Memelink v Official Assignee
[2023] NZHC 2342
•25 August 2023
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2018-485-363
[2023] NZHC 2342
UNDER the Insolvency Act 2006 IN THE MATTER
of an application pursuant to s 238
BETWEEN
HARRY MEMELINK
Applicant
AND
THE OFFICIAL ASSIGNEE
Respondent
CAMILLA WATSON
Interested Party
Hearing: 19 July 2023 Appearances:
Applicant in person
P Chisnall for Respondent
No appearance by or for the Interested PartyJudgment:
25 August 2023
JUDGMENT OF ASSOCIATE JUDGE SKELTON
[1] Harry Memelink was adjudicated bankrupt in August 2018. He applies under s 238 of the Insolvency Act 2006 for an order cancelling the Official Assignee’s admission of a claim by the estate of Murray Horlor admitted in the bankruptcy.
[2] Mr Horlor’s estate is represented by the interested party, Camilla Watson, who has declined to participate in this matter. The Official Assignee opposes Mr Memelink’s application.
MEMELINK v THE OFFICIAL ASSIGNEE [2023] NZHC 2342 [25 August 2023]
Statutory framework
[3] Mr Memelink has previously challenged determinations of the Official Assignee in this bankruptcy. In Memelink v The Official Assignee,
Associate Judge Johnston summarised the relevant statutory framework as follows:1
[5] The obligations of the Official Assignee in dealing with claims by unsecured creditors against bankrupt estates are dealt with in s 234 of the Insolvency Act which provides:
234 Assignee must examine creditor’s claim form
(1)The Assignee must examine each creditor’s claim form and the grounds of the debt, unless the Assignee considers it likely that no dividend will be paid to creditors.
(2)After examining the claim form, the Assignee must, as soon as practicable, do 1 or more of the following:
(a)admit the claim, in whole or in part:
(b)reject the claim, in whole or in part:
(c)require further evidence in support of the claim.
[6] …The Official Assignee is obliged to consider creditors’ claim forms and admit or reject the same, in whole or in part, unless she has concluded that there is unlikely to be any funds available to pay unsecured creditors. [T]he Official Assignee may require additional evidence before making a determination.
[7] The authorities indicate that the onus is on the claimant, and that, whilst the Official Assignee is not obliged to engage in a minute analysis of each claim, before accepting a claim, or any part of a claim, she must be satisfied that there is sufficient supporting evidence.
[8] The Official Assignee’s determinations pursuant to s 234 of the Insolvency Act are challengeable pursuant to s 238 which provides:
(1)Court may cancel creditor’s claim
(a)The court may make an order cancelling an admitted creditor’s claim or reducing the amount claimed, if it considers that the claim was improperly admitted.
(b)The court may make the order on the application of the Assignee, the bankrupt, or any creditor.
(c)The court must not make an order under subsection unless the creditor who submitted the claim has been served with the application.
1 Memelink v The Official Assignee [2020] NZHC 2709 at [5]-[9] (footnotes omitted); and see also
Memelink v The Official Assignee [2022] NZHC 953 at [12].
[9] Applications pursuant to s 238 of the Insolvency Act raise de novo the issue of whether the claim is properly founded, and the Court must determine whether the Official Assignee’s determination and the process by which she reached that determination was reasonable. Again, the burden rests on the claimant or creditor to satisfy the Court that the claim is adequately supported.
[4] In Holdgate v Bloccassa Ltd, Courtney J considered the relevant authorities in the context of the equivalent section in the Insolvency Act 1967, s 89(5), and held that:2
[12] I therefore intend to proceed on the basis that an appeal under s 89(5) is an appeal de novo and to be approached in the manner described in Austin Nichols & Co v Stichting Lodestar. This requires me to make my own assessment of the proofs of debt and to decide what weight, if any, is to be given to the Official Assignee’s decision to admit the proofs of debt.
Official Assignee’s position
[5] At issue is a proof of debt lodged with the Official Assignee by the estate of Murray Horlor on 14 July 2020. The claim was admitted by the Official Assignee in the sum of $90,453 (including interest) and this was notified to Mr Memelink (via his solicitor) on 9 June 2021.
[6] Robert McDonald (the Official Assignee) has provided two affidavits setting out the background facts and the information relied on by the Official Assignee in consideration of the claim.
[7] In this case, the Official Assignee stands in the creditor’s shoes, and maintains his decision to admit the claim.
Background to the admission of the claim
[8] Mr Memelink has for many years traded the majority of his business activities through Link Trust No. 1 (the Trust). The creditors in Mr Memelink’s bankruptcy consist of purely personal creditors and those to whom he incurred liability in his capacity as a trustee of the Trust.
