ECAF Limited (in rec) v Thow HC Invercargill CIV 2011-425-000191

[2011] NZHC 1531

IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY

CIV 2011-425-000191

IN THE MATTER OF     of the Insolvency Act 2006

AND IN THE MATTER OF of the bankruptcy of BRENDAN SHANE THOW

BETWEEN  ECAF LIMITED (IN RECEIVERSHIP) A DULY INCORPORATED COMPANY Judgment Creditor

ANDBRENDAN SHANE THOW Judgment Debtor

Hearing:         28 September 2011 (Heard at Invercargill)

Appearances: S C Bamford for Judgment Creditor

R G Eagles for Judgment Debtor

Judgment:      28 September 2011

JUDGMENT OF ASSOCIATE JUDGE OSBORNE

[1]      The debtor on 23 September 2011 filed a notice of intention to oppose this application for an order adjudicating him bankrupt and supported that notice of opposition with evidence of his own and an affidavit of Kenneth Steel, a company director who has an interest in intellectual property matters.

[2]      Mr  Eagles  has,  in  the  best  traditions  of  the  bar,  taken  relatively  late instructions from Mr Thow in relation to this matter and has clearly worked assiduously to put the debtor’s best position before the Court.  That said it remains a relatively sketchy position although the affidavits which Mr Eagles has had to cause to be prepared are relatively lengthy given the urgency with which he has been

operating.

ECAF LIMITED (IN RECEIVERSHIP) V THOW HC INV CIV 2011-425-000191 28 September 2011

[3]      What emerges from Mr Thow’s evidence are three main issues.  First, he has concerns in relation to the guarantee liability for which judgment was given in that it arises from a deed of guarantee which was entered into or executed two days after the advances which are the subject of the judgment debt appear to have been made.

[4]      Secondly, Mr Thow asserts that the creditor’s debt (now a judgment debt) may have been overstated which appears to have some relationship to the first point. Be that as it may, the debt is now the subject of a judgment of this Court.

[5]      Thirdly,  Mr Thow raises issues which Mr Eagles concedes  are issues  in relation  to  the  conduct  of  the  receivers  whom  ECAF  appointed  pursuant  to  its security interest.  The claims are by their nature claims not against ECAF and would not be claims in the nature of set-off or counterclaim.  They are claims relating as I have said to the conduct of the receivers and might lead or not lead to recovery against those persons.  Ms Bamford appearing on instructions has opposed the matter being adjourned for further enquiry.  Mr Eagles frankly indicated to the Court that his enquiries by their nature have produced relatively tentative views and a main reason  for an  adjournment  would  be to  enable Mr Eagles  to  satisfy himself  as counsel as to the appropriateness or otherwise of proceeding further with the opposition.  This relates particularly to matters associated with the possibility that there is an issue as to the underlying quantum of the judgment that has been entered.

[6]      If there were to have been an adjournment, the adjournment would have been for a period of one month and I would then have heard this application on its merits in the light of any further evidence filed by Mr Thow and in the light of evidence to be adduced by ECAF.   In the event I am not satisfied that the matter requires an adjournment.    The  basis  of  Mr  Thow’s  case  against  the  receivers  is  not  an appropriate basis upon which for a further period to hold this judgment creditor out of its money or of its right to proceed in this jurisdiction. Any claim which Mr Thow may have against the receivers will inure in his bankruptcy and the assignee will be able to pursue that claim in the interests of Mr Thow and more particularly of his creditors.

[7]      Mr Thow, to the extent he may have wished to make enquiries as to quantum of the judgment against him, has had a great deal of time to explore such issues before this hearing.  The judgment was entered on 6 April 2011 for a sum exceeding

$5,000,000.  The evidence on the summary judgment file indicates that a letter of demand was sent to him and to his company on 2 July 2010 for a sum a little in excess of $6,000,000.  That file also indicates that on 31 August 2010 at latest he had a solicitor acting for him, namely Clive Gardner, who responded not to the substance of the demand made upon Mr Thow but with a letter in the nature of a counterclaim demanding that the creditor return a helicopter to Mr Thow.   That letter drew a prompt response indicating that the helicopter was the subject of a security and would not be returned.  There is no suggestion that any further correspondence was entered into on Mr Thow’s part questioning the liability for the claimed amount. ECAF’s solicitors followed up on 1 February 2011 by issuing what became its final demand for payment and when that was not met, the proceeding was issued three days later on 4 February 2011 and served on Mr Thow on 15 February 2011.  He was adjudged to owe the creditor the judgment sum at the first call on 6 April 2011. There is no application before the Court for the setting aside of that judgment and in the light of the period of some 14 months that Mr Thow has had to deal with this matter I do not view it as an appropriate exercise of the Court’s jurisdiction to give him further time to consider an application for setting aside.  He has had any amount of opportunity to do that.

[8]      In the circumstances, having regard to his failure to meet or respond to the bankruptcy notice in this case, there is a presumption that Mr Thow is insolvent. Significantly he does not assert in his evidence filed in this Court that he is other than insolvent.   It is clear that he is.   The creditor has established its grounds for adjudication and in these circumstances there is an order adjudicating Mr Thow bankrupt. The time of this order is 10.39am.

[9]      I express my gratitude to Mr Eagles for the way in which he has acted in Mr Thow’s best interests and for the appropriately frank manner in which he has dealt with his submissions.

[10]     Following the judgment I have just given, I heard from counsel as to costs and I now make an order that the debtor pay the creditor costs on a 2B basis together

with disbursements to be fixed by the Registrar.

Associate Judge Osborne

Solicitors:

Eagles Eagles & Redpath, PO Box 1445, Invercargill 9840

Anthony Harper, PO Box 2646, Christchurch 8140 ([email protected])