In a judgment delivered on 11th June 2015 in the case of Bank of Ireland Mortgage Bank –v- Brenda Mary Sheridan & Patrick Andrew Eoin Sheridan  NICh 12, the High Court ruled that a meeting of creditors convened to consider the debtors’ proposals for an individual voluntary arrangement (IVA) was invalid and therefore the subsequent IVA that was deemed to have been put in place had no binding affect on the debtors’ creditors.
The debtors had engaged an English Insolvency Practitioner (IP) to assist them in putting forward their proposals to their creditors. The IP did not appreciate that there were subtle, yet extremely important, differences between the IVA procedures in Northern Ireland compared to those in England and Wales. Some of the main issues in the case were as follows:
- The debtors’ paperwork erroneously referred to incorrect legislation, being the Insolvency Act 1986 as opposed to the Insolvency (Northern Ireland) Order 1989.
- The IP failed to endorse the debtors’ proposals when they were received.
- The IP failed to submit a report to the High Court within 14 days of receiving the debtors’ proposals.
- The IP failed to ensure that the meeting of creditors was convened not less than 14 days and not more than 28 days from the date his report was filed in Court.
The existence and the validity of the IVAs were being challenged by the Bank in their capacity as a creditor. The Court deemed that the IP had failed to follow the “highly prescribed mechanism for the proposal of an IVA and the timescales within which the various steps in relation to the proposal should be taken.” The Court also noted that “Where the statutory architecture puts in place a highly regulated mechanism to deal with any proposal for an IVA any material departure from the machinery is likely to render anything done after the departure invalid”. The Court therefore concluded that the meeting of creditors that had been convened was invalid and that any purported decision taken at that meeting was of no effect.
In essence the debtors’ IVAs were deemed not to have existed and creditors are now free to continue to pursue these debtors in respect of their outstanding debts.
This judgment highlights the importance of both debtors and creditors in Northern Ireland engaging a local, professional firm like McManus Kearney Solicitors who have an expert knowledge of insolvency matters in Northern Ireland to ensure that they receive accurate advice as to their legal position and that they are aware of all of the legal options available to them.
Partner, McManus Kearney
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