Oglesbury v Accident Compensation Corporation
[2024] NZHC 2447
•30 August 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2024-404-297
[2024] NZHC 2447
UNDER the Insolvency Act 2006 BETWEEN
MITCHELL GUY OGLESBY
Insolvent
AND
ACCIDENT COMPENSATION CORPORATION
Creditor
CARTERS BUILDING SUPPLIES LIMITED
CreditorCOLLECTION HOUSE (NZ) LIMITED
CreditorINLAND REVENUE DEPARTMENT
CreditorMOTOR TRADE FINANCE LIMITED
Creditor
Hearing: 1 August 2024 Appearances:
YSBV Yang for the Applicant Trustee
Judgment:
30 August 2024
JUDGMENT OF ASSOCIATE JUDGE SUSSOCK
This judgment was delivered by me on 30 August 2024 at 12 pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors:
Chapman Tripp, Auckland
OGLESBY v ACCIDENT COMPENSATION CORPORATION [2024] NZHC 2447 [30 August 2024]
Introduction
[1] The insolvent, Mitchell Guy Oglesby, filed a proposal to his creditors for the payment or satisfaction of his debts under sub-pt 2 of pt 5 of the Insolvency Act 2006 and has sought approval from the Court.
[2] The proposal is to continue to make contractually agreed payments to his secured creditor and to make weekly payments of $380 for five years to his trustee to be distributed to his unsecured creditors by monthly pro-rata payments in respect of unsecured debts of approximately $117,896.25. Through the proposal, Mr Oglesby will repay approximately 85 cents in the dollar to the unsecured creditors, less the trustee’s fees and expenses as set out in the proposal.
[3] Applying to the Court for approval is the final stage in the process allowing an insolvent to avoid bankruptcy by making a proposal to creditors for the payment or satisfaction of the insolvent’s debts.1
[4] The first stage is for a proposal to be filed satisfying the requirements of s 327 of the Insolvency Act. This includes nominating a trustee for collection and distribution of instalments paid who becomes the provisional trustee until the proposal is approved.
[5] The second stage is for the provisional trustee to call a meeting of the insolvent’s creditors pursuant to s 330 of the Act and for the passing of a resolution accepting the proposal by a majority of the creditors in number and three quarters in value of the creditors who vote.
[6] The trustee must then 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 every known creditor.
[7] When the matter was called, there was no appearance on behalf of any creditor or otherwise objecting to the proposal.
1 Insolvency Act 2006, s 326 and as contained in sub-pt 2 of pt 5 of the Act.
[8] Having heard from counsel for the Trustee, and considered the documents filed and the requirements of the Act, I approve the proposal for the reasons set out below.
Background
[9] The insolvent, Mr Oglesby, is based in Auckland. Counsel for the trustee submits that over the course of the COVID-19 pandemic, his business suffered financially leading to an inability to meet his financial commitments, including to Inland Revenue.
[10] As at September 2023, Mr Oglesby's debts totalled approximately $133,590.45 comprised of:
(a)$115,724.60, owed to four unsecured creditors; and
(b)$17,865.85, owed to one secured creditor.
[11] Mr Oglesby sought the assistance of Debtfix, a debt management entity, to resolve his debt situation and nominated Christine Liggins, the director of Debtfix and a licenced insolvency practitioner, to assume the role of provisional trustee.
[12] Mr Oglesby’s proposal, among other things, includes that in full and final satisfaction of all existing debt Mr Oglesby will:
(a)continue to make contractually agreed payments to his secured creditor, Motor Trade Finance Limited, directly;
(b)make weekly payments of $380 for five years (260 payments) to his trustee to be distributed to his unsecured creditors by monthly pro-rata payments; and
(c)not enter into any further personal borrowing or seek an increase to existing borrowing during the term of the proposal.