2 Holdgate v Bloccassa Ltd HC Auckland CIV-2005-404-002693, 4 July 2008 at [5]-[12].
[9] On 25 October 2012, there was a deposit from a bank account operated by the Barraud Trust of $70,000 to “Memalink”. Mr Horlor was a trustee of the Barraud Trust.
[10] There is an undated document by which the then trustees of the Trust acknowledged the debt of $70,000 to Mr Horlor, and agreed to repay that sum plus interest on 23 November 2013. Interest was to accrue at 5 per cent per annum. This document was signed by Patrick John Renshaw and Mr Memelink as trustees of the Trust.
[11] The debt of $70,000 was recorded in the annual reports for the Trust for the years ending March 2014 and 2015 (being the only such reports available). The debt is recorded in these documents as:
Loan - M. Horlor (Unit 1 408 Hutt Road) $70,000
[12] The debt was also recorded in the statements of financial position for the Barraud Trust for the years ending March 2013 to 2019. Each of the relevant statements is signed by Mr Horlor on behalf of the trustees. The debt is recorded in these documents as:
Memelink Advance $70,000
[13] Prior to being adjudicated bankrupt in August 2018, Mr Memelink put forward a creditors’ proposal. The proposal documents are not before the Court. In his affidavit in support of this application Mr Memelink acknowledges that Mr Horlor’s loan was included in the proposal by Mr Memelink’s lawyer, but says this was despite Mr Horlor stating that he did not intend to collect the debt.
[14] Subsequently, Mr Horlor appears to have signed two documents stating he did not wish to have the debt repaid at that time. The first document dated 1 September 2018 is expressed to be a statement of support for the annulment of Mr Memelink’s bankruptcy. The document states:
… We do not wish to have our capital repaid at the present time and are satisfied by the existing arrangements with “Memelink Group” for security and interest paid on the money loaned.
[15]The second document is dated 6 September 2018 and states:
Statement of support for the annulment of bankruptcy – Mr Harry Memelink
I, Murray Barrington Horlor, friend of Mr Harry Memelink, make the following statements:
·I support and am actively working with Harry, his family members and supporters to restructure Harry’s business affairs
·I support Harry’s application for the annulment of bankruptcy
·I am not, at this time, pursuing repayment of monies I have loaned to Link No. 1 Trust.
[16]Mr Horlor passed away in February 2020.
[17] As noted above, the proof of debt was lodged with the Official Assignee by the estate of Murray Horlor (represented by Camilla Watson) on 14 July 2020 in the amount of $90,453.42 (including interest).
[18] The decision was made to admit the Horlor claim and this was notified to Mr Memelink’s solicitor on 9 June 2021. Mr Memelink was advised at that time of his right to apply to the Court to cancel admitted claims under s 238 of the Insolvency Act. Mr Memelink took no steps to challenge the admission of the claim at that stage.
[19] Subsequently, the subject claim came before the Court along with others when the Official Assignee sought summary judgment against the Trust for claims pursuant to the Official Assignee’s right of indemnity against the assets of The Trust. In a judgment dated 31 May 2022, Churchman J found for the Official Assignee, against the Trust, in respect of the subject claim and other claims.3
Mr Memelink’s position
[20] In his interlocutory application dated 30 January 2023, affidavit in support dated 29 January 2023, and memorandum dated 18 July 2023 for the hearing,
3 Body Corporate 81012 v Memelink [2022] NZHC 1244 at [147]–[152].
Mr Memelink raises a number of arguments in support of his application that the admitted creditor’s claim should be cancelled.
[21] First, Mr Memelink contends that neither he nor any entity connected to him has borrowed money from the Barraud Trust or have any connection to it. However, Mr Memelink acknowledges that in 2012, Mr Horlor, in his personal capacity loaned the Trust $70,000. Mr Memelink states in his affidavit:
Due to the building issues and the length of time it was taking to finalise insurance claims, which in fact to date are still not been finalised, Mr Horlor agreed to personally loan the Trust $70,000 to assist me at a difficult time.
A basic loan agreement was drawn-up and signed by myself, my co-trustee, and Mr Horlor.
[22] These statements accord with the undated acknowledgement of debt signed by the trustees of the Trust and referred to above at [10].
[23] The evidence before the Court establishes that there was a loan from Mr Horlor to the Trust in the sum of $70,000 in 2012, and that interest was payable on the loan, and the principal sum together with interest was due to be repaid on 23 November 2013. The evidence indicates that the funds were paid to the Trust through the Barraud Trust. In my view, on the basis of the evidence, it is reasonable to infer that the Barraud Trust was the vehicle through which Mr Horlor made investments such as the loan to the Trust.
