Dancingonmoonlight Limited v Shim - [2022] NZHC 268

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-1370

[2022] NZHC 268

UNDER the Insolvency Act 2006

IN THE MATTER OF

the bankruptcy of THATT KIONG SHIM

BETWEEN

DANCINGONMOONLIGHT LIMITED

Judgment Creditor/Respondent

AND

THATT KIONG SHIM

Judgment Debtor/Applicant

Hearing: 14 February 2022

Appearances:

Michael Heard and Christopher Smol for the Applicant Charles Jones for the Official Assignee

Judgment:

25 February 2022

JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR

This judgment was delivered by me on 25 February 2022 at 4:00pm
pursuant to Rule 11.5 of the High Court Rules

…………………………. Registrar/Deputy Registrar

Solicitors:
LeeSalmonLong (Michael Heard/Christopher Smol), Auckland, for the Applicant Official Assignee (Charles Jones), Auckland, for the Respondent

DANCINGONMOONLIGHT LIMITED v SHIM [2022] NZHC 268 [25 February 2022]

Introduction

[1] Mr Thatt Kiong Shim was adjudicated bankrupt on 3 February 2021, on Dancingonmoonlight Ltd’s application. He has applied for that adjudication to be annulled on the basis that there has been a substantial change in his financial circumstances since the date of the adjudication.1

[2] The relevant change is that a settlement proposal Mr Shim intended to offer Dancingonmoonlight Ltd before his adjudication (but which was not offered due to a third party’s error) has now been offered and accepted, and Mr Shim’s other creditors all either consent, or do not object, to his annulment application.

Background

[3] Mr Shim was adjudicated bankrupt on 3 February 2021, on Dancingonmoonlight Ltd’s application. It is said that this adjudication could have been avoided had Mr Shim’s co-guarantor on his guarantee to Dancingonmoonlight Ltd communicated a settlement offer that Mr Shim wished to make before the adjudication.

[4] Westpac and ANZ filed proofs of debt in the bankruptcy. Mr Shim also has some other liabilities that were not provable in the bankruptcy.

[5] Mr Shim applied for annulment of his bankruptcy on 8 June 2021. Shortly thereafter, Mr Shim and Dancingonmoonlight Ltd signed a settlement deed that is conditional on the annulment of the bankruptcy. It provides for the resolution of Mr Shim’s debt to the company.

[6] Mr Shim’s other creditors either consent to, or do not oppose, the annulment application. It is said that Mr Shim can satisfy his debts to those parties as well as costs and disbursements of the Official Assignee..

[7] The Official Assignee has filed a report with the Court dated 8 July 2021, which states that the Official Assignee ad been contacted regarded potential claims by

1 Insolvency Act 2006, s 309(1)(c).

FE Investments Ltd (a company in receivership and liquidation) (FE Investments). Mr Shim was an executive director of that company between July 2003 and April 2019.

[8] On 26 July 2021, the Official Assignee gave notice to Rhys Cain, as liquidator of FE Investments, and Brendon Gibson and Neale Jackson, as receivers of that company, that if they wished to file a claim in Mr Shim’s bankruptcy, they should do so by Friday 6 August 2021.

[9] Mr Cain filed…

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 Dancingonmoonlight Limited v Shim

Details

AGLC: Dancingonmoonlight Limited v Shim [2022] NZHC 268
Case: [2022] NZHC 268
Decision Date: 25 February 2022

CaseChat Overview and Summary

The matter before the court involved an application by Mr. Shim for the annulment of his bankruptcy, which had been adjudicated on 3 February 2021 at the instance of Dancingonmoonlight Limited. The primary legal issue before the court was whether there had been a substantial change in Mr. Shim's financial circumstances since the date of adjudication that would warrant the annulment of the bankruptcy under s 309(1)(c) of the Insolvency Act 2006. Mr. Shim argued that a settlement proposal he had intended to make before the adjudication, which had now been offered and accepted, constituted such a change. The Official Assignee, who had not opposed the application, argued that while the settlement proposal might avoid bankruptcy, the remaining debts were significant and Mr. Shim had not provided clear information on how he would meet these debts.

The court found that the liquidator's potential claim against Mr. Shim under s 292 of the Companies Act was not a provable debt, as it was a prospective creditor only and did not need to be taken into account in assessing Mr. Shim’s annulment application. Furthermore, the court agreed with Mr. Shim’s counsel that any claim under s 292 was barred by the liquidator's failure to file and serve a notice of a voidable transaction. The court also found that potential claims by the liquidator under ss 297 and 298 of the Companies Act did not amount to provable debts and thus were not barred by s 76 of the Insolvency Act.

In determining whether annulment of the bankruptcy was appropriate, the court considered that while Mr. Shim was not making arrangements to pay all his creditors at the time of annulment, there were no objections from his creditors and no suggestion that he would not honour his commitments. The court concluded that the change in circumstances, coupled with the lack of opposition from creditors, warranted the annulment of Mr. Shim's bankruptcy under s 309(1)(c).

The court annulled Mr. Shim’s bankruptcy and reserved costs, directing the parties to attempt to agree on the Official Assignee’s costs within a specified period. If an agreement could not be reached, the parties were permitted to file memoranda on the costs.

Orders