[13] The proposal records that the fees and expenses of the Trustee will be paid in the following manner:
(a)$1,000 in expenses;
(b)20 per cent of the first $3,000;
(c)10 per cent of the following $7,000; and
(d)5 per cent in excess of $10,000.
Approval of proposals — relevant legal provisions
[14]Section 333 of the Insolvency Act provides:
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.
(4)The court must not approve a proposal if it does not provide for the payment, before any other debts are paid, of—
(a)those debts that would have priority under this Act if the insolvent was adjudicated bankrupt; and
(b)the trustee’s fees and expenses that are properly incurred by the trustee in respect of the proposal; and
(c)costs incurred by a person other than the insolvent in organising and conducting a meeting of creditors for the purpose of voting on a proposal.
(5)Subsection (4)(a) does not apply to the extent that a creditor waives the priority that the debt of that person would otherwise have had.
(6)When it approves the proposal, the court may correct any formal or accidental error or omission, but must not alter the substance of the proposal.
[15] From the use of the words “may” and “must” in ss 333(3) and (4), the Court retains a discretion whether to refuse to approve a proposal in the circumstances set out in s 333(3) whereas the Court’s refusal is mandatory in the circumstances set out in s 333(4).
[16] In terms of the second of the discretionary circumstances in s 333(3)(b), whether the proposal is reasonable, this is to be assessed objectively from the perspective of the “commercially experienced prudent creditor”.2
[17] In Herbert v New Zealand Guardian Trust Co Ltd the Court of Appeal held that when considering reasonableness, the Court is required to exercise its independent judgment but that it must be influenced by the commercial judgment of creditors.3 The Court held that unless there are special public interest or other commercial considerations present, the assessment of the general body of creditors ought to be accepted.
[18] The third discretionary basis is whether there is any reason why it is not expedient that the proposal be approved.4 As Asher J explained in Kelly v Structured Finance Ltd:5
The word “expedient” is capable of a broad meaning. It can mean “practicable”, but also has the wider meaning of “suitable” or “appropriate”.
… I consider that s 333(3)(c) requires an open-ended approach, and that any attempt to focus it on a specific matter would be to impose a limitation that does not arise from the words of the subsection.
2 Kelly v Structured Finance Ltd [2009] 2 NZLR 785 (HC) at [45] approved by the Court of Appeal in Magsons Hardware Ltd t/a Mitre 10 Mega v Bogiatto [2011] NZCA 378 at [29].
3 Herbert v New Zealand Guardian Trust Co Ltd [2012] NZCA 442.
4 Insolvency Act 2006, s 333(3)(c).
5 Kelly v Structured Finance Ltd, above n 2, at [53].
[19] Section 333(4) requires the Court to refuse the proposal if the proposal does not provide for the payment before other debts are paid of:
(a)debts that would be preferential in a bankruptcy;
(b)the trustee’s fees and expenses properly incurred by the trustee in respect of the proposal; and
(c)the costs of any other person other than the insolvent in relation to the meeting of creditors.
Have the requirements of sub-pt 2 been complied with?
[20] The trustee, Ms Liggins, in her report to the Court dated 19 March 2024 confirms that:
(a)On 18 September 2023, she gave notice to all known creditors of Mr Oglesby that a meeting of creditors would be held on 26 October 2023 to consider the proposal.
(b)Baycorp (NZ) Limited was originally recorded as a creditor but on 9 October 2023 Accident Compensation Corporation emailed their proof of debt, postal vote and copy of invoices directly rather than through their debt collection agency, Baycorp. Accident Compensation has therefore replaced Baycorp on the intituling.
(c)The meeting of creditors was held on 26 October 2023. No creditors attended in person. The proposal was accepted by Accident Compensation Corporation and Inland Revenue. Both voted by postal vote.
(d)The proposal was rejected by Carters Building Supplies Limited who had a debt of $26,213.30.
