Court approves personal insolvency arrangement over creditor objection, ruling write-down necessary for solvency.

Neutral Citation: [2025] IECC 6

Record Number: C:IS:ESLH:2023:001790

C:IS:ESLH:2023:001791

AN CHÚIRT CHUARDA

THE CIRCUIT COURT

EASTERN CIRCUIT COUNTY OF LOUTH

IN THE MATTER OF THE PERSONAL INSOLVENCY ACTS, 2012 – 2015

AND IN THE MATTER OF SHANE AND DIANE O’BRIEN (THE DEBTORS)

Record Number- Shane O’Brien: C:IS:ESLH:2023:001790

Record Number- Diane O’Brien: C:IS:ESLH:2023:001791

JUDGMENT of Her Honour Judge Mary O’Malley Costello delivered on 10th day of April 2025.

1. This matter comes before the Court by way of Notice of Motion pursuant to S 115A to review the decision of the Creditor, namely, Pepper Finance DAC, which refused to approve the proposed Personal Insolvency arrangement, as the only creditor concerned, in the case of Shane O’Brien and the PIA of Diane O’Brien presented to it at a meeting of her Creditors on the 28th of March 2024.

2. I am satisfied that the S115A application is properly before me, the necessary notice having been given to all creditors concerned and that it is accompanied by the necessary documentation and certificates. I am further satisfied that the Debtors are insolvent, that they require to enter into some arrangement with their creditors in order to return to solvency and that the necessary proofs are met, including that the debt due to the Objecting Creditor is a relevant debt.

3. Under the arrangements put forward by the practitioner, their indebtedness would be addressed over a two-year term by interlocking 24-month arrangements which propose to restructure the Mortgage Loan as follows: a. The arrears, which currently stand at €377,043.65 are to be capitalised. b. The term is to be extended for to 240 months;

c. The debt will be written down to the value of the Property (€385,000) with €218,473.96 written off and treated as an unsecured debt. d. Month 1 —24: i. Interest rate will be 3% fixed. ii. Fixed repayment of €962.50.

e. Month 25 —240

i. Interest rate will be 4% variable. ii. Full capital and interest payments estimated at €2,503.26. f. The Practitioner's fee is to be €7,885.60.

4. Shane O’Brien, a maintenance worker, is now aged 51 having been born on 3 July 1974 and Diane O’Brien is described as a scheduler for a Limited company (which I’m presuming to be an office job), was born on the 12th October 1976 and is aged 48. They have one dependent aged 18 still in education.

5. Shane O’Brien has one creditor, the Objecting Creditor, and Diane O’Brien has two creditors, the Objecting Creditor and Allied Irish Bank in respect of a credit card debt in the sum of €1918. Allied Irish Bank voted in favour of the arrangement but the Objecting Creditor did not.

6. For the purpose of this decision, in order to fully understand the finances, I have added the income of Mr. O’Brien and Ms, O’Brien together to ascertain the “family income and outgoings”. The arrangements show these to be as follows: - Total household income of €5,672 per month. Out of this sum, their set costs calculated in accordance with the guidelines issued by the Insolvency Service of Ireland (“ISI”) are €2,358. Their monthly obligations on foot of a mortgage to the bank under the PIA are €962. In addition, they incur what are described as “special circumstances costs” in the sum of €687 per month, which are made up of college costs totalling €302, insurance at €60, the cost of a second car at €137, life cover at €37 in the case of Shane O’Brien, and childcare at €117 and additional expenditure in the case of Diane O’Brien giving a total RLE for the family at €653. By the time the matter came on for hearing it was accepted that the Family income was €5672 and the set costs had varied in accordance with schedules which were handed into Court and is referred to hereunder.

7. For the reasons identified in the Notice of Objection, the Objecting Creditor does not believe that the PIA presents a fair or realistic path to solvency for the Debtors. In particular, it submits that its counter proposal is less prejudicial to its interest and would have provided a fairer return to solvency for the Debtors.

