Property developer Michael O’Flynn has won his High Court challenge to a personal insolvency arrangement (PIA) secured by his former business partner and neighbour John O’Driscoll.
Judge Nessa Cahill, in upholding O’Flynn’s objection to the PIA coming into effect, found O’Driscoll was “unequivocally not insolvent” in November, 2021.
That means his PIA is deemed at an end and he is now liable in full for debts that would otherwise be covered by it but does not affect payments previously made under it, including to Bank of Ireland and the Revenue.
Among her findings, the judge held, on foot of uncontradicted evidence, O’Driscoll had misappropriated €15,725 from pub operator Ezeon Entertainment Ltd, established by O’Driscoll.
O’Flynn had claimed O’Driscoll, from Ovens, Co Cork, owed him around €950,000 and was not insolvent when he provided a personal financial statement (PFS) in November 2021 as part of the personal insolvency process.
During the High Court hearing, senior counsel Martin Hayden, with barrister Keith Farry, for O’Flynn, argued it was “a contrivance, a prepack PIA”.
O’Flynn’s alleged debt arose from a €2.2 million personal guarantee given to him concerning liabilities of Ezeon. Former Ireland rugby international Ronan O’Gara was a co-guarantor on the loan agreement, and filed a sworn statement with the court as part of the dispute.
In O’Driscoll’s PIA, O’Flynn’s debt was listed as a contingent liability and given a nominal value of €1 because he had not proved it during the PIA process.
In her judgment, Cahill expressed “mystification” over how Alan McGee, the personal insolvency practitioner who prepared the PIA for O’Driscoll, formed the view O’Driscoll was cash flow insolvent in November 2021 on the basis of disclosures in his PFS “without giving any apparent consideration to the realisability of a property at Leslie’s Arch”.
This “elephant in the room” was never properly addressed by the debtor or the PIP, she said.
Located at Ballincollig, Cork, the Leslie’s Arch property, owned by O’Driscoll, was valued in his PFS at about €395,000, with an outstanding mortgage of almost €208,000.
O’Flynn had argued the sale of that property would be sufficient to discharge O’Driscoll’s debts to Bank of Ireland and the Revenue, leaving a substantial surplus.
“This is what happened , and quickly,” the judge said, noting the property had sold for €430,000.
Despite there being “simply no evidential support for, or even explanation of”, the view that O’Driscoll was insolvent, the PIP has “repeated this view in bald terms since November 2021, blanketly denying the objections raised by Mr O’Flynn”, the judge said.
The four year litigation included a successful appeal by O’Flynn to the Supreme Court after another High Court judge held he lacked the necessary legal standing to object to the PIA due to having failed to “prove his debt” at an earlier stage of the process.
In a statement on Friday, O’Flynn said the High Court had accepted his view O’Driscoll had realisable assets “more than sufficient” to meet his debts as set out in his own financial statement. The issue of faith and trust in the personal insolvency system is “fundamental to me” and the court decision “is a critical outcome in that regard”, he said.