F M Custodians Ltd v Bartels - [2014] NZHC 3214

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-3515 [2014] NZHC 3214

UNDER the Insolvency Act 2006

IN THE MATTER OF

the bankruptcy of TIMOTHY STEPHEN BARTELLS

BETWEEN

F M CUSTODIANS LTD as custodial trustee of MIDLANDS MORTGAGE TRUST

Judgment Creditor

AND

TIMOTHY STEPHEN BARTELLS Judgment Debtor

CIV-2013-404-4863

UNDER the Insolvency Act 2006, Part 5 Sub-part 2

IN THE MATTER OF an application by CALLUM MACDONALD in respect of a proposal
by TIMOTHY STEPHEN BARTELLS, an insolvent

Hearing: 4 June and 27 June 2014

Appearances:

G Bogiatto for Callum Macdonald and Timothy Bartells
H Holland for F M Custodians Ltd

J Belthazar and S J Davies (on 4 June only) for B F Walker, a creditor

Judgment:

17 December 2014

JUDGMENT OF ASSOCIATE JUDGE R M BELL

This judgment was delivered by me on 17 December 2014 at 3:00pm
Pursuant to Rule 11.5 of the High Court Rules
………………………………………….
Registrar/Deputy Registrar

F M CUSTODIANS LTD as custodial trustee of MIDLANDS MORTGAGE TRUST v TIMOTHY STEPHEN BARTELLS [2014] NZHC 3214 [17 December 2014]

TABLE OF CONTENTS

Paragraph Background [4] Issues [7] Mr Bartell’s proposal [13] Mr Trott’s claims [22] Treatment of partnership claims [27]

Separate creditors [35] Creditors associated with Mr Rudkin [36] Mr Trott [37]

Mr Bartell’s joint and inter-partners claims [40] Mr Rudkin’s claim for $1,097,977.87 [40] Further partnership losses [43]

Assessment of the proposal [45] Mr Macdonald’s decision to adjourn on 5 December 2014 [46] Mr Walker [51] O’Shannessy Street [54] No notification to joint creditors [55] Alteration to the proposal [57] Equal ranking of all creditors under the proposal [60] Sale of McRobbie Road [67]

Not expedient to approve the proposal in any event [72]

Result [90]

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[1] Mr Bartells is insolvent. He has committed an act of bankruptcy by not complying with a bankruptcy notice served on him on 7 November 2013. The judgment debt in the notice is $163,500.80. The judgment creditor, FM Custodians Ltd, has applied for an adjudication order. The requirements of s 13 of the Insolvency Act 2006 have been satisfied.

[2] In response, Mr Bartells has made a proposal under Part 5 subpart 2 of the Insolvency Act. The bankruptcy application has been stood over to await the decision on the application to approval the proposal. A proposal under subpart 2 of Part 5 may be an appropriate alternative to bankruptcy.1 This decision is mainly concerned with whether to approve Mr Bartells’ proposal under s 333 of the Insolvency Act. If the proposal is approved, the bankruptcy application will be dismissed. If the proposal is not approved, it does not follow automatically that Mr Bartells should be adjudicated bankrupt. The court retains a discretion under s
37 of the Insolvency Act whether to adjudicate him bankrupt, but a refusal to approve a proposal may leave the court with little other option.

[3] Two of Mr Bartells’ creditors have opposed the proposal: FM Custodians Ltd and Mr B Walker, a judgment creditor for $113,057.24. They oppose on all the grounds…

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 F M Custodians Ltd v Bartels

Details

AGLC: F M Custodians Ltd v Bartels [2014] NZHC 3214
Case: [2014] NZHC 3214
Decision Date: 17 December 2014

CaseChat Overview and Summary

The High Court of New Zealand was asked to decide whether to approve a proposal made by Timothy Stephen Bartells under Part 5 Sub-part 2 of the Insolvency Act 2006, or instead to declare him bankrupt. Bartells had been adjudicated bankrupt once before, in 2000. He was now insolvent again and had committed an act of bankruptcy by not complying with a bankruptcy notice. The judgment debt in the notice was $163,500.80. Bartells had made a proposal to pay his creditors a dividend of 5.59 cents in the dollar by payments to his trustee over three years. Two of his creditors, FM Custodians Ltd and Mr B Walker, opposed the proposal on the grounds that it was not reasonable, was not calculated to benefit the general body of creditors, and it was not expedient that it be approved. The court found that Bartells' proposal did not provide for the payment of separate creditors before other debts and was not reasonable or calculated to benefit the general body of creditors. The court also found that it was not expedient to approve the proposal because Bartells' conduct demonstrated a significant danger to the commercial community and a sterner response than his proposal was required. The court refused to approve the proposal and adjudicated Bartells bankrupt.

Orders