Dempster v Jones

[2019] NZHC 2036

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2018-485-901

[2019] NZHC 2036

BETWEEN

ALEXANDRA DEMPSTER

Judgment Creditor

AND

SARAH ELIZABETH JONES

Judgment Debtor

CIV-2018-485-902

BETWEEN

ALEXANDRA DEMPSTER
Judgment Creditor

AND

GERAINT MATHEW JONES

Judgment Debtor

CIV-2019-485-208

BETWEEN

SARAH ELIZABETH JONES
Applicant

AND

ALEXANDRA DEMPSTER

Respondent

CIV-2019-485-209

BETWEEN

GERAINT MATHEW JONES
Applicant

AND

ALEXANDRA DEMPSTER

Respondent

Hearing:	16 August 2019
Appearances:	M Garnham for the judgment creditors in CIV-2018-485-901 and CIV-2018-485-902 and for respondent in CIV-2019-485-208 and CIV-2019-485-209

DEMPSTER v JONES [2019] NZHC 2036 [19 August 2019]

C Feng for the judgment debtors in CIV-2018-485-901 and

CIV-2018-485-902 and for the applicants in CIV-2019-485-208 and CIV-2019-485-209

Judgment:

19 August 2019

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[1]                 The primary matters before the Court for determination are applications for the approval of two proposals under sub-pt 2 of pt 5 of the Insolvency Act 2006. Also before the Court are bankruptcy proceedings against Sarah Jones and Geraint Jones who are the parties on whose behalf the proposals are put forward for approval.

[2]                 This matter has a long history with the bankruptcy proceedings having been commenced in December 2018.

[3]                 Mr and Mrs Jones’ proposals were the subject of a creditors’ meeting convened by the provisional trustee on 14 May 2019. Ms Dempster is an unsecured creditor of both Mr and Mrs Jones. She has a judgment against them jointly for $46,550 arising out of a decision of the Tenancy Tribunal. Ms Dempster initially objected to the proposals. The evidence is that she changed her position when Mrs Jones’ other unsecured creditors at the meeting agreed to subordinate their claims to hers, agreeing that Mrs Jones’ provisional trustee could pay her claim in full before anything was paid to them.

[4]                 I am satisfied that 100 per cent of the unsecured creditors present at the meeting voted in favour of the proposals, as amended in the way that I have described.

[5]                 Following that meeting, the proposed trustee applied pursuant to s 333 of the Insolvency Act for the Court’s approval of the proposals.

[6]                 Regrettably, there was some confusion at that stage as to how that application was to be disposed of. As a result, on  31 May 2019,  I approved  both  proposals.  Ms Dempster, through her solicitors, came back to the Court indicating that she had

not received the relevant material and objected to the proposals in the form presented to the Court.

[7]                 Following a hearing on 18 June 2019, I recalled my earlier decision, and the applications for approval were set down for hearing.

[8]                 By the time the matter came on for hearing, the issues between the provisional trustee and Ms Dempster had narrowed significantly.

[9]                 In short the parties are on common ground that the criteria set out in s 333 of the Insolvency Act are met, subject to a costs issue to which I will return.

[10]              The law is clear that, whatever the positions of the proposed trustee and any unsecured creditor participating in the application, the Court is obliged to exercise an independent judgment in approving or declining to approve a proposal.

[11]              In the case of these two proposals, I note first that they received unanimous support from Mr and Mrs Jones’ unsecured creditors, second that they provide for the repayment of a substantial proportion (100 per cent in the case of Ms Dempster; 85 per cent in the case of the other unsecured creditors) of the unsecured debt, and third that the evidence is that on bankruptcies Mr and Mrs Jones’ unsecured creditors would be most unlikely to recover similar amounts.

[12]              Finally,  I  note  that,  despite   initial   opposition   to   these   applications, Ms Dempster no longer contends that there is any substantive reason why they should not be approved.

