A proposed personal insolvency arrangement for retired High Court taxing master James Flynn, who has debts of just over €5 million, does not meet a condition necessary for the court to consider whether or not to approve it, a High Court judge has ruled.
Mr Justice Denis McDonald was ruling on a preliminary issue concerning an application by Mr Flynn’s personal insolvency practitioner (PIP) after his insolvency arrangement failed to win the support of a majority of his creditors.
Some €2,603,054 of Mr Flynn's total €5,181,102 debt is owed to Everyday Finance, which acquired it from AIB. It is unsecured debt; Mr Flynn's other unsecured debts include some €1.65 million owed to Promontoria Arabn Ltd; €564,157 to Havbell; and €360,745 to Carley & Connellan Solicitors.
ESB, a secured creditor, is owed some €265,906.
Mr Flynn’s adviser made an application under section 115A of the Personal Insolvency Act 2015, which permits the court, subject to various conditions, to confirm the coming into effect of a proposed insolvency arrangement notwithstanding its rejection by a majority of creditors.
But one of the conditions attached is that at least one class of creditors has accepted the proposed arrangement by a majority of more than 50 per cent of the value of the debts owed to that class.
The insolvency practitioner argued that Carley & Connellan constituted a separate class of creditor for the purposes of section 115.9. That claim was disputed by Everyday, which argued the law firm is one of a number of unsecured creditors and cannot be treated as a separate class.
In his judgment, Mr Justice McDonald held Carley & Connellan cannot be differentiated from the other unsecured creditors of the retired taxing master – an official who decides disputes over legal fees. The fact the firm’s debt arose from it providing services rather than from a loan to Mr Flynn is irrelevant in the context of this application, he held.
Addressing claims that Everyday had an “animus” or hostility against Mr Flynn, the judge said he failed to see how the motivation of a particular creditor is relevant to the issue as to how classes of creditors are to be constituted.
His decision on the preliminary issue meant the entire application for approval of the arrangement under section 115A fails without having to consider other issues that would require to be addressed, he said.
The judge earlier noted, in an affidavit in support of the PIA proposal, Mr Flynn had said the debt due to the law firm arose in respect of legal fees accrued during litigation with AIB. Mr Flynn said the firm had provided work and services for the debt and retained security in that they had a lien over his file.
He said his financial difficulties arose on foot of a guarantee given by him in respect of a company, Fortberry Ltd, and as a consequence of alleged wrongful conduct by AIB. In April 2016, he and Fortberry had consented to judgment being entered in favour of AIB. The judgment against Fortberry was €5.18 million and the judgment against him was for €2.5 million on foot of a guarantee he had given in relation to indebtedness of Fortberry.