Pack v Ultra Projects Limited (in liquidation) - [2015] NZHC 940

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2014-485-11276 [2015] NZHC 940

UNDER Part 5 of the Insolvency Act 2009

IN THE MATTER OF

A proposal made by Stephen John Edward
Pack

BETWEEN

STEPHEN JOHN EDWARD PACK Applicant

AND

ULTRA PROJECTS LIMITED (in liquidation)

Objector

Hearing: 16 February 2015

Counsel:

D G Dewar for Applicant
J C Corry for Objector
No appearance for provisional trustee

Judgment:

6 May 2015

JUDGMENT OF ASSOCIATE JUDGE SMITH

[1] This is an application by Mr Pack for approval of a proposal to his creditors made under pt 5(2) of the Insolvency Act 2006 (the Act). Under s 333 of the Act, a proposal by an insolvent, once approved by the requisite majority of the insolvent’s creditors, must also be approved by the Court. Creditors who object to the proposal have the right to oppose the application for approval.

[2] A meeting of creditors to consider Mr Pack’s proposal was scheduled for

22 October 2014. That meeting was adjourned to 6 November 2014, and on that

date the requisite majority of Mr Pack’s creditors approved the proposal.

[3] The statement of affairs which was sent to Mr Pack’s creditors before the meeting showed that he had total assets of $41,500. In a report made to the Court

STEPHEN JOHN EDWARD PACK v ULTRA PROJECTS LIMITED (in liquidation) [2015] NZHC 940 [6 May
2015]

following the creditors’ meeting at which the proposal was approved, the provisional trustee, Ms Susan Wylde, expressed the view that the value of Mr Pack’s assets was overstated at $41,000. She did not consider there was any value in the household chattels which had been included as assets in the statement of affairs. In her view the only assets of value were a motor vehicle having an approximate value of $3,000 and an item of plant called a “scissor lift”, worth approximately $7,000.

[4] Mr Pack has since abandoned his claim to ownership of the scissor lift.

[5] Mr Pack’s statement of affairs disclosed that he had three unsecured creditors, with debts totalling $278,951.80, and two secured creditors, with debts totalling
$2,660,447.69. The two secured creditors were Otago Fund Managers / FM Custodians Ltd (Otago Fund Managers) and Heartland Bank Ltd (Heartland). Of the unsecured creditors, by far the largest was the objector, Ultra Projects Ltd (in liquidation) (Projects), with a debt of $274,741.80.

[6] Projects is a company of which Mr Pack was the sole director, and which he formerly controlled. It was put into liquidation on 8 October 2013. Mr Pack’s indebtedness to Projects arises out of advances made by Projects to him on his shareholder’s account with the company.

[7] Otago Fund Managers and Heartland had lent money to another company formerly owned and controlled by Pack, Ultra Developments Ltd (Developments), which is also now in liquidation. Mr Pack personally guaranteed these two debts.

[8] Another unsecured creditor (not referred to in Mr Pack’s statement of affairs) submitted a proof of debt, attended the meeting of creditors on…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2015] NZHC 940
Decision Date: 6 May 2015

CaseChat Overview and Summary

- Parties: Stephen John Edward Pack (Applicant) and Ultra Projects Limited (in liquidation) (Objector)
- Nature of the dispute: The case concerns an application by Mr Pack for approval of a proposal to his creditors made under pt 5(2) of the Insolvency Act 2006.
- Court: High Court of New Zealand
- Legal issues: The court was required to decide on several issues, including whether the proposal provided for the payment of the trustee's fees and expenses before any other debts were paid, if Mr Pack's statement of affairs substantially set out the true position of his assets, debts, and liabilities, whether the names, addresses, and occupations of each of Mr Pack's creditors were properly disclosed, if the terms of the proposal were reasonable and calculated to benefit the general body of creditors, and if it was expedient that the proposal be approved.
- Court's reasoning and outcome: The court found that Mr Pack's statement of affairs did not substantially set out the true position of his assets, debts, and liabilities, as he failed to disclose a substantial asset in the form of a debt due to him by the SS Pack Family Trust. The court also found that the terms of the proposal were neither reasonable nor calculated to benefit the general body of creditors. Furthermore, the court considered it inexpedient to approve the proposal due to the high risks of further commercial defaults by Mr Pack. Consequently, the application for approval of the proposal was refused.
- Final orders: The application for approval of the proposal was refused, and the objector was entitled to costs, which were fixed on a 2B basis, with disbursements as fixed by the registrar.

Orders