Maharaj v Bunnings Limited T/A Benchmark Building Supplies HC Auckland CIV 2011-404-003427

[2011] NZHC 1315

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2011-404-003427

UNDER  the Insolvency Act 2006

IN THE MATTER OF     the proposal of Ashok Maharaj

BETWEEN  ASHOK MAHARAJ Insolvent

AND  BUNNINGS LIMITED TRADING AS BENCHMARK BUILDING SUPPLIES ANZ NATIONAL BANK LIMITED COUNTIES READY MIX LIMITED Creditors

AND  BANK OF NEW ZEALAND ASB BANK LIMITED

WESTPAC NEW ZEALAND LIMITED GE FINANCE AND INSURANCE TRADING AS GE MONEY WESTMINSTER FINANCE LIMITED TELECOM NEW ZEALAND LIMITED MIGHTY RIVER POWER LIMITED TRADING AS MERCURY ENERGY

B M CUNNINGHAM R J WARBURTON WESFARMERS INDUSTRIAL &

SAFETY NZ LIMITED TRADING AS NEW ZEALAND

PREMIER INSULATION LIMITED GENESIS POWER LIMITED

ACCIDENT COMPENSATION CORPORATION

VODAFONE NEW ZEALAND LIMITED AUCKLAND COUNCIL

Hearing:         19 July 2011

(Heard at Auckland)

Appearances: B M Cunningham for Applicant/Trustee

C L Waugh for Bunnings Limited, a creditor

MAHARAJ V BUNNINGS LIMITED HC AK CIV 2011-404-003427 20 July 2011

[1]      The insolvent filed a proposal under sub-part 2 of Part V Insolvency Act

2006.  A meeting of his creditors was held on 15 and 16 June 2011.  The provisional trustee, as chairperson, recorded the meeting as having resolve to accept the proposal by a majority number (6:1) and by more than three quarters (97 percent) in value of the creditors who voted.

[2]      The  applicant  now  applies  for  approval  of  the  proposal  pursuant  to  s

333(1)(a) of the Act.

Preliminary Issue

[3]      In separate proceedings (CIV 2010-404-8213) Bunnings Limited had applied to the Court for an order adjudicating the insolvent bankrupt.   The insolvent had opposed  that  application  having  regard  to  the  proposal  he  was  putting  to  his creditors.

[4]      At  the  meeting  of  creditors,  Bunnings  Limited  and  two  other  creditors, provided voting papers but not creditors’ claim forms.  The chairperson rejected the claims of Bunnings Limited and those other two creditors for the purposes of voting. These matters were appropriately recorded in the minutes, wherein the chairperson recorded that had those three ―informal votes‖ been counted there would have remained a majority in favour of the proposal (6:4) and 81 percent in value in favour.

[5]      Bunnings Limited was minded to oppose the Court’s approval of the proposal

because of the rejection of its vote.

[6]      In the event, Mrs Waugh appeared before me this morning to indicate that there would be no opposition to approval and Bunnings Limited, for its part, would leave the Court to determine the application without opposition.

The proposal was that a dividend of 3 cents in each dollar be paid on all unsecured debts (as proved by creditors).   It was that proposal which was accepted by the majorities to which I have referred.   The payments are to be made to the trustee monthly in amounts of not less than $10,000.00 per annum (which the Court takes to mean and believes the creditors would have understood it to mean) a payment of no less than $834.00 per month.  However it is also proposed by the insolvent that he will borrow from family members the total amount required to make payment of 3 cents in the dollar to his creditors and will make payment of that dividend in full within six months from today’s date.

[7]      The insolvent has a wide range of trade and banking creditors and other service creditors.   The provisional trustee summarises the unsecured creditors as amounting to $1,433,311.15.  As against that, the insolvent identifies his only asset as being $320.00 cash in hand.  The creditor’s proposal will require, after allowing for the payment of his trustee’s expenses, that the insolvent raise some $34,000.00 to meet the requirements of the proposal.

[8]      This background was obviously well understood by the creditors involved, who would have, no doubt, taken all relevant matters into account when voting as they did.

My approach to the approval of the proposal

[9]      Section 327 of the Act requires a proposal to satisfy an insolvent’s debts in the prescribed form and to be accompanied by a statement of affairs in the prescribed form.   I am satisfied that that was done.   Under s 330 the person appointed provisional trustee had to call the meeting of creditors as I have referred to, and I am satisfied, with one exception, that these were met.  The requirements under ss 330 and 331:

330 Provisional trustee must call meeting of creditors

(1)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—

(a)a notice of the date, time, and place of the meeting: (b)a summary of the insolvent's assets and liabilities:

(c)a copy of the proposal and particulars of any charge or guarantee: (d)a creditor's claim form:

(e)a postal vote in the prescribed form.

(2)A creditor who has proved a claim in the prescribed manner may vote on the proposal by sending a postal vote that reaches the provisional trustee before or at the meeting.

(3)If the provisional trustee receives a postal vote before or at the meeting, the postal vote has effect as if the creditor had been present and voted at the meeting.