8. Its counter proposal made in accordance with sections 98 and 102 of the Act proposed: a. 12-month PIA. b. Term extension to 252 months. c. Write down to €450,000. d. Interest rate: i. fixed at 3% from month 1 - 24; ii. the prevailing variable rate (currently 4.25%) thereafter.

e. Repayments: i. Interest only payments of €1,075 from month 1 — 12. ii. Capital and interest payments of €2,384.77 from month 13 —24. iii. Capital and interest payments of €2,649.98 from month 25 —252. As appears therefrom, the Counter Offer proposes inter alia (a) 252-month term extension versus a 240-term extension as proposed by the Practitioner, (b) a write down to €450,000 versus €385,000, which would result in an extra €65,000 to the Creditor.

The Objecting Creditor submits that the PIA is unfairly prejudicial to its interests in that: -

(a) The proposed write down to the market value of the Property in unnecessary and unjustified.

(b) The PIA will not enable the Objecting Creditor to recover the debts due to it to the extent that the means of the Debtors reasonably permit (contrary to section 115(A)(9)(ii) of the Act). Their case is that the Debtors will have increased affordability when their child is no longer dependant in circa 5 years and that they have capacity to continue working after age 66 (when each can draw an old age pension) such that they could make repayments for an additional period. If this were done, the required write off would be less and, they argue, fairer in the circumstances.

9. In a nutshell, the issue in this case is whether the full means of the Debtors are brought to bear on their debts and whether the write down to market value as proposed is justified or unfairly prejudicial to the creditor.

10. In support of its argument that the counterproposal is a fairer solution the Objecting Creditor, in the Supplemental Affidavit of Caroline Loftus sworn on the 23rd January 2025, avers that if the counter proposal were implemented and if the Debtors both continued to work until month 252 as well as claim old age pension from age 66 at €1100 each, the following would be their projected joint income and expenditure.

Month 1 - 12 Month 13 - 24 Month 25 - 60

Income €5,672.67 Income €5,672.67 Income €5,672.67

Set costs €2,358.60 Set costs €2,049.54 Set costs €2,049.54 Travel to €260 Travel to Travel to €0 school school school College College €550 College €550 Insurance €108.94 Insurance €108.94 Insurance €108.94 Second car €250.36 Second car €250.36 Second car €250.36 Life Cover €68.58 Life Cover €68.58 Life Cover €68.58 Total costs €3,046.48 Total costs €3,027.42 Total costs €3,027.42 Disposable €2,626.19 Disposable €2,645.25 Disposable €2,645.25 income income income Repayments €1,075 Repayments €2,384.77 Repayments €2,649.98 PIP €1,551.19 PIP PIP fees/dividend fees/dividend fees/dividend Surplus Surplus €260.48 Deficit -€4.73 Month 61 - 204 Month 205 Month 229 - Income €5,672.6 Income €6,772.6 Income €7,872.67

7 7

Set costs €2,049.5 Set costs €2,049.5 Set costs €2,049.54

4 4

Travel to Travel Travel

school to to

school school

Insurance €108.94 Insurance €108.94 Insurance €108.94

Second car €250.36 Second car €250.36 Second car €250.36

Life Cover €68.58 Life Cover €68.58 Life Cover €68.58

Total costs €2,477.4 Total costs €2,477,4 Total costs €2,477.42

2 2

Disposable €3,195.25 Disposable €4,295.25 Disposable €5,395.25 income income income Repayments €2,649.9 Repayments €2,649.9 Repayments €2,649.98

8 8

PIP PIP PIP

Surplus €545.27 Surplus €1,645.27 Surplus €2,745.27

Counsel on behalf of the Debtor submitted a table to the Court setting out what the figures would be if the PIA was implemented. There are small variations which are not material from that which was in the original arrangement, and referred to at para. 6 above, but it is agreed that the following are the figures which set out income and expenditure for the Debtors if the arrangement were implemented.

