Baldock v ASB Bank Limited

[2022] NZHC 637

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-1794

[2022] NZHC 637

UNDER

the Insolvency Act 2006

BETWEEN

LOGAN PHILLIP BALDOCK

Insolvent

AND

ASB BANK LIMITED

FINANCE NOW LIMITED t/as WAREHOUSE

HARMONEY LIMITED

LATITUDE FINANCIAL SERVICES LIMITED

Creditors

Hearing:	3 February 2022
Appearances:	B Jones for the Insolvent
Judgment:	31 March 2022

JUDGMENT OF ASSOCIATE JUDGE SUSSOCK

This judgment was delivered by me on 31 March 2022 at 4.00pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:

Webster Malcolm Law, Warkworth

BALDOCK v ASB BANK LTD & ORS [2022] NZHC 637 [31 March 2022]

Introduction

[1]                 The insolvent, Mr Logan Phillip Baldock, seeks approval of a creditors’ proposal under part 5 subpart 2 of the Insolvency Act 2006.

[2]                 The insolvent filed his proposal on 1 September 2021. Through his provisional trustee, Christine Higgins, Mr Baldock then followed the procedure for putting that proposal by notice to his creditors together with the information required under the Insolvency Act.

[3]                 Notice was given to every known creditor on 21 September 2021 that a meeting of creditors would be held on 28 October 2021 to consider the proposal.

[4]The notice was accompanied by the following:

(a)a statement of the assets, debts and liabilities of the insolvent;

(b)a list of the insolvent’s creditors affected by the proposal and showing the amounts of their claims;

(c)a copy of the insolvent’s proposal, a claim form (proof of debt) and a postal voting letter.

[5]                 On 27 October 2021 the provisional trustee gave notice to every known creditor that an online creditors’ meeting would be held.

[6]                 The meeting of creditors was held on 28 October 2021. No creditors personally attended as they had each provided postal votes in advance accepting the proposal.

[7]                 The proposal was therefore accepted by a majority in number and three quarters in value of the creditors who voted by postal vote, as required by s 331 of the Insolvency Act.

Court’s approval of proposal – legal principles

[8]                 Following the acceptance of the proposal by the creditors, the trustee is required to apply to the Court for approval. Section 333 of the Insolvency Act provides:

333 Court must approve proposal

(1)After the proposal has been accepted by the creditors, the trustee must, as soon as practicable,—

(a)apply to the court for approval of the proposal; and

(b)send notice of the hearing of the application in the prescribed form to the insolvent and to each known creditor.

(2)The court must, before approving a proposal, hear any objection that is made by or on behalf of a creditor.

(3)The court may refuse to approve the proposal if it considers that—

(a)the provisions of this subpart have not been complied with; or

(b)the terms of the proposal are not reasonable or are not calculated to benefit the general body of creditors; or

(c)for any reason it is not expedient that the proposal be approved.

(4)The court must not approve a proposal if it does not provide for the payment, before any other debts are paid, of—

(a)those debts that would have priority under this Act if the insolvent was adjudicated bankrupt; and

(b)the trustee’s fees and expenses that are properly incurred by the trustee in respect of the proposal; and

(c)costs incurred by a person other than the insolvent in organising and conducting a meeting of creditors for the purpose of voting on a proposal.

(5)Subsection (4)(a) does not apply to the extent that a creditor waives the priority that the debt of that person would otherwise have had.

(6)When it approves the proposal, the court may correct any formal or accidental error or omission, but must not alter the substance of the proposal.

[9]                 As set out in s 333(3)(a), I may refuse to approve the proposal if I consider that the provisions of subpart 2 have not been complied with. I discuss these requirements below.

[10]             Whether the proposal is reasonable (as required by s 333(3)(b)) is to be assessed objectively from the perspective of the “commercially experienced prudent creditor”.1

[11]             In Herbert v New Zealand Guardian Trust Co Ltd & Ors the Court of Appeal held that in determining whether a proposal is reasonable, the Court is required to exercise its independent judgment but that it must be influenced by the commercial judgment of creditors. Unless there is special public interest or other commercial considerations present, the assessment of the substantial body of creditors ought to be accepted.2

[12]             The final question for the Court pursuant to s 333(3) is whether there is any reason why it is not expedient that the proposal be approved (s 333(3)(c)). As Asher J explained in Kelly v Structured Finance:3

… the word “expedient” is capable of a broad meaning. It can mean “practicable”, it also has the wider meaning of “suitable” or “appropriate” … I consider that s 333(3)(c) requires an open-ended approach, and that any attempt to focus it on a specific matter would be to impose a limitation that it does not arise from the words of the subsection.

Proposal

[13]             The proposal lodged by the insolvent is to make payments of $840 per fortnight for three years (78 payments) to cover all proven debts, on condition that no further action is taken against the insolvent, no defaults are registered, no goods are re- possessed and that the payments are in full settlement of the debt.

[14]             The payments will be made from the insolvent’s current employment where he has worked for three years. His salary is $57,000 net per annum.

[15]             In the proposal the insolvent further agrees that he will not enter into any further personal borrowing or seek an increase to existing borrowing during the term of the proposal.

1      Kelly v Structured Finance [2009] 2 NZLR 785 (HC) at [45]; approved by the Court of Appeal in

Magsons Hardware Ltd t/a Mitre 10 Mega v Bogiatto [2011] NZCA 378.

2      Herbert v New Zealand Guardian Trust Co Ltd [2012] NZCA 442.

3      Kelly v Structured Finance, above n 1, at [53].

[16]             The total amount owing to creditors is approximately $71,000. Under the proposal, approximately $65,000 will be repaid including fees and disbursements for the trustee.

Have the requirements of subpart 2 been complied with (s 333(3)(a))?

[17]             At the hearing of this application I required the statement of affairs to be sworn and filed, as Covid-19 had prevented that previously, and the postal votes of Finance Now Ltd and ASB Bank to be signed and witnessed as those postal votes did not appear to have been signed in accordance with requirements. These documents have now been filed in the Court.

[18]             Section 333(6) allows the Court to correct any formal or accidental error or omission that does not alter the substance of the proposal, so these corrections are appropriate.

[19]             I am now satisfied that the provisions of subpart 2 have been complied with. The first stage in s 333(3) is therefore satisfied.

Is the proposal reasonable (s 333(3)(b))?

[20]             The second stage is to consider the reasonableness of the proposal. From the material provided to the Court it appears that the proposal is reasonable and calculated to benefit the general body of creditors as the section requires.

[21]             As discussed in the authorities above, it is appropriate to be influenced by the creditors’ positions in relation to the proposals. All creditors have accepted this proposal supporting a decision that it is reasonable.

[22]             Furthermore, the provisional trustee’s report confirms that it is her view that the insolvent’s proposal is an advantageous one for the creditors as the proposal recovers more debt than could be achieved through any alternative method, such as a debt repayment order or bankruptcy.

Is there any reason  that it is not expedient for the proposal  to be approved      (s 333(3)(c))?

[23]             There is nothing in the application before me that suggests that it would not be expedient for the proposal to be approved.

Section 333(4) matters

[24]             The Court’s approval is not prevented by the matters set out in s 333(4) as there are no priority debts and the trustee’s fees and expenses are provided for.

Result

[25]             For the reasons set out above, I approve the proposal of Logan Phillip Baldock filed on 1 September 2021 pursuant to s 333 of the Insolvency Act.

Associate Judge Sussock