[21] The trustee records that Collection House (NZ) Limited did not submit any documents despite several requests until after the postal vote. In addition, Motor Trade Finance Ltd did not seek to have its debt admitted by the provisional trustee and did not vote.
[22] Section 331(3) of the Act sets out the requirements for acceptance of a proposal at the creditors’ meeting, providing:
(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 s 332 or have voted by postal vote.
[23]These thresholds therefore only relate to those creditors voting.
[24] Of the creditors who voted, two out of three voted in favour of the proposal and in respect of $87,459.95 out of $113,673.25 worth of debt owing to the voting creditors. The proposal was therefore approved by a majority in number and over three‑quarters in value, as required by s 331(3) of the Insolvency Act.
[25] The proposal sets out the trustee’s fees and expenses as set out above and as required by s 327 of the Act and Form B 9 of the High Court Rules 2016. These are in accordance with reg 40 of the Insolvency (Personal Insolvency) Regulations 2007.
[26] Affidavits have been filed confirming that the creditors were advised of the original and amended hearing dates for the application to the Court to approve the proposal and of the change in representation of the trustee.
[27] I am satisfied therefore that the requirements of sub-pt 2 of pt 5 of the Insolvency Act have been complied with.
Is the proposal reasonable under s 333(3)(b)?
[28] The trustee’s report to the Court advises that in her opinion Mr Oglesby’s assets have a total value of $35,000, including a motor vehicle valued at $30,000 secured to
Motor Trade Finance Ltd. His debts therefore far exceed the value of realisable assets in his possession.
[29] The total amount of the payments to be made by Mr Oglesby under the proposal in respect of unsecured creditors is $98,800.
[30] After deduction of the trustee’s costs and expenses, there will be $92,060 available for distribution to the unsecured creditors, resulting in a distribution of approximately 78 per cent of the total unsecured debts.
[31] The trustee confirms in her report that the payments by Mr Oglesby will be made from his salary.
[32] The voting creditors have voted unanimously in favour of the proposal and there are no apparent public interest or other commercial considerations that ought to prevent the assessment of the general body of creditors being accepted (as held in Herbert).6
[33] I am satisfied the proposal will result in a better and more certain return for creditors than if Mr Oglesby were to be adjudicated bankrupt. Ms Liggins also confirms in her report that in her view the proposal recovers more debt than could be achieved through any alternative method.
[34] I therefore consider the proposal is reasonable and calculated to benefit the general body of creditors.
Is there any reason that it is not expedient to approve the proposal?
[35] The trustee’s report sets out the current salary of the insolvent and confirms that at Debtfix they work with the client on a detailed budget with a net income and all outgoings of the insolvent to determine that there is enough of a surplus to afford a proposal.
6 Herbert v New Zealand Guardian Trust Co Ltd, above n 3.
[36] The trustee filed a further report to the Court dated 2 July 2024 confirming that Mr Oglesby has made and continues to make timely payments to the trustee in accordance with the proposal and that following approval by the Court Ms Liggins will release those funds to repay the creditors.
[37] There is nothing in the application that suggests it would not be expedient for the proposal to be approved.
Section 333(4) matters
[38] In terms of s 333(4) matters, in this case there are no preferential debts, and the proposal provides that the trustee’s fees and expenses will be paid for. The trustee organised the meeting of creditors to approve the proposal and does not claim any separate costs. None of the matters for which the Act mandates refusal therefore prevent approval of this proposal.
Conclusion
[39]I am satisfied that:
(a)the provisions of sub-pt 2 of pt 5 of the Act have been complied with;
(b)the terms of the proposal are reasonable and calculated to benefit the general body of the creditors;
(c)it is expedient that the proposal be approved; and
(d)there are no grounds under s 333(4) of the Act which mandate against approval of the proposal.
Result
[40] For the reasons set out above, I approve the proposal by Mitchell Guy Oglesby dated 4 September 2023 pursuant to s 333 of the Insolvency Act.
Associate Judge Sussock
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