Personal Insolvency Bill to be enacted by the end of the year

The Insolvency Bill has finally passed all stages the Oireachtas and will be enacted before the end of the year.  It is due to come into force by the end of March next year.

The main purpose is to provide a mechanism is to deal with the resolution of loans in difficulty ranging from €20,000.00 up to €3,000,000.00. 

It is hoped that the Act will in the appropriate circumstances, bring about a level of debt write off.  The Act provides for the fall back situation that if agreement cannot be reached between the debtor and the financial institution concerned that bankruptcy may be an unavoidable consequence.  The bankruptcy period has been reduced from 12 years to a more manageable 3 year period although there are circumstances where this can be extended to 8 years if there has been evidence of non-disclosure on the part of the debtor. 

Much of the debate in relation to the legislation has centred around the veto which Banks will have on any debt forgiveness proposal.  However the reality is that the Banks will have to exercise a certain amount of commercial sense to any such proposals.  If it simply refuses to agree to reasonable proposals it is possible that debtors will opt for bankruptcy and the Banks will lose out significantly on the security of its assets.

There are three personal insolvency arrangements created by the Banks;

1. Debt Relief Notice which deals with debts of less than €20,000.00 where people have a very low disposable income and where they have no secured assets.  It is envisaged that such debt relief notices will be negotiated directly between the debtor and the Banks.
2. The second arrangement is a Debt Settlement Arrangement which deals with unsecured debt of greater than €20,000.00.
3. The third element which is likely to be the most used of the three options is the Personal Insolvency Arrangement (PIA) which is aimed at those with secured assets including mortgage debt in excess of €20,000.00 but no greater than €3,000,000.00.  This will only apply where there is no possibility of full repayment. 

This will involve negotiations with a Personal Insolvency Practitioner who will try to negotiate an agreement between the debtor and the institution.  Any such arrangements must be approved by the Circuit Court.  The Minister has indicated that eight specialist Judges will be assigned to the applications.

In order for such a proposal to be approved no less than 65% of the secured lenders must agree to the PIA which will involve payments by the debtor for a period of six years.

Time will tell as to how successful this Act is going to be but it is likely to be of significant assistance to people with severe mortgage debt.  We at Dillons have been advising many clients on Personal Insolvency related issues for a number of years.

For further information on the provisions of the Act or how we can assist you please contact Brendan Dillon on 01-296 0666 or info@dillon.ie

Merry Christmas from Dillon Solicitors

Merry Christmas from Dillon Solicitors As we come to the end of our 20th year in practice it has been another year where the economic recession continues to bite and impact on everybody's day to day lives.  At Dillon Solicitors it has been no different but there are signs of light at the end of the tunnel.  While the domestic economy continues to drag there are signs of a stabilisation in unemployment and that the housing market has begun to bottom out.  Prospects for growth in my view are dependent on a number of crucial issues being addressed namely the significant concession on the bailout terms for the Government as well as the enactment and implementation of the Personal Insolvency Bill.  The overhang of domestic borrowing continues to be a huge impediment to economic recovery. While 2012 has been another very challenging year for the Firm we have managed to grow the practice in some very significant areas.  Some examples of this are; Acting for Property Receivers. Assisting clients in difficulty with Banks in handling negotiations and advising generally in relation to these issues. Family law - we continue to offer options of mediation, collaborative law and all other family law options. SME advisory work - we act for a large number of small and medium sized enterprises in relation to general advisory work as well as dispute resolution and employment advice. Property - we have seen a significant increase in property related work.  In June 2011 we launched our "Auction Title Reports" service which has proved to be a huge success in the various distressed property auctions. Elderly Issues - we have advised on a whole range of issues in this area including Wills, Enduring Powers of Attorney, Wards of Court applications, appointment of Care Representative, as well as assisting clients in extracting Probate and other related matters. We are looking forward to 2013 and one hopes that the property market will continue to recover, the huge issue of personal debt will be dealt with and the domestic economy will begin to show some signs of recovery. In recent years the Firm has invested significant time and effort in improving its practice management systems.  This is good for our clients as well as the Firm.  Putting in place good practice management systems means that we can carry out our work while delivering a more efficient and consistent service to our clients.  We continue to monitor client feedback and we wish to thank all of our clients who have completed client service questionnaires and for your very positive feedback.  In 2011 we became the first Law Firm practising solely in the Republic of Ireland to achieve the Lexcel standard which is the Practice Management standard for Firms operating in the UK.  There are approximately 1200 Firms in the UK who are Lexcel accredited.  One of the largest Firms in Ireland have recently followed suit and other medium sized firms are also applying for Lexcel. We underwent our annual Lexel audit in August of this year and we are pleased to confirm that our accreditation was renewed for a further year. We were also delighted during the year to be short listed for the Leinster Firm of the Year in the Inaugural Irish Law Awards. During 2013 we plan to provide an e-zine service to our clients which we hope will be a useful addition to the service you already receive from us.  We hope in the e-zine to focus on practical topics which will be of benefit to you our clients. I want, on behalf of everybody at Dillon Solicitors, to thank you once again for your business in 2012 and to wish you and your families a very Happy Christmas and a prosperous 2013. Kind Regards Brendan Dillon  Dillon Solicitors

