FM Custodians Limited v Henderson HC Christchurch CIV 2010-409-559

[2010] NZHC 2087

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV 2010-409-559

IN THE MATTER OF     The Insolvency Act 2006

AND

IN THE MATTER OF     The Bankruptcy of DAVID IAN HENDERSON

BETWEEN  FM CUSTODIANS LIMITED HAVENLEIGH GLOBAL SERVICES LIMITED

Judgment Creditors (Substituted)

ANDDAVID IAN HENDERSON Judgment Debtor

CIV 2010-409-1672

AND BETWEEN            ALLIED FARMERS INVESTMENTS LIMITED

Judgment Creditor

ANDDAVID IAN HENDERSON Judgment Debtor

Hearing:         15 November 2010

Appearances: A J Forbes QC for Judgment Debtor

J V Ormsby for FM Custodians [559]

C R Vinnell for South Canterbury Finance (Creditor in Support) [559 and 1672]

J P Forsey for Allied Farmers Investments [1672]

K Patterson for BNZ (Creditor in Support) for [559 and 1672] Ms Hill-Dunn for Havenleigh Global Services Ltd (Creditor in Support) [559]

P Rollo for Strategic Finance Ltd (Creditor in Support) [559]

Ms Goodwin for Equitable Property Finance (Creditor in Support) [559]

Judgment:      15 November 2010

ORAL JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN

FM CUSTODIANS LIMITED HAVENLEIGH GLOBAL SERVICES LIMITED V DAVID IAN HENDERSON HC CHCH CIV 2010-409-559  15 November 2010

[1]      Originally  both  of  these  matters  were  adjourned  for  a  hearing  on  29

November 2010.  When granting those adjournments Judge Osborne said it was an indulgence but respected the fact that Mr Henderson accepted he was insolvent.  The adjournment was to provide him time to put a proposal to all creditors.   Judge Osborne also provided that an outline of that proposal was to be given to all creditors within 10 working days, that is by today.

[2]      This morning the Court received a copy of a proposal outline.  At the same time  those  creditors  appearing  on  these  two  matters  called  this  morning,  also received a copy of that outline.

[3]      Having  read  it  I  informed  Mr  Forbes  it  was  insufficient  as  it  gave  no indication of creditors’ claims or of total indebtedness.

[4]      Mr Forbes provided me with copies of emails from six creditors indicating preparedness  to  support  a  proposal.    However  those  emails  did  not  detail  the amounts owed to them.

[5]      I  then  adjourned  the  matter  to  4:30pm  this  afternoon  requesting  more information be disclosed.   I informed Mr Forbes the purpose was to decide if the matter now ought to be adjourned to 29 November 2010 as originally directed.   I noted that on 10 November 2010 Judge Osborne directed the matter of those bankruptcy applications could now be heard today.

[6]      I should recall that the hearing on 10 November 2010 was requested by Mr Ormsby on behalf of FM Custodians in the outcome, I infer, of the discovery of the transfer of shares in a number of companies by Mr Henderson to another since 1

November 2010.

[7]      I have reviewed the material provided in relation to those transfers.   I am satisfied that a significant part of Mr Henderson’s reasons for doing that was his receipt of advice from his solicitor, and that it was not, nor could it have in the circumstances of the case, had the affect of defeating creditors’ claims.

[8]      I informed Mr Forbes that this Court was prepared to act summarily to grant an order for adjudication if it was clear from the evidence available to the Court that it could not succeed because it did not have the support of at least half of the creditors by number and 75 per cent by value.

[9]      The information provided to me this afternoon by Mr Forbes and given also to counsel acting for parties appearing for creditors in support showed that Mr Henderson owed about $165M or $86M net of securities held.

[10]     Of course for proposal purposes the half creditor numbers and three quarters in value thresholds are calculated by reference to the total debt owing exclusive of securities held.

[11]     It  appeared  clear to me that in the face of the opposition of the parties appearing  today  that  Mr  Henderson  could  not  obtain  the  75  per  cent  in  value required.

[12]     However I was persuaded by Mr Forbes’ submission that Judge Osborne’s original timetable meant to provide all creditors an opportunity to indicate support for or against.  Further that in the timeframe of things originally prescribed it was possible, at least mathematically, that major creditors who were actively marketing the sale of secured properties may in the interim effect a sale of those.  In the result the debts owed to those creditors might be significantly different at the time those creditors voted upon the proposal.

[13]     As I indicated to counsel I am acceding to this argument only because of the original indication that Mr Henderson would have until 29 November 2010 to garner support for his proposal.  It is clear to me that the Court need not indefinitely take into account the fact that creditors may have access to security which if sold would

‘affect the numbers’.   The success or failure of the proposal will not await the outcome of efforts by security holders to realise upon their securities.   This view seems to be reinforced by the fact that for value purposes voting strength is assessed by reference to the total debt regardless of security held.

[14]     Therefore because of the original timetable set, and by reason only of that, I

am not prepared to order adjudication today.

[15]     When advising that result I informed Mr Forbes that if it appeared clear on 29

November that a creditors’ proposal could not succeed then Mr Henderson ought to be prepared for an adjudication order to be made.

[16]     For the purposes of the 29 November 2010 hearing I informed Mr Forbes that the Court would require proof of service of Mr Henderson’s proposal outline upon all creditors to ensure the creditors have an opportunity not less than three working days prior to indicate their position of support or opposition.  It will be sufficient for proof to be given of delivery by email.

[17]     Until  further  order  of  the  Court  I  direct  the  details  of  Mr  Henderson’s proposal outline may not be given to persons other than creditors or their solicitors and shall not in any event be the subject of public disclosure save to the extent of the gross and net indebtedness position identified within that proposal.  If there is any doubt about the extent of this confidentiality order then counsel are at liberty to apply on short notice for a telephone conference to be convened before myself or Judge Osborne regarding same.

Associate Judge Christiansen