Personal insolvency arrangement for golf shop director refused

A High Court judge has refused to approve a personal insolvency arrangement (PIA) for a golf shop director which would have seen a €198,000 debt secured on the shop in Birr, Co Offaly, written down to €80,000.

Alan McGee, a personal insolvency practitioner (PIP) acting on behalf of Michael Horan, of Rapemills, Banagher, sought approval of the arrangement under the Personal Insolvency Acts.

Mr Horan’s main creditor, Promontoria (Oyster) DAC, owed some €740,000, of which some €198,000 is secured on the Birr premises, objected to the PIA.

After the Circuit Court refused approval of the insolvency arrangement, the PIP appealed to the High Court.

On Friday, Mr Justice Mark Sanfey dismissed the appeal after finding a “relevant debt” had not been established as is required under the Acts.

There was no objective evidence before the court that the mortgage on the home of Mr Horan and his wife Deborah was in arrears on January 1st, 2015, he said.

Even if a relevant debt had been established, the judge said he would also refuse approval arising from Mr Horan’s failure to make any repayments to Promontoria since it took over his Ulster Bank loan in 2016.

Mr Horan, a father of two and a director of Birr Golf Shop Limited, had said in an affidavit his financial difficulties arose due to the recession.

A golf instructor who ran a driving range since 1993, he bought 8.5 acres beside the driving range in 2006 with a view to developing and improving the entire facility.

Land purchase

He agreed with Ulster Bank it would lend him €500,000 to purchase the land and deal with some tax liabilities, with further sums to be advanced to develop the facility.

After the economic crash in 2007, he was unable to borrow the redevelopment funds or to meet full repayments on the loan.

The judge noted the PIA set out Mr Horan’s total indebtedness, as of the date of the PIA, at €976,340. Bank of Ireland Mortgage Bank is owed €233,013, secured on Mr Horan’s home currently valued at €250,000, and Promontoria is owed some €197,716, secured on the golf shop premises, plus a further sum of €542,290. The golf shop, valued at €70,000, is regarded as a “core asset” as it generates the income of Mr Horan and his wife, also employed by the company. The PIA said Mr Horan has a net monthly income of €3,002 and monthly set costs of €1,815 and the PIA proposed a total contribution of €64,553 over its term.

Keith Farry, for the PIP, argued there would be a better outcome for all creditors under the arrangement than under bankruptcy.

The judge said the particular difficulty for Mr Horan was that Promontoria, as its counsel Rudi Neuman outlined, had received no payments whatsoever from him since it took over the loan in 2016, notwithstanding he paid €238,806 to Ulster Bank between 2007 and 2016.

‘Profoundly unsatisfactory’

Mr Horan had said he had “lost faith that any long-term deal could be reached” and Promontoria had made no demand of him. Having secured a protective certificate and on advice of the PIP, he had “set aside” rental payments from the golf shop company to him now amounting to over €15,000, to be paid to Promontoria if the PIA was approved.

The way in which this matter was approached in the affidavits on behalf of Mr Horan was “profoundly unsatisfactory”, the judge said. If the amount now held was some €15,000, and the monthly rent from the company to him was €1,250, it was clear not all monthly rent has been set aside, he said.

While the repayment obligation under the mortgage is independent of the receipt by Mr Horan of the rent from the company, Promontoria was justified in complaining, notwithstanding being the mortgagee of the golf shop which generates all the income for the Horans, no repayment from that income was made to it for, at this stage, almost five years.

Even if a relevant debt had been established, he would have dismissed the application on this issue alone, the judge said. He accepted the bona fides of the assurance of Mr Horan and the PIP, given through counsel, the money would be paid to Promontoria if the PIA came into effect and did not infer that assurance to indicate, if the PIA was not approved, the money would not be paid to Promontoria.