Jay Bourke's personal insolvency "fell below appropriate ethical standards," the judge said

Jay Bourke’s personal insolvency “fell below appropriate ethical standards,” the judge said

A judge has sharply criticized Jay Bourke’s personal insolvency for providing misleading information to creditors during a failed bid to secure a € 12.2 million debt write-off for the well-known publican and restaurateur.

Judge Mark Sanfey said that John O’Callaghan of KPMG had “fallen far short of the appropriate ethical standards that can be expected of a personal insolvency practitioner (PIP)”.

Mr Bourke’s High Court application for a deal that significantly reduced his debt by € 13.7 million had to be withdrawn in April when a company he had invested in went bankrupt. He was then sentenced to bankruptcy at the request of the tax authorities.

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Although this would normally have been the end of the matter, controversy lingered over the composition of the withdrawn personal insolvency arrangement (PIA).

Mr Bourke’s main creditor Pepper complained to the court that the PIA, which the creditors voted for, stated that Revenue owed a preferential debt of EUR 558 601, when in fact it was only EUR 351 627 of that debt.

A preferential debt is a debt that takes precedence over other debts when it comes to repayment.

In a statement, O’Callaghan apologized to the court, saying that his treatment of the debt was “a mistake” and should not have happened. He said that Revenue had told him that his entire debt “must be preferential or import of preferential, as paid in priority and paid 100”.

PIP said he was “just trying to show how [Revenue] was paid as opposed to distorting the position ”.

But in a ruling today, Justice Sanfey said he was “not impressed” by O’Callaghan’s statement.

The judge found that the income debt had been incorrectly characterized, which gave the impression that Revenue was entitled to be paid before unsecured creditors, which included Pepper.

Justice Sanfey described PIP’s statement as “distorted and contradictory” and said it did not address what happened in any meaningful way.

The judge said there was an obvious attribution of the debt, at least in part, to the Revenue, but this was “unsupported by the evidence and rejected by the Revenue”.

Mr Justice Sanfey said that although it was “important to acknowledge PIP’s hard work” in trying to find a solution to Bourke’s “unmanageable insolvency”, he considered Pepper’s concerns to be justified.

“I have no doubt that O’Callaghan is a dedicated and skilled practitioner 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 the client’s creditors and ultimately the court, the judge said.

Mr Sanfey continued: “I am of the opinion that by providing misleading information to creditors, by failing to take note of the legitimate objections formally made by Pepper, and by failing to give an appropriate comprehensible explanation of his actions to the Court, Mr. O’Callaghan has on this occasion fallen far below the appropriate ethical standards that can be expected of a personal insolvency practitioner.

“This is particularly unfortunate, as O’Callaghan is obviously an experienced and highly regarded practitioner whose applications to this court have previously been unusual and well presented.”

The judge said that although it was not necessary for the court to issue any orders, he expected O’Callaghan and all PIPs to carefully reflect on their obligations to creditors and the court.

He said that a high degree of sincerity and trust is required for the personal insolvency process to work properly.

The verdict comes two years after another judge, Justice Denis McDonald, demanded a “change of attitude” from PIPs and advisers because the system was “concerned with legal issues and disputed cases”.

In a recent interview with the Irish Independent, the director of Ireland’s insolvency service, Michael McNaughton, said that trust between creditors and PIP had improved since Mr. Justice McDonald’s comments, which led to less opposition to the PIA.

Mr Bourke, 55, had hoped to protect his 1.4 million-euro family home in Rathmines, Dublin via the PIA.

After being sentenced to bankruptcy, he told the Irish Independent about his hopes of “bouncing back” when his period of bankruptcy is over.

Mr. Bourke had been synonymous with the hospitality sector for decades, opening Wolfman Jack’s restaurant in Rathmines in 1989 and continuing to open 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 group Café Bar Deli.

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.

According to the recalled PIA, Pepper had been responsible for recovering only 65,000 euros of the 12.3 million euros it owed in connection with the hotel.

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