The High Court has recently approved an insolvency arrangement allowing for the write-off of over €4 million of a salesman’s debt.
David Langan, who had accumulated debts amounting to €5.7 million, had a debt arrangement put together by insolvency practitioner Gary Digney. The arrangement involved a restructuring of Langan’s mortgage, with a ten-year term and variable interest rate, and capitalized arrears.
All secured creditors, including Bank of Ireland, Permanent TSB, AIB, and a solicitor, voted in favor of the arrangement, despite objections from unsecured creditor Promontoria Aran Limited.
The approval of this arrangement marks a significant step for Langan towards financial freedom, as he will have a considerable portion of his debt written off. However, the decision was not without controversy, as Promontoria Aran Limited, which was owed over €4 million by Langan, objected to the write-off.
Although the creditor will receive just 0.48% of what it was owed, the write-off could set a precedent for other similar debt arrangements in the future.
This article explores the details of Langan’s debt arrangement, the objections and approvals from creditors, and the factors that influenced the High Court’s decision to approve the write-off.
David Langan’s Debt Arrangement
The arrangement proposed by insolvency practitioner Gary Digney for salesman David Langan’s €5.7 million debt has been approved by the High Court. The approved arrangement involves a restructuring of the mortgage to a 10-year term, variable interest rate, and capitalized arrears.
Secured creditors, including Bank of Ireland, Permanent TSB, AIB, and a solicitor, will receive 67% of what they were owed, while an unsecured creditor, Promontoria Aran Limited, will receive just 0.48% of the over €4 million it was owed, despite objections.
The insolvency arrangement also provides for the sale of a Wexford rental property, which will be placed on the market for €250,000. The solicitor with a first legal charge over the property will be repaid from the net sales proceeds.
Mr. Langan’s debt to the solicitor arose in 2016 when he engaged his services to sue Promontoria and a receiver over the receiver’s appointment over a London property. The High Court ruling in favour of Promontoria and the receiver in 2019 granted them judgment of €4.3 million against Mr. Langan in their counterclaim.
Creditor Objections and Approvals
Despite objections from an unsecured creditor, the insolvency arrangement for David Langan, a salesman with debts totalling €5.7 million, was approved by Mr. Justice Mark Sanfey. All secured creditors, including Bank of Ireland, Permanent TSB, AIB, and a solicitor, voted in favour of the arrangement, which will see them receive 67% of what they were owed.
However, Promontoria Aran Limited, an unsecured creditor, objected to the write-off of more than €4 million of Mr. Langan’s debt. Despite this, Mr. Justice Sanfey approved the arrangement, and Promontoria will now receive just 0.48% of the more than €4 million it was owed, compared to the 0.27% it would have received in a bankruptcy scenario.
The judge was influenced by the “very considerable delay” of Promontoria and its predecessor Ulster Bank in initiating proceedings to establish an alleged equitable mortgage over the Wexford property. Additionally, Promontoria had a “complete failure” to engage with the insolvency practitioner during the period when creditors are required to prove their debt. As a result, Mr. Digney, the insolvency practitioner, was “perfectly entitled” to treat Promontoria’s debt as unsecured in the insolvency arrangement.
Ultimately, none of Promontoria’s objections were considered valid, and the write-off was approved.
Factors Influencing the Approval
Factors influencing the insolvency arrangement approval for David Langan included the delay in initiating proceedings by Promontoria and its predecessor Ulster Bank to establish an equitable mortgage and their failure to engage with the insolvency practitioner during the debt proof period. Mr. Justice Sanfey noted that the delay was “very considerable” and disapproved of Promontoria’s “complete failure” to engage with the insolvency practitioner.
As a result, Mr. Digney was “perfectly entitled” to treat Promontoria’s debt as unsecured in the insolvency arrangement, which ultimately led to the significant write-off. Despite Promontoria’s objections, none of them were deemed valid by Mr. Justice Sanfey.
In addition to the delay and failure to engage, the insolvency arrangement was also approved because all secured creditors voted in favour of it, and it provided a means for the repayment of the solicitor’s debt.
The arrangement involves a restructuring of the mortgage to a 10-year term and variable interest rate, with arrears capitalized. The Wexford rental property will be placed on the market for €250,000, with the solicitor to be repaid from the net sales proceeds. Ultimately, the approval of the insolvency arrangement provides a means for Mr. Langan to resolve his debts and move forward financially.
