Oakes v Jordan

[2021] NZHC 234

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2020-485-240

[2021] NZHC 234

UNDER

the Insolvency Act 2006

IN THE MATTER

of the bankruptcy of Neville Jordan

BETWEEN

LESTER JAMES OAKES and

KATE ROCHELLE PATERSON as trustees of the I & S Family Trust

Judgment creditors

AND

NEVILLE JORDAN

Judgment debtor

Hearing:	19 February 2021
Appearances:	B Marten and T Lynskey for judgment creditors S Barker for judgment debtor
Judgment:	22 February 2021
Reissued:	9 March 2021

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[1]        In what circumstances will the Court exercise its discretion to decline to make an order bankrupting a judgment debtor even although the judgment creditor is able to satisfy the requirements of the Insolvency Act 2006 and is prima facie entitled to such an order?

[2]        In late 2016 the trustees of the I & S Family Trust (now Mr Lester Oakes and Ms Kate Paterson, but others at the time) lent $150,000 to  the  judgment  debtor,  Mr Neville Jordan. The loan was repayable on demand. The trustees demanded repayment. Mr Jordan defaulted. The trustees sued. Mr Jordan did not defend the

OAKES v JORDAN [2021] NZHC 234 [22 February 2021]

claim. The District Court entered summary judgment for the full amount of the loan plus costs. Mr Jordan repaid some of the judgment debt, but approximately $80,000 remained — and still remains — outstanding. The trustees served a bankruptcy notice on Mr Jordan. Mr Jordan did not comply with the notice within the required time. The trustees commenced this proceeding seeking an order bankrupting Mr Jordan. Mr Jordan filed a notice of opposition.

[3]        Immediately prior to the hearing the judgment debtor filed a supplementary affidavit. This exhibited an exchange of emails between the parties’ solicitors that took place during the days leading up to the hearing in which a proposal was put to the judgment creditors by the judgment debtor. The proposal involved an immediate payment of $20,000, and what amounted to a best endeavours undertaking to pay the balance by 31 March 2021. It envisaged the proceeding being adjourned until after that date. The trustees rejected the proposal. On the strength of that eleventh-hour proposal Mr Barker sought an adjournment. This was opposed by Mr Marten. I declined to adjourn the hearing. The dispute dates back years. Since the judgment creditors first demanded repayment of the loan Mr Jordan has made numerous promises to clear the debt. He has not done so. This proceeding was commenced in late July 2020. Had the proceeding not been defended, it would have been heard within a month or so. Mr Jordan defended the proceeding as he was entitled to do. As a result, the parties did not secure a fixture for over six months. In my view, it would be unjust to adjourn the hearing on the strength of another promise.

[4]That brings me back to the substantive matter for determination.

[5]        It is common ground that the trustees have made out the grounds for adjudication set out in s 13 of the Insolvency Act. Mr Jordan does not contend otherwise. What he says is that in the circumstances he should not be bankrupted. He asks the Court to exercise its discretion under s 37 to decline to make the order the trustees seek.

[6]Section 37 provides:

37       Court may refuse adjudication

The court may, at its discretion, refuse to adjudicate the debtor bankrupt if—

(a)the applicant creditor has not established the requirements set out    in section 13; or

(b)the debtor is able to pay his or her debts; or

(c)it is just and equitable that the court does not make an order of adjudication; or

(d)for any other reason an order of adjudication should not be made.

[7]        Mr Barker focussed on s 37(c), his submission being that in the circumstances it would not be just and equitable for an order to be made.

[8]        The leading case is Baker v Westpac Banking Corporation.1 The Court of Appeal’s judgment was delivered by Richardson J. His Honour said that where, as in the present case, the grounds for adjudication are made out, the judgment creditor is prima facie entitled to an order. However, that is subject to s 37. A judgment debtor inviting the Court to exercise its discretion under that provision bears the burden of satisfying the Court that that is the proper course.

[9]        There are any number of authorities, including Baker v Westpac Banking Corporation itself, in which the courts have discussed the considerations that are relevant to any exercise of discretion under s 37, especially in relation to the just and equitable ground. Nothing would be achieved by summarising these here. It is sufficient to say that I am satisfied that the matters raised by Mr Barker on behalf of Mr Jordan are well within the scope of relevant considerations.

[10]      Mr Barker’s first point is that the loan — and more particularly the residual indebtedness — is “a minor amount”. To most people, and I expect to most family trusts, $150,000, or even $80,000, is a substantial sum of money. I accept of course that what is in issue here is tens of thousands of dollars, rather than hundreds of thousands of dollars or more. However, I do not see that that advances matters very far.

