FM Custodians Limited v Hannan - [2018] NZHC 3083

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA

TE WHANGANUI-Ā-TARA ROHE

CIV-2016-485-983

[2018] NZHC 3083

UNDER the Insolvency Act 2006

IN THE MATTER OF

the bankruptcy of Patrick Bernard Hannan

BETWEEN

FM CUSTODIANS LIMITED

Judgment Creditor

AND

PATRICK BERNARD HANNAN ALSO KNOWN AS PATRICK BERNARD CHRISTOPHER HANNAN

Judgment Debtor

Hearing:
21 August 2017; further submissions 4 September 2017,

11 September 2017, 27 September 2018 and 3 October 2018;
further hearing 10 October 2018

Appearances:

F B Barton (10 October 2018) and M B Couling for the Judgment Creditor

P B Hannan in Person

Judgment:

17 May 2018

Reissued:

26 November 2018

JUDGMENT OF ASSOCIATE JUDGE SMITH

This judgment was delivered by me on 26 November 2018 at 4.00pm, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors / Counsel:
Anderson Lloyd, Dunedin

Copy to:
Mr P B Hannan

FM CUSTODIANS LTD v HANNAN [2018] NZHC 3083 [26 November 2018]

[1] The judgment creditor (FM) applied for an order adjudicating Mr Hannan bankrupt. In a judgment give on 17 May 2018 (the May 2018 judgment) I dismissed the application, but in a reserved judgment given on 26 November 20181 (the Recall judgment), I recalled the May 2018 judgment, on the basis that relevant statutory considerations had not been taken into account in the May 2018 judgment. FM and Mr Hannan both made submissions on FM's recall application, and they agreed at the conclusion of the hearing of that application that if I decided to recall the May 2018 judgment I should proceed to deliver a new judgment on FM's adjudication application without the need to hear further submissions from the parties.

[2] Having recalled the May 2018 judgment, I now give judgment on FM's application for an adjudication order.

Background

[3] By loan agreement dated 10 July 2012 FM agreed to lend $784,297.26 (the loan) to Paddy Hannan Contracting Ltd (the Company), a company of which Mr Hannan was a director. The loan was repayable upon demand, and pending demand, by 1 December 2014. Interest was payable at an ordinary rate of 12 per cent per annum; in event of default, penalty interest was payable at the ordinary rate plus seven percentage points (i.e. 19 per cent per annum). Interest was payable monthly.

[4] In the event of default, FM was entitled to require the Company to pay the balance of the loan, accrued interest, and all other amounts which the Company owed FM.

[5] The loan was secured by an existing memorandum of mortgage over properties owned by the Company at 7A and 14 Waiu Street, Wainuiomata, and an existing General Security Agreement (GSA) held by FM over all the assets and undertakings of the Company. In addition to those securities, FM obtained a new memorandum of mortgage over two other properties in Waiu Street, Wainuiomata owned by the Company, namely numbers 19A and 19B Waiu Street.

1 FM Custodians Ltd v Hannan [2018] NZHC 3079.

[6] The loan…

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.

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Details

Case: [2018] NZHC 3083
Decision Date: 17 May 2018

CaseChat Overview and Summary

The applicant, FM Custodians Limited, applied for an order adjudicating Mr Hannan bankrupt, based on his failure to comply with a bankruptcy notice. Mr Hannan opposed the application on the basis that he had paid the amount owing on the judgment debt. The Court of Appeal had previously recalled a judgment dismissing the adjudication application and ordered that the application be heard afresh. The key issues for the Court were whether the amounts FM had received in reduction of the judgment debt were to be credited against the debt before FM's post-judgment expenses were taken into account, and whether, in any event, there were grounds to decline to make an adjudication order. The Court found that, by virtue of statutory provisions, FM was entitled to deduct its post-judgment expenses from the proceeds of sale before any credit was given to Mr Hannan against the judgment debt. There was no basis for the Court to decline to make an adjudication order, and Mr Hannan was adjudicated bankrupt.

Orders