A major High Court ruling means heavily indebted farmers can use Personal Insolvency Proceedings (PIAs) to avoid being forced to sell their land.
The decision has major implications for how banks and vulture funds treat farmers, most of whom are asset rich but cash poor.
The court found that a farmer with $1.1 million in debt
Fergus O’Connor, 47, has faced the loss of part of his farm in Kilmuckridge, Co Wexford after a receiver was appointed. However, he will be able to keep the entire farm under the terms of a PIA after Mr Justice Alexander Owens dismissed arguments from the Promontoria Oyster vulture fund, which claimed the farmer was solvent.
The judge agreed with comments made by Keith Farry BL on behalf of Mr O’Connor’s (PIP) liquidator that the farm could not be considered an “easily realizable asset” as it was “a core asset” necessary for Mr O’Connor’s livelihood.
Under the PIA, Mr. O’Connor will not have any of his debts written off, but will instead be given an extended 30-year period to pay off his debts while keeping his home.
The court’s decision will increase the pressure on lenders to cut restructuring contracts with indebted farmers in the future.
Mr. O’Connor said that Irish Independent He was relieved by the decision but said the matter should never have gone to the High Court.
“It shouldn’t have gotten that far. I have never run away from my debt. I always wanted to pay them,” he said.
“There should have been a solution, but the banks didn’t want to hear about the spread [repayments] out over the years. All I wanted was a chance to pay them back. But all they wanted to hear was a final billing number.”
The case is the first time the High Court has heard a contested PIA application in relation to a farm. It was an agreement drafted by PIP Gary Digney, to whom Mr O’Connor was referred after asking the Irish Farmers Association (IFA) for help.
A PIA was approved by the Circuit Court earlier this year.
However, Promontoria Oyster, which the farmer owes €874,000, appealed the decision to the High Court.
It unsuccessfully argued that Mr O’Connor had net assets of €717,000, mainly from agricultural land, and that if these were taken into account he would not be insolvent for the purposes of the Personal Insolvency Act.
Mr Farry argued that this sum was wrong and that in any event the country was “an instrument of its trade and simply constitutes the means of going about its day-to-day work”.
FPM Accountants’ Mr Digney said the High Court’s decision meant debt-ridden farmers would not have to sell land if they had another solution.
“We have a landmark case here where the High Court judge essentially confirmed that cash flow determines insolvency, not your balance sheet,” he said. “Hence, farmers whose assets are worth more than their liabilities can apply for PIAs.”
Mr O’Connor’s debt stemmed primarily from a €1.1million loan he and his now-estranged wife received from Ulster Bank in 2006 to purchase 64 acres of land.
“I can now move on with my life to a certain extent”
Later, between 2006 and 2009, the crop and sheep farmer sold various assets worth around 800,000 euros, including the marriage home, to help pay off the debt. However, this did not prevent the Ulster Bank from charging fees for other estates he owns. The bank later sold the loans to Promontoria Oyster, an Irish vehicle of the Cerberus Vulture fund.
Mr O’Connor said he was “glad” to take his PIA “over the border” because he was determined to continue farming the land he had inherited from his mother. “I can now move on with my life to a certain extent.”
He said some farmers “don’t want to go that route” because of a perceived stigma attached to it.
But he urged others in his situation to speak to a PIP to consider their options.
“A lot of people don’t go that route because they don’t want their name printed. But there are a lot of people out there who could benefit if they just went and did it,” he said.
James Kehoe, a former Wexford IFA chairman who helped Mr O’Connor with his case, said: “It will definitely bring hope to others in his case
“The most important thing from the farmers’ point of view is that the farm remains intact and the farmer can continue to be a farmer and meet his obligation to pay back the money he has borrowed.”
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