A High Court judge has said that Jay Bourke’s personal insolvency practitioner fell “well below” the appropriate ethical standards expected.
Mr Justice Mark Sanfey criticised the practitioner for his explanation for how a portion of Revenue’s debt came to be mischaracterised in Mr Bourke’s debt restructuring plan.
Mr Bourke’s personal insolvency arrangement (PIA) which sought to write off the bulk of his €13.7 million debt, was withdrawn in April after a company he had invested in went into receivership.
His application had been objected to by creditor Pepper Finance, which was owed €12.2 million.
The restaurateur, who operated The Rí Rá, Panti Bar and Eden Restaurant, was declared bankrupt by the High Court upon the application of Revenue, which was owed €558,000.
Although his PIA was no longer before the courts, Mr Justice Sanfey requested a further explanation from personal insolvency practitioner John O’Callaghan, of KPMG, as to how Revenue’s entire debt came to be catergorised as “preferential”, when only a portion had preferred status.
In a ruling on Friday, the judge said he was not impressed by the description of this as an “error” and “incorrect use of language”. Although he apologised to the court, the practitioner failed to provide an “appropriate intelligible explanation” for his actions, Mr Justice Sanfey went on.
In providing misleading information to creditors, in neglecting to engage with the justified objections of Pepper, and in failing to properly explain his action to the court, the judge said the Mr O’Callaghan has, on this occasion, “fallen well below the appropriate ethical standards to be expected”.
Mr Justice Sanfey noted that a preferential debt can only be included in a PIA where the creditor concerned has consented to such. Where a creditor with a preferential debt opts out of the arrangement, it can take action to recover its debt.
Mr O’Callaghan worked diligently, the judge said, to encourage Revenue to “opt in” to the arrangement, and it was clear it would only consent if it would recover 100 per cent of its debt.
The discrepancy had been brought to the court’s attention by Pepper Finance, which would have recovered less than 1 per cent of its debt if the PIA was approved. Its counsel, Niall Ó hUiginn, said any reader of the PIA was left with the “clear impression” Revenue was entitled to be repaid its debt in full, but there was no entitlement for payment in respect of the non-preferential element.
The judge made clear he did not doubt Mr O’Callaghan is a “dedicated and skilled practitioner who does his bet for his clients” whose other applications to the court have been “unexceptionable and well presented”. However, he said practitioners must carry out their duties in accordance with their obligations to the creditors and the court, as well as their clients.
While noting no court order was required, Mr Justice Sanfey said he expected all personal insolvency practitioners to “reflect carefully” on their obligations to creditors and the court.
The “proper and effective operation” of the personal insolvency process “depends upon” practitioners observing their duties and obligations, he added.