WHO SAID THAT THE JUDICIARY ARE OUT OF TOUCH – SERVICE OF SUMMONS BY FACEBOOK SANCTIONED IN A RECENT CASE

In a recent Judgment delivered by Mr Justice Peart a solicitor was allowed to serve proceedings on a non resident Defendant by serving them by way of a private message on the Defendant’s Facebook page.

In this case the Defendant had left the jurisdiction and the solicitor in question was unable to serve him.  The normal rules of service are that the Defendant must be served personally where it is reasonably practicable.  If it is not possible to serve personally there are other modes of service which can be made by way of an application to Court i.e. by leaving the summons at the Defendant’s place of residence / workplace where it can be established that he/she is there or other applications can be made to serve by ordinary post where the Court is satisfied that the Defendant is deliberately trying to avoid service.

In this case Judge Peart was satisfied on the basis of an Affidavit submitted by the Plaintiff that exhaustive efforts had been made to locate the Defendant.  The Plaintiff was also able to satisfy the Court that the Facebook page in question was both genuine and was also used regularly by the Defendant.  In other words the Defendant was likely to access same and realise the existence of the proceedings.

The decision of Judge Peart follows on from other cases in the UK and other jurisdictions such as New Zealand and the United States where similar Orders have been made.

This is a very interesting development and time will tell whether such applications could be extended to include service on LinkedIn and other forms of social media.

Allsop Auction 3rd October 2012

Dillon Solicitors are once again gearing themselves up for the next Allsop Space auction on the 3^rd of October when one hundred and twenty seven properties will go under the hammer.  This is the eighth major auction held by Allsop Space since April 2011.

Dillon Solicitors are once again offering their low entry report service where prospective buyers can purchase a title report for a payment of €250.00 plus VAT.  The type of report will deal with all matters relating to contracts, title, planning, receivership issues, management company issues and all other relevant issues which prospective buyers need to be aware of.

At the October auction the majority of properties for auction are located in Dublin.  In previous auctions the majority of properties have been apartments but of the one hundred and twenty seven lots on offer forty three of them are houses.  There is also a substantial amount of quality commercial properties including a number of public houses.  For further information on our auction title report service please contact us at info@dillon.ie or phone us on 00353-12960666.

Dillon Solicitors are again offering their unique auction title report service for the next Allsop Auction which will be held in the Shelbourne Hotel on the 6th July 2012.  

If you or anyone with whom you do business have a requirement for contracts/ title to be inspected prior to the auction please contact us without delay.

Our service is comprehensive, quick, very cost effective and deals with the following matters;

1. Report on contract
2. Report on title
3. Report on receivership issues
4. Report on planning issues
5. Report on availability of BER Certificate

And many others

For further information please contact us on 01 296 0666 or info@dillon.ie

IMPORTANCE OF COMPLIANCE WITH CODE OF CONDUCT ON MORTGAGE ARREARS 2011

A recent decision by Ms. Justice Laffoy in March 2012 in a case of Stepstone Mortgage Funding Limited and Fitzell highlighted the importance for Banks of complying with the terms of the code of conduct for mortgage arrears 2011.