Month 1-12 Month 13-24 Month 25-60

Income €5,672.67 Income €5,672.67 Income €5,672.67

Set Costs €2,358.60 Set Costs €2,049.54 Set Costs

€2,049.54

Travel to €260 Travel to €0 Travel to €0

School School School

College €0 College €550 College €550

Insurance €108.94 Insurance €108.94 Insurance €108.94

Second Car €250.00 Second Car €250.00 Second Car €250.00

Life Cover €68.58 Life Cover €68.58 Life Cover €68.58

Total Costs €3,046.12 Total Costs €3,027.06 Total Costs €3,027.06 Disposable €2,626.55 Disposable €2,645.61 Disposable €2,503.26 Income Income Income Repayments €962.50 Repayments €962.50 Repayments €2,503.26 PIP €1,664.05 PIP €1,683.11 PIP fees/dividend fees/dividend fees/dividend Deficit €0.00 Deficit €0.00 Surplus €142.35 Month 61-204 Month 205- Month 229-

228 252

Income €5,672.67 Income €6,772.67 Income €7,872.67

(Figure used by (Figure used by

creditor on creditor on basis

basis of both of both Debtors

Debtors working working and

and one Debtor both Debtors

receiving OAP at receiving OAP at

retirement age) retirement age)

Set Costs €2,049.54 Set Costs €2,049.54 Set Costs

€2,049.54

Travel to Travel to Travel to

School School School

College College College

Insurance €108.94 Insurance €108.94 Insurance €108.94

Second Car €250.00 Second Car* €250.00 Second Car* €250.00

Life Cover €68.58 Life Cover €68.58 Life Cover €68.58

Total Costs €2,477.06 Total Costs €2,477.06 Total Costs €2,477.06 Disposable €3,195.61 Disposable €4,295.61 Disposable €5,393.61 Income Income Income Repayments €2,503.26 Repayments €2,503.26 Repayments €2,503.26 PIP € PIP PIP fees/dividend fees/dividend fees/dividend Surplus €692.35 Surplus €1,792.35 Surplus €2,892.35 *Second car may not be used by Debtors once retired

11. The Law

S.115A (8) provides as follows:

(8) The Court shall consider whether to make an Order under subsection 9 only where it is satisfied that certain criteria are met.

They are:

(a)(i) The eligibility criteria specified in Section 91 have been satisfied and,

(ii) The mandatory requirements referred to Section 99 have been complied with.

(iii) The proposed arrangement does not contain any terms that would release the Debtor from an excluded debt or an excludable debt other than a permitted debt or otherwise affect such a debt and

(b) it considers that having regard to the information before it including the information contained in the Notice of Objection no ground specified in Section 120 applies in relation to the Debtor or the proposed arrangement.

Subsection 9 of Section 115A sets out that as follows:

(9) The court, following a hearing under this section, may make an order confirming the coming into effect of the proposed Personal Insolvency Arrangement only where it is satisfied that—

(a) the terms of the proposed Arrangement have been formulated in compliance with section 104,

(b) having regard to all relevant matters, including the terms on which the proposed Arrangement is formulated, there is a reasonable prospect that confirmation of the proposed Arrangement will—

(i) enable the Debtor to resolve his or her indebtedness without recourse to bankruptcy,

(ii) enable the creditors to recover the debts due to them to the extent that the means of the Debtor reasonably permit, and

(iii) enable the Debtor—

(I) not to dispose of an interest in, or

(II) not to cease to occupy,

all or a part of his or her principal private residence,

(c) having regard to all relevant matters, including the financial circumstances of the Debtor and the matters referred to in subsection (10)(a), the Debtor is reasonably likely to be able to comply with the terms of the proposed Arrangement,

(d) where applicable, having regard to the matters referred to in section 104(2), the costs of enabling the Debtor to continue to reside in the Debtor’s principal private residence are not disproportionately large,

(e) the proposed Arrangement is fair and equitable in relation to each class of creditors that has not approved the proposal and whose interests or claims would be impaired by its coming into effect,

(f) the proposed Arrangement is not unfairly prejudicial to the interests of any interested party, and

(g) other than where the proposal is one to which section 111A applies, at least one class of creditors has accepted the proposed Arrangement, by a majority of over 50 per cent of the value of the debts owed to the class.

