The last twelve months have seen an unprecedented number of receivers appointed by financial institutions to the core assets of borrower companies. The appointment of a receiver to such assets does not, however, preclude a financial institution from also pursuing personal guarantees provided by individuals in respect of company loans. The most common procedure for pursuing such personal guarantees is for the financial institution to seek summary judgment through the courts.

Summary judgment applications appear before our courts on an almost daily basis, with applications involving public figures attracting widespread media coverage. Undoubtedly, the largest summary judgment orders this year, and indeed ever in the history of the State, are those entered against Sean Quinn in the amounts of €417 million and €1.7 billion. Irish Bank Resolution Corporation (formerly Anglo Irish Bank) obtained judgment for over €2 billion cumulatively against Mr Quinn on foot of personal guarantees given in respect of corporate borrowings. The liability of the majority of personal guarantors is not, however, on such a scale.

Faced with an increasing number of ‘consumer’ debtors, the Central Bank recently revised its Consumer Protection Code to significantly strengthen the protection offered to such consumers in their dealings with financial institutions. The Code directs, amongst other things, how financial institutions are to conduct dealings with ‘consumer’ debtors in arrears. A ‘consumer’ is defined in the Code to include not only individuals, but also partnerships and corporate entities with a turnover of less than €3 million. The revised Code comes into force on 1 January 2012.

There is little recent precedent with regard to financial institutions pursuing bankruptcy adjudications against individual debtors either on foot of personal borrowings or guarantees. The pursuit of bankruptcy by creditors is uncommon in Ireland, perhaps because the costs involved outweigh the prospect of financial recovery. However, there are signs that creditors are now prepared to take this step and the recent bankruptcy petition brought by the Revenue Commissioners against Today FM DJ, Tony Fenton, is a case in point. It remains to be seen if financial institutions will pursue a similar course of action in relation to personal debtors.  

Contributed by Craig Sowman.

Back to Legal News