This was a case where the Bank had entered into interim arrangements for the repayment of the mortgage with the borrowers after proceedings/possession of the borrower’s family home had been instituted.  After the revised repayment schedule had failed the Bank wrote to the borrowers and requested an updated standard financial statement (SFS) which was received by the Bank on the 30^th September 2011.  After considering the SFS the Bank advised the borrowers that they were not prepared to offer a further repayment arrangement and that they were going to proceed with a litigation process.  They went on to advise the borrowers that “given that this process has already commenced, you do not have the benefit for the MARP process referred to in the 2010 Code of Conduct and Mortgage Arrears 2011 (i.e. the current Code) and consequently among other things you do not have the right to appeal this decision”.

When the matter came before the Master of the High Court he adjourned the case on the basis that the Bank had not complied with their obligations to allow the borrowers to appeal.  The Bank appealed this decision to the High Court and the matter came before Ms. Justice Mary Laffoy.

In the course of her decision Ms. Justice Laffoy referred to the obligations on the part of the Bank and as set out in the Code of Conduct.  She came to the conclusion that in circumstances where proceedings for possession of a primary residence by way of an enforcement of a mortgage or charge to which the current Code applied, the Bank were under an obligation to demonstrate to the Court compliance with the Code.  She referred to the imposition of a moratorium on the initiation of proceedings which is contained in provision 47 of the current Code and which as a result of the updated Code was increased from six months to twelve months .She observed that in circumstances where a Court was seeking to evict a person from his/her home, the Court was entitled to know that the requirements set out in provision 47, which had been imposed pursuant to statutory authority, were complied with.  The Court came to the conclusion that the current Code had not been complied with and in those circumstances refused the Bank’s application.

This case has very clear implications for Banks in cases relating to the repossession of family homes. 

What is not altogether clear is whether the same standard i.e. the need to comply with the obligations under the Consumer Protection Code 2012 applies in relation to non Principal Private Residences.

It should be noted that in order for a borrower to be able to sustain a Defence for breach of the Consumer Protection Code 2012 it would have to demonstrate that it is “a personal consumer” i.e. was acting other than in its normal trade or business.  A borrower may be able to establish a Defence on foot of some aspects of the 2012 Consumer Protection Code such as the duty on the Bank to have to resolve an arrears issue before commencing proceedings or by arguing that a lender had exercised undue pressure on a borrower.  It is a Defence that given the relatively low threshold for establishing an arguable Defence which may have the effect of persuading the Master of the High Court to refer to the case for a full hearing in the High Court, the Fitzell decision may make it more difficult for banks to obtain summary Judgment. 

For further information or enquires in relation to mortgage arrears or any personal insolvency

queries do not hesitate to contact Brendan Dillon on 01 296 0666 or brendandillon@dillon.ie.

Receivership Issues

The following are some issues to be considered by Receivers in the current environment where more and more borrowers are looking to pursue a Receiver for breach of their obligations.

This article looks at the various ways in which a Receiver can be appointed, the duties of Receivers and how Receivers can protect themselves from litigation.

Mode of Appointment

The traditional method of appointing a Receiver is under a Deed of Mortgage/Debenture where the appointment is usually governed by the loan documents.

Under the NAMA Act a Receiver can be appointed by the Court as a statutory Receiver and when appointed he becomes an officer of the Court.  Section 147 and 151 of the NAMA Act sets out the duties of the Receiver in these circumstances. 

General Duties

The general duty of a Receiver is to assume and take control of the assets of the debtor.

Section 316 A of the 1963 Companies Act provides that the Receiver must obtain “the best price reasonably attainable at the time of the sale”.

In the current environment more and more Receivers are opting for the auction route (particularly through the distressed property sale market) .This presumably is to be able to demonstrate to a Court at a later date that he/she has placed the property by way of public auction and the price obtainable was the best in the circumstances.  While it is fair to say that the sale by way of auction does not necessarily insulate a Receiver fully from a threat of legal action it certainly goes a long way to demonstrating that he /she has made all reasonable efforts to obtain the best price reasonably obtainable.