12. Class of Creditor/Right to have arrangement reviewed.

A further issue which arises in this case is whether or not Diane O’Brien is entitled to bring a section 115A application at all given that the unsecured creditor who voted in favour of her arrangement owns less than 1% of the overall debt due to Creditors present and voting. In Re Ali [2019] IEHC 138, Mr Justice McDonald confirmed the importance of the Court having regard to the “…proportionate size of the debt due to one class of creditor” and confirmed that a class of creditor can be treated as a separate class, “notwithstanding the amount due may be only a very small fraction of the overall indebtedness”. In Re McNamara [2019] IEHC 622 , he found that there were “…sufficient considerations which arise in this case to persuade me that the Revenue Commissioners should be treated as a separate class of creditors.”. The Objecting Creditor submits that it was not the purpose or intention of Section 115A to permit a Debtor to wholly disregard the wishes of the substantial majority creditor merely because a small unsecured Creditors is satisfied with the proposed arrangement. I am satisfied that there are sufficient considerations in this case to allow Diane O’Brien seek a section 115A review. In this case, Mr O’Brien, who has no other creditor at all, is entitled to seek a court review and it would be contrary to the interests of justice in my view to refuse to allow Diane O’Brien to have her interlocking arrangement reviewed by the Court. The fact of the matter is that the full family income must be brought to bear on the debt if there is to be any hope of its being restructured in any way at all. The Court will review the proposal and compare it with the counter proposal put forward by the Objecting Creditor. I will then make a decision as to which is the more appropriate restructure of the debt, bearing in mind the overall objectives of the Personal Insolvency Acts as amended.

“ (a) the need to ameliorate the difficulties experienced by debtors in discharging their indebtedness due to insolvency and thereby lessen the adverse consequences for economic activity in the State,

(b) the need to enable creditors to recover debts due to them by insolvent debtors to the extent that the means of those debtors reasonably permits, in an orderly and rational manner, and

(c) the need to enable insolvent debtors to resolve their indebtedness (including by determining that debts stand discharged in certain circumstances) in an orderly and rational manner without recourse to bankruptcy, and to thereby facilitate the active participation of such persons in economic activity in the State, to provide for additional mechanisms and arrangements relating to insolvency to facilitate the achievement of those objectives…”.

13. The Counterproposal -vthe PIA

In examining the counter proposal and comparing it to the Personal Insolvency Arrangement and deciding whether there is a justification to write the debt down to the market value of the property, the Court notes that one must also ensure that the full means of the Debtors are brought to bear on their debt.

These are all issues which are intertwined. A practitioner must propose a solution which is sustainable, which he/she believes is fair to creditors and Debtors and one which is allowed by the Act. Of necessity, as was pointed out by Baker J. in Paula Callaghan [2017] IEHC 322, “the scheme of the personal insolvency legislation affords a very broad discretion in a pip to formulate a proposal for a PIA as the financial circumstances of each Debtor will be different and the proposal for a PIA must respect and make provision for such differences and do so in the light of the express objective of the act in so for as this can be achieved in a manner that is not unfairly prejudicial to an impaired creditor” bearing in mind that “…a Debtor should continue to own or occupy his or her principal private residence”. At paragraph 59 of Callaghan, she points out that section 115A(b)(ii) constrains the court by “…considerations of reasonableness” namely that there be a reasonable prospect that confirmation of a proposed PIA will enable the Debtor to resolve his or her indebtedness and enable the creditors to recover their debts to the extent that the means of the Debtor reasonably permit. “The inclusion of a requirement of reasonableness” she continues “supports the argument that a margin of appreciation will be afforded to a practitioner in formulating an arrangement.” She indicated that the Court should not interfere unduly with a proposal even if another and possibly equally reasonable proposal could be formulated and the “…objection of a creditor will not be upheld merely on account of the fact that it can offer an alternative proposal”.