331 Procedure at meeting of creditors

(1)The provisional trustee is the chairperson of the meeting of creditors, unless the creditors elect their own chairperson.

(2)The creditors may—

(a)examine the insolvent:

(b)accept the proposal with or without amendments or modification, by passing a resolution that sets out the proposal in its final form:

(c)confirm  the  provisional  trustee  as  trustee,  or  appoint  another person who is willing to act as trustee, in which case that person becomes the trustee.

(3)The resolution accepting the proposal must be decided by a majority in number and three-quarters in value of the creditors who—

(a)vote; and

(b)are  personally present or  are  represented  at  the meeting  by  a person specified in section 332 or have voted by postal vote.

(4)If the insolvent consents, the creditors may include in the proposal teams for the supervision of the insolvent's affairs.

[10]     The  provisional  trustee  exhibited  in  his  affidavit  the  form  of  notice  of creditors’ meeting sent to creditors.  The notice, having identified the date and other such details of the meeting, added this –

You may vote either in person or by authorised representative or by postal vote by completing and returning the attached voting paper.

[11]     The notice itself did not refer to a form of claim nor did the exhibited notice attach a form of claim.

[12]     On the other hand, it is clear from the trustee’s report that the three creditors whose claims were not taken into account for voting purposes have been treated by the creditor as proper claimants upon the estate of the insolvent.  To the extent that there  may  have  been  any  disadvantage  to  Bunnings  Limited  or  the  other  two creditors through non-provision of the claim form, they have chosen not to pursue that issue by exercising their right to object to approval of the proposal.   As the trustee’s report indicates, the votes of the three creditors in question would not have reduced the proportion of voting below the minimum levels required.

[13]     I view the apparent breach by the trustee of his obligation to include a form of claim notice in the notice to creditors as a breach by the trustee but one which, in the circumstances of this case, does not go to the substance of the proposal or its approval.  That said, it behoves any trustee taking part in the important process of proposals under Part 5 of the Act, to ensure that he or she is fully aware of the requirements of the legislation and that he or she meets all such requirements.  In other circumstances where, for example, the voting was much more in the balance or an aggrieved creditor persisted in such circumstances with an objection to the proposal, the trustee’s failure to provide the correct notices for claims or for voting purposes might constitute a bar to approval.

[14]     In the event, I am satisfied in this case that that should not be so.

[15]     Following the acceptance of the proposal in this case, it was then the trustee’s obligation to apply to the Court, as he has now done for approval.  Sections 333 (1) – (3) provide:

333 Court must approve proposal

(1)After the proposal has been accepted by the creditors, the trustee must, as soon as practicable,—

(a)apply to the Court for approval of the proposal; and

(b)send notice of the hearing of the application in the prescribed form to the insolvent and to each known creditor.

(2)The Court must, before approving a proposal, hear any objection that is made by or on behalf of a creditor.

(3)The Court may refuse to approve the proposal if it considers that—

(a)the provisions of this subpart have not been complied with; or

(b)the  terms of  the proposal are not reasonable or are not calculated  to benefit the general body of creditors; or

(c)for any reason it is not expedient that the proposal be approved

[16]     The process is therefore in three stages.  The first stage was achieved through the filing of the proposal at the meeting of creditors; the second stage was that the acceptance of the required majorities had to be secured; and the third is the stage which has now reached me on 19 July 2011.  I have to consider the reasonableness of the proposal, and I have to consider the expediency of the proposal.

[17]     It is well settled law that while I have some discretion to refuse an approval I should refuse approval only if one or more of the trigger paragraphs in s 333(3) apply.  The approach normally taken to proposals is that set out by Hardie Boys J. in Re Bennetts Proposal (HC Christchurch B138/81 and M306/81 1 February 1982) which was subsequently quoted with approval in Farmer v Rowley [1992] 2 NZLR

195 at 196:

I think the Court should accept the view of the creditors or the majority of them and grant approval unless it is apparent that one of the grounds for refusing approval exists

[18]     I note also, as has been pointed out by this Court previously, that the very heading to s 333 is that the ―Court must approve proposal‖, which emphasises the limited nature of the discretion.

Have the provisions of the sub-parts of s 333 been complied with?

[19]     I find that each of the statutory requirements has been complied with.

Are the terms of the proposal “not reasonable” or “not calculated to benefit the general body of creditors”?

[20]     I find this a case where the proposal has up-side for the creditors, and no demonstrable downside.

Expediency of the proposal

[21]     Adopting the previously used judicial approaches of such terminology as

―practicable‖,  ―suitable‖  or ―appropriate‖,  I find the present proposal has all those

three qualities.

Exercise of the discretion

[22]     Ultimately, having been through those steps, I stand back and look at the proposal in its entirety and determine whether there is anything that should adversely impact on the exercise of my discretion in this case.  I find that there is none.

Result

[23]     The application for approval of the proposal is granted.

Associate Judge Osborne

Solicitors:

Paramjit K Singh, PO Box 76323, Manukau City, Manukau 2241

Mr A Maharaj, 40A Sunnyside Avenue, Papatoetoe, Auckland