[24] Secondly, Mr Memelink contends that Mr Horlor did not wish to pursue payment of the loan or wrote off the loan. Mr Memelink relies principally on the documents signed by Mr Horlor dated 1 September 2018 and 6 September 2018 in support of Mr Memelink’s application for annulment, referred to above at [14] and [15].
[25] Regarding the document dated 6 September 2018, Mr McDonald states in his affidavit:
I refer to the statement of Murray Horlor dated 6 September 2018 … . I cannot confirm that my office received that document at the time of Mr Memelink’s annulment application in 2018. I was not aware of it in 2021 when I made the decision to admit Mr Horlor’s claim. Had I been aware of it, I would not have
made a different decision because there was overwhelming evidence that the debt was owing. Any indication that Mr Horlor was not pursuing the debt was temporary in nature and in support of an annulment application that did not succeed. It was open for his estate to revisit the matter and seek payment in Mr Memelink’s bankruptcy.
[26] The documents relied on by Mr Memelink dated 1 September 2018 and 6 September 2018 record that Mr Horlor did not wish to have the debt repaid “at the present time” and “at this time”. I agree that any indication in the documents that Mr Horlor was not pursuing the debt was temporary in nature and in support of Mr Memelink’s annulment application. The documents do not establish that Mr Horlor was writing off or forgiving the loan. This is supported by the fact that the statements of financial position of the Barraud Trust continued to record the loan as an investment as at 31 March 2019.
[27] Mr Memelink also relies on an additional document to support his contention that Mr Horlor intended to forgive the debt. This is an email from Ms Barbara Gordon to Mr Memelink dated 26 April 2022. Mr Memelink says in his affidavit that Mr Horlor introduced him to Ms Gordon, who he referred to as “his partner”. The email states:
I was a close friend of Murray Horlor and remember Murray telling me about the damage to the property leased by Harry Memelink. He had previously told me that he loaned Harry, a very close friend of his, $70,000. He was upset about the damage and said to me that he intended to forgive the debt and work out costs with Harry and they could sort it all out between them.
Murray discussed a lot of business facts with me on all sorts of levels and he was the family Accountant who knew all about our business affairs as well. If the Lawyer concerned wished to contact me, please phone me at … .
Barbara Gordon
[28] The email is hearsay. If Mr Memelink wished to rely on this evidence and have weight attached to it, then he should have had Ms Gordon swear an affidavit confirming the email and further explaining the circumstances and timing of the exchanges with Mr Horlor referred to in the email, and the circumstances of the email itself, for the purpose of assessing reliability.4 I understand from Mr Memelink’s affidavit evidence that Ms Gordon is available as a witness. There has been ample
4 Evidence Act 2006, ss 18 and 20; Jessica Gorman and others McGechan on Procedure (online ed, Thomson Reuters) at [HR 7.30.03].
opportunity for her to provide an affidavit since the application was filed by Mr Memelink on 30 January 2023. Further, the email seems to me to be inconsistent with the contemporary documents from 2018 and 2019 referred to above. These documents do not establish that Mr Horlor intended to forgive the loan, and the loan remained recorded as an investment in the statements of financial position of the Barraud Trust as at 31 March 2019.
[29] Thirdly, Mr Memelink contends that there are agreed counterclaims that exceed the $70,000 loaned by Mr Horlor to the Trust.
[30] In his affidavit dated 29 January 2023, Mr Memelink refers to issues with the building that his company was leasing from Mr Horlor and his associates, and to storm damage that occurred when the roof of the building was being replaced by contractors. Mr Memelink states that Mr Horlor told him he would write-off the entire loan and interest as an offset against any shortfall in the expected eventual insurance payment. Mr Memelink states that he understood that until everything was finalised, the loan would remain on Mr Horlor’s accounts.
[31] Mr Chisnall, for the Official Assignee, submits that the matters raised by Mr Memelink appear to be in relation to a lease from one of Mr Horlor’s companies (not Mr Horlor personally) to Link Technology 2000 Limited (not the Trust nor Mr Memelink). He submits that therefore no set off could have arisen in relation to the personal loan arrangements between Mr Horlor and Mr Memelink as a trustee of the Trust.
[32] Further, Mr Memelink’s evidence with regard to the alleged counterclaim and set off seems to me to be inconsistent with the contemporary documents from late 2018 and early 2019 which do not indicate an intention on the part of Mr Horlor to write off the loan.
[33] I am not satisfied on the evidence before the Court that there are agreed counterclaims exceeding the $70,000 loaned by Mr Horlor that could be set off against the loan.
