Li

[2013] NZHC 2582

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2013-404-003844 [2013] NZHC 2582

IN THE MATTER OF       The Insolvency Act 2006

IN THE MATTER OF       the proposal by Jing Kristine Li

Hearing:                   3 October 2013

Appearances:           P R Cogswell for applicant trustee

Judgment:                3 October 2013

(ORAL)JUDGMENT OF ASSOCIATE JUDGE ABBOTT

Solicitors:

Cogswell Law, Auckland

Re LI [2013] NZHC 2582 [3 October 2013]

[1]      On 16 August 2013 Jing Kristine Li (the insolvent) filed a proposal to her creditors under subpart 2 of part 5 of the Insolvency Act 2006.  The proposal is that she will pay a sum of $25,000, over two years, to satisfy her debts to her creditors. Those debts total $417,046.

[2]      The insolvent proposes to pay the fees and expenses of the trustee from future earnings and/or from support provided by a third party in addition to the sum to be paid to participating creditors pursuant to the proposal.

[3]      The insolvent’s proposal was put to, and accepted by, the requisite majorities of creditors (both in respect of number and value of debt) at a meeting held on 28

August 2013 (voting was both by post and by creditors present in person).   The trustee of the proposal, Peri Michaela Finnigan, has since filed this application for approval, and served notice of it on the creditors.  No creditors have filed notice of intention to appear of have appeared at the hearing.

[4]      I am satisfied that the procedural requirements of Part 5 have been satisfied.

[5]      The trustee has filed a report on the proposal (dated 30 August 2013) in which she expresses the view that the proposal is an advantageous one for creditors in that it provides a better result than would be achieved under bankruptcy.

[6]      I have two potential concerns over the proposal.   The first is that the sum proposed to settle her debts is modest in relation to the size of the debts.  The second is whether the insolvent will be able to meet the proposal.

[7]      The  amount  offered  ($25,000)  is  to  be  paid  in  two  sums,  half  in approximately a year’s time (July 2014), and half a year later (in July 2015).   It represents a value of between 9 cents and 15 cents in the dollar.   This difference depends on whether or not debts incurred by the insolvent’s company, The Magic Story Box Ltd, are to be included by reason of personal guarantees.  Evidence of the guarantees has been sought.  If it is provided those debts will be included, taking the return to creditors down towards the lower figure (9 cents in the dollar).

[8]      Although the amount is modest, it is not a sum which can be considered as derisory, particularly having regard to what appears to be the potential for the insolvent to raise money from her income over the next two years.  There are two factors which satisfy me that it is an acceptable proposal:

(a)      The vast majority of the creditors (both in number and value) have supported it.

(b)Two significant creditors (to a total of $120,000) have elected not to participate in the distribution (but nevertheless to be bound by the proposal), because of the regard that they have for the insolvent and the work she was endeavouring to do (which unfortunately did not succeed).   Their  non-participation  has  helped  to  increase the  sum available to other creditors in a significant way.

[9]      The second concern is whether the insolvent can in fact meet the terms of the proposals.  I have this concern because it is clear that the project on which she was engaged (and which gave rise to the debts) cannot now be pursued in its previous form – the intellectual property in relation to it has passed to another.  However, I accept that she is genuine in her desire to meet the terms of the proposal, and to pursue her project in a different way.  Again, I take into account that the creditors have accepted that proposal (and hence satisfied themselves that there is a reasonable prospect that she will be able to achieve it).  I also take into account that they will be entitled to have the proposal brought back before the Court should she not succeed. The proposal is relatively modest ($12,500 per annum).  It is to be hoped that she will be able to achieve that whether out of a revised version of her original project or by earning in some other form.

[10]     Weighing these matters I am satisfied that there is no reason to find that it is not expedient that the proposal be approved.

[11]     I  make  an  order  in  terms  of  the  application  dated  3  September  2013,

approving the proposal.

Associate Judge Abbott