Development levy owed to county council not ‘excludable debt’ under PIA

A development levy owed to a local authority cannot be classed as an “excludable debt” for the purposes of a personal insolvency arrangement (PIA), a High Court judge has said.

In a judgment, Mr Justice Mark Sanfey said the term “State”, as defined in the Personal Insolvency Act, does not include a county council and, therefore, a development levy owed to it is not excludable from a PIA.

If the Oireachtas intended for a local authority to be included in a category of excludable debt relating to a “liability of the debtor arising out of any tax, duty, levy or other charge of a similar nature owed or payable to the State”, it would have made this clear, he went on.

Mr Justice Sanfey said his conclusions mean the court cannot approve the commencement of Lyle Chambers’s PIA and, thus, the personal insolvency practitioner’s appeal against the Circuit Court’s rejection must be refused.

Bank of Ireland Mortgage Bank objected to the coming into effect of the PIA for Mr Chambers, a farm operative from Ardbraccan, Kilmessan, Co Meath. Mr Chambers owed the bank some €656,700 at the time of the protective certificate primarily arising out of a mortgage loan. This was secured on his principal residence, which has an agreed market value of €296,800, the judge noted.

The bank’s primary ground of objection related to a sum Mr Chambers owed to Meath County Council, arising out of an unpaid development levy, being included in the arrangement to be paid out in full as an “excludable and/or preferential debt”, said the judge.

The PIA provided for payment of that €7,200 debt in full, by way of monthly instalments of €100, and treated the application as a single creditor case. The bank argued the local authority was a second creditor.

Under the PIA, there was to be a 12-month moratorium on mortgage repayments, so Mr Chambers could pay the council and the personal insolvency practitioner’s €5,000 fee. The debt to the council had been reduced to €3,900 by July 2020 and had been further reduced at the time of the hearing due to monthly €100 payments by the debtor, the judge noted.

The practitioner, Colm Arthur, argued the council debt was “excludable” from the PIA as he claimed it was a liability arising out of a levy owed or payable to the State. The council, he said, was to be considered an “emanation of the State”. Mr Arthur submitted it should be treated as a “special status debt” that forms a degree of preference.

Mr Justice Sanfey found the application failed firstly because the council’s debt fell outside the PIA and an excludable debt, were the levy to be considered such, must be “permitted” by the creditors. It may not be discharged in whole or in part as a special circumstances cost, he said.

It is not appropriate to consider a local authority is an “emanation of the State” under the Act, said the judge, warning that the court “must be wary of extending the categories of excludable debt beyond their bounds”.