 The Receiver has to make sure that in these circumstances that any sale is at arms length and that any interested bidder has no connection with the borrower or the Receiver.  Indeed if it is a case that an officer of the Company wishes to purchase any of the assets of the Company then certain statutory requirements as set out in section 316(a)(3)(a) of the 1963 Act apply.  These also apply in circumstances where the Receiver may be seeking to sell the Company itself or trade as a going concern and if he does so he must ensure that he sets out a tendering process which is fair and transparent to all prospective bidders.

In certain cases the Receiver may seek the directions of the Court.  This is provided for under Section 316 of the 1963 Act but this is rarely used as it is regarded as being reserved only for particularly complex matters given the additional costs.

Selling Assets

One of the dilemmas facing a Receiver is whether to hold onto assets and rent them or to sell them in a declining market.  There are a number of cases including the “Re Edenfell Holdings Limited” and “Grace v ACC Bank plc” which were decided in 1999 and 2006 respectively which deal with this issue.  Both of these cases established the principle that a Receiver should not postpone a sale of assets simply because he believes the market is at a low point and that it would be better to wait until there is an improvement in market conditions.  The Judgements made clear that a Receiver is not a property speculator.

To whom does the Receiver owe a duty ?

The primary duty of care as established in the case of Bula Limited v Crowley (3) (2003)which held that the Receiver owes the primary duty of care to the Debenture holder.  This is a fiduciary responsibility which means the Receiver must act in good faith and must prioritise the interests of the Debenture holder ahead of the interests of the Receiver.

Where the borrower has also signed personal guarantees the Receiver also has a subsidiary duty to the borrower and needs to careful to be sure that he has obtained the best price which is reasonably obtainable in the circumstances to avoid a legal challenge.

How can the Receiver Protect Himself?

1. Appoint a Property Expert with experience in the particular type property being sold/location being sold with a view to obtaining guidance in relation to optimising value and method of sale.
2. Procure the services of an insolvency practitioner with a view to advising on obligations, duties and the best method of guarding same.
3. Secure any assets i.e. make sure they are insured and are reasonably secure.
4. Ensure compliance with statutory obligations under the Companies Act 1963 and where it is a NAMA appointment under the NAMA Act.

The increasing number of Receiver appointments puts Receivers in the spotlight and it is important that they are careful to ensure that they protect themselves and isolate themselves from possible litigation.

For further information contact Brendan Dillon on brendandillon@dillon.ie or 01 296 0666.

The Personal Insolvency Bill

The Personal Insolvency Bill which is due to be enacted in the coming months is likely to bring about a significant change in relation to how personal debt liabilities are dealt with over the next 5-10 years.

The recent publication of the draft general scheme of the Insolvency Bill follows on from a Law Reform Commission report in 2010 and the publication of the Keane report some time later.  Indeed it is interesting to note that when the Keane report was published it was greeted with general disappointment as not going far enough to deal with the issues regarding personal insolvency.  By contrast the publication of the general scheme (which is primarily based on the recommendations of the Keane report), has been greeted with the general approval with some exceptions.

 This is a measure of how attitudes of both the Banks and borrowers in distress have moved considerably over the last 18 months.  There is a general acceptance that there is no silver bullet to resolve the huge mountain of personal debt that exists within our economy.  There is a realisation that there has to be a medium to long term view taken in relation to the debt so as to allow people to have some form of certainty and to move on with their lives.  In some cases this will allow people to restructure their debt.  In other cases it will mean that the inevitable conclusion will mean bankruptcy.  For the Banks it will allow them to negotiate deals and put them in a position where they can at least take account of a case of restructuring or renegotiating in the context of their balance sheet.

It is interesting to look at one of the objectives of the general scheme which is stated as being “to address the serious continuing destruction to society and the economy and the State as a result of wide spread insolvency among debtors with the secured debt and to provide for a realistic alternative for debtors in appropriate circumstances.”

The Scheme attempts to address these objectives by two main mechanisms;

1. Radical changes to the existing Bankruptcy Act.
2. Introduction of a comprehensive three pronged mechanism of restructuring debt as an alternative to bankruptcy.

The Bankruptcy Act

Existing legislation is to be amended to allow for the current twelve year period to be reduced to three years.  There is however an option that the three year period can be extended to eight years for non compliance of fraudulent or dishonest behaviour by the debtor.  Alternatively ,a Court can make a further provision on the discharge of a bankrupt for payments to creditors for up to a further five years.

