A judge has sharply criticized personal insolvency businessman Jay Bourke for providing misleading information to creditors during an unsuccessful bid to write off a €12.2m loan to a well-known public and restaurant owner.
Justice Mark Sanfe said that John O’Callaghan of KPMG “has fallen far below reasonable ethical standards expected of an individual insolvency practitioner (PIP)”.
Mr Bourke’s application to the High Court for a deal to reduce his €13.7m debt pile had to be withdrawn in April after the company he had invested in went into receivership. He was later declared bankrupt on a petition by the Revenue Commissioners.
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Although this would usually have been the end of the case, controversy remained over the structure of the withdrawn Individual Insolvency Arrangement (PIA).
Pepper, Mr Bourke’s biggest creditor, complained to the court that the PIA, voted by creditors, said revenue owed a preferential loan of €558,601, while in reality only €351,627 of that debt was preferential.
A preference loan is a loan that enjoys priority over other loans when it comes to repayment.
In an affidavit, Mr. O’Callaghan apologized to the court, saying his treatment of the revenue debt was “an error” and should not have happened. He said that the revenue had told him that his entire debt was to be “paid in priority or import of preferential, as was paid in priority and 100 pc was paid”.
PIP said he was “just trying to show how”. [Revenue] Separate payment was being made for misrepresenting the situation”.
But in a ruling today, Mr Justice Sanfe said he was “not impressed” by Mr O’Callaghan’s explanation.
The judge found that revenue debt was misrepresented, giving the impression that revenue was entitled to further payments to unsecured creditors, including Pepper.
Mr Justice Sanfe called the interpretation of the PIP “perverse and contradictory” and said it did not address the incident in any meaningful way.
The judge said that there was, at least in part, a clear allegation of blame for the revenue, but it was “unsupported by the evidence and dismissed by revenue”.
Mr Justice Sanfi said it was “important to acknowledge the hard work put in by the PIP” in its effort to find a solution to Mr Bourke’s “ruthless bankruptcy”, but considered the concerns raised by the paper justified.
“I have no doubt that Mr. O’Callaghan is a dedicated and efficient businessman who does his best for his clients. However, individual insolvency practitioners must always perform their duties according to their obligations, not just their own To the client, but also to the creditors of that client and ultimately to the court,” the judge said.
Mr Justice Sanfi continued: “I am of the view that in providing misleading information to the creditors, neglecting to engage with the reasonable objections formally notified by the paper, and failing to provide the court with a reasonable reasonable explanation of its actions In living, Mr. O’Callaghan has on occasion fallen far below the reasonable ethical standards expected of an individual insolvency practitioner.
“This is particularly regrettable, as Mr. O’Callaghan is clearly a seasoned and highly respected practitioner whose applications in the past have been unquestioned and well presented in this court.”
The judge said that while it was not necessary for the court to make an order, he expected Mr. O’Callaghan and all PIPs to carefully consider their obligations to creditors and the court.
He said that a high level of clarity and trust is required for the individual insolvency process to function properly.
The ruling comes two years after another judge, Mr Dennis McDonald, called for a “change of approach” by PIPs and advisers because the system was “surrounded by legal issues and contested cases”.
In a recent interview with the Irish Independent, Michael McNaughton, Director of Ireland’s Insolvency Service, said that trust between creditors and PIPs has improved since Mr Justice McDonald’s comments, reducing opposition to the PIA.
Mr Bourke (55) was hoping through PIA to protect his €1.4m family home in Rathmines, Dublin.
After declaring bankruptcy, he told Irish Independent of his hope of “bouncing back” after the bankruptcy period ended.
Mr Bourke has been synonymous with the hospitality sector for decades, opening Wolfman Jack’s restaurant in Rathmines in 1989 and Ri Ra Nightclub, The Globe Bar, Front Lounge in Dublin and Eden Restaurant, Bodega and Savoy in Cork. Garvog Bar in Sligo, and Café Bar Deli Group.
Most of his debt stemmed from his involvement in Bellinter House, the co-owned hotel he co-owned with the late music promoter John Reynolds.
Under the withdrawn PIA, Pepper stood to recover only €65,000 of the €12.3m owed in relation to the hotel.