Court of Appeal: Credit Union not entitled to order over solicitor’s €203,000 debt

The Court of Appeal has overturned the decision of Justice Baker in the High Court, and found that the Protective Certificate obtained by the solicitor had not caused the Credit Union to suffer an irreparable loss that would not otherwise occur. Any loss was an inevitable consequence that had been foreseen by the Oireachtas when enacting the relevant provisions of the Personal Insolvency Act 2012.

In the ex tempore judgment, all three members of the Court were satisfied that the appeal had to be determined within the confines of s. 97 and that any parallel application which might be made pursuant to an inherent jurisdiction of the court was not made in the High Court and was therefore a separate matter.


On 11th February 2016, the High Court issued a Protective Certificate to the Debtor, Mr Fergus McManus, and on 18th April 2016, the period of protection was extended pursuant to s. 95(6) of the Personal Insolvency Acts 2012 to 2015.

On 27th May 2016, the creditor, Clones Credit Union brought an application in the High Court to invoke the facility under s. 97 of the Personal Insolvency Act 2012 whereby, on satisfying the court of the requirements in the section, it could have its debt excluded from the operation of a personal insolvency arrangement entered into by the Debtor.

Clones Credit Union brought its application in circumstances where it had got liberty to enter judgment against the Debtor on 27th October 2015 – which matured into a judgment mortgage on 19th November 2015.

Under s. 102 (7) of the Personal Insolvency Act 2012, “a creditor who has registered a judgment mortgage against a debtor more than three months before the Insolvency Service’s issue of the protective certificate is a secured creditor for the purposes of a Personal Insolvency Arrangement”.

Given that the Protective Certificate was issued on 11th February 2016, the 19th November 2015 judgment mortgage “fell short of the three months space that was required in order to give it immunity”.

Court of Appeal

The Court was concerned only with the provisions of s. 97 and whether Justice Baker was correct in her analysis of sub-section (3)(a), which states that “in determining an application under this section the court shall not make an order directing that the protective certificate shall not apply to that creditor unless it is satisfied that… not making such an order would cause irreparable loss to the creditor which would not otherwise occur”. Notably, sub-section 3(b) was not considered, as it was not covered in the notice of appeal, notwithstanding its relevance in the case.

Under s.97(3)(a), the Court “has to be satisfied that if it did not make an order excluding the particular creditor that this party will suffer irreparable loss”. Further, “the irreparable loss has to be such that it would not otherwise have occurred”.

Contrary to the decision of Justice Baker in the High Court, the fact that the debtor went from secured to unsecured was not a relevant consideration. Furthermore, Justice Baker had erred in saying that there was a discretionary element to the criteria of 97(3)(a), which the Court regarded “a clear, definitive statutory provision”.

Alternatively, the Court stated that it was possible for the Credit Union to object to the personal insolvency of the debtor under s. 114 or s.120 of the 2012 Act – however “the failure to attack that” could not be considered a ground for sustaining irreparable damage that would not otherwise be sustained.

“…when the trial judge relied upon or looked for the existence of irreparable loss, she relied upon the fact that the Credit Union would be denied the opportunity to bring proceedings to set aside the security to be afforded to the other creditors on foot of an agreement on 2nd November 2015”. The Court found that it was clear that the Credit Union was “debarred from making that challenge by virtue of the provisions of s. 96(1) of the Act”.

The Court was satisfied that their loss of that right was “an inevitable consequence of the provisions of the Act itself” and was “precisely what the Oireachtas intended to flow as a consequence of the issuance of a Protective Certificate”. Similarly, the loss suffered due to moving from a position of secured creditor to unsecured creditor, was an inevitable consequence of the Act under s. 102(7).

It was held that the rationale for s. 97(3)(a) was not satisfied, namely, irreparable loss which would not otherwise occur. None of the grounds in the materials before the High Court or the Court of Appeal established those twin elements. The Court stated that the position of the Credit Union was no different from any other creditor, and that this was not the purpose of the section.

Consequently, on the strict application of section 97(3)(a), President Ryan, Justice Finlay Geoghegan, and Justice Irvine could not agree with Justice Baker’s decision, and allowed the appeal.

  • by Róise Connolly for Irish Legal News
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