New Restructuring Models

The Scheme provides for three new components of a personal insolvency structure;

1. A debt relief certificate (DRC)
2. Debt settlement arrangement (DSA)
3. Personal Insolvency Arrangement (PIA)

The main features of these three components are as follows;

1. DRC

·        Limited to debts of €20,000.00.

·        Debtor must have virtually no assets (less than €400.00) and virtually no income (max disposable income of €60.00).

·        Applies to unsecured debts only.

·        Debts can be written off by Insolvency Agency (to be established under the Act) after 1 year.

·        Creditors have no power of veto.

2. DSA

•      Applies to unsecured debts in excess of €20,000.00.

•      Proposals must be implemented within 5 years (may be extended to 6 years).

•      Only one DSA allowed every 10 years.

•      Requires agreement of 65% of creditors by value.

•      If agreed amounts under the DSA under 5/6 years the balance of the debts are written off.

3. PIA

• Applies to secured and/or unsecured debt in excess of €20,000.00.
• Debtor must be insolvent.
• It must be unforeseeable that the debtor would become solvent within 5 years.
• Limited to €3,000,000.00.
• One PIA in lifetime.
• PIA to be proposed by Insolvency Trustee.
• Standard financial statement must be prepared by debtor.
• Debtor must act in good faith at all times.
• Protective certificate to last for 40-60 working days – during this time Banks cannot take action against debtor.

The key feature of both debt settlement arrangements and personal insolvency arrangements will be the role of the Insolvency Trustee.

In the UK this role was confined to accountants and solicitors.  There is some indication from an Oireachtas Committee that suitably qualified mortgage brokers will be involved.  Undoubtedly experience and qualifications will be a big factor.

What will the role of the Insolvency Trustee involve?

• Meeting with the debtor and obtaining all relevant information.
• Assisting in the preparation of standard financial statement.
• Contacting the creditors and seeking submissions.
• Assessing submissions and preparing a workable proposal for the working out of the debt.
• Holding a creditors meeting.
• Negotiating with creditors and trying to seek agreement.
• Holding creditors meeting in the event of a successful debt settlement arrangement/personal insolvency arrangement.
• Ensuring that the DSA/PIA is implemented.
• Maintaining regular contact with the debtor, creditors and the Insolvency Service.
• Implementing any variation if necessary.
• Maintaining ongoing accounts relating the PIA/DSA.
• Notifying creditors in the event of any material inaccuracies that come to their attention.
• Arranging for creditors to be paid in accordance with the restructuring agreements.
• Wrapping up the DSA/PIA on the conclusion of all payments.

What Constitutes Approval?

The Scheme provides for an approval rating of 65% of creditors in both a PIA and DSA.  However because a PIA involves secured creditors (which do not come within the ambit of a DSA) there must be at least 65% of secured creditors in value who approve and 55% of unsecured creditors.  In this way it is clear that secured creditors in a PIA will hold the key.  This however may not give the Banks in a secured lending position the control that many people may envisage. The Banks, in any negotiations, will only be too aware that if a personal insolvency arrangement cannot be concluded that the ultimate conclusion may well be the bankruptcy of the debtor which may not suit the lender. 

The Termination of a PIA

A Personal Insolvency Arrangement can be terminated for a number of reasons which include the following;

a)      Material inaccuracies in financial information.

b)      Non compliance of the debtor i.e. if there is a default in three months of payments then application can be made to Court to have the arrangement terminated.  If there are six months of default in payments then the arrangement is automatically deemed to fail.  In this event a creditor can apply to make the debtor bankrupt at which point the debtor will become liable for all the debts and the insolvency arrangement will have terminated.

     Some of the issues that arise from the publication of the Scheme can be summarised as follows;

·        The Banks will clearly have the ultimate veto in relation to any personal insolvency arrangement and presumably in relation to a debt settlement arrangement.  However if this is abused by the Banks there may be more bankruptcies which may not suit the Banks. 

·        The insolvency trustees will have a crucial role in managing the expectations of the debtor and the creditors.  It is likely that unsecured creditors will come out badly in any such arrangement particularly where a vote is not needed for successful conclusion.

·        The scheme seeks to ring fence the family home.  The probability is however that the Banks will seek to apply pressure in circumstances where they feel that the debtor does not have to stay in for instance a large “trophy” family home.

