Henshaw v ANZ National Bank Limited

[2019] NZHC 3330

IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTEPOTI ROHE

CIV-2019-412-83

[2019] NZHC 3330

UNDER THE

Insolvency Act 2006

BETWEEN

ETHAN ANGUS HENSHAW

Insolvent

AND

ANZ NATIONAL BANK LIMITED, WESTPAC NEW ZEALAND LIMITED,

THORN GROUP FINANCIAL SERVICES LIMITED, AMERICAN EXPRESS

INTERNATIONAL (NZ) INC, HARMONEY LIMITED, FLEXI CARDS LIMITED, HEARTLAND BANK

LIMITED, LATITUDE FINANCIAL SERVICES LIMITED

Creditors

Hearing:

12 December 2019

Counsel:

M O’Neil for Insolvent

No appearance for Creditors

Interim Judgment:

16 December 2019

INTERIM JUDGMENT OF ASSOCIATE JUDGE LESTER

This interim judgment was delivered by me on 16 December 2019 at 2.00pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar 16 December 2019

HENSHAW v ANZ NATIONAL BANK LIMITED [2019] NZHC 3330 [16 December 2019]

[1]                 The insolvent, Mr Henshaw, seeks approval of a proposal under pt 5 of the Insolvency Act 2006 (“the Act”).

[2]                 The insolvent lodged in this Court  his  proposal  dated  12  August  2019.  Ms Liggins accepted the role of provisional trustee and she took on the task of sending the proposal  to creditors.   A meeting of creditors was  subsequently convened on    4 October 2019.

[3]                 Ms Liggins’ report says that the majority of creditors (that is a majority in number and three quarters majority in value) accepted the proposal. I will return to this issue later.

[4]                 When the application was called, I adjourned the application to address some issues of service, but also possible issues of substance in relation to the vote.

Call of creditors’ meeting

[5]Section 330(1) of the Act provides:

The provisional trustee must, as soon as practicable after the proposal is filed, call a meeting of creditors by posting to every known creditor at the creditor’s last known address …

details of the proposal and the date, time and place of the meeting and a posted voting form.

[6]The provisional trustee in this case emailed the notice of meeting to creditors.

[7]                 An argument can be made that in 2019 a reference to “posting” should be construed as including email. I note that the Act does not require the use of registered post, for example, as specified in s 359 of the Property Law Act 2007. In respect of registered post, s 359(2) of the Property Law Act provides that it includes any service that “provides a system of recorded delivery”.

[8]                 While s 330 of the Act does not have a definition of “post”, given the prevalence of email communication, there is an argument that posting should be interpreted as meaning any system of delivery analogous to traditional post.

[9]                 The issue is potentially academic in relation to those creditors who responded to the email advising them of the proposal and the meeting; their response confirming receipt in fact of the proposal. The insolvent’s statement of affairs disclosed eight creditors. The total value of the debts to the creditors is $74,204. Two creditors totalling $22,600 did not, as far as I read the material, respond to the email advice of the meeting. The trustee’s report does not say if there was any contact at all from the two creditors who did not participate.

[10]              Had those creditors participated and voted against the proposal then that would have meant the proposal would not have passed, as the two creditors represent just over 30 per cent of the total unsecured creditors.

[11]              I would have less concern about this issue had notice of this application not also been given by way of email.

Notification of application

[12]              Section 333(1) of the Act requires the trustee to apply to the Court for approval of the proposal and “send notice of the hearing of the application in the prescribed form to the insolvent and each known creditor”.

[13]              The eight creditors sought to be bound by the proposal were notified of this application by email. The trustee does not expressly explain the basis for the use of email.

[14]              The notice of hearing was not sent to  the insolvent’s one secured  creditor –  s 333(1)(b) relates to all creditors not just those sought to be bound by the proposal.

[15]              In the original notice to creditors of the proposal and creditors’ meeting there was included the following:

Please note by including an email address on the proof of debt you are accepting that all further correspondence for this case can be received by email to that address.

[16]              In respect of those creditors who provided a postal vote in favour of the proposal, I assume (but there is no evidence to that effect) that those creditors did

provide an email address on their proof of debt (only the postal votes being produced), I have my doubts as to whether a creditor responding to a proposal by email amounts to an agreement to accept service by email for the purposes of r 6.7 of the High Court Rules which  provides:  “Service  by  a  method  agreed  to  in  writing  by  a  party  is sufficient service on that party.”

[17]              The proposal seeks to bind creditors from them doing no more than displaying an email  address  for acceptance of the  ‘offer’ set  out  at  [15]  above.  As  service is critical to the process, in my view an agreement to accept service by email requires the party to be served to expressly confirm in writing that such is acceptable.

[18]              For present purposes, it would seem unlikely that those creditors who voted in favour of the proposal by postal vote would want to appear, but ultimately that is not the point.

[19] Of more practical concern is the situation with the two creditors who did not respond. I do not consider that giving them notice of the hearing by email is service of the application for approval of the proposal as on any view of it the ‘offer’ at [15] above was not responded to by them. It may be that those creditors have been in contact with the trustee and advised that they will abide, but that is not known.

[20]              Accordingly, the application is adjourned to permit the trustee to address issues of service.

[21]              As to the substance of the application, it appears to me to be an application that should be approved. The insolvent explains that he had been struggling to keep up with repayments of his debts due to being on low paid jobs since being a student but has now secured a better paid job and can take care of his debts. The proposal will see virtually all of the debt paid and as I have said, received unanimous support from those creditors who voted.

[22]              Another reason for the adjournment is that the report of the trustee at paras 9 and 10 appears to refer to the assets and liabilities of another person. The liabilities listed are different from those listed in the statement of assets and liabilities. The

trustee is to address this. This may have a flow-on effect to the figure in para 10 of the report as my rough calculation of the amount to be repaid over the three year term of the proposal is approximately $2,500 short of the total debt. When the costs of the proposal are taken into account, I am not sure how the 80 cents in the dollar return is calculated and the trustee is to address this matter also.

[23]              Returning to the merits of the proposal, but for the issue I have identified with the report, the proposal is in the prescribed form as required by s 327 of the Act. The trustee’s report confirms the procedure at the meeting of creditors was followed and the report produced complies with the regulations.

[24]              Nothing about the proposal is unreasonable or not calculated to benefit the general body of creditors, that being the guiding criteria for refusing approval under s 333(3) of the Act.

[25]              Based on the information I have to date and subject to confirming the position of the two creditors who did not participate in the proposal, I can indicate that I do not for the moment see any reason to exercise my discretion against approval of the proposal, but ultimately that order will need to await clarification of the above issues and the correction of the report.

[26]              The application is adjourned to a telephone conference at 9.00am on Wednesday 12 February 2020. Counsel is to file any submissions in respect of service and any evidence in relation to the position of the two creditors who did not vote and the correction to the trustee’s report, five working days prior (that is by Tuesday      4 February 2020).

Associate Judge Lester

Solicitors:

Webster Malcolm Law, Warkworth