14. At the same time, the position taken by the practitioner is not determinative. It is clear from S.115A (10) (b)(i) that there is an obligation on the court to independently consider and have regard to any counter-proposal which may have been made by a creditor. The Court must consider whether the counter-proposal put forward by the bank is one that achieves a better and fairer result than the proposal put forward by the practitioner.

The Callaghan case makes it clear that that the Court must be proportionate in its approach, that its decision must be reasonable and that it must take into account the individual facts and indeed the figures concerned in each case.

15. Counsel for the Objecting Creditor relies on the case of in Re Griffin [2019] IEHC 751 in support of its submission, that a proposal cannot be approved where the level of income available to the Debtors post PIA is such that makes it clear that their full means are not brought to bear on the debt, thereby in turn making it unfairly prejudicial that the debt be written down to market value.

It is certainly correct as pointed out by Ms Loftus in her affidavit sworn on behalf of the Objecting Creditor on 22nd October 2024 that “the PIA (in this case) imposes the largest write-down permitted under the Act“ namely, the write-down to market value. It is also correct and in accordance with the jurisprudence that any write-down must be justified and that, as she avers, “the practitioner should… maximise the Debtors repayment capacity. The agreed section 105 valuation should not be used as a starting point for reducing in negative equity secured debt”. They argue that one must determine an approach which meets the needs of the individual case. The Objecting Creditor in this case submits and I quote “The Debtors have the capacity to repay more over their working life.”. The question is what is their working life? In this regard, the Court is constrained by the considerations of reasonableness.

16. The Obligations of the Personal Insolvency Practitioner

The Objecting Creditor makes the case that the Personal Insolvency Practitioner should have engaged more fully with the counter proposal and indeed adopted that counterproposal.

The Court notes that as was pointed out by McDonald J. in Re Griffin, the “… counterproposal must be seen in the context of the statutory scheme for the making of representations by creditors to a practitioner. Under s. 98 of the 2012 Act, the practitioner is required to give notice to creditors of his or her appointment and to invite the creditors to make submissions regarding the manner in which the debts of the Debtor might be dealt with under a proposed arrangement. The practitioner is also under an obligation to consider any submissions made by creditors. Insofar as secured creditors are concerned, s. 102 (1) imposes a specific obligation on such creditors (following receipt of the notification under s. 98) to furnish to the practitioner an estimate of the market value of the security. In addition, s. 102 (1) enables the secured creditor to also indicate a preference as to how that creditor wishes to have the security and secured debt treated under the arrangement. This is, however, expressly made subject to s. 102 (3) and ss. 103 to 105 of the 2012 Act. In this context, it is important to bear in mind that under s. 104 (1) practitioners are required, in formulating proposals for personal insolvency arrangements, to do so in a manner which secures, insofar as reasonably practicable, the retention by a Debtor of his or her principal private residence.”

Obviously if one is to ensure a return to solvency, one of the main concerns of the Personal Insolvency Practitioner is to propose an arrangement which in the view of that practitioner is sustainable. It is well settled law that if it is not, then it does not provide a return to solvency for the Debtors and it is unfairly prejudicial to the creditor to burden them with a restructure which is doomed to fail.

