Creditors rejected a proposal that would have seen former property tycoons Michael and John Taggart avoid bankruptcy, the High Court in Belfast heard on Wednesday. But the Co Derry brothers, said to have debts of up to £213 million, are now set to contest the outcome of a meeting of those owed money.

A judge has given them 28 days to advance grounds of challenge to the decision. Ulster Bank is petitioning to have the Taggarts declared bankrupt over debts running into several million pounds.

Proceedings were issued after the brothers lost a marathon legal battle with the bank. In November last year a High Court judge held them liable for a €4 million personal guarantee over land purchases in the Republic of Ireland. A second personal guarantee of £5 million linked to developments north of the border also remains outstanding.

The Taggarts failed in their counter writ which claimed the bank's actions contributed to the collapse of the Taggart Group. Once a huge house-building operation on either side of the Border, with further interests in Britain, Europe and the United States, the firm was decimated in the 2007 property market crash. Within a year it had gone into administration.

‘Flawed’

Michael Taggart, who was at one time among Ireland’s richest businessmen, insisted his company would not have gone bust if bank concerns had been disclosed sooner. But a judge ruled against him after describing his evidence in the case as being “flawed, inconsistent and implausible”.

Earlier this year the bankruptcy petitions were put on hold so Individual Voluntary Arrangement (IVA) proposals could be put to a meeting of all creditors. An IVA involves a binding agreement to pay back at least some of the outstanding debts.

A majority of creditors must vote in favour of the plan before bankruptcy proceedings can be stopped. It was revealed at that stage that the total amount owed to unsecured creditors was £213 million, with liabilities to Ulster Bank now assessed at around £11 million.

The alternative resolution involved payments of 0.03 pence in the pound. In court on Wednesday it was confirmed that the proposal was rejected by a majority of creditors. However, counsel for the Taggarts said he had been instructed to challenge a decision by the chairman of the meeting to accept the outcome of the ballot.

Raising issues over the standing of a creditor, he contended that the proposal would have been approved without their inclusion in the vote. Bankruptcy master Kelly agreed that the debtors have a statutory right to mount an appeal within 28 days of the outcome. Adjourning the case to next month, she added: “There would have to be very good grounds for the challenge.”