1      Baker v Westpac Banking Corporation (unreported), Court of Appeal, 13 July 1993.

[11]      Mr Barker then submitted that this is Mr Jordan’s only material indebtedness. There is no evidence of that. In some of the correspondence there is mention of other debts. However, I accept from Mr Barker that at least on his instructions Mr Jordan has no other creditors of any significance.2

[12]      Mr Barker’s third point was that Mr Jordan is someone who has made a real contribution to society. The evidence is that his business interests have been connected with education and health, and that he is a philanthropist. I do not doubt that Mr Jordan has made a contribution to society.

[13]      Mr Barker next submitted that as a result of his business and other activities over the years Mr Jordan has considerable standing in the community, and that this would be diminished if he were to be adjudicated bankrupt. I accept that, though of course the same might be said of any insolvent person otherwise of good standing.

[14]

[14]

[15]      Mr Barker next submitted that were the Court to exercise its discretion under s 37, he would not present any risk. There is very little evidence as to the nature of Mr Jordan’s business activities. He operates through a company called Endeavour Capital Limited which I understand is a trader in commodities. Mr Jordan says that he has outside board appointments — paid and unpaid — and anticipates a further board appointment with an Auckland based company that trades in bullion. I do not think that it can be said that to permit Mr Jordan to go on trading through his company when he is plainly unable to pay his own debts would be without some degree of risk to potential creditors.

2      Following the hearing, the trustees’ solicitors filed and served a memorandum appending a recent judgment of Mallon J in this Court (The Town of Jupiter, Florida v Endeavour Capital Ltd & Neville Jordan [2021] NZHC 95). They say that they did not become aware of the case until after the hearing. They draw it to the Court’s attention because it indicates that there is another substantial claim against Mr Jordan. Mr Barker objects to the Court having regard to this. Even although leave has not been sought, I cannot see that there is a strong basis for this objection. It is not as if this is new evidence. All that the trustees’ solicitors are doing is drawing attention to a judgment that neither party referred to at the hearing. That said I do not propose to place any reliance on the case. It concerns a claim and is not evidence of a debt.

[16]      Mr Barker’s seventh point was that whilst it is often the case that an order adjudicating a party bankrupt is important to ensure that the Official Assignee investigates the bankrupt’s affairs, there is nothing requiring investigation in this case. I am not convinced that that is a submission that is open. Unless and until inquiries are made it is not possible to know whether or not there is anything to investigate.

[17]      The final point advanced on Mr Jordan’s behalf by Mr Barker is that if he is bankrupted now there will be no money available for the trustees. That may or may not be so. I expect that the trustees will have considered that in responding to the most recent overtures. In any event, such a situation is commonplace.

[18]      For the trustees, Mr Marten did not dispute that there are factors favouring Mr Jordan that the Court can and should take into account in considering whether or not to exercise its discretion under s 37 of the Insolvency Act. However, he submitted that these factors fall well short of justifying the exercise of that discretion. He submitted that Mr Jordan’s application essentially amounted to a contention that the Court should subordinate the trustees’ prima facie entitlement to Mr Jordan’s interests in being allowed to continue trading through his company.

[19]I agree.

[20]      There are some factors to which Mr Jordan can point in support of his contention that the Court should exercise its discretion under s 37. I see these as being confined to        , the contribution he has made to society coupled with the impact of bankruptcy and the likelihood that his bankruptcy would yield nothing and in that sense may be futile. However, in the end, my judgment is that the trustees are entitled to the order they seek and that the factors on which Mr Jordan can rely, viewed individually or collectively, are not strong enough to justify the Court in depriving the trustees of their prima facie entitlement.

[21]      The view I have reached is that substantial justice as between the parties will be done if I make the order sought by the trustees but do so  on terms that give      Mr Jordan a short, final opportunity to make arrangements to pay the money he owes to them and avoid bankruptcy.

[22]The Court’s orders are as follows:

(a)on the application of the judgment creditors there will be an order pursuant to s 36 of the Insolvency Act 2006 bankrupting the judgment debtor;

(b)the judgment creditors will have their costs calculated on a 2B basis in accordance with the High Court Rules 2016, together with such disbursements as may be allowed by the Registrar;

(c)the order in (a) above will come into force at 4.00 pm on Friday 5 March 2021, unless, by that time and date, the outstanding debt due to the judgment creditors by the judgment debtor, together with all costs and disbursements, including the costs and disbursements ordered in (b) above, is paid in cleared funds.

Associate Judge Johnston

Solicitors:

Izard Weston, Wellington for judgment creditors Buddle Findlay, Wellington for judgment debtor