In this case, the Personal Insolvency Practitioner, Mr. McDarby, in his affidavit sworn on 13th December 2024 avers that he did engage as required. He exhibits the correspondence entered into between himself and the Objecting Creditor and avers that having assessed the Debtor’s affordability to meet a higher mortgage balance over a longer period at a slightly higher interest rate, he was of the view that the counter proposal was not an acceptable or sustainable solution. Comparing the length of the arrangement with counter proposal he was of the view that the 24- month arrangement was required, both in order to ensure supervision, to allow for the payment of the debt to AIB by Mrs O’Brien and the payment of Personal Insolvency Practitioner fees by both Debtors. He had concerns about the long-term ability of the Debtors to sustain the repayments following the normal retirement age given that that it required them to continue working. As he avers caution must of course be exercised when one extends the term beyond age 70. He points out that post PIA there would be a surplus of €125 per month if the proposal were adopted compared with a deficit if the counter proposal were implemented. It is accepted by the Objecting Creditor that the Debtors would be required to live below RLE’s from months 25 to 60 albeit in a small sum (€5). The Personal Insolvency Practitioner expresses concern about the fact that there is a variable interest rate payable over the lifetime of this mortgage and in that regard considers that a buffer is necessary to ensure that the once in a lifetime opportunity of a PIA does not fail.

17. The Court agrees that it is a delicate balancing exercise. The Personal Insolvency Practitioner is relied upon to be fair and independent in the discharge of his duties.

The burden of proof rests on the Debtors and so on the Personal Insolvency Practitioner on their behalf to show that on balance, the proposal is fair and reasonable, otherwise the Court cannot impose that solution.

On the basis of the evidence, I accept that the Personal Insolvency Practitioner did engage as best he could but that ultimately as was the case in Re Griffin, the Objecting Creditor who was the only creditor concerned in the case of Mr O’Brien had indicated that it had made a decision not to support the arrangement. Therefore, there was little the practitioner could do but to present the arrangement, which he considered fair, to the meeting of Diane O’Brien’s creditors and go on to support the Debtors in seeking the court review when it failed to be approved by the Objecting Creditor.

As Baker J. observed in Paula Callaghan, at para. 59 of her judgment, “… a margin of appreciation will be afforded to a practitioner in formulating a personal insolvency arrangement”. In part, this is in recognition of the fact that, in any given case, a Practitioner will be required to balance many different competing interests in formulating a proposal for an arrangement. The Court must always be conscious of the practical difficulties which confront the Practitioner in undertaking this hugely important task. The Court must also keep in mind the very important statutory role given to the Practitioner under the 2012-2015 Acts. The Practitioner is entrusted with the task of formulating proposals which are sustainable and which provide a return for the creditors of the Debtor which is commensurate with the means of the Debtor.

18. Court Review

The Court is cognisant of the fact that as per paragraph 28 of Mr Justice McDonald’s

decision in Re Griffin, it is clear from Section 115A (10)(b)(i) that there is an obligation on the court to independently consider and have regard to any counterproposal that may have been made by the creditor. The Court then has an obligation to look at the scheme as proposed /consider the counterproposal, which gives a superior return to the Objecting Creditor, and decide whether or not to approve the PIA applying the law as explained by Judge Baker in Callaghan and by Judge McDonnell in Griffin.

The question which arises in the present case is whether, notwithstanding the margin of appreciation given to the Personal Insolvency Practitioner, the proposal involves an unfair treatment of the secured creditor’s debt.

19. Counsel for the creditor relies on the case of In Re Griffin. In that case, while Mr Justice McDonald was of the view that the counter proposal lacked reality, the fact that on examination of the figures Mr. Griffin and Ms. Griffin would have a surplus monthly income of €1,596.26 above reasonable living expenses post PIA such that even if 50% of that surplus was made available it would be sufficient to service payment of that part of the debt owed to the bank which it was proposed to write down (namely €138,000) over the remaining term of the mortgage led him to the

conclusion that “..there is no sufficient evidence before the court which would allow the court to form the view that a surplus income in the order of €1596.26 per month is justified or act reasonable.” He further found that there was no evidence to justify the extent of the write down of secured debt in that case. On the other hand, the Court in Re Parkin, on the facts, decided that a buffer of €900 per month was acceptable.

