) which requires the court to have

regard to the payment record of the debtor but does not require the court to dismiss an

application under s. 115A where the payment record is poor. In para. 21 of my judgment

Page 20 ⇓

in that case, I suggested that, where a debtor has demonstrated a contempt for his or her

payment obligations, this factor would weigh against the grant of relief under s. 115A.

On the other hand, where the debtor is in a position, through appropriate evidence, to

demonstrate that there was an inability to make significant payments during the relevant

two-year period, the court might be persuaded to grant relief under s. 115A

notwithstanding the poor payment record.

53. In this case, Ms. Forde Egan has very fully and comprehensively addressed the family

circumstances and it seems to me that there is sufficient evidence before the court to

take the view that, notwithstanding the poor payment record of Ms. Forde Egan during

the relevant two-year period, this would not, of itself, justify the court refusing the

application under s. 115A. Moreover, in the period since the protective certificate was

granted in this case, Ms. Forde Egan (as confirmed in para. 33 of her affidavit) has been

making payments in the sum of €1,780 per month towards the mortgage debt. This also

provides a very useful indicator of the sustainability of the proposed arrangement which

envisages monthly payments being made on that scale into the future.

The counter proposal made by the bank

54. The final issue raised by the bank in its notice of objection and in Mr. Nolan’s affidavit

relates to a counterproposal made by the bank for the treatment of its secured debt. The

terms of the counterproposal are described in para. 26 of Mr. Nolan’s affidavit. The most

material terms can be summarised as follows:-

(a) The term of the mortgage would be extended by nine years to 23 years (i.e. when

Ms. Forde Egan would be 65 years of age);

(b) The monthly repayments in respect of the loan would be €2,200 for the first three

years of a six-year arrangement;

the arrangement and for the remaining terms of the loan’

(d) The fees of the practitioner would be paid in even instalments over a six-year

period;

(e) The special circumstances costs in the sum of €142 per month in respect of motor

insurance for Ms. Forde Egan’s eldest child would not be allowed. Nor would the

special circumstance costs of €230 per month in respect of childcare.

55. The counter-proposal is addressed by the practitioner in his replying affidavit sworn on

25th July, 2018 in the following terms:-

“…the counter-proposal was not appropriate, sustainable or fair in circumstances

where the debtor would be required to give up on necessary additional

expenditures including childcare and medical costs. Such a proposal is unfair and

inequitable as consideration of same would risk the debtor’s return to solvency. I

say that the debtor felt that the bank’s counter-proposal was not within the

Page 21 ⇓

affordability of her household. The debtor also believed the bank’s alternative was

unsustainable. The debtor identified that she will continue to have educational

costs for the next ten years as well as medical costs as she does not have a medical

card or health insurance.”

56. In addition, the practitioner said, in his replying affidavit, that the only feasible way in

which the bank could receive payments into the future of €2,653 per month would be to

remove all additional expenditure including the provision for a vehicle hire purchase

agreement and childcare costs and instead to apply those monies towards repayment of

the mortgage. Given the particular circumstances of this family, I believe that the

practitioner is right in what he says. It is clear from the evidence of Ms. Forde Egan that

this family will have to incur additional expenditure over and above what one would

normally find in a two-parent household with three children. It is also clear, having

regard to the special needs of the second child in the family that the additional

expenditure will continue into the future. In the circumstances, I do not believe that the

counter-proposal represents a sustainable or affordable option.

57. It is nonetheless striking that the counter-proposal was made in the terms described by

Mr. Nolan in his affidavit. Notwithstanding what the bank has said about the alleged

unfairness and prejudice to it as a consequence of Mr. Egan remaining in the property,

the counterproposal shows that the bank was prepared to deal with Ms. Forde Egan in

relation to repayment of the mortgage loan and it gives the lie to the suggestion that the

bank will suffer very significant prejudice as a consequence of an arrangement solely with

Ms. Forde Egan.

Conclusion

58. For all of the reasons set out above, I reject the objections which have been made on

behalf of the bank to the application under s. 115A. On the contrary, it seems to me that

all of the requirements of s. 115A are satisfied in this case. Although I have not dealt, in

this judgment, with each of the individual requirements of s. 115A, I confirm that I have

considered each one of them and I am of opinion that they have all been satisfied. I

therefore believe that the appeal of the bank must be dismissed and the order of the

learned Circuit Court judge affirmed. I will hear the parties as to whether any

consequential orders are required.