Brown - [2020] NZHC 1131

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-470

[2020] NZHC 1131

IN THE MATTER

AND
of the Insolvency Act 2006

IN THE MATTER

of a proposal under Part 5 subpart 2 of the Insolvency Act 2006 by KEPPEL JOHN BROWN

Applicant

Hearing: 21 May 2020

Appearances:

RB Hucker and M Swan for the Insolvent O Ward for the Trustee

Judgment:

26 May 2020

JUDGMENT OF ASSOCIATE JUDGE SMITH

Solicitors:
Hucker & Associates, Auckland Stace Hammond, Auckland

Re Brown [2020] NZHC 1131

[1] The insolvent, Mr Brown, filed a proposal to his creditors under subpart 2 of Part 5 of the Insolvency Act 2006 (the Act) on 16 March 2020. The proposal named Brenton John Joseph Hunt as the proposed trustee, and it was accompanied by the required affidavit setting out Mr Brown’s assets and liabilities.

[2] The proposal was approved by the required majority in number and value of Mr Brown’s creditors, at a creditors’ meeting held on 16 April 2020.1

[3] Mr Hunt filed a report on the proposal dated 24 April 2020, and he subsequently made application to this Court under s 333(1) of the Act for approval of the proposal. No creditor objected to the proposal.

[4] I heard brief argument from Mr Hucker for the insolvent and Mr Ward for the trustee at a list hearing on 21 May 2020. Counsel subsequently submitted a memorandum addressing one aspect of the voting at the creditors’ meeting that I had raised in a Minute dated 22 May 2020.

Mr Brown’s assets and liabilities

[5] Mr Brown disclosed total assets of $24,019.22, which included $15,000 as the estimated value of furniture and personal property. The only other assets comprised cash held in two bank accounts, of approximately $9,000.

[6] Mr Brown’s affidavit listed unsecured creditors totalling $1,263,120.28. There were no secured creditors.

[7] There were a total of 13 unsecured creditors. The six largest (in the amounts proved at the subsequent creditors’ meeting) were the following:

1 Under s 331(3) of the Act, the resolution accepting the proposal had to be decided by a majority in number and three-quarters in value of the creditors who voted and were either personally present or represented at the meeting by a person specified in s 332 of the Act, or voted by postal vote.

Peter John Reardon $335,000.00

Lion NZ Ltd $298,385.90

The Laura Hopwood Trust $175,000.00

Paul Lomax of Chester Hospitality Ltd $150,000.00

Flexigroup (New Zealand) Ltd $144,895.43

Alison Hopwood $100,000.00

[8] Of the unsecured creditors, Mr Reardon and Ms Alison Hopwood are close family members of Mr Brown, and the Laura Hopwood Trust is associated with Mr Brown’s partner, Laura Hopwood.

[9] Mr Brown’s affidavit provided some background to his insolvency. Briefly, he was involved in a number of restaurant businesses that were not financially successful. Two of them were effectively controlled by Lion Breweries, and that company owned the fixed assets. Mr Brown received a fixed monthly fee…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Brown

Details

AGLC: Brown [2020] NZHC 1131
Case: [2020] NZHC 1131
Decision Date: 26 May 2020

CaseChat Overview and Summary

Mr Brown was the insolvent who filed a proposal to his creditors under subpart 2 of Part 5 of the Insolvency Act 2006 (the Act) on 16 March 2020. The proposal was approved by the required majority in number and value of Mr Brown’s creditors, at a creditors’ meeting held on 16 April 2020. Mr Brown proposed to pay a single lump sum of $40,000 to his creditors in full satisfaction of his debts. The proposal was to be binding on all of Mr Brown’s creditors, and he would be released and discharged from any further liability to creditors if it was accepted by the requisite majorities of creditors and approved by the Court. The court was required to decide whether the proposal should be approved.

The court first considered whether the provisions of the Act had been complied with. It found that the provisions had been complied with, except for one matter that gave the court some cause for pause, which was that the votes of the two family members and the Laura Hopwood Trust together accounted for approximately 48% of those voting in favour of the proposal. However, the court concluded that there was no basis to refuse the proposal under s 333(3)(a) of the Act.

The court then considered whether the terms of the proposal were unreasonable or not calculated to benefit the general body of creditors. The court found that it was not at all clear that the creditors would fare better if Mr Brown were bankrupted, and that the wishes of the creditors favoured the approval of the proposal. The court also found that the proposal was not calculated to benefit the general body of creditors because three of the creditors would not benefit at all from the proposal.

Finally, the court considered whether it was expedient to approve the proposal. The court found that there was no basis for refusing the proposal under s 333(3)(c) of the Act.

The court concluded that the proposal should be approved because there was no basis for refusing it under any of the grounds set out in s 333 of the Act. The proposal was approved, and Mr Brown was released and discharged from any further liability to creditors.

The final orders of the court were that the proposal be approved, and that Mr Brown be released and discharged from any further liability to creditors.

Orders