20. Analysis

On the facts in this case, it is clear that during the course of the PIA the full means of the Debtors are brought to bear on the debts due to the Objecting Creditor. Post PIA, in months 25 to month 60, there will be a surplus of €142. This is certainly within the parameters which are acceptable and, indeed, in most cases would be necessary to deal with the vicissitudes of life never mind possible increased interest rates. The counter proposal would require the Debtors to live approximately €5 below RLE’s during that time. The Act provides that during the PIA persons cannot be required to live below RLE’s. Although very often they choose to do so in order to remain in their principal private residence, it cannot be imposed upon them. In this regard, therefore, the PIA as proposed is acceptable since in months 25 to 60, the restructure, immediately post the PIA, is in the Courts view more reasonable, proportionate and sustainable than the counter offer. Looking at months 61 to 204, when the dependent child finishes college and both parties are working, there is a possible surplus (unless interest rates increase to eat it

up) of approximately €700 per month whereas the counter proposal would have allowed for a surplus of €545. While €545 would be acceptable, the surplus of €700 per month is not unacceptable. Indeed, bearing in mind that the interest rate applied to the secured debt under this arrangement is variable and evidence presented to the Court shows that it increased to 8% at one time, it may indeed be necessary. Hopefully that will not happen as it might affect the ability of the Debtors to sustain the payments. From month 205 to month 228, (17 years in the future) Mr. O’Brien will be 66 and entitled old-age pension. He will have an increase in income if when his pension kicks in, he continues to work. His pension would provide him with an extra €1100 per month, leading to a surplus of €1792 per month for that period. However, it is equally as likely that during that time he may have to retire from what is a manual job thereby causing a decrease in income to the point where he might only have an income of €1100 per month.

In month 229 to 252, when Mrs O’Brien reaches pension age, she may or may not be able to continue her work (perhaps more likely as hers is an office job). So, the possibility is that the parties would have their present income plus a possible additional €2200 at that point in time if both were working and drawing the pension. However, to project forward in the manner suggested by the Objecting Creditor seems to fall within the realms of speculation rather than reality. We are warned against such an approach by Baker J in Callaghan particularly when one is dealing with projections which apply long into the future.

21. Bankruptcy Comparison

The Bankruptcy Comparison makes it clear that, under that regime, the Objecting Creditor would not do as well as in the PIA.

22. DECISION

On balance therefore, the Court has to accept as reasonable and proportionate the proposal put forward by the Practitioner. It envisages what can only be described as, on balance, a more sustainable solution. The Court therefore finds that it is not unfairly prejudicial to the Creditor to impose this solution. The evidence presented provides justification for the write down of the loan to the market value of the property as it is necessary to ensure that the Debtors can make the repayments which are envisaged in the arrangement and that they can service the loan in the long term without default. This is in the best interests of both the Objecting Creditor and the Debtors. The Debtors only have one chance in their lifetime to enter into a PIA. If they do so, it must be clear that not only can they abide by its terms during its currency but that its reasonably foreseeable that they can abide by the restructure of their debt in the long term. This PIA achieves that objective. The counter proposal on the other hand leaves them vulnerable to default in 17 years’ time, or, as described by Baker J. in Re Callaghan as “…on the hazard.” unless they manage to work post normal retirement age. For that reason, it is unacceptable.

23. CONDUCT

Finally, although this issue was not specifically raised by the parties but conscious of my obligations under the Act I confirm that, in arriving at my decision, I have taken account of the matters referred to at Subsection (10) i.e. the conduct of the Debtors in the two years prior to the issue of the Protective Certificate and the submissions made by the Creditors and I am satisfied that their conduct is such as enables me to exercise my discretion in their favour.

24. CONCLUSION

I therefore refuse to uphold the objection. I approve the coming into being of the proposed arrangement.

25. Costs

The parties are invited to make submissions. Following submission, the Court makes no order as to costs.