A judge has sharply criticized Jay Bourke’s personal insolvency practitioner for providing misleading information to creditors during a failed attempt to secure a €12.2 million debt write-off for the well-known restaurant owner.
r Judge Mark Sanfey said that John O’Callaghan of KPMG “has fallen well below the proper ethical standards expected of a personal insolvency practitioner (PIP)”.
Bourke’s request to the Supreme Court for a settlement that would substantially reduce his €13.7 million debt pile had to be withdrawn in April when a company he had invested in went into bankruptcy. He was later found bankrupt on a petition by the Revenue Commissioners.
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While this would normally have been the end of the matter, controversy persisted over the composition of the withdrawn personal insolvency agreement (PIA).
Bourke’s largest creditor, Pepper, complained to the court that the PIA voted on by the creditors declared that the IRS had €558,601 preferential debt, when in fact only €351,627 of that debt was preferential.
A preferred debt is a debt that is given priority over other debts when it comes to repayment.
In an affidavit, O’Callaghan apologized to the court, saying his handling of the IRS debt was “a mistake” and should not have happened. He said the IRS told him that all his debt “had to be preferential or preferential import, as it pays in priority and pays 100pc”.
PIP said he was “simply trying to show how [Revenue] were being paid as distinguished to misrepresent the position.”
But at a trial today, Judge Sanfey said he was “not impressed” with Mr. O’Callaghan’s explanation.
The judge found that the IRS debt had been mischaracterized, giving the impression that the IRS was entitled to be paid before the unsecured creditors, which included Pepper.
Judge Sanfey described the PIP’s explanation as “illegible and contradictory” and said it does not meaningfully address what occurred.
The judge said there was an apparent attribution of blame, at least in part, to the IRS, but this was “unsupported by the evidence and rejected by the IRS.”
Judge Sanfey said that while it was “important to recognize the hard work done by the PIP” in trying to find a solution to Bourke’s “intractable insolvency”, he found the concerns raised by Pepper justified.
“I have no doubt that Mr. O’Callaghan is a dedicated and skilled professional who does his best for his clients. However, personal insolvency practitioners must always perform their duties in accordance with their obligations, not only to their client, but to that client’s creditors and, ultimately, to the court,” said the judge. .
Judge Sanfey continued: “I am of the opinion that, in providing misleading information to creditors, in neglecting the justified objections formally notified by Pepper, and in failing to provide a proper intelligible explanation of his actions to the court, Mr. On this occasion, O’Callaghan fell well below the proper ethical standards expected of a personal insolvency practitioner.
“This is particularly regrettable as O’Callaghan is clearly an experienced and highly respected professional whose claims to this court in the past have been irreproachable and well presented.”
The judge said that while it was not necessary for the court to make any orders, he expected O’Callaghan and all PIPs to carefully consider their obligations to creditors and the court.
He said a high degree of candor and trust is needed for the personal insolvency process to work properly.
The judgment comes two years after another judge, Judge Denis McDonald, called for “a change in approach” by the PIPs and aides because the system was “beset by legal issues and contested cases”.
In a recent interview with the Irish Independent, Ireland Insolvency Service director Michael McNaughton said that trust between creditors and PIPs has improved since Judge McDonald’s comments, leading to less opposition to PIAs.
Bourke (55) had hoped to secure his €1.4 million family home in Rathmines, Dublin, through the PIA.
After being declared bankrupt, he told the Irish Independent about his hopes to “recover” once his bankruptcy period is over.
Bourke has been synonymous with the hospitality industry for decades, opening the Wolfman Jack restaurant in Rathmines in 1989 and going on to open the Rí Rá nightclub, The Globe bar, Front Lounge and Eden restaurant in Dublin, Bodega and 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 that he co-owned with the late music promoter John Reynolds.
Under the withdrawn PIA, Pepper had recovered just €65,000 of the €12.3 million owed against the hotel.