Two significant decisions in relation to personal insolvency applications were made recently in the Dublin Circuit Court and the High Court. The decisions relate to “locus standi”, which means who has the right to bring an application before a court.

Circuit Court case

In this case, KBC Bank Ireland plc rejected a proposal for a personal insolvency arrangement (PIA) formulated by a personal insolvency practitioner (PIP) on behalf of a couple, in which a debt secured on their family home would be written down by more than €380,000. The debtors sought to bring an application under section 115A of the Personal Insolvency (Amendment) Act 2015, which provides that where a PIA is not approved, a PIP may, in certain circumstances, apply to court for an order confirming the PIA.

Bank’s arguments

Counsel for KBC argued that, under the legislation, only the PIP is permitted to bring such an application and that the debtors were not entitled to do so. Judge Ryan agreed and ruled that the PIP was the correct party to bring a Section 115A application. Judge Ryan stated that the section was clear on its face and applied the long established principles of statutory interpretation in reaching this conclusion. This decision was appealed to the High Court, however it has not been assigned a hearing date as there are three linked matters dealing with this issue currently before the High Court, the conclusions of which are adjourned to 21 December.

High Court case

On 5 October, in Reilly & the Personal Insolvency Acts 2012-2015, the High Court made a ruling on who is the appropriate party to appeal a decision of the Circuit Court in a Section 115A application. In this case, the Circuit Court had dismissed the debtor’s application for a review of the rejected PIA. The decision of the Circuit Court was appealed by the debtor himself to the High Court. At the appeal hearing, counsel for Bank of Ireland argued that the correct party to bring such an appeal was the debtor’s PIP. The debtor argued that as he is the person whose interests are affected by the appeal, he had locus standi to bring the appeal.

In her decision, Ms Justice Baker agreed with the bank that the appeal should be brought by the PIP. The judge stated that a PIP takes on a statutory role, and that he or she is obliged to achieve an outcome that is “satisfactory to all parties concerned”, the PIP does not simply act on the debtor’s instructions. The Court noted that the intention of the legislature in providing for the appointment of a PIP to bring an application under section 115A was to achieve an orderly processing of the debt management system.

Effect of the decisions

These rulings will affect hundreds of cases currently in the insolvency process, where debtors wish to challenge a bank’s rejection of their PIA. In Reilly, Ms Justice Baker made reference to the “practical problems” which her decision may have, in particular because PIPs may be reluctant to appeal Circuit Court decisions because there is no specific provision in the legislation dealing with the costs of such appeals. However, she noted that the Court would only award costs against the PIP in “exceptional circumstances” and that if a PIP exercises his or her professional and reasonable judgement in lodging an application or bringing an appeal, it is unlikely that costs would be awarded against the PIP.

Reilly & Personal Insolvency Acts 2012-2105 [2017 IEHC 558]