Finnigan v Ellis - [2018] NZHC 2878

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-1232

[2018] NZHC 2878

UNDER the Insolvency Act 2006

IN THE MATTER OF

the bankruptcy of BRIAN ROBERT ELLIS

BETWEEN

PERI MICHAELA FINNIGAN and

BORIS VAN DELDEN as liquidators of WENZTRO CO-OPERATION LIMITED
Judgment Creditors

AND

BRIAN ROBERT ELLIS

Judgment Debtor

Hearing: 31 October 2018

Appearances:

K Crossland for the Judgment Creditors C LaHatte for the Judgment Debtor

Judgment:

7 November 2018

JUDGMENT OF ASSOCIATE JUDGE R M BELL

This judgment was delivered by me on 7 November 2018 at 12:15pm
pursuant to Rule 11.5 of the High Court Rules.

…………………………………
Deputy Registrar

Solicitors:
Shieff Angland (K Crossland/J Boparoy), Auckland, for the Judgment Creditors Sellar Bone Partners, Newmarket, Auckland, for the Judgment Debtor
Copy for:
Christopher LaHatte, Auckland, for the Judgment Debtor

FINNIGAN and VAN DELDEN v ELLIS [2018] NZHC 2878 [7 November 2018]

[1] Mr Ellis seeks a halt of the creditors’ bankruptcy application under s 42 of the Insolvency Act 2006 while he appeals against a judgment in their favour. The creditors are the liquidators of Wenztro Co-operation Ltd (in liq). They sued Mr Ellis and two others for breaches of duty as directors or de facto directors under s 301 of the Companies Act 1993. In his judgment of 22 May 2018 Wylie J gave judgment against all three for $765,692.81 together with interest.1 In a later decision of 17 September 2018 he awarded costs of $134,409.75 against Mr Ellis.2 The liquidators issued a bankruptcy notice based on the judgment of 22 May 2018. Mr Ellis did not apply to set aside the bankruptcy notice and did not comply with it. A bankruptcy application issued on 1 August 2018 is based on the same debt.

[2] Mr Ellis appealed against the judgment of 22 May 2018. There have been procedural difficulties. Mr Ellis has not pursued the appeal as promptly as he ought to have, and he has required some indulgences from the Court of Appeal. He has yet to file his case on appeal, but I was assured in the hearing that it was imminent. Mr Ellis says that he has arranged for $155,000 to be held in the trust account of independent solicitors.

[3] Mr Ellis applied for a stay of execution of Wylie J’s judgment of 22 May 2018, but he has not pursued that application. In effect, his application to halt the proceeding under s 42 of the Insolvency Act has been run in its place. The section says:

42 Halt or refusal of application when judgment under appeal

(1)This section applies if the creditor's application for adjudication relies on one of the following acts of bankruptcy:

(a)the debtor failed to comply with a bankruptcy notice (see section 17):

(b)a judgment against the debtor for non-payment of trust money is not satisfied within 5 working days after the date of the judgment (see section 28).

(2)If the debtor has appealed against the judgment…

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 Finnigan v Ellis

Details

AGLC: Finnigan v Ellis [2018] NZHC 2878
Case: [2018] NZHC 2878
Decision Date: 7 November 2018

CaseChat Overview and Summary

In the High Court of New Zealand, Associate Judge R M Bell heard an application by Peri Michaela Finnigan and Boris Van Delden, as liquidators of Wenztro Co-operation Limited, against Brian Robert Ellis. The liquidators sought to proceed with a bankruptcy application against Ellis, who had been adjudged liable for $765,692.81 in a prior judgment. Ellis sought to halt the bankruptcy proceedings while he appealed the judgment, invoking section 42 of the Insolvency Act 2006.

The primary legal issues were whether the Court could halt the creditors' bankruptcy application while Ellis's appeal was pending, and if so, for how long, and under what conditions. Ellis argued that his appeal had a reasonable prospect of reducing his liability significantly. The liquidators contended that the appeal only sought a reduction, not the nullification of the entire judgment, and thus, they should proceed with the bankruptcy application. They argued that even if Ellis succeeded in his appeal, he would still owe a substantial amount, justifying the continuation of the bankruptcy process.

The Court considered the criteria for halting a bankruptcy application pending appeal, including the debtor's bona fides, the merits of the appeal, the stage of the appeal, and whether the bankruptcy proceeding would harm the creditors. The Court found that Ellis's appeal, even if successful, would not eliminate his liability entirely, and that the liquidators would still be owed a significant amount. Therefore, the Court decided that the appeal did not present an arguable case that could nullify the entire liability, and the creditors should be allowed to proceed with the bankruptcy application for the amount of $200,000 that Ellis would likely remain liable for, pending the outcome of the appeal.

The Court ordered that the liquidators could proceed with the bankruptcy application on the basis of Ellis's liability for $200,000, but could not claim more than that amount until the appeal was resolved or further order of the Court. The case was adjourned for further hearing on the merits of the bankruptcy application and for costs.

Orders