[13]              I am satisfied that the relevant provisions of the legislation have been complied with, that the proposals are fair and that there are no other reasons why they should not be approved, and I will approve them.

[14]              That brings me back to the only remaining contentious area, that is to say the amount of Ms Dempster’s costs in connection with the bankruptcy proceedings.

[15]              It is common ground between Ms Feng and Mr Garnham that the amount in respect of which Ms Dempster is to receive priority is the amount of the judgment debt

— $46,550 — together with her costs in the bankruptcy proceedings.

[16]              A fair way of putting things would be to say that that is not immediately obvious on a reading of the proposals. Ms Feng assured the Court that the unsecured creditors other than Ms Dempster had agreed to subordinate their claims to the extent of Ms Dempster’s judgment debt and any costs to which she was entitled. She referred me to cl 1.3 of Mrs Jones’ proposal and to s 274(1)(b) of the Insolvency Act, and suggested that these were sufficient to make that clear. Whether or not that is correct, as Mr Garnham submitted, although the Court may only approve or refuse to approve a proposal, and does not have jurisdiction materially to amend it, I am satisfied that the Court has jurisdiction (by reason of s 333(6) or otherwise) to rectify any proposal if it appears that it does not correctly record what the unsecured creditors agreed to. On that basis,  given Ms Feng’s confirmation that the proposal was  always that     Ms Dempster would have priority in respect of her judgment debt together with costs associated with the bankruptcy proceedings, if it were necessary to do so, I would make an order rectifying the proposals accordingly.

[17]              That of course does not resolve the quantum of the claim because Ms Feng and Mr Garnham, or rather the provisional trustee and Ms Dempster, have been unable to agree on the quantum of the latter’s costs in the bankruptcy proceedings. That is ultimately a matter for the Court. The Court always retains a discretion in relation to costs.

[18]The difference between the parties is not large — just over $3,500.

[19]              As Ms Feng and Mr Garnham invited me to do, I have considered the schedule submitted by Mr Garnham on Ms Dempster’s behalf and Ms Feng’s response on behalf of the provisional trustee (and related correspondence). The view I have come to is that Ms Dempster should be allowed costs in the bankruptcy proceedings of $6,244 together with disbursements of $2,000. Taking Mr Garnham’s schedule as my starting point, I have reduced Ms Dempster’s claims in respect of appearances on 12 March, 16 April, 21 May and 18 June as I agree with Ms Feng that these are best regarded as

having been appearances in callover lists; disallowed the claim in respect of 16 May as there is no record of an appearance on that date; but allowed Ms Dempster .4 of a day in connection with the filing of a memorandum relating to the recall of my original judgment as, in my view, the case for a recall had to be made out notwithstanding that the provisional trustee took a neutral position in relation to the same.

[20]              Obviously, upon the approval of the proposals, Ms Dempster’s bankruptcy proceedings must come to an end and I propose to direct that they now be treated as having been discontinued.

[21]              Finally, Mr Garnham raised certain possible difficulties in the future with the proposals. Cognisant of that, I will grant leave to the trustee, Ms Dempster and any other unsecured creditor of Mr and Mrs Jones to come back to the Court should any difficulties arise.

[22]On those bases, I make the following orders:

(a)I set Ms Dempster’s costs in relation to the bankruptcy proceeding at

$6,244 and recoverable disbursements at $2,000;

(b)I direct that Ms Dempster’s bankruptcy proceedings be treated as discontinued;

(c)I approve the proposals put before the Court on behalf of Mr Jones and Mrs Jones by the provisional trustee pursuant to s 333 of the Insolvency Act 2006;

(d)I grant leave to the provisional trustee, Ms Dempster and any other unsecured creditor to come back to the Court in the context of the CIV-2019-485-208 and 209 proceedings should any issues arise;

(e)As I understand it no costs issues arise in relation to the provisional

trustee’s application for approval of the Jones’ proposals.

Associate Judge Johnston

Solicitors:
Duncan Cotterill, Wellington for the judgment debtor in all proceedings