[34] Fourthly, Mr Memelink has previously contended that Mr Horlor’s claim was made after the specified times for filing a claim in the bankruptcy.5
[35] It is not clear whether Mr Memelink is continuing to pursue this argument in the current application as it is not referred to in his notice of application or affidavit in support.
[36] However, the issue was dealt as part of the summary judgment application by the Official Assignee for claims pursuant to the Official Assignee’s right of indemnity against the assets of The Trust.6 It seems that Mr Memelink also pleaded in response to that application that “…Mr Horlor had not wished to file a claim in the bankruptcy”.7 In considering the claim by the estate of Mr Horlor, Churchman J held:8
[148] The claim was filed online by Camilla Watson, the executor of the late Mr Horlor’s estate on 14 July 2020. It was admitted by the Official Assignee on 11 May 2021 and notice was given by the Official Assignee to Mr Memelink’s solicitor of the admission on 9 June 2021. The detailed evidence supporting the claim was provided to Mr Memelink’s solicitor on 2 December 2021. That included a copy of the signed acknowledgment of the debt signed by Mr Memelink and the other then trustee of the Trust, Patrick Renshaw. Details of the annual interest due on the original $70,000 at 5 per cent per annum were also provided at the same time.
…
[150] It was not disputed that, in this case, the Official Assignee had not ever specified a “specified time” either to the Trust or by way of advertisement.
[151] There is nothing in the Act that requires the Official Assignee to set a “specified time” in all cases. Therefore, the failure of the Official Assignee to do so cannot extinguish the obligation on Mr Memelink to pay the debt. I am satisfied that the debt was properly admitted by the Official Assignee in the sum of $90,453.42. Interest is also payable on that sum at 5 per cent as from 25 July 2021.
[37] Mr Chisnall submits that an issue estoppel arises. It is not clear whether issue estoppel is raised only in relation to the limitation issue or also in relation to the issue of whether Mr Horlor intended to claim in the bankruptcy. However, whether or not
5 Insolvency Act 2006, s 233.
6 Body Corporate 81012 v Memelink, above n 3, at [147]–[152].
7 At [147].
8 At [148] – [151].
an issue estoppel arises in relation to the matters, I am satisfied that there is no substance in the contention that the claim was submitted out of time.
[38] Further, to the extent that Mr Memelink may have been raising a limitation argument, Mr Chisnall submits that, in relation to the limitation period for claims against a bankrupt, time stops running on the date of adjudication.9
[39] Finally, at the hearing, Mr Memelink referred to the application for probate in respect of Mr Horlor’s will. Mr Memelink submits that there are statements in the application and the will to the effect that “the executors must sort out any claims or payment” in relation to the estate.
[40] Mr Chisnall submits that the documents referred to by Mr Memelink are standard form documents, and there is nothing in these documents which changes the position with regard to admission of the claim. I agree. It does not seem to me that these documents have any bearing on the issue of whether the Official Assignee properly admitted the claim.
Conclusion
[41] For the reasons set out above, and on the basis of the material that was before the Official Assignee, and is now before the Court, I am satisfied that the claim by the estate of Mr Horlor for the sum of $90,453 has been properly admitted. I am satisfied that the Official Assignee’s admission of the claim and the process by which that determination was reached was reasonable.
[42] In particular, the acknowledgement of debt by the trustees of the Trust establishes that the debt was owed to Mr Horlor personally, and I am not satisfied that the debt was forgiven or written off by Mr Horlor prior to his death.
[43]Mr Memelink has also sought ancillary orders as follows:
(c)A discovery order against the following parties to confirm the status of the unresolved and outstanding insurance claims and damages,
9 Kalev Crossland Heath and Whale on Insolvency (online looseleaf ed, LexisNexis) at [7.3].
including loss of earnings for Link Technology 2000 Ltd who’s operation was severely impacted by the factory closure.
(i)Mr Horlor’s company GPI (2002) Limited (removed from register); and
(ii)The Barraud Trust; and
(iii)The estate of Murray Barrington Horlor (deceased); and
(d)Directing Camilla Watson and other persons to be called to answer questions and give evidence in Court.
[44] Mr Memelink is seeking discovery orders against non-parties and orders directing that Ms Watson and other persons be called to answer questions and give evidence in Court.
[45] Given the findings that I have made with regard to the admission of the claim, I do not consider that the ancillary orders sought by Mr Memelink are necessary or appropriate.
Result
[46] Mr Memelink’s application for an order cancelling the Official Assignee’s admission of the claim by the estate of Murray Horlor in the bankruptcy of Mr Memelink and for ancillary orders is dismissed.
[47] As to costs, the Official Assignee has been successful and is entitled to costs on a 2B basis.
Associate Judge Skelton
Solicitors:
Anthony Harper, Christchurch for respondent
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