A judge has sharply criticised Jay Bourke’s personal insolvency practitioner for providing misleading information to creditors during a failed bid to secure a €12.2m debt write-off for the well-known publican and restaurateur.
Mr Justice Mark Sanfey said John O’Callaghan of KPMG had “fallen well below the appropriate ethical standards to be expected from a personal insolvency practitioner (PIP)”.
Mr Bourke’s High Court application for a deal substantially reducing his €13.7m debt pile had to be withdrawn in April when a company he had invested in went into receivership. He was subsequently adjudicated bankrupt on a petition from the Revenue Commissioners.
While this ordinarily would have been the end of the matter, controversy lingered over the composition of the withdrawn personal insolvency arrangement (PIA).
Mr Bourke’s largest creditor Pepper complained to the court that the PIA voted upon by creditors stated Revenue was owed a preferential debt of €558,601, when in fact only €351,627 of that debt was preferential.
A preferential debt is a debt which receives priority over other debts when it comes to repayment.
In an affidavit, Mr O’Callaghan apologised to the court, saying his treatment of the Revenue debt was “an error” and should not have happened. He said Revenue had told him its entire debt “had to be preferential or the import of the preferential, as in paid in priority and paid 100pc”.
The PIP said he had been “simply trying to show how [Revenue] were being paid as distinct to misrepresenting the position”.
But in a judgment today, Mr Justice Sanfey said he was “not impressed” with the explanation given by the Mr O’Callaghan.
The judge found the Revenue debt had been mischaracterised, giving the impression Revenue was entitled to be paid ahead of unsecured creditors, which included Pepper.
Mr Justice Sanfey described the PIP’s explanation as “garbled and contradictory” and said it did not address what occurred in any meaningful way.
The judge said there was an apparent attribution of blame, at least in part, to Revenue, but this was “unsupported by the evidence and rejected by Revenue”.
Mr Justice Sanfey said that while it was “important to acknowledge the hard work done by the PIP” in attempting to find a solution to Mr Bourke’s “intractable insolvency”, he considered the concerns raised by Pepper to be justified.
“I do not doubt that Mr O’Callaghan is a dedicated and skilled practitioner who does his best for his clients. However, personal insolvency practitioners must always carry out their duties in accordance with their obligations, not just to their client, but to the creditors of that client and ultimately the court,” the judge said.
Mr Justice Sanfey continued: “I am of the view that in providing misleading information to the creditors, in neglecting to engage with the justified objections formally notified by Pepper, and in failing to provide an appropriate intelligible explanation of his actions to the court, Mr O’Callaghan has on this occasion fallen well below the appropriate ethical standards to be expected from a personal insolvency practitioner.
“This is particularly regrettable, as Mr O’Callaghan is clearly an experienced and highly regarded practitioner whose applications to this court have in the past been unexceptionable and well presented.”
The judge said that while it was not necessary for the court to make any orders, he expected Mr O’Callaghan and all PIPs to reflect carefully on their obligations to creditors and the court.
He said a high degree of frankness and trust was required for the personal insolvency process to function properly.
The judgment comes two years after another judge, Mr Justice Denis McDonald called for "a change of approach" by PIPs and those advising because the system was "beset by legal issues and contested cases".
In a recent interview with the Irish Independent, the director of the Insolvency Service of Ireland, Michael McNaughton, said trust between creditors and PIPs had improved since Mr Justice McDonald’s comments, leading to less opposition to PIAs.
Mr Bourke (55) had been hoping to safeguard his €1.4m family home in Rathmines, Dublin via the PIA.
After being adjudicated bankrupt, he told the Irish Independent of his hope to “bounce back” once his period in bankruptcy ends.
Mr Bourke had been synonymous with the hospitality sector for decades, opening Wolfman Jack’s restaurant in Rathmines in 1989 and going on to open Rí Rá nightclub, The Globe bar, the Front Lounge and Eden restaurant in Dublin, the Bodega and the Savoy in Cork, the Garavogue bar in Sligo, and the Café Bar Deli group.
Most of his debts arose from his involvement in Bellinter House, the Co Meath hotel he co-owned with the late music promoter John Reynolds.
Under the withdrawn PIA, Pepper had stood to recoup just €65,000 of the €12.3m it was owed in connection with the hotel.