A financial fund has lost its appeal over the writing off of €4.68 million debt it was owed by a furniture salesman.
The Court of Appeal on Tuesday refused Promontoria Aran Limited’s request for it to overturn an order activating David Langan’s personal insolvency arrangement (PIA) which means the company receives just 0.48 per cent of what it was due.
Mr Langan, a single man in his 60s with no dependants, had debts totalling €5.7 million before the High Court confirmed the insolvency plan despite objections from Promontoria, an unsecured creditor.
His debts arose primarily out of personal guarantees he provided for loans to his furniture business and other companies. He got into financial difficulties during the recession and the companies were wound up in 2009.
The PIA allows him to keep his principal residence at Bachelors Walk, Dublin, by restructuring the mortgage to a 10-year term and variable interest rate, with arrears capitalised.
He was to sell two other properties, with net proceeds to be paid to Permanent TSB and a solicitor. Secured creditors receive 67 per cent of what they are owed, while unsecured creditors get €22,240.
The High Court heard Promontoria, which purchased loans Ulster Bank gave to Mr Langan’s companies, would have achieved 0.27 per cent of its claim if Mr Langan had been made bankrupt instead of being returned to solvency via a PIA.
Promontoria had petitioned for Mr Langan’s bankruptcy in 2019 but he secured a certificate protecting him from legal proceedings by his creditors while he applied for a PIA.
In objecting to the arrangement, Promontoria complained that its debt ranked lower than Mr Langan’s debt of €236,800 to Tom Casey Solicitors.
The legal fees had accrued during Mr Langan’s failed High Court challenge to Promontoria’s appointment of a receiver over a property he owned in London. After six days at a hearing in 2019, the court ruled in favour of Promontoria and the receiver, granting the fund judgment of €4.3 million against Mr Langan in its counterclaim.
Mr Langan agreed to provide the solicitor with a first legal charge over his property in Wexford. His PIA, put together by insolvency practitioner Gary Digney, of FPM Accountants, provides for the Wexford property to be placed on the market for €250,000, with the solicitor to be repaid from the net proceeds.
Promontoria claimed it held an equitable charge over the property and that the solicitor’s first legal charge was not registered on time.
The High Court’s Mr Justice Mark Sanfey said his decision to approve the PIA was influenced by the “very considerable delay” by Promontoria and its predecessor Ulster Bank in initiating proceedings to establish an alleged equitable mortgage over the Wexford property.
There was also a “complete failure” by the fund to engage with Mr Digney during the period when creditors are required to prove their debt, he said.
Mr Digney, represented by barrister Keith Farry, instructed by Anthony Joyce & Co Solicitors, was “perfectly entitled” to treat the fund’s debt as unsecured, the judge added.
In the appeal, Promontoria argued the High Court should have refused to approve the arrangement as Mr Langan had incorrectly given “preference” to the solicitor in giving a first legal charge over the property.
Further, the fund submitted, that the judge was wrong to conclude there was no “unfair prejudice” to it and failed to address its arguments that Mr Langan’s total secured debts exceeded €3 million, making him ineligible for the process.
In a ruling on behalf of the three-judge Court of Appeal, Mr Justice Charles Meenan rejected all of the grounds, including Promontoria’s “literal” interpretation of the word “preference” in the relevant Acts.
He found the High Court judge was correct to find no merit in Promontoria’s contention that the debtor had secured debts exceeding €3 million. The figures for which there was an undertaking were “far short” of this sum, he said.
With the support of his colleagues Mr Justice Robert Haughton and Ms Justice Teresa Pilkington, the judge dismissed the appeal. He indicated his view that the insolvency practitioner is entitled to his legal costs.
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