·        The scheme allows for debts which are incurred in the pursuance of a trade or profession to be factored into a PIA.  It is not clear if this will include guarantees given in this regard.

·        The scheme does not deal with negative equity mortgages and it has preferred the Keane approach and focused on affordability.

·        It is quite possible that unsecured loans will be harder to get given the fact that people will be able to seek a debt relief certificate for unsecured debts for up to €20,000.00.

·        There is limit of €3,000,000.00 on personal insolvency arrangements.  There is a view that this limit is simply too low to take account of the extent of unsecured debt. 

·        The scheme allows for a debtor to have “a reasonable standard of living”.  This is not defined and presumably will be assessed on a case by case basis.

·        The Banks argue that the implications of debt settlement arrangements and personal insolvency arrangements will naturally be that it will increase the cost of obtaining mortgages for new borrowers. 

What is certainly clear is that the new Act when eventually enacted will create an opportunity for lenders and distressed borrowers to seek some certainty in relation to their respective positions and bring about an orderly resolution to the discharge of the mountain of personal debt which exists within our economy.  It is regrettable that it has taken over two years for many of the proposals of the Law Reform Commissions and laterally the Keane report to become law.  It is likely that in 5-10 years time the new Act (assumed that it is published in similar terms to the general scheme) will have made a significant contribution to the significant personal insolvency issues currently existing.

For more information contact us on 01 - 296 0666 or by email at info@dillon.ie 

Dillon Solicitors Short Listed for Leinster Firm of the Year

Dillon Solicitors were delighted to be recognised for our achievements throughout the last twelve months by being shortlisted with four other firms for Leinster Firm of the Year in the inaugural Irish Law Awards. 

The ceremony took place in the Shelbourne Hotel on the 4^th May .Miriam O Callaghan was the host and Minister for Justice Alan Shatter was the guest speaker.

Renowned former President of the Law Society Moya Quinlan won the Lifetime Achievement Award.

Breast Implants Recall

Recall for Breast Implants

Dillon Solicitors are offering legal advices to women affected with breast implants recalled by the manufacturer Poly Implant Prothese (PIP).

The recall was necessitated after it was discovered that PIP had been using an unsuitable silicone gel instead of a medical-grade silicone gel.

It appears that the breast implants were implanted in the following Private Hospitals / Clinics: Shandon Street Hospital in Cork, Clane Hospital in Co Kildare, The Hospital Group (Dublin and Galway) and The Harley Medical Clinic in Dublin. The Irish Medical Board have advised that out of the 1,500 women in Ireland who have received the PIP breast implants, 878 of them are former patients of the Harley Medical Group.

All women with these implants are advised that if they have any concerns about their implants that they should seek advice from the surgeon who carried out the procedure as a matter of urgency.
 
Anyone concerned that they may have received the PIP implant should contact their surgeon/clinic where their surgery was carried out and obtain medical advices. They should request copies of all medical documents and have a scan carried out to ascertain the present state of the implants.

We understand that this matter is particularly upsetting and sensitive. We also understand that the thought of further surgery can be the cause of major distress in patients.

Our solicitors in Dillon Solicitors are available to provide you with legal advice on this matter and to discuss with you any claim you may have.

For more information please contact us at info@dillon.ie or contact our office at 01-2960666.

Allsop Auction 1st March 2012

Dillon Solicitors are again offering their unique auction title report service for the next Allsop Auction which will be held in the Shelbourne Hotel on the 1^st March 2012.  It is expected that over 100 properties will be up for auction and if previous auctions are anything to go by interest will once again be intense. 

As a result of advising clients in the 2011 Allsop Auctions we have developed particular expertise in identifying the key issues that arise in relation to these auctions. 

If you or anyone with whom you do business have a requirement for contracts/ title to be inspected prior to the auction please contact us without delay.

Our service is comprehensive, quick, very cost effective and deals with the following matters;

1. Report on contract
2. Report on title
3. Report on receivership issues
4. Report on planning issues
5. Report on availability of BER Certificate

And many others

The cost of acquiring one of our title reports is only €250.00 plus VAT @23%.

For further information please contact us on 01 296 0666 or info@dillon.ie