March-01-2017 in Commercial & Business
In two separate cases the High Court and the Court of Appeal have provided guidance in relation to applications by disgruntled creditors to set aside the effect of Protective Certificates in personal insolvency proceedings.
What is a Protective Certificate?
The Personal Insolvency Act 2012 (the “Act”) makes provision for a debtor to apply to court for a protective certificate during the period when the debtor engages with his creditors. A Protective Certificate affords complete protection to a debtor from his creditors for a period of 70 days and this deadline can be extended by way of a court application.
Section 97 of the Act allows creditors to apply to court to set aside a Protective Certificate as it relates to that creditor. Before making such an order the court needs to be satisfied that not making such an order would cause irreparable loss to the creditor which would not otherwise occur and no other creditor to whom notice of the Protective Certificate has been given would be unfairly prejudiced.
In two separate judgments James Nugent & the Personal Insolvency Act 2012 (“Nugent”) [2016] IEHC 127 and Fergal McManus & the Personal Insolvency Act 2012 [2016] IECA 248 (“McManus”) the courts considered the question of when the courts may set aside a Protective Certificate.
Nugent
In Nugent Danske Bank sought an order setting aside the extension of a Protective Certificate on the grounds that the initial application for the grant of Protective Certificate was made with a lack of candour.
It was held by Baker J., in refusing to exercise her discretion to continue the protection order, that there had been material and culpable non-disclosure by both the debtor and the Personal Insolvency Practitioner in making the initial application for protection.
McManus
In McManus the debtor registered charges on his principal private residence (“PPR”) in favour of his mother and wife as security for their advancing funds to him. When the Clones Credit Union sought to register a judgment obtained against the debtor as a mortgage against the PPR, it was informed that the charge would rank behind the charges in favour of the debtor’s mother and wife.
The Court of Appeal considered an application by the Clones Credit Union under Section 97 of the Act. The Court of Appeal endorsed the High Court Judge’s view that for such an application to succeed it is necessary for the creditor to show that something other than the ordinary statutory consequences of the issue of the Protective Certificate has occurred. The Court of Appeal went on to overturn the High Court’s decision to grant Clones Credit Union’s application under Section 97 of the Act.
Conclusion
Nugent and McManus serve to highlight the onus of candour imposed on applicants for Protective Certificates. McManus highlights the high bar which a frustrated creditor must cross in order to set aside a Protective Certificate as it relates to that creditor.
Back to Full News