FM Custodians Ltd v McNally - [2013] NZHC 34

IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY

CIV-2012-488-813 [2013] NZHC 34

UNDER the Insolvency Act 2006

IN THE MATTER OF the bankruptcy of STEVEN RAE McNALLY

BETWEEN FM CUSTODIANS LIMITED Judgment Creditor

ANDSTEVEN RAE MCNALLY Judgment Debtor

Hearing: 29 January 2013

Appearances: Steven Rae McNally in person
L Hawes-Gandar for Judgment Creditor

Judgment: 29 January 2013

ORL JUDGMENT OF ASSOCIATE JUDGE R M BELL

Solicitors:
Grove Darlow (T J G Allan/L Hawes-Gandar) P O Box 2882 Auckland, for Judgment Creditor
Email: tima@grovedarlow.co.nz

Copy for:
S R McNally, Kaikohe
Email: Steve.McNally2@fndc.govt.nz

FM CUSTODIANS LIMITED V MCNALLY HC WHA CIV-2012-488-813 [29 January 2013]

[1] FM Custodians Ltd obtained judgment against Mr McNally for $856,353.37 on 14 June 2012. FM Custodians Ltd had sued Mr McNally, a property valuer, for alleged negligence in a property valuation.

[2] After it obtained judgment, FM Custodians Ltd served a bankruptcy notice on Mr McNally. The bankruptcy notice is in the form required by s 29 of the Insolvency Act 2006. The notice, properly, requires compliance within 10 working days of service of the notice. The matters which Mr McNally must do to comply with the notice are the standard requirements. In particular paragraph 1(b) of the notice says that he may secure or enter into a new formal agreement with the judgment creditor or alternatively obtain the High Court’s approval of terms of payment. The statutory basis for that provision of the bankruptcy notice is s
29(1)(b)(iii) of the Insolvency Act 2006.

[3] Mr McNally has clearly read the bankruptcy notice because he has applied to the court for an order approving the terms of payment. He proposes to pay the sum of $50,000 to FM Custodians Ltd over a period of five years. He asks the court to approve those proposed terms of payment.

[4] FM Custodians Ltd opposes. It initially opposed as if Mr McNally had applied to set aside the bankruptcy notice, and submissions were prepared for this hearing on that basis. That opposition is misdirected, because Mr McNally has not applied to set aside the bankruptcy notice. Instead, he has applied to the Court to approve the terms of payment and which, if approved, would then mean that the bankruptcy notice has been complied with, so that no act of bankruptcy would arise. Accordingly I do not have to consider questions such as whether Mr McNally had a cross-claim in which he could not have set up in the original proceedings. I also do not have to consider whether the case comes within the decision of Master Kennedy-
Grant in Re Wise.[1]

[1] Re Wise ex parte Benecke HC Auckland, B227-228/95, 21 June 1995.

[5] There is a technical matter to be considered. The bankruptcy notice was served on Mr McNally on 27 November 2012. Mr McNally filed his application on
11 December 2012. That was the 10th working day after he was served with the

bankruptcy notice. He accordingly took steps within the 10 working days of service.…

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.

Keep reading for free

Create a free CaseChat account to read FM Custodians Ltd v McNally and more:

Read every judgment in full
Ask AI and get answers linked to paragraphs
See how each paragraph was cited in later cases
Download judgments as PDF or Word

Continue with Google

One click creates your free account or signs you in.

By continuing you agree to the Terms and Privacy Policy.

Details

Case: [2013] NZHC 34
Decision Date: 29 January 2013

CaseChat Overview and Summary

FM Custodians Limited obtained judgment against Mr McNally for $856,353.37 on 14 June 2012 for alleged negligence in a property valuation. FM Custodians served a bankruptcy notice on Mr McNally, who applied to the court to have his proposed payment terms approved. The court had to decide whether Mr McNally's proposed payment terms were sufficient to satisfy the bankruptcy notice and prevent an act of bankruptcy.

The court found that the application was not to set aside the bankruptcy notice but rather to approve the payment terms. The court noted that Mr McNally had taken steps within the 10 working days of service and that the bankruptcy notice remained in suspension while the application was pending. The court considered Mr McNally's affidavit and found that he was insolvent, with his debt to FM Custodians Ltd being significantly larger than his other liabilities.

The court noted that it was exercising an independent power to consider whether the bankruptcy notice would be deemed to have been complied with by the court approving the terms of payment. The court emphasised that it did not necessarily exercise a commercial judgment and usually applied insolvency law while leaving the parties to make commercial judgments. The court found that Mr McNally's proposed payment of $50,000 over five years was insufficient to satisfy the debt in a substantive sense and did not grant approval of the terms of payment. The court dismissed Mr McNally's application, leaving it open to FM Custodians to apply for an order adjudicating Mr McNally bankrupt.

Orders