Harris v TR Group Limited

[2013] NZHC 26

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2011-409-002560 [2013] NZHC 26

UNDER  the Insolvency Act 2006

IN THE MATTER OF     the Bankruptcy of PAUL DAVID JOSEPH HARRIS

BETWEEN  PAUL DAVID JOSEPH HARRIS Applicant

ANDTR GROUP LIMITED Respondent

ANDTHE OFFICIAL ASSIGNEE Second Respondent

Hearing:         29 January 2013 [Judgment amended 7/2 & 22/2/13] Appearances: P J Shamy for Applicant

Judgment:      29 January 2013

JUDGMENT (3) OF ASSOCIATE JUDGE MATTHEWS

[1]      Mr Harris was adjudicated bankrupt on 7 August 2012.  He has applied under s 294 of the Insolvency Act 2006 for an order discharging him from bankruptcy. Section 294 provides:

294     Bankrupt may apply for discharge

(1)       The bankrupt may at any time apply to the Court for an order of discharge from bankruptcy.

(2)       However, if the Court has previously refused an application by the bankrupt for a discharge, and has specified the earliest date when the bankrupt may again apply, the bankrupt must not apply before that date.

(3)      The hearing of the application must be in accordance with section

177.

PAUL DAVID JOSEPH HARRIS V TR GROUP LIMITED HC CHCH CIV-2011-409-002560 [29 January 2013]

[2]      The application has been served on the Official Assignee and on all creditors who proved in the bankruptcy.  The Official Assignee has filed a report as required by s 296.

[3]      Section 297 provides that any creditor who intends to oppose the discharge on a ground not mentioned in the Assignee’s report must give notice to the Assignee and the bankrupt, setting out the grounds for opposing the discharge.   No formal oppositions were filed in the Court.    However, the Registry did receive correspondence by letter and email from three creditors who raised concerns about the way in which Mr Harris is said to have conducted his business, and other points of concern to them.

[4]      Mr Harris is a horse trainer.  He holds a licence for his occupation, as he is required to do.  That licence was suspended when he was adjudicated bankrupt.  It will not be reinstated whilst he remains a bankrupt, but this is his sole source of livelihood.  Mr Harris has not only himself but also his wife and three children to support.  I gather from information placed before the Court that he is generally held in good regard by the industry and this is evidenced by the way in which various persons have grouped together to provide him with financial assistance and, of even more importance, managerial assistance so that if he is discharged from bankruptcy he can continue to operate his licence and work in his chosen career without being troubled by the pressures of also running a business, an area which is plainly not one of his strengths.

[5]      The colleagues referred to, headed by a Mr Bunz, have worked closely with the Official Assignee and with creditors both of Mr Harris personally, and also of a company he operated.  It seems that Mr Bunz did not distinguish clearly between his personal operations and those of his company with the result that not only the assets but also the liabilities of each entity were in some cases indistinguishable.   One result of this is that the Official Assignee has now compiled a list of creditors of Mr Harris, personally, and a further list of those debts which may be his personally or may be those of his company, with the latter creditors also being included as personal debts for the purposes of assessing Mr Harris’s position. All those creditors have been contacted and a proposal made that they receive 51 cents in the dollar in

full settlement of their debts, on the basis that they will not oppose a discharge from bankruptcy of Mr Harris once payment is made.  It is clear from the material before me that this sum is being made available by Mr Bunz and other colleagues and will result in a payment to the creditors concerned well in excess of anything they may have at any prospect at all of receiving had this proposal not been made.

[6]      Part of the proposal is that Mr Bunz will resign as a director of his company, and that company will no longer operate. A new company will be formed, owned by Mr Bunz, and Mr Harris will be employed by that company in the foreseeable future. All accounting and management of the business generated by Mr Harris will be undertaken entirely by that company.  He will not be an officer of the company, nor have any managerial role; he will simply be employed as a horse trainer, that being his perceived strength.

[7]      The Official Assignee has reported to the Court that Mr Harris has been cooperative with him, and she does not oppose an early discharge from bankruptcy provided the Official Assignee’s costs are paid in full.  The Official Assignee has a sum of just over $5,000 in trust being funds received from winnings generated by Mr Harris, and that sum will be applied towards those costs.   A figure of around

$6,000 is required in addition and this is also provided for in the proposal which I

have described.

[8]      The Official Assignee has noted concerns expressed by a number of creditors and has in each case advised them to take legal advice with a view to filing a formal objection with the Court.

[9]      A number of creditors have indicated their support for the proposal to the Court, and as I have indicated some have indicated, informally, considerable opposition.  Notwithstanding the informality of those indications, I have given them full weight in my determination of this application.   The creditors concerned are owed relatively small sums of money and one can understand reluctance on their part in incurring legal fees to express their views.  The informality of these indications does not comply with the requirements of the Insolvency Act but in my discretion I think it appropriate to give them such weight as I think fit.

[10]     Nonetheless, they are in my view outweighed by the positive factors which arise from this application.   First, Mr Harris will be able to continue to earn a livelihood, which on the information before me appears not only to be in his interests and those of his family but also in the interests of the racing industry.  Secondly, he will be able to do so unburdened by the pressures of conducting a business in addition to pursuing his career.  Thirdly, the creditors will receive just over half of their debts, which is a great deal more than they would otherwise receive.

[11]     At the same time the public interest in ensuring that a person who has failed at business is not released promptly back into the business community where he might fail again can be suitably protected by the imposition of conditions preventing Mr Harris from being a director or officer of any company for a period roughly equating the period during which he might have been bankrupt had he not received an early discharge.

[12]     I am satisfied that it is appropriate to grant to Mr Harris a discharge from his bankruptcy, provided that the intended payments to the Official Assignee and to creditors are made and conditions are imposed to ensure that the intended means by which Mr Harris will continue his career are put in place and remain so for an extended period. Accordingly I order:

1.     Mr Harris is discharged from bankruptcy with effect from 5.00 pm on

15 March 2013 on condition that prior to that time:

(a)     he pays to the Official Assignee a sum of $6,658.13 representing an additional sum required to pay the Official Assignee’s costs in full;

(b)    he pays 51  cents in every dollar of the indebtedness of each creditor listed in the report of the Official Assignee dated 14

January 2013, paragraph 5 (both groups of creditors listed in that paragraph);

(c)     he takes such formal steps as are required to resign as a director of Paul Harris Bloodstock Limited and any other company of which he may presently be a director.

2.    Pursuant to s 299 I order that Mr Harris shall not prior to 15 March

2016 be a director of any company or take part in the management or control of any business or class of business, directly or indirectly.

[13]     No issues of costs arise on this application.

J G Matthews

Associate Judge

Solicitors:

Raymond Donnelly & Co, PO Box 533, Christchurch. Davies Law, PO Box 15547, New Lynn, Auckland.